The Definition And Essence Of F O B Contract

The Definition And Essence Of F O B ContractA vender f.o.b. performs his obligation by putting the goods which accommo duration to the produce on jump on the embark at his expense. The commonplace rule in f.o.b. contracts is that fortune passes on freightage and according to the traditional view, this is do when the goods cross the enchants rail. Moreover, thither ar various vitrines of f.o.b. contract, and for the sake convenience, they have been grouped under tierce major headings which forecast on the conception of parties as decided by the harm of contract and the skirt circumstances. It is in the first place tell exclusively to the elaboration of the first of the two basic features of the f.o.b. contract menti unityd earlier, drawly, to the section of costs and responsibilities which putting goods free on game venire whitethorn real entail in various instances. For this reason they have been boundaryed respectively the stiff or classic f.o.b. contract, th e f.o.b. contract with additional services and the f.o.b. contract ( purchaser spying with carrier).The definition of F.O.B.It is difficult to define a FOB contract because in that respect are many variant variants Devlin J.1explains the FOB contract as a flexible instrument. The main obligations of the parties to an FOB contract were described judici onlyy in Wimble, Sons and Co v Rosenberg.2The trafficker moldiness put on batting regularise ship goods which conform to the contract a must pay all charges in connection with loading. The vendor is non obliged to book transport space in advance the purchaser must create the ship to carry the goods and notify the seller of the nominating address in conviction to forfeit the seller to deliver the goods on room. The costs of carriage are for the purchasers account.The midpoint of F.O.B. ContractIt is not easy to state in general shapes the duties of an f.o.b. seller, for the obvious reason that they vary according to the face of f.o.b. contract in question. A further difficulty in discussing the duties of the seller results from the circumstance that shipment under an f.o.b. contract is in many respects a cooperative enterprise, involving co-operation between buyer and seller. It tail, however, be verbalise that the principal duties usually undertaken by an f.o.b. seller are to put goods which conform with the contract on plank the ship in accordance with the shipping instructions (if any) befoold from the buyer, and the buyer are to jump out the expense of doing so. Additional duties may, of course, be undertaken in the contract.3When expression at the various discriminative pronouncements that have attempted to define the f.o.b. full term, one statement may be struck by the general term in which they are implicit. One of the earliest is probably Stock v Inglis4a movement dealt with unique(predicate) goods, where it was statedIf the goods dealt with by the contract were specific goods , it is not denied however that the words freeon board, according to the general understanding of merchants, would mean more than merely thatthe shipper was to put them on board at his expense they would mean that he was to put them onboard at his expense on account of the person for whom they were shipped and in that theatrical role thegoods so put on board under a contract would be at the run a risk of the buyer whether they were lost ornot on the voyage.Now that is the meaning of those words free on board in a contract with regard to specific goods, and in that case the goods are that the purchasers risk, level(p) though the payment is not to be made on the delivery of the goods on board, entirely at some separate time, and although the bill of lading is sent forward by the seller with documents attached, in order that the goods shall not be finally delivered to the purchaser until he has true the bills or paid cash.5Almost a century later lord C.J. similarly stated in J . Raymond Wilson Co. Ltd. v. N. Scratchard Ltd.6that the f.o.b. term hasFor a long time, for certain more than one hundred years, had a well-known meaning, and if a society sells goods free on board, the meaning is that he has to put the goods on board and to pay the expense of doing so, and delivery is made and the goods are at the risk of the buyer when they are on board, the expense having been paid by the seller.7 look in both these judgments, on that point are two characteristics of the f.o.b. terms, which fag be summarized as followsthe seller must pay the cost and bear the responsibleness of putting goods free on board , in early(a) words, bear the full liability for the cost and safety of the goods until the point of their passing the ships rail, andthat upon this beingness consummate delivery is complete and the risk of loss in the goods is in that location and hence transferred to the buyer.8However, the above cited definitions are only directed to the essential features of the f.o.b. term. They do not include an extensive or detailed examination of a variety of marginal responsibilities of which many have been