Incoterms, and the Transfer of Risk and Title in Sale of Goods Transactions
Parties should be aware of the risks associated with both a contract title clause and a negotiable bill of lading.
April 13, 2023 at 12:28 PM
6 minute read
Cargo and ShippingIn 1936, the International Chamber of Commerce (ICC) developed a set of three-letter acronyms known as Incoterms for use in sale of goods contracts to allocate risk of loss and expenses between buyers and sellers. Each acronym reflects a time or place for delivery and when placed sequentially in a table for ease of comparison, the set graphically creates staircases depicting the respective obligations of each party in the movement of goods from origin to destination. Perhaps the most familiar of these acronyms is FOB, meaning free on board. For example, if a contract of sale includes the term FOB vessel, the seller must load the goods aboard the vessel free of cost to the buyer. There the risk of loss passes to the buyer, who must then undertake to transport the cargo to destination and pay for all attendant expenses, including export and import fees, stevedore charges to unload the goods at destination, and destination terminal charges and storage there, if necessary.
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