Free On Board Flashcards
FOB Principle: Risk remains with the seller until goods are loaded on board the vessel.
All Russian Co-operatives Society Ltd v Benjamin Smith & Sons (1923) 14 Lloyd’s Rep 351
• Facts: FOB contract. Goods were damaged before being loaded due to seller’s delay.
• Issue: Who bore the risk during the delay?
• Holding: The seller was liable as the goods had not passed the ship’s rail.
FOB Principle: Under FOB, the buyer must nominate the vessel in good time; delays shift liability to the buyer.
Modern Transport Co. Ltd v Ternstrom & Roos (1924) 19 Lloyd’s Rep 345
• Facts: Buyer delayed nominating a vessel in an FOB contract, affecting shipment.
• Issue: Was the buyer liable for losses due to late nomination?
• Holding: Yes. Delay in nominating the ship was a breach of buyer’s duty.
FOB Principle: FOB transfer of risk and property occurs only when goods are actually on board.
Cowasjee v Thompson (1845) 5 Moore P.C 165
• Facts: Dispute over whether risk had passed in an FOB contract where goods were delivered to the dock but not yet loaded.
• Issue: When does risk transfer in FOB?
• Holding: Risk does not pass until goods cross the ship’s rail.
FOB Principle: A buyer’s delay in ship nomination must substantially frustrate shipment for the seller to terminate.
Wimble & Sons v Rosenberg [1913] 3 KB 743
• Facts: Seller tried to cancel an FOB contract, claiming buyer’s delay in nomination.
• Issue: Was the buyer’s delay sufficient to repudiate the contract?
• Holding: No. The delay was not so serious as to frustrate the seller’s obligations.
FOB Principle: Risk passes to the buyer only after goods are loaded. Partial loading or delivery to port is insufficient.
Pyrene & Co. v Scindia Navigation Co. Ltd (1954) 2 All ER 158; (1954) 2 QB 402
• Facts: Fire tender was damaged during loading onto ship in an FOB contract.
• Issue: Who bore the risk at the time of damage?
• Holding: Seller bore the risk since loading had not been completed.
FOB Principle: In FOB contracts, prompt nomination of the vessel by the buyer is a condition. Breach may justify termination.
Bunge & Co. Ltd v Tradax England Ltd [1975] 2 Lloyd’s Rep 235
• Facts: Buyer failed to provide timely notice of ship readiness under FOB terms.
• Issue: Was this breach serious enough to allow termination?
• Holding: Yes. Timely nomination is a condition of the contract.
FOB Principle: The buyer has a duty to nominate a vessel within a reasonable time; failure can lead to damages in favour of the seller.
Colly v Overseas Exporters (1921) 126 LT 58
• Facts: FOB contract where the buyer failed to nominate a ship in time, causing delivery issues.
• Issue: Could the seller claim damages for buyer’s failure to nominate?
• Holding: Yes. The buyer’s delay caused a breach.
FOB Principle: In FOB contracts, the seller bears risk until goods cross the ship’s rail.
Pearl Mill Co. Ltd v Ivy Tannery Ltd (1919) 1 KB 78
• Facts: Seller delivered goods to dock under FOB, but goods were lost before loading.
• Issue: Who bore the risk of loss at that stage?
• Holding: Seller bore the risk since goods were not yet loaded onto the ship.
FOB Principle: Under FOB, risk passes on shipment. Delays in issuing documents do not affect risk transfer.
Allied Marine Transport Ltd v Vale do Rio Doce Navegação (The Leonidas D) [1985] 2 All ER 796
• Facts: Cargo was loaded on a vessel but bill of lading was delayed. Buyer claimed breach.
• Issue: Whether delay in documentation constituted breach under FOB.
• Holding: No breach; risk had passed on loading.
FOB Principle: Accurate and timely documentation is essential; errors can result in liability, especially where they affect the ability to claim under insurance or pass property.
El Amria & The El Minia (1982) 2 Lloyd’s Rep 252
• Facts: Conflicting instructions and documentation errors in an FOB sale.
• Issue: Whether confusion in documentation could shift the allocation of liability.
• Holding: Yes. Errors in documentation affect performance obligations.
FOB Principle: Frustration requires an external event beyond control, not mere buyer omission. FOB contracts depend on buyer action, but sellers can’t claim frustration lightly.
Harlow & Jones v Panex (1967) 2 Lloyd’s Rep 509
• Facts: Seller claimed contract frustration due to failure by buyer to nominate a ship.
• Issue: Was the contract frustrated by the buyer’s omission?
• Holding: No. Failure to nominate ship did not automatically frustrate the contract.
FOB Principle: Once the buyer nominates a vessel, costs such as demurrage resulting from their delays fall on the buyer.
