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Cash on Delivery

Jagan - April 11, 2022 - 0 comments

  1. Cash on delivery (“COD”) is a common business termi used generally for the sale of goods in the consumer market. The buyer is expected to pay cash at the time of delivery of the goods to the delivery person, often a 3rd party Logistics Service Provider (“LSP”), failing which the delivery will be suspended. This terms is also often used in the shipping and logistics industry but the effect is different. The aim of this article is to discuss the differences between the sale of goods and services and the potential issues which may arise in a COD sale / shipment.
  2. In the sale of consumer goods, customers often have an option to make payment on COD basis i.e. payment at the time of delivery of the goods. If the customer is unable to make payment, the delivery will be suspended and with the cargo being returned to the seller’s warehouse, say for use for the next sale. The value of the transportation is often only a small portion of the costs of the goods being sold and therefore the missed payment and the attendant costs (for reshipment and storage) does not severely impact the sellers and who may have also factored these costs in the sale price. If the contract of sale incorporates say Singapore Law, then the Singapore Sale of Goods Act 1979 (“SOGA 79) would apply. Clause 28ii of the SOGA 79  provides that payment and delivery are concurrent conditions unless otherwise agreed. This being the case, it appears to us that the term COD for the sale of goods is superfluous at least when SOGA 79 is applicable.
  3. The effect of COD in the sale of services, say for the transportation of goods by a Logistics Service Provider (“LSP”), is different given that expenses are being incurred by the LSP prior to the payment and if payment is not received, they (LSP) would continue to incur additional expenses say for the storage of the goodsiii till such time payment is received. If we take an analogy for shipment of goods by sea, under common law, freight is only earned on right and true deliveryiv. Owners are also entitled, under common law,  to a lien on the goods till such time they have been paid the freight due for that shipment. We therefore submit that this should also hold good for LSP’s performing carriage of goods by other modes of transport. However, as this appears to be untested, it may be better to contractually provide this, say by incorporating COD as a term in the contract of services. 
  4. If the LSP incorporated their Standard Trading Conditions (“STC”), say the Singapore Logistics Association (“SLA”), then this would entitle the LSP to
    1. Seek payment immediatelyv .
    2. Seek 2% per month interests for amounts overduevi.
    3. Hold lien on the goodsvii.
    4. Seek payment of the storage charges for the non-delivery of the goodsviii.
  5. In a dispute between a LSP and a cargo interest relating to a COD shipment, parties were unable to compromise their claim and the matter was heard at the Small Claims Tribunal (“SCT”), Singapore.
    1. In our earlier article, “Which Dispute Resolution Process?”, we had mentioned that SCT is one of the options available for a party to pursue their claim for a sum not exceeding SGD 20,000 (which can be extended to SGD 30,000 if both parties agree). While the advantage of SCT route is limited costs, the downside appears to be that parties need to self represent themselves and therefore must have some basic legal knowledge to pursue/defend the matter. While this may not be an issue in simple matters, this may indeed be daunting when complex matters are being pursued or defended.
    2. The facts of this dispute is that the LSP quoted for a shipment which was to be picked up overseas, air freighted and then delivered to the customer. At the time of quotation, no specific terms of payment were agreed but after booking but prior to shipment, the customer was advised that the terms of the shipment were on COD basis. The shipment was effected and prior to delivery, the LSP issued an invoice and sought payment. Prior to delivery, the customer responded that they were willing to pay by way of a post-dated cheque. The LSP was not agreeable to this arrangement and proceeded to hold lien on the cargo and sought payment of the outstanding freight and the additional charges incurred for the storage of the cargo till delivery
    3. The quotation of the LSP did make mention of the LSP’s Standard Terms and Conditions (Singapore Logistics Association Standard Terms and Conditions) in the footer and in small fonts. During the SCT hearings, the discussions centered on whether:
      1. the terms of shipment were COD
      2. the standard trading conditions were incorporated in the contract
      3. the LSP were  entitled to hold lien on the cargo.
        As both the cargo interests and the LSP subsequently withdrew their claim , there was no definitive ruling given in this matter.
  6. Under common law, while a carrier is entitled to hold lien on cargo for unpaid freight, they are not entitled to recover charges incurred for holding lien unless this has been expressly provided for in the contractix. While the STC’s such as the SLA STC would be of assistance in ensuring that LSP’s are entitled to  prompt payment and recovery of charges incurred due to non/delayed payment, the critical part would be as to whether the STC’s are properly incorporated into the contract. Accordingly, as a matter of course, the LSP’s should ensure to not only incorporate their STC but also draw the attention to their customers of the incorporation of the STC’s so as to avoid any challenge being made later on their incorporationx.
  7. In conclusion, if a LSP provides services on COD terms, they must be aware of the potential issues which may arise due to non / delayed payment. In order to better protect themselves, LSP’s  should  incorporate additional terms (as is provided in the SLA STC)  to ensure that they are able to recover charges incurred for say holding lien on the cargo. 

i. See
ii. Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price and the buyer must be ready and willing to pay the price in exchange for possession of the goods.
iii. In the absence of any specific contractual provisions, the LSP would have duty under bailment to take reasonable care of the goods till such time delivery is effected.

iv. Invariably, this is contractually amended to provide for the freight as being earned when the goods have been accepted for shipment.
v. Clause 19(f) of the SLA STC states “Unless otherwise expressly agreed in writing, all invoices rendered by the Company are payable immediately on sight
vi. Clause 19(c) of the SLA STC states On all amounts overdue to the Company, the Customer shall pay to the Company interest, calculated from the date such amounts are overdue until payment thereof, at the rate of two (2) per cent. per month”.
vii. Clause 25(a) of the SLA STC states “All Goods and documents in the possession, custody and control of the Company or its agents shall be subject to a general lien and right of detention for all sums (including without limitation all costs and charges payable by the Customer) due to the Company at any time and from time to time whether in respect of Services provided or in respect of such Goods or other goods or otherwise. If the sums due as aforesaid are not satisfied within 7 days of a notice in writing by the Company to the Customer, the Company shall be entitled to sell or dispose of the Goods or documents whether by public auction, private treaty or otherwise, and the proceeds of sale shall be applied in satisfaction of firstly, the costs and expenses of the sale or disposal and secondly, the sums due to the Company without any liability whatsoever on the part of the Company to the Customer. In the event that the proceeds of sale are insufficient to satisfy all sums due to the Company, the Company shall be entitled to recover from the Customer all sums which remain outstanding”.
viii. Clause 23 of the SLA STC states “If delivery of the Goods or any part thereof is not taken by the Customer or Owner at the time and place when and where the Company or any person whose services the Company makes use of calls upon the Customer or Owner to take delivery thereof, the Company shall be entitled to store the Goods or any part thereof at the sole risk of the Customer, whereupon the liability of the Company in respect of such Goods shall wholly cease and the cost of such storage and all other expenses and liability whatsoever paid or payable or incurred or which may be incurred by the Company shall be paid by the Customer on demand”.
ix. See Jarl Tra Ab & Ors V Convoys Ltd and which can be viewed at Jarl Tra AB & Ors v Convoys Ltd. | [2003] 2 CLC 1072 | England and Wales High Court (Commercial Court) | Judgment | Law | CaseMine
x. See our earlier article, “Standard Trading Conditions – Incorporation”.

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