Distinguish between "FOB" and "FOB destination" contracts.
What will be an ideal response?
If the contract requires the seller to ship the goods by carrier but does not require that the seller guarantee their delivery to a specific destination, this is known as a shipment contract, and the risk passes to the buyer when the goods are delivered to the carrier. An "FOB" (free on board) shipping term creates a shipment contract. It calls for the seller to deliver the goods free of expense and at the seller's risk to the place designated. So, if the contract term is "FOB Chicago" or some other place of shipment, the seller bears the risk and expense of delivering the goods to the carrier. If the term is"FOB vessel, car, or other vehicle," the seller must load the goods on board at his or her own risk and expense.
If the contract requires the seller to guarantee delivery of the goods to a specific destination, this is known as a destination contract, and the seller bears the risk and expense of delivery to that destination. An "FOB destination" shipping term creates a destination contract. It puts the expense and risk of delivering the goods to that destination on the seller.
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