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(7) SFC + FOB ITL SOG (FOB ks (duties of FOB (passing of (Passing of…
(7) SFC + FOB ITL SOG
FOB ks
- Mitsui & Co Ltd v Flota Mercante Grancolombiana SA [1988] 1 WLR 1145, Staughton LJ at 1151
‘The expression “f.o.b.” determines how the goods shall be delivered, how much of the expense shall be borne by the sellers, and when the risk of loss or damage shall pass to the buyers. It does not necessarily decide when the property is to pass.’
duties of FOB
seller
- Supply goods conforming to contract
Put goods on board ship nominated by buyer
Meet expenses until goods on board
Obtain and tender documents to buyer (e.g. BoL)
Ensure goods are shipped within agreed shipment period
Provide B with relevant information to arrange insurance (SOGA 1979, s 32(3))
buyer
- Procure a ship or space on a ship
Give shipping instructions to seller: location and timing for loading of goods
Meet expenses after shipment of goods
Pay contract price
passing of
Passing of property - presumptive rule
- General rule: property passes when the goods are put ‘over the ship’s rail’
:check: See Carlos Federspiel & Co SA v Charles Twigg & Co Ltd [1957] 1 Lloyd's Rep 240 - costa rican buyer of bicycles, english manufacturer (seller) went into liquidation before goods went to the port …although bicycles had been packaged up in sellers premises. Buyers tried to argue goods alr passed. Judge held it hasn't passed. P
But common for S to reserve right of disposal until B has paid: see SOGA 1979, s 19(1) and (2)
Passing of risk
- General rule: risk passes to B when goods are put on board ship (e.g. Scottish & Newcastle)
Applies even when S has reserved the right of disposal
privity
privity
Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402 - raised a privity issue
- Pyrene sells goods to customer
Goods damaged when being loaded, but not yet across ship’s rail. S wanted to sue carrier.
Tort claim by Pyrene against Scindia (carrier)
Question: liability limited by relevant Convention?
Answer turns on whether Pyrene was a party to the contract of carriage (i.e. issue is privity of contract)
Devlin J: Pyrene had participated in the contract of carriage and therefore limitation applied
[ there are many variations to fob contracts. (1) classic type ]
Devlin J at 424:
- ‘[1]The f.o.b. contract has become a flexible instrument. In what counsel called the classic type as described, for example, in Wimble, Sons & Co. Ld. v. Rosenberg & Sons the buyer's duty is to nominate the ship, and the seller's to put the goods on board for account of the buyer and procure a bill of lading in terms usual in the trade. In such a case the seller is directly a party to the contract of carriage at least until he takes out the bill of lading in the buyer's name... ’
[(2) where FOB seller makes arrangement themselves. Small packages (where seller sorts out shipping arrangements themselves) ]
- ‘ … [2] Sometimes the seller is asked to make the necessary arrangements; and the contract may then provide for his taking the bill of lading in his own name and obtaining payment against the transfer, as in a c.i.f. contract … ’
[(3) where buyer sorts out the goods….. While there are standard incidents, they are varied in a # of ways. There is a set obligations.]
‘ … [3] Sometimes the buyer engages his own forwarding agent at the port of loading to book space and to procure the bill of lading; if freight has to be paid in advance this method may be the most convenient… the seller discharges his duty by putting the goods on board, getting the mate's receipt and handing it to the forwarding agent to enable him to obtain the bill of lading. The present case belongs to this third type; and it is only in this type … that any doubt can arise about the seller being a party to the contract.’
Scottish & Newcastle International Ltd v Othon Ghalanos Ltd [2008] UKHL 11, [2008] 2 All ER 768, Lord Mance at [34]:
‘[FOB as described by Devlin J in Pyrene v Scindia] embraces (a) cases where the buyer arranges and nominates the ship, but the seller ships and takes the bill of lading in his own name as consignor, (b) cases where the seller arranges shipment and takes the bill in his own name as consignor and (c) cases where the buyer arranges and nominates the ship, and the seller ships but the buyer is named in the bill as consignor’.
Standard form contracts
- International sales contracts often made using standard form agreements
- Trade association contracts: e.g. Grain and Feed Trade Association (GAFTA)
- E.g. GAFTA Contract 100 is a general feeding stuffs contract on CIF terms. GAFTA 41 is a hot one
- Evolved in response to case law development
- Incoterms 2010 (International Chamber of Commerce)
- Sets of terms setting out rules for a range of different international sales contracts
- Ks developed over a long time. Trade associations tend to amend standard form ks to address problems
Notice of appropriation
:check: Waren Import Gesellschaft Krohn & Co v Alfred C Toepfer (The Vladimir Ilich) [1975] 1 Lloyd’s Rep 322, Donaldson J at 328
‘The giving of a valid notice of appropriation narrows the contract to a particular parcel or parcels goods being carried in a named vessel under a bill of lading of a given date. It may, but will not necessarily convert the contract into one for specific [more correctly, ascertained] goods, depending on whether the bill of lading relates to an unseparated part of a larger bulk cargo.’
NOA doesn't necessarily result in passing of property
- Often a k requirement in CIF contracts that S provide a notice of appropriation to B
- Usual in commodity sales
- Common feature of standard form contracts
- Issued after shipment of goods, but before tender of the documents: Gives buyer information about the actual goods shipped beyond the general contract description
- May also be referred to as a declaration of shipment
When S and B enter into k for wheat, k will usually refer it to a particular kind of wheat. But at the point, notice of appropriation narrows down what S provides
CIF and FOB
- Particular risks in international sales context: financial, physical and/or legal
- The law recognizes particular forms of contract for international sales, including …
- FOB (free on board) and CIF (cost, insurance and freight)
- CIF and FOB contracts characterized by
- Typical duties of S and B, and
- Presumptions with regard passing of property and risk
- FOB: UK seller contracts with Malaysian buyer for the supply of industrial machinery
S responsible for ensuring goods put on board a particular ship at a particular port (notified by the buyer)
S may retain ownership until paid
- CIF: Canadian seller contracts with German buyer for the sale of wheat
S has wheat loaded onto the ship in Canada
When the ship is mid-Atlantic German B makes a sub-sale to a Swiss company
- ‘FOB Liverpool’
Liverpool is port of shipment: i.e. S will put goods aboard ship in Liverpool
- ‘CIF Rotterdam’
Rotterdam is the destination port: i.e. where B will take delivery
- May be a ‘string’ of sales
Only initial S makes physical delivery of goods
Only final B takes physical delivery of goods