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com

INTERNATIONAL TRADE LAW

RESEARCH TOPIC: FREE ON-BOARD CONTRACT (FOB)
BY MAGALA FRED

Free On Board (FOB) refers to an international contact of sale of goods where the seller
undertakes the role of placing the goods on board a ship that has been nominated or named by
the buyer at the agreed place of shipment. The seller is bound to foot all the costs from his place
of manufacture up to when the goods are loaded on the ship nominated by the buyer.
The buyer under this contract is responsible for all other costs the moment the goods are
delivered and loaded on the nominated ship. The buyer has then procured space for storage of the
goods on board as well as freight and marine insurance not leaving out the costs of unloading
when the goods reach the desired planned destination.
In the case of Wimble sons & co. Ltd. V Rosenberge & Sons (1913) 3kb it was elaborated that
an FOB contract is one where the seller is obliged to deliver and load the goods on his expense
on the account of the buyer.1
Further in the case of Prynean v Scindia Navigation (1952) 2 QB 402 where the plaintiff sold
certain machines Free On-Board London where the buyers made arrangements for carriage to
Bombya aboard the defendant’s vessel.2 One of the machines was dropped and damaged through
the defendant’s negligence while loading. The contract of carriage was intended to be covered by
the bill of lading issued under the HAGUE RULES. The question before court was “whether
the defendants were entitled to take advantage of a limitation of liability contained in the
those.”
Court held that there are different types of FOB contracts and proceeded to examine their
nature.
Classic type: under the classic type the buyer is under a duty to nominate the ship and the
seller’s duty is to put the goods on board for the account of the buyer and procure a bill of lading
in terms usual in trade. Therefore, this makes the seller party to the contract of carriage and the
buyer only acquires the property in the goods when they pass over the ship’s rail which usually
occurs before the issuance of the bill of lading.
Bare FOB contract: under this FOB contract the buyer is required to engage the carriage
vessel, in absence of provisions to the contrary, the FOB seller can presume that this will be done
and the seller is not a party to the contract of carriage.
1
Wimble Sons & Co. Ltd. V Rosenberge & Sons (1913) 3 kb 743 <
https://www.coursehero.com/file/p396h95i/Wimble-sons-v-Rosenberg-and-sons-COA-HELD-this-can-be-complied-
with-if-the-buyer/> accessed 31st.03.2023.
2
Pyrene Co Ltd v Scindia Navigation Co Ltd: QBD 1954< https://swarb.co.uk/pyrene-co-ltd-v-scindia-navigation-co-
ltd-qbd-1954/> accessed 31st.03.2023.
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In Ian Stach Ltd. V Baker Basley Ltd. (1958) 2 QB 130, Diplock J. held that under an FOB
contract it’s upon the buyer to nominate a ship and as well find space there on and as well
determine the date and place of shipment. This makes the FOB contract peculiar from the rest.3

PARTIES UNDER FREE ON BOARD

There are different parties under an FOB contract and these include the following;
I. Seller
II. The buyer
III. Carriage / shipper
PASSING OF PROPERTY AND RISK
Article 67 of the United Nations Convention on Contracts for the International Sale of
Goods, states that, “if the contract of sale involves carriage of the goods and the seller is not
bound to hand them over at a particular place, the risk passes to the buyer when the goods are
handed over to the first carrier for transmission to the buyer in accordance with the contract of
sale. If the seller is bound to hand the goods over to a carrier at a particular place, the risk
does not pass to the buyer until the goods are handed over to the carrier at that place. The fact
that the seller is authorized to retain documents controlling the disposition of the goods does not
affect the passage of the risk”.4
Its evident in the case of Pyrene & Co Ltd v Scindia Steam Navigation Co Ltd5 where risk
was at the seller’s risk when a machine was dropped during loading prior to crossing the ship’s
rail. Therefore, in an FOB risk doesn’t pass until the goods have passed the rail od the ship and
are on board.
Where the goods are ascertained, under a standard FOB the property in the goods shall pass
shall pass immediately the goods are loaded on the rails of the shipment unless there is an
express provision postponing the passing of the title to the goods, for example where the
parties agreed that the property in the goods shall only pass after complete payment the it doesn’t
pass until the same is done.
OBLIGATION OF PARTIES UNDER AN FOB
Buyer’s obligations;

