The Julia case brief summary
Facts: Seller, Luis De Ridder, loads 1,120 tons of grain/rye onto a ship, the Julia, to ship to Belgium. The carrier gives the seller (Luis De Ridder) a negotiable bill of lading made out to Belgian Grain, who is the seller’s agent in Belgium. While the ship is en route, seller contracted to sell 500 tons of the rye to Boerenbond Belge (buyer): 500 tons of rye for $5000, CIF Antwerp, Payment against documents. Seller does not give buyer a bill of lading, because he wants to split up the goods that are listed on the bill of lading and sell to multiple buyers and if he hands over a bill of lading that would be essentially selling all of the goods. Instead, seller gives belgian, his agent, a delivery order, and it is the responsibility of the agent to deal with the buyers. Along with the delivery order there are two different insurance certificates, one was for marine risks and one for war risks. Seller has possession of the insurance certificates and his agent, belgian, has the delivery order. All of these documents (i.e. insurance certificates and delivery order) are delivered to Van Bree who is the seller’s cargo superintendent. Van Bree is required to stamp/endorse the order, making a note that acknowledges obligation of delivery to the buyer. Van Bree delivers the delivery order, provisional invoice (the bill), and two insurance certificates to the seller’s agent (i.e. Belgian Grain) because Van Bree is not authorized to deal with the buyer. Buyer accepts the documents: the delivery order, provisional invoice, and two insurance certificates (but no bill of lading because the seller needs to hang on to the bill of lading under the circumstances of this case).
WHAT WAS SUPPOSED TO HAPPEN?:
1) Shipment arrives at port
2) Buyer hands over the delivery order plus a check for freight charge to its own cargo agent (Carga)
3) Carga gives the check for the freight charges and the delivery order to the seller’s sales agent (Belgian Grain)
4) Belgian Grain notes that the freight charges have been paid and hands the delivery order to the seller’s cargo superintendent (Van Bree)
5) Van Bree issues an order to its workers to release the goods (lasissez suivre) to the buyer.
But the goods are still on board the ship so...
*6) Van Bree gives the bill of lading to the ship’s captain.
*7) Ship’s captain gives the (laissez suivre) order to release the goods.
*Two key elements of this transaction
WHAT ACTUALLY HAPPENED?:
-There is war in Europe, so the rye is diverted to Lisbon, Portugal instead and sold at a loss (sold at a loss because Lisbon was one of few ports open in Europe, so it is likely that others were dumping their rye off there as well.)
-Buyer has the option to seek remedy through insurance, but the buyer wants a refund of the full purchase price.
Issue: Can the buyer recover the purchase price in a CIF K?
Holding: This is a CIF K. Therefore, since the sellers have delivered the documents, the buyer cannot recover the purchase price. In a CIF contract, the seller cannot deliver any goods that it wants, there must be “transfer of title” (i.e. document that gives title to the goods). In this case, the bill of lading was nonnegotiable, thus non-transferable. It would have to be negotiable in order to be transferable. Lack of goods (i.e. proper documents) caused a lack of consideration. Here, the buyers only received the delivery order (i.e. part performance; preliminary steps, without any legal significance), which was only a portion of the bill of lading.
-Must look at the parties intent as to what they wanted the documents to mean. Cannot just look at the words “CIF” and know what the parties intended, it must have the essential characteristics of a CIF.
-Delivery order gives you rights against the seller (and his agents) but not against other parties. Must have a negotiable bill of lading to give the buyer rights against everyone (i.e. alienability or fully transferable rights)
-If parties expressly agree in writing that a delivery order was intended to be a document of title then it can be viewed as a document of title by the courts.
Requirements of intending a delivery order to be a document of title: a) seller writes: “whoever has delivery order has legal rights to the goods” and b) it is a sale between sophisticated merchants.)