The defendant entered into a contract to sell hops to the plaintiff in London, as follows:
. . . one hundred bales, equal to or better than choice brewing Pacific Coast hops of each of the crops of the years 1905 to 1912 Inclusive. The said hops to be shipped to Sunderland. The [buyer] shall pay for the said hops at the rate of ninety shillings sterling per 112 lbs. CIF to London, Liverpool, or Hull. Terms net cash.
The seller wrote to the buyer stating that they were ready to ship and that they expected payment upon presentation of a negotiable bill of lading. The buyer replied that it was prepared to take delivery but insisted that the seller either submit samples for prior inspection or that it be permitted to inspect each bale prior to payment. The buyer was unwilling to accept a certificate of inspection from the San Francisco Merchant's Exchange as assurance of quality. The seller refused to ship, and the buyer brought this action. The seller counterclaimed for the buyer's refusal to pay on the documents. The lower court ruled in for the defendant buyer. The Court of Appeals affirmed, with Kennedy, L.J., dissenting. On appeal to the House of Lords, the judgment was reversed.
1. Why did the court rule that the buyer was not entitled to inspect the goods prior to paying for them?
2. What assurance did the buyer have that conforming goods were actually shipped?
3. What terms could the buyer have negotiated in the contract to assure that the goods shipped would be as ordered?
4. Assume that the documents arrive well ahead of the ocean cargo and that they were purchased by the buyer. A day later, the ship and cargo go down at sea. Assuming that the carrier was not at fault, what is the buyer's recourse?
5. In a CIF contract, which party assumes the risk of changes in the cost of ocean freight after the signing of the contract but before shipment?