IGNOU : M.COM : IBO 4 : UNIT 2 : Q - 2. Describe the major legal implications of FOB contract.

 

Ans. The major legal implications of FOB contracts are:

i) The delivery is completed by delivering the goods to the carrier. This means that delivery to the carrier operates as delivery to the buyer, unless the seller has reserved the right of disposal over the goods.

 ii) The price in a FOB contract covers all expenses up to the loading of the goods on the carrier. All costs subsequent to that point will be on the buyer's account.

 iii) Risks in the goods passes from the seller to the buyer at the same time when delivery is completed  i.e. when the goods are placed on the carrier.

iv) Normally property in the goods also should pass from the exporter to the importer along with risks. The passing of property may be postponed by a specific provision in the contract.

v) Payments fall due when the delivery is completed. It is generally stipulated that property will pass only when the buyer fulfils his contractual obligations under the' relevant terms. For example, acceptance of the Bills of Exchange submitted along with the Bill of Lading or the Airway Bill.