The document summarizes key aspects of free on board (FOB) contracts under international law. It discusses three main types of FOB contracts: (1) the classic FOB where the buyer nominates the ship and seller puts goods on board; (2) the extended FOB where the seller also makes shipping arrangements as principal; and (3) the strict FOB where the buyer is responsible for shipping arrangements. The duties of the FOB buyer include nominating the port and ship, securing shipping space, and contracting for carriage. The duties of the FOB seller include shipping goods of the contract description at the named port.

1. ILYANA ISKANDAR – INTERNATIONAL LAW NOTES AS OF 2016
FREE ON BOAR [F.O.B]
1. THE ESSENCE OF FOB CONTRACTS
a. Stock v Inglis
i. The words free on board would mean that the shipper (seller) was to put
the goods on board at his expense; and the goods so put on board would
be at the risk of the buyer, whether they were lost or not on the voyage.
b. Wimble v Rosenberg
i. The FOB is a contract for the sale of goods where the seller agrees to
deliver the goods over the ship’s rail, and the buyer agrees to convey it
overseas.
c. The incidents of the contract may be varied in many ways by reason of express
and implied terms in the contract.
d. The fact that the parties have described their contract as ‘FOB’ will not
necessarily be conclusive.
e. A court might come to the conclusion that it is not in fact an FOB contract.
2. TYPES OF FOB CONTRACTS
a. Pyrene v Scindia Navigation - (The first type) (The classic FOB)…
i. The buyer’s duty is to nominate the ship, and the seller’s to put the
goods on board and procure a bill of lading. In such a case the seller may
enter into the contract of carriage but it only will be as an agent of the
buyer.
ii. (The second type) is known as the “extended FOB” or “FOB with
additional services”. Sometimes the seller is asked to make the
necessary shipping arrangements (including entering into the
contract of carriage).
1. This differs from the classic FOB in two ways:
a. the seller makes the contract of carriage as principal,
the buyer is normally not a party to it.
b. it is the seller who nominates the ship.
2. The extension of seller’s duties may include an obligation to
procure insurance.
3. It is, therefore, quite similar to a CIF contract.
4. The difference would simply be in the computation of the price.
5. In the FOB, the price would not include the freight and the cost of
insurance. (The seller would make the contract of carriage or
insurance for the buyer’s account).

2. ILYANA ISKANDAR – INTERNATIONAL LAW NOTES AS OF 2016
6. So FOB price will be less than CIF price. (good for
importers/buyers)
iii. The third type is the Strict FOB.
1. The buyer engages his own forwarding agent at the port of
loading to book space and to procure the bill of lading.
2. The seller has no function in the making of the contract of
carriage, whether as agent for the buyer or as principal.
3. In the strict FOB, the seller discharges his duty by putting the
goods onboard, getting the mate’s receipt and handing it to the
forwarding agent to enable him to obtain the bill of lading.
iv. Devlin J’s division of the three types of FOB contract has been
approved in The El Amira and The El Minia
3. THE STRICT FOB
a. In the strict FOB, the buyer nominates the ship, procures the shipping space, and
is the legal shipper ab initio.
4. DUTIES OF THE F.O.B BUYER
a. To nominate the port of shipment, the vessel’s name and procure the necessary
shipping space
i. NOMINATION OF THE PORT OF SHIPMENT
1. The port of shipment is usually designated in the contract of
sale.
2. The contract will often state this precisely (e.g. FOB Liverpool).
3. But it may give alternatives (e.g., FOB Hull, Liverpool or
London) or a range of ports (e.g. FOB Danish ports).
4. If the contract is a multi-port one, the choice of port will
normally be the buyer’s and he has the corresponding duty of
notifying the seller of his choice in good time.
5. David Boyd v Louis Louca - The contract of sale contained the
provision “FOB good Danish port”. It was held that the buyer had
the option of selecting any good Danish port.
6. Gill & Duffus v Societe pourl’ Exportation - Failure to make a
nomination of the port of shipment and to notify the seller by an
agreed date may amount to a breach of condition precedent to
the seller’s obligation to load the goods.
7. date of shipment
a. A date or period of shipment is normally specified in the
contract of sale.