Cargill v Continental C/A [1989] 1 Lloyd’s Rep 193
• Facts: FOB contract dispute over demurrage charges and timing of delivery.
• Issue: Who was liable for demurrage costs due to delayed loading?
• Holding: Buyer was liable as delays occurred after ship nomination.
FOB Principle: In FOB sales involving letters of credit, the seller must strictly comply with documentation requirements; otherwise, payment can be lawfully refused.
Kum v Wah Tat Bank Ltd [1971] 1 Lloyd’s Rep 439
• Facts: Under an FOB contract, the buyer’s bank refused to pay due to discrepancies in documents.
• Issue: Could the seller still claim payment?
• Holding: No. Under documentary credit rules, strict compliance is required.
FOB Principle: In FOB contracts, specific shipment conditions must be satisfied. Failure to meet them may excuse performance altogether.
Mackay v Dick [1881] 6 App Cas 251
• Facts: Dispute over a condition precedent in the contract involving shipment terms.
• Issue: Could a failure to fulfil this condition void the contract?
• Holding: Yes. Conditions precedent must be met before obligations arise.
FOB Principle: Risk in FOB contracts passes when goods are loaded aboard. Post-loading losses, including due to poor stowage, fall on the buyer.
HO Brandt & Co v HN Morris & Co. [1917] 2 KB 784
• Facts: Goods sold FOB. After loading, ship sank due to defective stowage.
• Issue: Was the seller liable for the loss?
• Holding: No. Risk had passed upon shipment.
FOB Principle: Timeliness of document delivery affects rights under the contract but does not necessarily delay risk transfer once goods are loaded.
Petrotrade Inc v Stinnes Handel GmbH (The Times, 27 July 1994)
• Facts: A dispute over FOB terms and late delivery of shipping documents.
• Issue: Did late delivery of documents affect the passing of risk or property?
• Holding: Risk had already passed upon loading.
FOB Principle: Risk passes at shipment even if the vessel is later found unseaworthy, unless seaworthiness was a condition of the contract.
Peter Turnbull & Co Pty Ltd v Mundas Trading Co. (Australasia) Pty Ltd [1954] 2 Lloyd’s Rep 198
• Facts: Seller delivered goods FOB but vessel was unseaworthy, and goods were lost.
• Issue: Could the buyer recover the loss?
• Holding: No. Risk had passed on shipment.
FOB Principle: A buyer’s delay in nominating the ship may entitle the seller to terminate if it fundamentally affects shipment.
Agricultores Federados Argentinos v Ampro SA (1965) 2 Lloyd’s Rep 757
• Facts: FOB dispute involving delay in buyer’s ship nomination.
• Issue: Whether delay justified termination by the seller.
• Holding: Yes. Seller could cancel due to buyer’s failure.
FAS (Free Alongside Ship)
Meaning: Seller delivers when goods are placed alongside the ship at the named port.
• Risk Transfer: Buyer assumes risk once goods are alongside the ship.
• Seller’s Duty: Clears goods for export and delivers them next to the ship.
• Buyer’s Duty: Responsible for loading, freight, insurance, and further transport.
FCA (Free Carrier)
• Meaning: Seller delivers the goods, cleared for export, to a carrier named by the buyer.
• Risk Transfer: When goods are handed to the carrier.
• Seller’s Duty: Loads goods onto buyer’s transport if delivery is at seller’s premises.
• Buyer’s Duty: Arranges and pays for main transport.
DES (Delivered EX Ship) (obsolete in Incoterms 2010/2020; replaced by DPU/DAP)
• Meaning: Seller delivers when the goods are made available to the buyer on board the ship at the destination port.
• Risk Transfer: At the port of destination, before unloading.
• Seller’s Duty: Bears all costs and risks up to arrival on board at the destination.
• Buyer’s Duty: Unloading and further transport.
DEQ (Delivered EX Quay) (also obsolete; replaced by DPU)
• Meaning: Seller delivers when goods are made available on the quay (wharf) at the destination port.
• Risk Transfer: When goods are placed on the quay.
• Seller’s Duty: All costs including unloading at the port.
• Buyer’s Duty: Import duties and further transport.
EXW (Ex Works)
• Meaning: Seller delivers by making goods available at their premises.
• Risk Transfer: Once goods are made available at seller’s location.
• Seller’s Duty: Minimal – just make goods available.
• Buyer’s Duty: All costs and risks for transport, loading, export clearance, etc.
CFR (Cost and Freight)
• Meaning: Seller pays for cost and freight to bring goods to destination port.
• Risk Transfer: Once goods are loaded onto the ship.
• Seller’s Duty: Covers freight but not insurance.
• Buyer’s Duty: Insurance and risk after loading.
