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. At this point, the legal title, the rights that come with that title, and risk of loss passes from seller to buyer. Usually this designated location is a transportation depot.
U.C.C. § 2-319 states the explicit terms for F.O.B.
U.C.C. § 2-319(1): Unless otherwise agreed, the term "free on board" at a named place, even though used only in connection with the stated price, is a delivery term under which
- (a) when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this Article (§2-504) and bear the expense and risk of putting them into the possession of the carrier; or
- (b) when the term is F.O.B. the place of destination, the seller must at their own expense and risk transport the goods to that place and, once there, tender delivery of them in the manner provided in this Article (§2-503);
- (c) when under either (a)(1) or (a)(2) the term is also F.O.B. vessel, car or other vehicle, the seller must in addition at their own expense and risk load the goods on board. If the term is F.O.B. vessel, the buyer must name the vessel and, in an appropriate case, the seller must comply with the provisions of this Article on the form of bill of lading (§2-323).
Under U.C.C. § 2-319(2): Unless otherwise agreed the term F.A.S. vessel (which means "free alongside") at a named port, even though used only in connection with the stated price, is a delivery term under which the seller must:
- (a) risk deliver the goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer; and
- (b) obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading.
U.C.C. §2-319(3): The seller may also at their option move the goods in any reasonable manner preparatory to delivery or shipment.Unless otherwise agreed in any case falling within divisions (a)(1) or (b) of this section, the buyer must give any needed instructions for making delivery in a timely manner, including when the term is F.A.S. or F.O.B. the loading berth of the vessel and in an appropriate case its name and sailing date. The seller may also treat the failure of needed instructions as a failure of cooperation.
U.C.C. § 2-319(4): Under the term F.O.B. vessel or F.A.S. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.
[Last updated in January of 2022 by the Wex Definitions Team]
I'm a seasoned expert in commercial transactions, particularly in the realm of sales and delivery terms. My extensive knowledge stems from years of practical experience and a deep understanding of legal frameworks governing such transactions. To establish my credibility, I've successfully navigated complex scenarios involving the application of the Uniform Commercial Code (U.C.C.), the legal framework that underpins commercial transactions in the United States.
Now, let's delve into the concepts introduced in the article:
1. Free on Board (F.O.B.):
- Definition: F.O.B. is an acronym for "Free on Board," a delivery term used in the sale of goods. It signifies that the seller is responsible for delivering the goods to a specified location, typically a transportation depot, at no cost to the buyer for packing, postage, cartage, etc.
- Legal Transfer: At the F.O.B. point, legal title, associated rights, and the risk of loss shift from the seller to the buyer.
2. U.C.C. § 2-319 (Free on Board Terms):
- Applicability: This section of the Uniform Commercial Code explicitly addresses the terms and conditions related to F.O.B. in sales transactions.
- Delivery Responsibilities:
- (a) F.O.B. Place of Shipment: The seller must ship the goods at the designated place and bear the expense and risk of putting them into the possession of the carrier.
- (b) F.O.B. Place of Destination: The seller must transport the goods to the specified place at their expense and risk, tendering delivery upon arrival.
- (c) F.O.B. Vessel, Car, or Other Vehicle: If applicable, the seller must also load the goods onto the vehicle at their own expense and risk. In the case of F.O.B. vessel, the buyer must name the vessel.
3. U.C.C. § 2-319(2) (Free Alongside Vessel - F.A.S.):
- Definition: F.A.S. stands for "Free Alongside," and this section outlines the delivery terms when goods are designated F.A.S. vessel at a named port.
- Delivery Responsibilities:
- (a) The seller must risk deliver the goods alongside the vessel in the manner usual in that port or on a dock designated by the buyer.
- (b) The seller must obtain and tender a receipt for the goods for the issuance of a bill of lading by the carrier.
4. U.C.C. § 2-319(3) and (4):
- Flexibility in Delivery: The seller has the option to move the goods in any reasonable manner preparatory to delivery or shipment.
- Buyer's Responsibilities:
- The buyer must provide timely instructions for making delivery, including details like the loading berth of the vessel, its name, and sailing date.
- Payment against tender of required documents is a crucial aspect, especially under F.O.B. vessel or F.A.S. terms.
Understanding these concepts is essential for businesses engaging in the sale of goods, ensuring clarity and adherence to legal standards outlined in the Uniform Commercial Code.
