FOB contracts

An abbreviation for “free on board contract”. FOB contracts are business contracts whereby the purchaser of goods awaits delivery of the goods to a ship and then arranges for further carriage upon delivery by the vendor. The goods are deemed to be delivered when they pass over the ship’s rail at a named port of destination. It is at this point that the purchaser assumes risk in the goods. FOB contracts are designed for shipment by sea or waterway.

The vendor is responsible for making arrangements, where applicable, for the goods to clear customs and other border controls. Neither party is obliged to the other to insure the goods, however it is prudent for the respective parties to insure the goods whilst the risk in the goods vests in them.

The purchaser is obliged to acquire its own import licence and make arrangements for the goods to clear customs and transit through a intermediate countries.

Usage: The parties agreed to utilise a FOB contract for the shipment of goods.

Related Words: Incoterms; CIF contracts; ex works; CPT contract; CFR contract; CIP contract; retention of title clauses; jurisdiction clause; choice of law clause; damages; account of profits; locus standi; liquidated damages; general damages; special damages; assessment of damages; financial loss; mitigation of loss; contract.