Fob Supply Agreement

It is also important for those who design delivery contracts involving incoterms to understand how specific goods are delivered physically (i.e. by what mode of transport, how they are packaged, etc.). It is common for the person processing the delivery contract (usually a “home” or “external” agent) to be not as familiar with the actual nature of the delivery as the “supply person” on site. Gaps in understanding this process can lead to contractual design issues. For example, when goods are stored in containers, it is customary for containers to be delivered to the terminal by the vendor and not transported on board the ship, as this is the responsibility of the logistics officers. If a supplier has been responsible for FOB delivery, but there are provisions in the delivery contract that offer the supplier a delay exemption outside its proper control, a buyer cannot be protected from late delivery if the reason for the late delivery is the delay of delivery through logistics. Conversely, if the supplier has accepted the delivery of FOB but does not have, under the delivery contract, an exemption from non-loading containers by these intermediaries, the supplier may face contractual liability in the event of a delay, etc., regardless of whether it delivered the containers to the port at the right time. Hanjin Shipping`s financial problems in mid-2016 caused many sleepless nights for sellers who, in this regard, had contracted inappropriately under FOB`s terms. This is a warning story for sellers and buyers. Again, in a delivery contract drawn up by the buyer, it is not uncommon for there to be provisions that the responsibility for all licences and authorizations related to the delivery of goods rests with the seller (with the exception of explicit exceptions). Such a “catch all” provision is in turn at odds with a number of incoterms which provide who is responsible for the export and who is responsible for the importation of the goods, as well as the licenses and authorizations associated with them, which are necessary.

If EXW is the applicable delivery time, any clause requiring the seller to ensure that all export licenses and authorizations of the goods are obtained is inappropriate. Under EXW`s terms and conditions, the seller is not required to obtain export authorizations. This is done at the buyer`s peril and at the buyer`s expense. If the parties intend to arrange this by the seller, FCA should be used instead. Incoterms can play a very useful role in procurement contracts by optimizing efficiency in the drafting process and in the field, as they are generally understood and eliminate the need for full commitments. However, the purchase of critical equipment for projects is too regular with delivery contracts that do not correspond to the incoterms indicated there. Nor are incoterms sufficient on their own to deal with all aspects of the sale and purchase of goods, even for a simple delivery contract. For example, if one refers only to a particular incoterm in an order without additional conditions, this means that the contract does not deal with issues such as the existence of legislation on goods, the control and receipt of goods, price, payment mechanisms, force majeure, breach of contract, termination and dispute resolution procedures. None of these issues are dealt with by Incoterms, which deals only with transport-related issues. Therefore, these clauses must be included, among other things, in the supply contract concerned.

Although incoterms is widely used in many national and international procurement agreements around the world, including in Australia, they are often incorporated by reference to “off the shelf” or “precedent” supply contracts, specific incoterm agreements not subject to sufficient review and consideration, and aspects of their supply contracts that need to be amended to adequately integrate the relevant incotert. This error leads to delivery contracts containing incoherence