Legal Definitions - cash-against-documents sale

Definition: A type of documentary sale where the buyer pays for the goods upon the seller's tender of documents of title covering the goods, plus a sight draft requiring the buyer to pay “at sight.” This type of sale typically occurs before delivery of the goods, which might be en route when the buyer pays.

Example: A company in the United States wants to purchase goods from a supplier in China. The supplier sends the shipping documents, such as the bill of lading and commercial invoice, to the buyer's bank. The buyer's bank releases the documents to the buyer only after the buyer pays for the goods. The buyer then presents the documents to the shipping company to take possession of the goods.

Explanation: In this example, the buyer pays for the goods only after receiving the shipping documents from the seller's bank. The buyer's bank releases the documents to the buyer only after the buyer pays for the goods. This ensures that the seller gets paid before the buyer takes possession of the goods. The buyer then presents the documents to the shipping company to take possession of the goods. This type of sale is common in international trade where the buyer and seller may not know each other well and want to reduce the risk of non-payment or non-delivery.