International trade is largely based on trade in goods transported by sea. These transactions, known as maritime sales, have important legal characteristics that all international trade operators must master in order to secure their operations. Unlike traditional sales, maritime sales incorporate the sea transport dimension into their mechanism.
The different types of maritime sales
A sale by sea is a sale of movable property in which the parties attach certain legal effects to the sea voyage required to transport the goods from the seller to the buyer. The basic classification distinguishes between outward and inward sales, depending on when the risks associated with the transport are transferred.
Fundamental distinction: outbound sales vs. inbound sales
In sales on departure, the risks are transferred to the buyer as soon as the vessel leaves. The goods therefore travel at the buyer's risk, although the seller may be responsible for organising and paying for the transport. Conversely, in the rarer case of sales on arrival, the risks are only transferred at destination. The seller therefore assumes the risks of maritime transport.
This distinction is crucial in determining who will bear the financial consequences in the event of loss or damage to the goods during the sea journey, an unfortunately frequent occurrence in international trade.
Maritime Incoterms: an essential reference
To facilitate transactions and avoid misunderstandings, the International Chamber of Commerce has developed standardised commercial terms known as Incoterms, some of which are specifically dedicated to maritime sales. The most commonly used are:
- FAS (Free Alongside Ship): the seller delivers the goods alongside the ship at the port of shipment.
- FOB (Free On Board): the seller delivers the goods on board the ship.
- CFR (Cost and Freight): the seller pays for the transport, but the risks are transferred on shipment.
- CIF (Cost, Insurance, Freight): like CFR, but the seller also takes out the insurance.
These standardised terms enable the parties to clearly allocate the obligations, costs and risks associated with maritime transport, as explained in more detail in our article on FAS and FOB sales.
Initial sales: essential principles
Outbound sales are the most common category of maritime sales. They include FAS, FOB and CIF sales.
Common characteristics of initial sales
In all outgoing sales, the transfer of risk takes place as soon as the goods are loaded. If the goods perish or are damaged during transport, the buyer must still pay the agreed price. This feature is particularly suitable for international trade in standardised goods or raw materials.
The Transport Code specifies that "sale on departure places the goods sold at the risk and expense of the buyer, from the day on which they are delivered under the conditions of the contract". This wording underlines the importance of the precise moment of delivery, which varies according to the formula chosen.
Differences between the main formulas
While FAS and FOB sales are mainly distinguished by the place of delivery (alongside the ship for FAS, on board for FOB), the CIF sale has a major distinctive feature: the seller provides not only the goods, but also the transport and marine insurance.
However, make no mistake: the CIF sale is still a sale on departure. Despite the seller's obligation to conclude the contract of carriage and insurance, the risks are transferred to the buyer upon shipment, as detailed in our article on the CIF sale.
Inbound sales: key features
Sales on arrival are less frequent but offer greater security for the buyer, as the goods travel at the seller's risk.
Types of sales on arrival
French law distinguishes between two main types of sales on arrival:
- Sale on designated vessel: the seller informs the buyer of the name of the vessel carrying the goods. In the event of loss, the seller is not obliged to replace the goods.
- Sale on shipment: if the goods perish during the voyage, the seller must reship the same quantity of goods under the terms of the contract.
These legal subtleties can have considerable economic consequences in the event of a marine casualty, as you will discover in our detailed article on inbound maritime sales.
Maritime sales financing
The financing of maritime sales, which generally involve large sums, is often based on the documentary credit mechanism.
The documentary credit mechanism
A documentary credit is an undertaking given by a bank, at the buyer's request, to pay the seller in return for the submission of compliant documents. These documents certify that the goods have been shipped and insured.
This method of financing offers security to both parties: the seller is guaranteed payment as soon as he presents the correct documents, while the buyer only pays if the seller can prove that he has dispatched the goods. However, its implementation requires particular attention to documentary aspects, as explained by our article on documentary credits in maritime sales.
The importance of documents in maritime sales
Documents play a vital role in maritime sales, particularly the bill of lading, which fulfils three essential functions:
- Proof of contract of carriage
- Receipt of goods
- Title representing the goods, enabling them to be sold during transport
The compliance of these documents with contractual requirements often determines payment and the transfer of ownership. An error or irregularity can have serious financial consequences and cause significant operational stoppages.
The complexity of the legal mechanisms involved in maritime sales and their potential consequences justify the involvement of a lawyer with expertise in commercial maritime law. Our firm has the necessary expertise to support you at every stage of your maritime sales operations, as you can find out at our page dedicated to commercial maritime law.
If you are considering a maritime sale or are experiencing difficulties in this area, do not hesitate to contact our firm for advice tailored to your situation.
Frequently asked questions
What is the main difference between an FOB sale and a CIF sale?
In an FOB sale, the buyer organises and pays for the sea transport, whereas in a CIF sale, the seller takes care of it, while including these costs in the selling price.
Is the CIF seller liable for damage during transport?
No, although the seller organises transport and insurance, the risks are transferred to the buyer as soon as the goods are loaded.
Can standard Incoterms obligations be modified?
Yes, Incoterms are binding and the parties can derogate from them by specific stipulations in their contract.
What documents are generally required for a documentary credit?
Mainly the bill of lading, the commercial invoice, the insurance policy and possibly certificates of origin or quality.
How do you choose between an outward and an inward sale?
This choice depends on a number of factors: the nature of the goods, industry practices, the negotiating power of the parties and, above all, their respective appetite for the risk associated with maritime transport.
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