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 his 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]