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ACCA Applied Skills · Corporate and Business Law (Global) · Transportation documents and means of payment

Garnet Ltd sells a bulk cargo of grain to Hollis Ltd on FOB Port Alba terms (Incoterms 2020). Hollis fails to nominate a vessel in time, so the goods sit at the port, past the agreed date, and are then damaged by flooding. Garnet had clearly identified the goods as the contract goods. Who bears the loss?

Hollis bears the loss. Under FOB, if the buyer fails to nominate a vessel or give notice, risk passes early from the agreed date or period end, provided the goods are clearly identified as the contract goods, which Garnet had done.

  1. AGarnet, because delivery on board has not occurred
  2. BHollis, because where the buyer fails to give proper notice or nominate the vessel, risk can pass early once the goods are clearly identifiedCorrect
  3. CNeither party, because risk only passes on payment

Explanation

Incoterms 2020 provide that if the buyer fails to notify or nominate the vessel, risk passes to the buyer from the agreed date or the end of the agreed period, provided the goods are clearly identified as the contract goods. Garnet identified them, so Hollis bears the flood loss. Risk does not depend on payment.

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