195 4â Ex Works
lading in his own name, then property will pass at a later stage, normally against payment of the goods. Goods, if shipped in bulk, must be ascertained for the purposes of section 16 of the 1979 Act before property will pass.
(d)â Passing of risk
In a FOB contract, risk will pass on shipment even if property may not have passed at the same time. In Stock v. Inglis,49 a cargo of sugar was shipped ‘FOB Hamburg’, however the bags were not appropriated to the contract; when the ship and goods were lost it was held that the cargo was at the risk of the buyer even though property had not passed.
Q6 In what circumstances can the FOB buyer substitute a nominated ship?
(e)â FOB and INCOTERMS 2010
Under INCOTERMS 2010, FOB is varied from its meaning under English law. Although the seller is not under an obligation to the buyer to make a contract of carriage, INCOTERMS provide that if requested by the buyer or if it is commercial practice and the buyer does not give any contrary instructions, the seller ‘may’ arrange for carriage of the goods on the usual terms; this will be at the buyer’s risk and expense. If the seller declines to perform this duty he must notify the buyer.
There is no obligation for the seller to arrange for insurance of the goods, however he must provide any information that the buyer needs to obtain insurance.
The seller is under a duty to pack the goods; the cost of any pre-shipment inspection required before export can take place will be at the seller’s expense. Delivery will consist of placing the goods on board the vessel as opposed to
‘over the ship’s rail’; risk will pass at this time as well.
4â Ex Works
The trade term ‘Ex Works’ places the least amount of responsibility on the seller, with the buyer performing most of the duties under the contract. When a contract is made subject to the term ‘Ex Works’, the place of delivery is usually the seller’s place of business. It is the buyer’s duty to collect the goods from the seller’s premises on the date of delivery. The buyer will bear the cost of transporting the goods to their destination as well as the risk of any loss or damage. The seller is usually not required to load the goods for transport, however parties are free to make any express contractual stipulations to this effect.
49 (1884) 12 QBD 564.
196 |
Standard trade terms |
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5â FAS contracts
FAS (free alongside ship) is similar to FOB with the exception that the goods are delivered when they are placed alongside the ship. The seller must provide the goods and the documents, in conformity with the contract of sale. The seller must obtain at his own expense any export licences necessary to facilitate shipment. The buyer is under an obligation to name a port of shipment and to nominate a vessel. He must take delivery of the goods and pay the contract price. Once delivery is made alongside the vessel, risk will pass to the buyer.
6â Conclusion
As we can see, standard trade terms fulfil a useful function in international trade. They set out the obligations of the buyer and seller as well as determining when risk and property will pass. Parties to the contract can choose to incorporate INCOTERMS to provide a set definition of their obligations under the contract. Courts will give effect to these trade terms if the parties make an express stipulation to that effect.
7â Recommended reading
Atiyah, P.S., Adams, J. and MacQueen, A. The Sale of Goods (11th edn, Pearson Education Ltd, Harlow, 2005)
Bridge, M. The International Sale of Goods (Oxford University Press, 2007) Evans, P. ‘FOB and CIF contracts’ (1993) ALJ 844
Gower, S., ‘FOB contracts’ (1955) 19 MLR 417 Ramberg, J. Guide to INCOTERMS 1990 (ICC, 1991)
Sassoon, D.M. ‘Application of FOB and CIF sales in common law countries’ (1981) ETL 50 Treitel, G.H. ‘Rights of rejection under CIF sales’ (1984) LMCLQ 565
Part 3 Chapter 2
The Vienna Convention on the International Sale of Goods 1980 (CISG)
Contents
1â |
Introduction and background |
197 |
2â |
Structure and scope |
198 |
3â UNIDROIT Principles of International Commercial Contracts |
212 |
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4â |
Conclusion |
213 |
5â |
Recommended reading |
213 |
1â Introduction and background
Due to the effects of increased trade amongst states in the late twentieth century, the need for a harmonised instrument of international sales law was expressed. It was envisaged that a harmonising measure would increase international trade, promote fairness and reduce the negotiation cost of transactions.
In 1929, Ernst Rabel working with the International Institute for the Unification of Private Law (UNIDROIT), sought to establish a uniform law governing transactions of sale. This resulted in two Hague Conventions in 1964: the Uniform Law for the International Sale of Goods (ULIS), and the Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF). These Conventions came into force in 1972, but they had limited success as uniform law, because they were generally considered too wide-ranging in scope and thought to favour industrialised nations. They were therefore only ratified by nine countries, predominately European nations.
The failure of these Conventions led to the recognition that more effort was needed to create a uniform sales law that could be applied in all states regardless of their legal, social or economic backgrounds. In 1966, the General Assembly of the United Nations established the United Nations Commission on International Trade Law (UNCITRAL). This working group sought to review ULIS and ULF in order to create a new Convention, and the result of their efforts were completed in 1978. The UN Convention on Contracts for the International Sale of Goods (CISG) was signed in Vienna in 1980, and came into force in 1988 upon gaining the required number of ratifications. As