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Compose a 2500 words essay on Law of Contract Master. Needs to be plagiarism free!Download file to see previous pages This would facilitate the execution of a smooth contract. The parties have the fur
Compose a 2500 words essay on Law of Contract Master. Needs to be plagiarism free!Download file to see previous pages
This would facilitate the execution of a smooth contract. The parties have the further choice of incorporating an INCOTERM as well as providing for any other conditions concerning the sale connected with the carriage of goods like contract of insurance and local delivery in the country of import.
Being one of the popular and important international commercial terms, 'FOB' is used very widely in the international commercial transactions. 'FOB' is one of the F group terms denotes 'Free on Board' where the element of freight is undertaken to be paid by the buyer and the risk on the goods is deemed to pass to the buyer at the point where the goods are delivered to the specified carrier.
The term FOB was originally developed with an intention to specify the responsibilities and liabilities of the parties under the contract4. In the case of Pyrene v Scindia5 three different variations of the FOB Contracts have been established.
Under 'Classic FOB' contract the buyer is given the responsibility to nominate the vessel and the seller is to draw up the contract of carriage. As has been laid down in El Amira &.El Amina6 it is possible for the seller to act as the principal shipper. In Wimble Sons v Rosenberg and Sons7 it has been held that sometimes the seller ships the goods as a favour to the buyer but is not obligated to do so.
The second variation involves the seller taking the responsibility for arranging the shipping and insurance on the buyer's account. But still the responsibility for nominating the vessel is left with the buyer.
The third variation is the one which is presently in practice, where the vessel is nominated by the buyer and also the buyer makes the contract of carriage.8
As a consequence in a FOB contract if the buyer fails to advise his nomination of a specific vessel within the time stipulated under the contract the contract can be terminated by the seller. With this repudiation of the contract the seller reserves the right to sell the goods to any other third party and also to recover any resultant loss from the buyer.
FOB is being used as one of the important commercial term for the past two centuries and because of the familiarity traders do not wish use other terms while formulating the sales contracts. However this has resulted in using the term FOB wrongly as FOB Factory or FOB Plant which is an incorrect usage as stated by the International Chamber of Commerce According to the Chamber the term implies only 'Free on Board'.9
Thus under the FOB contract the seller need only to place the goods on board the ship which is nominated by the buyer. However as specified in Para B7 of Incoterms 2000, the buyer is obligated to give the seller sufficient notice of the vessel he has nominated. The buyer must advise the seller the name of the vessel, loading point, and required delivery time. According to the provisions of Para B7 of the Incoterms 2000 the FOB buyer having already nominated a vessel will not necessarily permitted to substitute another ship, unless the sale contract so provides and the seller may refuse to load the substituted vessel. This principle has been laid down in Cargill U.K Ltd v Continental U.