Biddell Brothers v. E. Clemens Horst Co.
Facts: Seller (U.S.) (brewing hops); Buyer (England). Contract terms: ”C.I.F. to London, Liverpool, or Hull”, ”Terms net cash.” Buyer refused to pay against documents because they wanted a sample and seller refused to send samples. So instead, buyer stated that they will only pay against goods. Seller argues that a third party (i.e. S.F. Merchant Exchange) provided buyer with a certificate of quality. Buyer does not trust the S.F. Merchant Exchange. Seller refuses to ship the goods arguing that the buyer breached because they refused to accept the goods. Buyer believes that they have a CIF contract and so they can decide whether they want to accept goods and pay or accept documents and pay. Seller argues that in a CIF contract you must pay against documents and that this is a “terms net cash”, which means that payment must be made against documents.
Issue: Must the buyer make payments against documents or against delivery of goods or either?
Holding: It does not make any sense to give the buyer the choice of “symbolic delivery” or “actual delivery”. By using a negotiable bill of lading, which you must, and if the negotiable bill of lading is something of value (i.e. title to the goods) and the seller delivered the bill of lading, but the buyer asks for delivery of goods, then the seller would be performing/paying twice (a. delivery of bill of lading and b. delivery of goods). Further, CIF and “terms net cash” mean that the “delivery of the bill of lading when the goods are at sea can be treated as delivery of the goods themselves.” (i.e. lex mercatoria = the customary law between merchants)
-Rule: If it is a CIF contract, the buyers have to pay against documents-The fact that CIF was used does not make “payment against delivery” but the fact that there was a bill of lading and they said CIF made “payment against delivery” an option.