3. ILYANA ISKANDAR – INTERNATIONAL LAW NOTES AS OF 2016
b. If a period of shipment is specified, the option for the
actual time of shipment within the period lies with the
buyer.
c. Until the buyer has made an effective nomination of the
date of shipment, the seller’s obligation to have goods
ready to load at port does not arise.
d. A seller who takes goods to port for loading in the absence
of an effective nomination by the buyer does so at his
own risk.
e. J & J Cunningham Ltd. v RA Munro & Co. Ltd.
i. The contract was for the sale of bran under a
contract FOB Rotterdam and the shipment period
was specified as October.
ii. The seller moved his grain to port on 14 October.
f. The buyer did not make an effective nomination until 28
October, by which time the grain had deteriorated.
g. The buyer rejected the defective grain and it was held that
they were entitled to do so.
ii. NOMINATION OF THE VESSEL
1. It is the buyer who has to nominate the vessel to be used, if none
is specified in the contract of sale.
2. He must notify the seller of the ship’s readiness to load within a
reasonable time before the date for shipment so as to give the
seller sufficient time to complete the loading process.
3. Bunge Corporation v Tradex Export SA
a. The contract of sale required for the delivery of 15,000 tons
of soya bean meal FOB an American port in the Gulf of
Mexico.
b. The buyer is to nominate an effective ship to take delivery
of the goods and to give the seller at least 15 days notice of
readiness of the vessel to load.
c. The notice was late for four days. The sellers selected to
treat the contract as terminated.
d. The court gave judgment for the sellers and held that the
notice was a ‘condition’. It stated that “in a contract for the
sale of goods a stipulated time of delivery is of the
essence.”
4. Substituting the nominated ship with another ship
a. Unless the buyer’s nomination is required by the contract to
be final, he is not confined to it and may replace any

4. ILYANA ISKANDAR – INTERNATIONAL LAW NOTES AS OF 2016
nomination by a later one provided that it will be
available for loading within the stipulated period.
b. Agricultores Federados Argentinos v Ampro SA
i. The contract calls for the shipment of maize on
FOB terms between September 20 and 29.
ii. The buyers nominated ship ‘A’ and it was delayed
by bad weather and would be unable to reach the
port of loading within the shipment period.
iii. They then made a second nomination at 16:30 on
September 29.
iv. The sellers refused to load claiming that the buyers
had breached the contract.
v. The buyers sued the sellers for non-performance
vi. On the facts, it would have been possible to
complete loading before the end of September 29
(before midnight) if workers were made to work
overtime.
vii. Held: The sellers were not entitled to treat the
contract as repudiated.
viii. The buyers’ right to make a second nomination is
valid so long as the goods could be shipped
within the shipment period by the substitute
vessel.
5. express provision in the contract is final
a. Cargill v Continental SA
i. Where the contract expressly provides that the first
nomination is to be ‘final’, the buyer is bound by
his first nomination.
ii. He cannot make a substitution.
iii. TO SECURE SHIPPING SPACE
1. In the absence of contractual stipulation to the contrary, it is the
buyer’s duty to procure space on the nominated vessel.
b. to obtain the necessary import license
i. AV Pound & Co. Ltd. v MW Hardy - Normally it is the seller who is
required to procure the necessary export license.However, the buyer must
obtain any import license for the importation of the goods.
c. to contract for the carriage of the goods

5. ILYANA ISKANDAR – INTERNATIONAL LAW NOTES AS OF 2016
i. In the strict FOB, the buyer is the legal shipper.
ii. He must contract for the carriage of the goods.
iii. However, after loading, the seller will obtain from the master of the ship
the mate’s receipt and transfer it to the buyer.
iv. It enables the buyer to exchange the mate’s receipt for the bill of lading,
which in turn entitles him to possession of the goods from the carrier at the
port of destination.
v. The strict FOB contract is thus the most typical form of FOB contract.
vi. Pyrene v Scindia Navigation
1. The plaintiffs, Pyrene Co., sold a number of fire tenders to the
Government of India for delivery FOB London.
2. The buyers nominated a ship belonging to the defendants and
through their forwarding agents made all arrangements for the
carriage of the goods to Bombay.
3. While one of the tenders were being lifted into the vessel, it was
dropped and damaged before it had crossed the ship’s rail.
4. It was repaired at a cost of £966 and later shipped in another
vessel.
5. The sellers claimed the cost of repair from the defendant (SO) who
admitted negligence but pleaded that, being carriers, their liability
was limited to £200.
6. Devlin J held that the sellers were entitled to damages up to the
maximum limit of the liability, i.e., £200.
5. DUTIES OF THE FOB SELLER
a. To ship goods of contract description at the named port of shipment
i. Goods of contract description
1. The seller must ship goods that answer in all respects to the
contract description.
2. examination of the goods
a. The parties may have agreed on “pre-shipment
inspection”, which plays an increasing role in modern
export trade.
b. Where they have not so agreed, the buyer is not obliged to
inspect the goods when shipped.
c. If he fails to examine them on that occasion, he will not
lose his right of rejection if they do not conform to the
contract.
d. In this case, the only possible place of inspection would
be on arrival of the goods at their place of destination.

