A fob supply agreement, also known as a free-on-board supply agreement, is a type of contractual arrangement between a buyer and a seller where the seller is responsible for delivering the goods to the port of shipment and loading them onto a vessel designated by the buyer.
Under a fob supply agreement, the seller is not responsible for any damages or losses incurred during transportation after the goods have been loaded onto the vessel. The buyer assumes ownership and all the risks associated with the goods once they are aboard the vessel.
In a fob supply agreement, the seller is responsible for delivering the goods to the port of shipment and ensuring that they are ready for shipment. The seller is also responsible for loading the goods onto the vessel designated by the buyer. Once the goods are loaded onto the vessel, the seller`s obligation ends and the buyer assumes all the risks and responsibilities for the goods.
It is important to note that the seller may not always own the goods being sold under a fob supply agreement. Many times, the goods are owned by a third party, such as a manufacturer or distributor. In such a scenario, the seller acts as an intermediary, facilitating the sale between the buyer and the third-party owner.
Fob supply agreements are common in international trade where goods are transported by sea. They allow both the buyer and seller to have clear responsibilities and protect them from potential losses. However, it is crucial for both parties to understand the terms of the agreement and ensure that it works for their specific needs.
In conclusion, a fob supply agreement is a contractual arrangement that assigns clear responsibilities to the buyer and seller when it comes to the transportation of goods via sea. It is a common agreement in international trade and can be beneficial for both parties when used properly. As with any contract, it is important to understand the terms and conditions before entering into a fob supply agreement.