FOB contract - Law Dictionary (2024)

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FOB contract - Law Dictionary? ›

A Free on Board (FOB) contract is a contractual term in the sale of goods under which the seller bears the cost of delivering goods via a specific route determined by the buyer. Once the goods are on board, property and risk passes to the buyer.

Free on board, often abbreviated as “F.O.B.,” applies to the sale of goods and indicates that purchased property will be placed on board a vessel for shipment at a designated place without expense to the buyer for packing, potage, cartage, etc.

"Free On Board" or "F.O.B." is a term in commercial law specifying the point when respective obligations, costs, and risk involved in the delivery of goods shift from the seller to the buyer.

FOB DEFINITION | SHIPPING TERMS OF SALE. FOB, Free On Board, is a transportation term that indicates that the price for goods includes delivery at the Seller's expense to a specified point and no further.

FOB is the acronym for “Free on Board” or “Freight on Board” and is an internationally recognized commerce term. If you need to buy or sell goods from another country everyone involved in your commercial transaction will know how to define FOB.

Under FOB, the seller has no obligation to contract for carriage. If the buyer requests it, the seller (at the buyer's risk and cost) must provide the buyer with any information known by the seller, including transport-related security requirements, that the buyer needs to arrange carriage.

The basic feature of this type of contract is that the seller must pay the cost of the goods and bear the responsibility of putting goods 'free on board' (f.o.b) and until they pass the ship rail. After this delivery is complete and the risk of loss in the goods is there and then transferred to the buyer.

Nevertheless, under an FOB contract, the cargo forwarder is entrusted by the buyer, commonly in form of an agent-principal contract. In such circ*mstance, the FOB buyer is the contractual shipper, and the actual shipper shall be the FOB seller.

For example, if a buyer in Vancouver buys basketball shoes from a seller in Chengdu, China, he must pay for the transport costs from the seller's warehouse to the port, cost of loading goods onto a ship, and all transport costs from the shipping port to his warehouse/store.

The two types of FOB shipping are termed FOB Shipping Point and FOB Destination. At the time of sale negotiations, a sales contract is brought forth outlining all the details of the shipping sale and determines if a FOB Shipping Point or FOB Destination will be used during a shipping agreement.

What is the risk in FOB contract? ›

The general rule in f.o.b. contracts is that risk passes on shipment and according to the traditional view, this is made when the goods cross the ship's rail. The seller in c.i.f. contract performs his obligation by tender the proper documents i.e. a bill of lading, a policy of insurance and an invoice to the buyer.

So, what does FOB stand for? FOB is an acronym for “free on board” or “freight on board.” Understanding what FOB is is important as this term acts as a designation to signal that the liability and ownership of goods are being transferred from a seller to a purchaser.

Cash on Delivery (COD): Cash on delivery requires the shipping party to collect payment upon delivery of the freight. Free on Board (FOB): Free on board is the “hand-off” point between the buyer and seller in the supply chain.

Key Takeaways. Free on Board (FOB) indicates when the ownership of goods transfers from buyer to seller and who is liable for goods damaged or destroyed during shipping. FOB Origin means the buyer assumes all risk once the seller ships the product.

: watch pocket. 2. : a short strap, ribbon, or chain attached especially to a pocket watch. 3. : an ornament attached to a fob chain.

FOB on an invoice stands for Free On Board or Freight On Board and refers to the point after which a business shipping products to a buyer is no longer responsible for the items.

Believe it or not remote keyless entry systems started appearing as far back as 1983 on American Motors vehicles, some have suggested that the term stands for frequency operated button, but that ignores heavy use of the word before the remote keyless entry system. Tech Etymology: Key Fob.

06 Who Assumes the Cost of FOB Shipping Point vs Destination? Traditionally with FOB shipping point, the seller pays the transportation cost and fees until the cargo is delivered to the port of origin. Once on the ship, the buyer is responsible financially for transportation costs, customs clearance, fees, and taxes.

FOB stands for “free on board” or “freight on board” and is a designation that is used to indicate when liability and ownership of goods is transferred from a seller to a buyer.