3
IAN STACH, LTD. v. BAKER BOSLY, LTD. [1958] 1 Lloyd's Rep. 127< https://www.i-law.com/ilaw/doc/view.htm?
id=145152> accessed 31st.03.2023.
4
Article 67, United Nations Convention on Contracts for the International Sale of Goods<
https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/19-09951_e_ebook.pdf> accessed
31st.03.2023.
5
Pyrene Co Ltd v Scindia Navigation Co Ltd: QBD 1954< https://swarb.co.uk/pyrene-co-ltd-v-scindia-navigation-co-
ltd-qbd-1954/> accessed 31st.03.2023.
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In stach V Baleer (1958) 2 QB 130, opening credit in time as a condition of a contract was held
as one of the duties of a buyer under FOB.6
This is also provided under article 54 of the United Nations Convention on Contracts for the
International Sale of Goods where payment of the contractual price is taken as a paramount
duty of the buyer.
Subject to Article 58(3) of the United Nations Convention on Contracts for the International
Sale of Goods, the buyer is not bound to pay the price until he has had an opportunity to
examine the goods, unless the procedures for delivery or payment agreed upon by the parties are
inconsistent with his having such an opportunity
The buyer as well is obliged to give reasonable notice of the vessel where the seller is to load the
goods as held in Bunge corporation (New York) V Tradax export SA PANAMA (1981) 1
WLR 7117. In this it was held that under an FOB, the buyer was required to give “at least 15
consecutive days’ notice of the probable readiness of their vessel to load the goods. The seller
will need the information of the nominated suitable vessel to collect and take delivery of the
goods. The same position was pronounced in the case of Wimble sons & co. Ltd. V Rosenberg
& Sons (1913) 3kb8
Its also the duty of the buyer to nominate the port of loading under FOB contract and this should
always be done in time where its done, late then the seller has got a right to cancel the contract as
held in Hong Kong Fur Shipping co. v Kawasaki Kisen Kashia (1962) QB 26 9. where the
contract is silent, three situations may arise;
I. The port of loading will be named in the contract.
II. The contract may say nothing at all about the matter
III. The contract may name a range of ports or a geographical area.
The same position was emphasized in the case of Boyd & Co. v. Louca (1973) 1 LIR 209 where
the buyer failed to nominate a port of delivery and the seller sought damages for breach of
contract. It was held that the buyer was liable to pay such damages for failure to nominate the
port of delivery and inform the seller early enough hence breach of contract under FOB. Under
such circumstances the seller is entitled to treat the contract as repudiated where the buyer fails
to nominate the ship and port in the stipulated time if no time is stipulated, in a reasonable time.
er shipment

6
IAN STACH, LTD. v. BAKER BOSLY, LTD. [1958] 1 Lloyd's Rep. 127< https://www.i-law.com/ilaw/doc/view.htm?
id=145152> accessed 31st.03.2023.
7
Bunge corporation ( nweyork) V tradax export SA PANAMA >https://simplestudying.com/bunge-corporation-v-
tradax-1981-1-wlr-711/#:~:text=In%20the%20case%20of%20Bunge,the%20sellers%20by%2013%20June> accessed
31st.03.2023
8
Wimble Sons & Co. Ltd. V Rosenberge & Sons (1913) 3 kb 743 <
https://www.coursehero.com/file/p396h95i/Wimble-sons-v-Rosenberg-and-sons-COA-HELD-this-can-be-complied-
with-if-the-buyer/> accessed 31st.03.2023.
9
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26< https://lawprof.co/contract/terms-of-
contract-cases/hong-kong-fir-shipping-co-ltd-v-kawasaki-kisen-kaisha-ltd-1962-2-qb-26/> accessed 31st.03.2023.