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ACCA Applied Skills · Corporate and Business Law (Global) · Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms

Zanto Ltd (seller) agrees to sell machinery to Brevik Co (buyer) on FOB Port of Santos, Incoterms 2020 terms. At which point does the risk of loss of or damage to the goods pass from the seller to the buyer?

Under FOB, risk passes to the buyer when the goods are placed on board the vessel nominated by the buyer at the named port of shipment. From that moment the buyer bears loss or damage, even though the vessel has not yet reached its destination.

  1. AWhen the goods are placed on board the vessel nominated by the buyer at the named port of shipmentCorrect
  2. BWhen the goods are unloaded at the port of destination
  3. CWhen the contract is signed by both parties
  4. DWhen the goods are handed to the first carrier at the seller's factory

Explanation

Under FOB (Incoterms 2020) the seller delivers when the goods are placed on board the vessel nominated by the buyer at the named port of shipment. Risk passes at that point. Option B describes a rule used under arrival terms such as DPU, and option D describes FCA.

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