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ACCA Applied Skills · Corporate and Business Law (Global) · International trade, international legal regulation and conflict of laws

Evrin Co (seller) and Farrow Ltd (buyer) agree 'FOB Port of Evrin' for goods carried by sea in a vessel chartered by Farrow Ltd. The goods are damaged by a storm while still on the quay, before being loaded on board. Who bears the loss under the Incoterms rules?

Evrin Co bears the loss. Under FOB, risk passes to the buyer only when the goods are loaded on board the vessel at the port of shipment, so damage on the quay before loading falls on the seller.

  1. AFarrow Ltd, because the vessel was its choice
  2. BEvrin Co, because risk under FOB passes only when the goods are loaded on board the vesselCorrect
  3. CNeither, because FOB makes the carrier liable from the quay

Explanation

Under FOB the seller delivers, and risk passes, when the goods are on board the vessel at the named port of shipment. Goods on the quay are still at the seller's risk. Farrow's chartering the vessel does not alter the point at which risk passes.

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