## Facts

- Warner Bros. & Co., Ltd., a British sugar seller, contracted in New York on April 19, 1934, to sell A. C. Israel, a New York buyer, 1,000 tons of Philippine centrifugal sugar located in the Philippines.
- The contract was headed “Philippines C. I. F. Terms,” and included provisions for price adjustment by final weight and for carriage to a destination designated by the buyer.
- Warner shipped conforming sugar from the Philippines to New York on May 10, 1934, procured insurance for the buyer’s benefit, and tendered the customary shipping documents with a draft for 95% of the purchase price (less freight) through the buyer’s bank under an irrevocable credit; the draft was honored.
- Before the ship arrived, federal sugar-import quotas under the Jones–Costigan Act took effect, and by arrival the quota for Philippine sugar for 1934 was filled.
- The sugar arrived in New York Harbor in the quantity and condition required, but could not enter free circulation and had to be stored in a bonded warehouse; Israel arranged warehousing and later release.
- Israel refused to pay the remaining balance, asserting Warner had not completed “delivery,” and counterclaimed for damages based on a decline in market price during storage.

## Issues

1. Whether the agreement was a standard C.I.F. contract under which the seller earns the price upon shipment, insurance, and tender of documents, rather than upon physical delivery at destination.
2. Whether contract provisions concerning destination carriage and price adjustment displaced the usual C.I.F. allocation of risk and performance.
3. Whether post-contract import quota restrictions that forced bonded warehousing excused the buyer’s duty to pay the balance or supported a counterclaim for storage-related losses.

## Decision

- The Second Circuit held the agreement was an ordinary C.I.F. contract.
- Warner fully performed by shipping conforming sugar, procuring insurance for the buyer, and tendering proper shipping documents against payment.
- The import quota restrictions and resulting bonded warehousing did not relieve Israel of the obligation to pay the remaining balance.
- Israel’s counterclaim for damages based on the decline in sugar prices while stored was rejected.

## Legal Principles

- In a C.I.F. contract, absent clear contrary language, the seller’s performance is completed by (1) shipment of conforming goods, (2) procurement of insurance for the buyer’s benefit, and (3) tender of customary shipping documents against payment; physical delivery to the buyer is not a condition precedent to the seller’s right to the price.
- Contract terms addressing destination carriage or later price adjustment may be treated as consistent with, rather than displacing, the standard C.I.F. structure when the contract as a whole indicates adoption of C.I.F. terms.
- Under a C.I.F. allocation, governmental restrictions affecting entry or marketability at the port of arrival that arise after shipment and document tender generally fall on the buyer’s side of the risk, not the seller’s.
- A buyer cannot recover market-loss damages from the seller based on post-shipment storage conditions when the seller’s C.I.F. duties were satisfied and the intervening regulatory obstacle is not contractually allocated to the seller.

## Conclusion

The court treated the contract’s C.I.F. designation as controlling and held that shipment, insurance, and document tender entitled the seller to the full price; import quotas that forced bonded warehousing did not excuse the buyer’s remaining payment obligation or support a counterclaim for resulting market losses.


Warner Bros. & Co. v. Israel, 101 F.2d 59 (2d Cir. 1939)