Designation of the passing of risk of loss of goods from seller to buyer.
Free on Board (FOB) indicates that the seller is responsible for getting the goods onto a ship designated by the buyer. At this point, the risk of loss passes from the seller to the buyer.
When this term is followed by a city, that indicates where the risk will pass.
Background: Historically, Free on Board was a maritime trade term, however it has been accepted in the ICC Incoterms in connection with the trasportation of goods by sea. Under common law, the use has been expanded to include inland carriage aboard any vessel, car or other vehicle.
See UCC §2-319(1)
Unless otherwise agreed the term F.O.B. (which means "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 (Section 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 his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this Article (Section 2-503);
(c) when under either (a) or (b) the term is also F.O.B. vessel, car or other vehicle, the seller must in addition at his 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 (Section 2-323).
Definition from Nolo’s Plain-English Law Dictionary
A reference to the place where purchased goods will be shipped without transportation charge. Free on board at the place of manufacture shows there is a charge for delivery. Example: if an automaker in Detroit sells a car "FOB Detroit," then there will be a shipping charge if delivery is taken anywhere else.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:16 pm