Free on Board

Question 1

What types of FOB are there?

Answer 1

3: Classic, classic with additional services, and modern

Question 2

What is classic free on board

Answer 2

1) The buyer nominates the ship
2) The seller puts to the goods on the ship
3) For account of the buyer
4) The seller is then a party to the contract of carriage

Question 3

What is classic with additional service FOB?

Answer 3

1) The same as above, except : the seller arranges for the ship to come on the berth

Question 4

What is modern FOB?

Answer 4

1) The seller puts the goods on board
2) then takes a mate’s receipt
3) And gives to the buyer or the buyer’s agent
4) The buyer or his agent then takes the Bill of Lading
5) Therefore the buyer is party to the contract of carriage from the start

Question 5

What can you say about the nomination of ship?

Answer 5

1) The choice of ship is down to the buyer in strict FOB and Type 3, but may be down to the seller in type 3 as this is a negotiable term.
2) Time is of the essence of the contract and the contract is repudiated if the buyer fails to nominate the ship within a reasonable or stipulated time or if the nominated ship is fanciful or artificial
3) The ship must be ready, willing and able to carry the goods between the nominated ports
4) If the nominated ship is withdrawn or fails for some other reason, the buyer is obliged to name a substitute and bear any additional expenses incurrred.

Question 6

Nomination of port

Answer 6

1) Some FOB contracts provide for delivery at one several ports in a region
2) This miust be interpreted in accordance with the intention of th parties:
- Normally the buyer must nominate the actual port of shipment within a reasonable time
- Unless the duty to nominate the port falls on the seller - i.e. FOB type 2

Question 7

FOB and passing of risk

Answer 7

Risk passes when the goods are shipped - traditionally property passed once the goods passed the ship’s rail, but this was amended in INCOTERMS 2010.

Question 8

FOB Ascertained

Answer 8

1) If the goods are unascertained, property will not pass until the goods are allocated to specific buyers
2) If the goods are ascertained, property will pass once the goods have been shipped, unless passing of title is posponed by express or implied provision; e.g. retention of title.

Question 9

The passing of risk in classic and type 2 FOB

Answer 9

1) Whether title passes on shipment or transfer of the bill of lading depends on the intention of the parties:
- Usually passing of title is postponed until after the seller makes available the bill of lading to the buyer or the buyer’s agent.

Question 10

FOB Airport

Answer 10

There are 2 key points:
1) The critical point of transfer of responsibilities between the buyer and the seller is the point at which the air carrier take sdelivery of the goods at the airport
2) Unlike fob vessels, the seller shall be entitled to arrange for air carrange at the buyer’s expense, if he or the buyer has not given prompt notice to the contrary.