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Sale of Goods

Types of Contracts (With Regard To Delivery Of Goods)

There are various types of contracts from the point of view of the delivery of goods.

  1. F.A.S. or F.A.R. Contract - F.A.S. stands for 'Free Alongside Ship' and F.A.R. stands for 'Free Along with Rail'. Under FAS or far contracts, the seller is required to deliver the goods alongside the ship or rail named in the contract and to notify the buyer that the goods have been so delivered. The property in the goods passes to the buyer when the seller delivers the goods alongside the ship or rail. Thereafter, it is the buyer's duty to arrange for the contract of affreightment and insurance of the goods while the transit.
  2. F.O.B. OR F.O.R Contracts -- F.O.B. stands for 'Free on Board' and F.O.R. stands for 'Free on Rail'. In a F.O.B. (or F.O.R.) contract, the seller is required to deliver the goods on board the sip (or on rail), named in the contract. Thus, the seller has to bear all expenses upto and including shipment of goods on behalf of the buyer, who is responsible for their freight, insurance and subsequent expenses.

Thus, as soon as the goods are put on board the ship, the property in them passes to the buyer. This will be so even if the goods are not specific or ascertained. The buyer is liable to pay the price even if the goods are lost in transit. The property in goods shall, however not pass if the seller reserves the right of disposal.

  1. C.I.F. Contract -- The words 'C.I.F.' stand for cost, insurance and freight. A CIF contract is a type of contract wherein the price includes cost, insurance and freight charges. Under a CIF contract the seller is required to insure the goods, deliver them to the shipping company, arrange for their affreightment and send the bill of lading and insurance policy together with the invoice and a certificate of origin to a bank. The documents are usually delivered by the bank against payment of seller since he continues to be the owner of goods until the buyer pays for them and obtains the documents. The property in the goods passes to the buyer on the delivery of documents. The buyer is equally protected as he is called upon to pay only against the documents and the moment he pays, he obtains the documents, which enable him to get delivery of the goods. If in the meantime the goods are lost neither the buyer nor the seller is put to loss, whoever is the owner at the time of the loss can recover it from the insurer.
  2. Ex-ship contracts-- Under an 'ex-ship contract the seller has to delivery the goods to the buyer at the port of destination. In such contracts the property in the goods does not pass until actual delivery. The goods are at the seller's risk during the voyage. It is therefore, for the seller to insure the goods to protect his interest. The seller is to pay the freight, or otherwise release the ship owner's lien and to furnish the buyer with a delivery order or an effectual direction to the ship owner to deliver.

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