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CLASS OF FOB

There are three major classes of fob, as mentioned in the case of Pyrene Co Ltd v Scinda

Navigation Co Ltd and they are:

1. The Classic Fob: Under this type of contract, the buyer nominates the ship and where it

will arrive, while the seller places the goods on the account of the buyer. The seller receives

the bill of lading and transfer to the buyer. The marine insurance is arranged by the buyer, but

the seller bears the cost.

2. Fob Contract with additional service: Here, all arrangement are made by the seller on the

account of the buyer but the buyer unlike the classic fob is not obligated to nominate a

suitable ship

3. Fob contract buyer contracting with the carrier or simply fob: The buyer here enters into

a contract of carriage by sea directly or through an agent, he nominates the ship, the seller

puts the goods, The bill of lading goes directly to the buyer, usually through the agent.

THE NATURE OF FOB CONTRACT

The seller often makes the contract of carriage. It must be reasonable in terms of the nature of

goods and other circumstances, If not when the goods are lost or damaged in the course of

transit; the buyer may decline to treat the delivery to the carrier as a delivery to himself or

may hold the seller responsible in damages. [3]

This is to say that the seller bears the burden the burden of the goods even though there is an

existing contract between the parties involved but the general liability passes to the owner

once the goods gets to buyer.[4] The seller has the general property in the goods at the time

of the contracting and retains such property throughout the period of carriage. He is normally

the proper party to sue on the contract and in tort.[5] However, where the buyer can acquire

the right of sue is if he is lawfully the holder of a bill of lading irrespective of whether he

has also acquired property in the goods. The buyer can also bring an action on the contract of

carriage from the time when he takes possession of the consignment note, or accept the goods

or ask the carrier for the consignment note for the goods or for a change to the terms of the

contract of carrage.Again,a buyer who has bought goods under certain types of Fob contracts

will be under a duty to make the contract of carriage and he will consequently be a party to

that contract even before he comes to own the goods under a contract of sell.[6]

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1. "classic or strict" fob,

2. fob "with additional services" and

3. "simple" fob.

These variations reflect different form legal point of view options, when in case of simple fob

the buyer enters into contract of carriage and acquire the right to sue the carrier under this

contract. In case of classic fob and fob with additional services, the buyer only becomes party

to any contract of carriage and is able to sue on it when the bills of lading were endorsed to

him and the only contract of which he could avail himself is that contained in or evidenced by

the bill of lading.

Such flexibility allows contracting parties to use fob contract as "skeleton" set of terms for

any further amendment as better fits their requirements.

Donaldson LJ in The El Amria and El Minia [1982] 2 Lloyds Rep. 28 referring with

approval to classification of fob contracts provided by Devlin J In Pyrene & Co. v Scindia

Navigation Co.[1954] 2 Q.B. 402, said at p.32:

In the first, or classic type, the buyer nominates the ship and the seller puts the goods on

board for account of the buyer, procuring a bill of lading. The seller is then a party to the

contract of carriage and if he has taken the bill of lading to his order, the only contract of

carriage to which the buyer can become a party is that contained in or evidence by the bill of

lading which is endorsed to him by the seller. The second is a variant of the first, in that the

seller arranges for the ship to come on the berth, but the legal incidents are the same. The

third is where the seller puts the goods on board, takes a mates receipt and gives this to the

buyer or his agent who then takes a bill of lading. In this latter type the buyer is a party to the

contract of carriage ab initio.

Classic type of fob contract where provision of the ship was the duty of the buyer was

considered in Scandinavian Trading Co. A/B v Zodiac Petroleum S.A. and William Hudson

Ltd., (The Al Hofuf) [1981] 1 Lloyds Rep. 81. It was varied by the custom of the oil trade to

the extent that the buyer must give, in succession, notices of expected time of arrival of the

vessel at the refinery or lifting port in question, 72, 48 and 24 hours in advance of the

anticipated date of arrival.

The second type of fob contract differs from the classic fob in several respects. First, the

seller nominates the ship and makes the carriage contract in his own name - as principal,

secondly, the seller and not the buyer arranges the insurance. See as example of this type of

fob contract considered in The El Amria and El Minia [1982] 2 Lloyds Rep. 28

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Under the third type of fob the buyer or his agent nominates and charters the ship, in other

words, enters into contract of carriage with the shipowner. The seller loads the goods on

board, collects mates receipts from the vessel and gives them to the buyer or his agent, who

obtains a bill of lading from the master in exchange for it. In this case the buyer and not the

seller is the party to the contract of carriage, see example of such fob in President of India vMetcalfe Shipping Line [1970] 1 QB 289.

Types of FOB Contracts

Pyrene v Scindia Navigation [[1954]] 2 QB

402 (per Devlliin J)

1. (The first type) (The classic FOB) The

buyers duty is to nominate the ship, and

the sellers 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.

2. (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).

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

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party to it.

(b) it is the seller who nominates the ship.

The extension of sellers duties may include

an obligation to procure insurance.

3. The third type is the Strict FOB. The

buyer engages his own forwarding agent

at the port of loading to book space and to

procure the bill of lading.

The seller has no function in the making of

the contract of carriage, whether as agent

for the buyer or as principal.

In the strict FOB, the seller discharges his duty

by putting the goods onboard, getting the mates

receipt and handing it to the forwarding agent to

enable him to obtain the bill of lading.

Devlin Js division of the three types of FOB

contract has been approved in The El Amira and

The El Minia [1982] 2 Lloyds Rep. 28.

In the strict FOB, the buyer nominates the

ship, procures the shipping space, and is

the legal shipper ab initio.

Bunge Corporatiion v Tradex Export SA [[1981]]

2 Allll ER 513

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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.

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.

The notice was late for four days.The

sellers selected to treat the contract as

terminated.

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.

Nevertheless, if the buyer does fail to

nominate an effective ship, the sellers

remedy is damages and cannot claim for

the price.

Colllley v Overseas Exporters

[[1921]] 3 KB 302

- The buyer under a contract FOB Liverpool was

unfortunate in that five ships successively

nominated failed to arrive.

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- The seller, who had delivered the goods at

Liverpool, claimed the contract price and failed

to recover it.

- Since there had been no shipment, there had

been no delivery to the buyer and the seller

could not demand the price but merely damages

for non-acceptance of the goods.

Substiitutiing the nomiinated shiip wiith another

shiip

Unless the buyers nomination is required

by the contract to be final, he is not

confined to it and may replace any

nomination by a later one provided that it

will be available for loading within the

stipulated period.

Agriiculltores Federados Argentiinos v Ampro

SA [[1965]] 2 Llloyds L..R.. 290

- The contract calls for the shipment of maize on

FOB terms between September 20 and 29.

- The buyers nominated ship A. This ship was

delayed by bad weather and would be unable to

reach the port of loading within the shipment

period.

- They then made a second nomination at 16:30

on September 29. The sellers refused to load

claiming that the buyers had breached the

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contract. The buyers sued the sellers for nonperformance.

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.

Held: The sellers were not entitled to treat the

contract as repudiated. 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.