Reference no: EM132223293

In March 1999, China North Chemical Industries Corporation and Beston Chemical Corporation entered into a contract under which Nocinco agreed to sell to Beston 718 pallets of explosive boosters deliverable “CIF” to Berwick, Louisiana, for which Beston agreed to pay $2,477,691.00. The cargo was ultimately entrusted to Guangzhou Ocean Shipping Company, which booked a ship specially licensed to carry explosives cargo. The contract did not specify how the cargo would be stowed on board the transporting ship. However, Beston sent Nocinco a detailed list of stowage requirements, receipt of which Nocinco acknowledged. The ship proved too small to accommodate all of the cargo if the captain followed Beston’s instructions. The captain agreed to guarantee safe passage and issued to Nocinco a clean bill of lading covering the cargo. Unfortunately, the ship encountered storm conditions during which the cargo was damaged. Experts who examined the cargo when it arrived in Louisiana concluded that the damage was the result of improper stowage, inadequate securing, and the heavy weather encountered during the voyage. Beston subsequently paid 15% of the contract price but refused to pay the remaining balance. Nocinco filed a lawsuit against Beston to recover the remaining $2,077,464.60 due under the contract. Nocinco argued that it performed its obligations under the contract when it delivered the cargo to the ship in good condition as evidenced by the clean bill of lading. Nocinco conceded that the cargo was improperly loaded and stowed but that, under the contract’s CIF term, the risk of loss passed to Beston when the cargo passed the ship’s rail. The fact that the cargo arrived in Louisiana in damaged condition did not discharge Beston’s obligation to pay the contract price. Beston argued that Nocinco’s receipt, acknowledgement, and ultimate disregard of Beston’s shipping requirements excused it from paying the full contract price. Should Beston’s additional shipping requirements modify the CIF term which Nocinco otherwise met under the 1990 version of Incoterms in force and effect at the time of the contract? What Incoterms might Beston have employed to ensure complianc with its shipping requirements and transfer the risk of loss to Nocinco pending delivery in Louisiana?