Define: Free On Board

FOB is a shipping term that indicates the point at which the responsibility and ownership of goods transfer from the seller to the buyer. It specifies who is responsible for the goods during transit and who bears the risk of loss or damage.

There are two main types of FOB contracts: FOB shipping point and FOB destination. FOB shipping point means the buyer assumes responsibility once the goods are loaded onto the carrier, while FOB destination means the seller retains responsibility until the goods reach the buyer’s specified destination.

Yes, FOB terms are negotiable between the parties involved. Both the buyer and seller can agree on the specific FOB point and the associated responsibilities and risks.

Under FOB terms, the buyer is responsible for arranging and paying for transportation from the FOB point to the final destination. The seller is only responsible for delivering the goods to the agreed FOB point.

If the goods are damaged or lost during transit, the party bearing the risk at that point (either the buyer or the seller, depending on the FOB terms) will typically bear the financial consequences. It is important to have appropriate insurance coverage to mitigate such risks.

Yes, FOB terms can be used for international shipments. However, it is crucial to consider the applicable international trade laws, regulations, and Incoterms to ensure compliance and clarity in the contractual arrangements.

FOB contracts are subject to general contract law principles. It is essential to have a clear and unambiguous agreement in writing, including the FOB point, responsibilities, and any additional terms and conditions agreed upon by the parties.

Modifying or terminating FOB terms after the contract is formed requires the mutual agreement of both parties. It is advisable to document any changes or terminations in writing to avoid potential disputes.

Using FOB terms provides clarity and certainty regarding the transfer of responsibility and risk between the buyer and seller. It also allows for better cost allocation and control over transportation arrangements.

FOB terms are primarily used in sale transactions involving the transfer of goods. However, they may also be applicable in certain non-sale transactions, such as lease agreements or consignment arrangements, where the transfer of possession and risk is relevant. It is important to consult with legal professionals to determine the suitability of FOB terms in such cases.