6. ILYANA ISKANDAR – INTERNATIONAL LAW NOTES AS OF 2016
e. The buyer may reject the goods on arrival if they do not
correspond to the description.
ii. at the named port of shipment
1. The due delivery point is the port of shipment designated in the
contract of sale.
2. If the seller fails to ship goods at the agreed, named port of
shipment, he commits a breach of a condition.
3. The named port of shipment in an FOB contract is a condition of
the contract.
4. Peter Turnbull & Co. v Mundas Trading Co (Australasia) Pty Ltd
a. Goods were sold FOB Sydney.
b. The sellers then alleged that they could not deliver at
Sydney and asked to be allowed to deliver at Melbourne.
c. The buyers refused.
d. In an action for non-delivery of the goods at Sydney, the
seller were held liable as the port of shipment is of the
essence of the contract.
iii. To pay all costs for loading the goods on board the ship
1. The seller is responsible for loading the goods on board the ship
and for paying the cost of this.
2. However, it may be otherwise depending on the custom of the
port.
3. Pyrene Co. v Scindia Navigation Co.: Devlin J: “It is the practice
in the port of London for all loading to be done by the port
authority at the ship’s expense. The whole charge, therefore, for
loading from alongside is paid by the ship and covered by the
freight”. all costs for loading the goods on board the ship
b. TO SHIP GOODS ON TIME
i. Assuming that the buyer has nominated an effective ship, the seller’s duty
is to deliver the goods by putting them on board the ship within the
stipulated shipment period.
ii. Since time is of the essence in the commercial context, his failure to do
so may be treated as a breach entitled the buyer to reject the goods.
iii. All Russian Cooperative Society Ltd. V Benjamin Smith
1. The seller was only able to get the goods to the ship 15 minutes
before expiry of the shipment period.
2. It was held that the seller was in breach for failing to ensure
sufficient time for loading.

7. ILYANA ISKANDAR – INTERNATIONAL LAW NOTES AS OF 2016
c. to obtain export license
i. AV Pound & Co. Ltd. V MW Hardy - Normally it is the seller who is
required to procure the necessary export license.
d. to deliver the necessary documents
i. Unless otherwise agreed, the seller must furnish to the buyer the
documents necessary for him to obtain possession of the goods from the
carrier at the port of destination.
ii. The seller will perform it by obtaining from the master of the ship the
mate’s receipt and transferring this to the buyer, thus enabling him to
exchange the mate’s receipt for the B/L, which in turn entitles him to
possession of the goods from the carrier at port of destination.
iii. Unless otherwise agreed, the seller can demand payment in exchange for
the documents, since the delivery obligation is deemed satisfied by the
furnishing of the documents.
iv. passing of property
1. In fact, the passing of property in an FOB contract will depend on
several factors such as the terms of the contract and whether the
seller has reserved the right of disposal of the goods.
2. So far as FOB contracts are concerned, when property passes
depends on whether the seller reserves the right of disposal of
the goods by taking control of the bill of lading.
v. seller does not reserve right of disposal of the goods
1. Carlos v Charles Twigg
a. If an FOB seller delivers the goods to a carrier, and does
not reserve the right of disposal by taking control of the
bill of lading, then the property will pass when the goods
are put on board (or shipped).
b. “Shipment” usually means the goods crossing the ship’s
rail.
2. Pyrene v Scindia Navigation
a. a fire tender was badly damaged when it fell back into a
lighter from a crane before it had passed over the ship’s
rail.
b. The goods were held to have been the property of the seller
at the time they were damaged.
c. In many FOB contracts, the seller will not have been paid
by the time the goods are loaded on board.
d. Therefore, the seller is at risk if the buyer does not pay.

8. ILYANA ISKANDAR – INTERNATIONAL LAW NOTES AS OF 2016
e.
vi. seller reserves right of disposal of the goods
1. FOB sellers, if not assured of payment pursuant to a letter of
credit, commonly reserve the right of disposal of the goods.
2. He will make it clear that the property in the goods is to remain
in him, irrespective of the fact that the goods have been shipped
or even that they have actually come into the possession of the
buyer or his agent.
3. He will normally retain this right of disposal until some
condition, usually payment of the price, has been met by the buyer.
4. In these circumstances property in the goods will not pass on
shipment.
5. A seller who takes out a bill of lading in his own name and not
in the name of the buyer is deemed to reserve the right of disposal
of the goods.
6. Therefore, if the seller enters into contract of carriage with the
carrier and obtains the bill of lading (as in the case of the classic
FOB or the extended FOB), the passing of property may be
deemed to be postponed until the seller endorses the bill of
lading to the buyer or his agent.
6. PASSING OF RISK
a. Under an FOB contract, the risk will usually pass to the buyer on shipment and
this will not be affected by the fact that the property does not pass at that time.
b. Stock v Inglis
i. Sugar was sold FOB Hamburg and shipped the goods accordingly.
ii. The ship and cargo were lost.
iii. It was held that the goods had been at buyer’s risk since shipment even
though property had not passed.