the subject of dispute and even litigation between parties to f.o.b. sales. For example, they do not paint a picture whether an obligation, monetary or other, which relates to the shipment of the goods, that must be complied with before the goods can in fact be loaded, is for the buyers or for the sellers account.9In the absence of express contractual stipulations, judicial interpretations have had to rely on usage or custom and by implication attempt to ascertain what the intention of the parties with respect to accomplishment must have been.Furthermore, in that respect are various figures of f.o.b. contracts, and for the benefit of convenience, they have been dissever into three groups. The variations appear in the other incidents of the relationship between the parties play upon the terms of the contract and the surrounding circumstances.10The first grapheme is the strict or classic f.o.b. contract. The blurb is the f.o.b. contract with additional services. The last sheath may be described as the f.o.b. contract (buyer contracting with carrier).11Type of F.O.B. clausesSchmitthoff states that the term f.o.b. is used in transactions of different character and the responsibilities which arise under the clause differ according to the nature of the transactions in which the term occurs. The incidental obligations which the term f.o.b. implies have to be ascertained by an depth psychology of the express or implied intention of the parties. A distinction of considerable realistic importance is that between three characters of f.o.b. contracts, and, it depends on the parties which of these types are used.12The first type is the strict or classic f.o.b. contract. Schmitthoff explains this type of f.o.b. in the following term. He saidUnder this arrangement the buyer has to build a equal ship. When it arr ives in the port of shipment, the seller places the goods on board under a contract of carriage by sea which he has made with the carrier, but this contract is made for the account of the buyer. The seller receives the bill of lading which normally shows him as consignor and is to his order, and he transfers it to the buyer. Marine insurance is normally put by the buyer straight off, if he wishes to insure, but he may excessively ask the seller to arrange marine insurance for the buyers account.13The second type is the f.o.b. contract with additional services. Schmitthoff notes thatUnder this arrangement the shipping and insurance arrangements are made by the seller, but this is done for the account of the buyer. In this type of f.o.b. contract the buyer is not under an obligation to construct a suitable ship but the nomination is done by the seller. Again, as in contracts of the first type, the seller enters into a contract with the carrier by sea, places the goods on board shi p and transfers the bill of lading to the buyer.14The third gear type may be described as the f.o.b. contract (buyer contracting with carrier). Schmitthoff states that here the buyer himself enters into a contract of carriage by sea directly or through an agent, e.g. a forwarder. Naturally the buyer has nominated the ship, and when it calls on the port of shipment, the seller puts the goods on board. The bill of lading goes directly to the buyer and does not pass through the sellers hands.15Consequently, in f.o.b. contract of the first and third type the buyer has the responsibleness to nominate the ship, but in the second type this barter rests with the seller.16Furthermore, in contracts of the first and second type the seller is in contractual relationship with the sea carrier, and for this reason the second type has been described as a variant of the first type.17However, for the third type it is the duty of the buyer who may make the contract of carriage by sea with the carri er and the seller is not a party in this contract.18The Duties of the PartiesThe f.o.b. term is very flexible. Therefore, the duties of the parties between three types of f.o.b. contract subjects to the intention of the parties and the surrounding circumstances which of these types is used.191) Nomination of VesselThe obligation to nominate the watercraft can be placed on the seller or the buyer. However, unless agreed otherwise, this duty in f.o.b. contract is on the buyer.20Hence, in this case the buyer has to nominate an effective vessel in which he has booked shipment space. The buyer also has the duty to inform the seller of the name of the ship and the date when the vessel will be available for loading.21The nomination must be notified to the seller to give the seller sufficient time to put the goods on board a ship nominated by the buyer.If the buyer fails to nominate an effective vessel is a breach of contract, the seller is entitled to shout damages for breaching of the c ontract. Nevertheless, the seller will not be able to admit the purchase price if the buyer has not nominated an effective ship because the ownership in the goods will continue with the seller. In Colley Overseas tradeers22the seller was only entitled to damages, and not to the purchase price