Contract Law Free on Board Fob Cif

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In this case study, Patina is the seller and Luca is the buyer under an FOB (Free on Board) agreement. General picture of a FOB contract can be congregated from the case of Wimble & Sons v Rosenberg & Sons which describes it as a contract for the sale of goods where the seller which in this case is Patina who agrees to deliver the goods over the ship’s rail and the buyer or Luca in this stance agrees to convey it overseas. According to English law, the case of Pyrene v Scindia defines a classic FOB contract which has occurred in this case study between Patina and Luca as the seller (Patina) draws up the contract with Luca who then nominates a vessel. If the buyer in a FOB agreement fails to nominate a ship within the actual contracted time then the contract may stand effectively repudiated. The seller or Patina in this case would have been legally allowed to sell goods to a third party thus recovering any losses from the buyer. The Incoterms definition of a FOB is basically deprived of the seller being the shipper or transporter of the goods and the buyer’s duty is to nominate a vessel as it is described in Pyrene’s case. The main issue in this case is the transfer of risk from the seller (Patina) towards the seller (Luca). And furthermore it will be argued in regard to case law and statues. According to an FOB agreement, risk is transferred at the point where the goods cross the ‘ships rail’. Plaintiff in the case of Pyrene & Co v Scindia Steam Navigation Co sued the defendant carrier and was victorious in recovering damages of £200 as the defendant was found to be liable as he showed negligence while loading the goods and therefore the goods were damaged when they reached the plaintiff. Develin J in Pyrene’s case judged that the liability of negligence would extend to cover up damages if the goods are damaged during the process of loading either side of the ship’s rail. This was the point in English law where the problem of risk bearing arose as it was difficult to decide if the goods lean back over the ships rail and fall on the dock. In an FOB contract, goods which have passed the ships rail and are then damaged then the buyer is responsible for all the loss or damage even if the goods fall on the deck but if the goods fall on the wharf or water then the seller has to bears the losses. Conflicts basically arise when both the parties fail to understand the workings of the ‘ship’s rail’ concept. Case of Thermo Engineers Ltd v Ferry Masters Limited explains this concept perfectly. The facts of this case were that an English seller of a heat exchanger decides to enter in a FOB agreement with a buyer located in Denmark’s city of Copenhagen. The heat exchanger was carried by trailer onto the vessel which had a damaged lower deck. The damage was covered by the high calibre of the Hague-Visby rules as they provide that the carrier is only liable from the point where the goods are loaded on the ships and as the trailer had crossed the rails of the ship when the damage was done which relieved the burden of risk from road provisions authority which would have been liable if the damage would have occurred prior to the crossing of the ship’s rail. Due to uncertainty a new term of FCA (Free carrier) Incoterm was developed in order to provide an alternative to FOB. This was one of the major developments in International Trade Law after 1936 when Incoterms were first introduced to define costs, risks and obligations of buyers and sellers in International transactions. Legal duties of Patina under a classic FOB contract are to ship goods of contractual description at port of shipment. Section 13 of the Sale of goods act 1979 provides that the goods should correspond to the description which is present in the contract. Accordingly to Section 15A of Sale of goods act 1979, a breach if there is minor and a breach of warranty rather than a breach of condition. Thus does not allow the buyer to reject the goods. Seller’s delivery to the...
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