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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

Zenith Ltd in Country A agrees to sell machinery to Borra Co in Country B on a contract that states only 'FCA Zenith's factory, Incoterms 2020'. Borra Co asks what the Incoterms rule actually covers. Which statement is correct?

Incoterms allocate delivery tasks, costs and risk between seller and buyer. They do not cover transfer of ownership, price, payment, governing law or dispute forum, so those matters must be agreed separately in the contract.

  1. AIt allocates tasks, costs and risks of delivery between seller and buyer, but does not deal with transfer of ownership of the goodsCorrect
  2. BIt determines when ownership of the goods passes to the buyer
  3. CIt sets the governing law and the court that will hear any dispute
  4. DIt sets the price and the payment terms for the goods

Explanation

Incoterms rules define delivery obligations, the division of costs and the transfer of risk between seller and buyer. They do not govern transfer of property, price, payment terms, governing law or jurisdiction; these must be dealt with elsewhere in the contract. The ownership option is wrong because title is outside Incoterms.

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