Legal Definitions - free on board (FOB)

Definition:Free on board, or FOB, is a term used in the sale of goods. It means that the seller will place the purchased goods on board a vessel for shipment at a designated location without any cost to the buyer for packing, postage, or cartage. At this point, the legal title, rights, and risk of loss pass from the seller to the buyer. The designated location is usually a transportation depot.

For example, if a buyer in New York purchases goods from a seller in China with FOB terms, the seller will be responsible for shipping the goods to a designated location in China and loading them onto a vessel. Once the goods are on board, the legal title and risk of loss pass to the buyer, who is responsible for any further transportation costs and risks.

The Uniform Commercial Code (UCC) provides specific terms for FOB. According to UCC § 2-319, unless otherwise agreed:

• If the term is FOB the place of shipment, the seller must ship the goods at that place and bear the expense and risk of putting them into the possession of the carrier.
• If the term is FOB the place of destination, the seller must transport the goods to that place and tender delivery of them.
• If the term is FOB vessel, car, or other vehicle, the seller must load the goods on board at their own expense and risk.

Overall, FOB is a delivery term that specifies the responsibilities of the seller and buyer in the shipment of goods. It is important for both parties to understand the terms and agree upon them before making a purchase or sale.