Discuss the duties of an exporter under FOB and CIF contract. Describe the major legal implications of FOB contract.
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The duties of the exporter include placing the goods onboard the carrier nominated by the buyer. However, in some cases, the exporter may contract with the carrier directly. The responsibility of the exporter ends once the goods are delivered to the carrier.
Under an FOB (Free On Board) contract, the duties of the exporter include:
1) Supplying the contracted goods in conformity with the contract of sale.
2) Delivering the goods on board the vessel named by the buyer at the named port of shipment.
3) Bearing all costs and risks of the goods until they effectively pass the ship’s rail.
4) Providing, at their own expense, the customary clean documents as proof of the delivery of the goods.
On the other hand, under a CIF (Cost, Insurance, and Freight) contract, the duties of the exporter include:
1) Supplying the goods in conformity with the contract of sale.
2) Arranging, at their own expense, for the shipping space by the usual route.
3) Paying the freight charges for the carriage of goods.
The major legal implications of an FOB (Free On Board) contract are as follows:
1) Delivery is considered complete when the goods are delivered to the carrier. This means that delivery to the carrier is equivalent to delivery to the buyer, unless the seller has reserved the right of disposal over the goods.
2) The price in an FOB contract covers all expenses up to the loading of the goods onto the carrier. Any costs incurred after that point are the buyer’s responsibility.
3) The risks associated with the goods pass from the seller to the buyer at the same time as the delivery is completed, i.e., when the goods are placed on the carrier.