since the buyer failed to name a ship so property in the goods still remain with the seller and never passed to the buyer.23As a result of this uncertainty, the seller is well-advised to insist upon a contract clause requiring the purchase price to work due on a fixed date, whether a suitable vessel has been named or not.24Some f.o.b. contracts need the purchasers notification of the vessels nomination and readiness to receive delivery of the goods is given to the seller in advance of delivery. Then, if the buyer fails nominate a vessel on time means he is in breach of the contract, and the seller may refuse to deliver the goods on board, in Bunge Corp. v Tradax Export S.A.25was held that The court will require precise conformation with stipulations as to time, wherever the circumstances of the case indicate that this would fulfil the intention of the partiesAnd thatIt is clearly essential that both buyer and seller should know simply what their obligations are, most especially because the ability of the seller to fulfil his obligation may well be totally dependent on punctual performance by the buyer.Schmitthoff states that the buyer has the duty to nominate a vessel in a strict f.o.b. contract and an f.o.b. (buyer contracting with carrier) contract. However, this duty is not necessarily for him in f.o.b. contracts with additional services since in this type of contract he may leave the choice of the ship to the seller.262) Substitute Vessel eon of nomination is usually of the essence of the f.o.b.contract. Therefore, if the nominated ship is withdrawn or the nomination fails for some other reason, the buyer is obliged to name a substitute vessel, on condition th at loading can be accomplished within the contract dot.27This was so held in Agricultores Federados Argentinos v. Ampro S.A.28.Consequently, it means that if the buyers first nomination fails and the original vessel becomes unavailable for any reason, a substitute vessel may still be nominated by the buyer, provided loading can be completed within the contract period.29Moreover, the purchaser must serve any additional expense caused by the substitution.3) The Duty to Obtain an Export LicenseNormally the duty to obtain an export authorise is on the seller since he is in the better position to do so and the language of the contract or the surrounding circumstances may indicate that the seller was symboliseed to assume this duty.30On the other hand, if he does not, in that respect is no rule about who should have the duty to procure an export license under an f.o.b. contract. Each case must be set on its own fact and situation. In H.O. Brandt Co Ltd. v H.N. Morris Ltd31the lawc ourt of Appeal held that the obligation of applying for and obtaining an export license lay with the buyers rather than the sellers andScrutton L.J. observed thatthe buyers were under a duty to provide an effective vessel that is to regulate a vessel, which can legally carry the goods. If this is so the obtaining of a license is the buyers concern. It is their concern to have the vessel sent out of the country later the goods have been put on board and the fact that a rampart against export includes a prohibition against bringing the goods to the port or other place for exportation does not cast a duty of obtaining a license on the sellers. Bringing the goods on to the port is merely footslogger to the export, which is the gist of the license.On the other hand, in A.V. Pound Co Ltd. v M. W. Hardy Co. Inc.32, by the House of Lords was held that in the circumstances of the case the duty to secure the export license was cast on the sellers and not on the buyers.Accordingly, it i s obvious that duty to secure an export license will depend upon the circumstances of each case that it shall be obtained by the seller or the buyer.4) Transfer of PropertyUnder the ships rail rule is explained that for the f.o.b. contract there is a presumption that the passing of property to the buyer occurs when the goods pass the ships rail, but this remains subject to any express indication by the parties that they intend the passing of the property can occur at a different time under the Sale of Goods Act 1979, s.17.According to the above rule, there is the legal notion is applied despite the fact that some period before passing the ships rail it will have become breezy for the seller to recall and substitute the goods.In Pyrene v Scindia Navigation Co. Ltd. 195433, saida fire tender was damaged during the loading process at one time before it had crossed the ships rail. The property in the soods remained with the seller at the time they were damaged even though, in reality, the seller could not by then have halted the loading to call the fire tender back to set ashore to substitute it with another.5) Transfer of RiskIn f.o.b. contract Goode notes to the passing of risk of the goods that the risk passes to the buyer on shipment even though the seller has retained the bill of lading, or has had it made out to his own order to secure the price, and even if he intended to reserve a aright of disposal.34Conclusion