International trade transactions are fundamentally dependent upon legal certainty, particularly where documentary sale structures allocate obligations and risk independently from the physical movement of goods. Cost, Insurance and Freight (“CIF”) arrangements remain among the most widely used contractual mechanisms in maritime and commodities trade precisely because they establish a predictable framework governing shipment obligations, documentary requirements, insurance arrangements, and risk allocation.
In a significant judgment issued on 6 May 2026, our team, acting for a Turkish public joint stock company, successfully obtained a Court of Cassation (“Cassation Court”) ruling overturning an appellate judgment in a dispute arising from a maritime shipment governed by a CIF sale contract. In doing so, the Cassation Court reaffirmed an important principle of international trade law concerning the legal nature of CIF contracts and the limits of relying upon alleged commercial custom in derogation of express statutory provisions.
The dispute arose from a maritime sale transaction concluded on CIF terms, one of the most widely recognised documentary sale structures expressly regulated under UAE law. The statutory framework governing CIF contracts prescribes the respective obligations of sellers and buyers, including shipment obligations, marine insurance arrangements, documentary requirements, and the allocation and transfer of risk.
The dispute centred on the interpretation and application of Article 139 of Federal Decree Law No. (50) of 2022, Promulgating the Commercial Transactions Law (the “Commercial Transactions Law”), which provides that, under a CIF sale, the goods are deemed delivered to the buyer upon completion of loading onto the vessel, with the risk of loss transferring to the buyer from that moment.
Notwithstanding the clarity of the statutory framework and the settled legal principles governing CIF contracts under UAE law, the judgments rendered by Court of Appeal (“Appeal Court”) proceeded on the basis that the seller was required to establish actual delivery of the cargo at the destination port, together with proof of subsequent loss or damage, before entitlement to recover the purchase price could arise. In substance, the Appeal Court thereby imposed an additional condition not contemplated under the governing statutory framework of CIF contracts, treating alleged commercial custom and market practice as prevailing over the express legal allocation of obligations and risk prescribed under UAE law.
We challenged this approach before the Cassation Court on the basis that the legal framework governing CIF contracts is clear and settled, and that alleged commercial custom cannot override express statutory provisions or fundamentally alter the legal structure of internationally recognised trade mechanisms.
The Cassation Court overturned the appellate judgment and firmly rejected the reasoning adopted in the judgment under appeal and confirmed that CIF contracts are governed by established legal principles codified under UAE law and that courts may not impose additional obligations on a seller beyond those provided for under the statutory and contractual framework governing CIF arrangements.
The Cassation Court held that the Court of Appeal had mischaracterised the nature of the dispute and, in doing so, imposed an incorrect evidentiary burden on the seller. In particular, the Court of Appeal erred in requiring the seller to establish what occurred to the goods after their shipment, including whether they were lost, damaged, or destroyed, as a condition for recovering the contractual price. The Cassation Court clarified that this line of inquiry was irrelevant in the context of the claim as framed.
The judgment emphasised that the claim before the court was not one of delivery at destination, but rather a claim for the price under a CIF sale. Under such a structure, the seller’s obligations are discharged upon shipping the goods and tendering the agreed shipping and commercial documents. The risk in the goods passes to the buyer once the goods cross the ship’s rail at the port of loading. Accordingly, any subsequent loss or damage to the goods during transit does not affect the seller’s entitlement to payment.
The Cassation Court further explained that, once the goods are shipped and risk has transferred, the legal relationship governing any loss during carriage shifts away from the seller. The buyer’s recourse lies against the carrier or under the insurance obtained for its benefit, rather than in withholding the contract price from the seller. The Court explicitly noted that requiring the seller to prove the condition or fate of the goods after shipment is inconsistent with the allocation of risk inherent in CIF sales.
In correcting the Court of Appeal, the Cassation Court also reaffirmed the commercial rationale underlying CIF arrangements. The seller’s role is to place the goods on board, arrange carriage, and provide the documents that enable the buyer to take delivery or pursue claims against third parties. It is not part of the seller’s obligation to guarantee the safe arrival of the goods at destination, nor to account for events occurring after shipment. By conflating these distinct obligations, the Court of Appeal departed from both the agreed contractual framework and the settled legal principles governing CIF transactions.
By doing so, the Cassation Court provides a clear affirmation that, in documentary sales, liability and risk are not open-ended concepts but are fixed at identifiable points within the contractual sequence. That clarity is central to the operation of cross‑border trade and will continue to inform how UAE courts approach disputes arising from CIF and comparable shipment contracts.
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Disclaimer
The content provided in this article is intended for informational purposes only and does not constitute legal advice. While every effort has been made to ensure the accuracy and completeness of this information, the article does not offer a guarantee or warranty regarding its content. The matters discussed in this article are subject to interpretation, and legal outcomes may vary based on specific facts and circumstances. We recommend that readers seek individual legal counsel before making any decisions based on the information provided. If you require specific legal advice, please contact us directly.