Incoterms_® and Commercial Contracts

EXW FCA CPT CIP DAP DAT DDP: may be chosen for maritime transport and should be chosen for wholly or partly non-maritime transport

FAS FOB CFR CIF: should only be chosen for maritime transport

EXW Seller wants to restrict its obligation merely to place the goods at the buyer’s disposal at the seller’s premises or another named place

FCA Seller willing to make the goods available for the buyer at the carrier’s named reception point and to clear the goods for export

CPT Seller, in addition to obligations under FCA, is also willing to provide and pay for a contract of carriage to a named destination

CIP Seller, in addition to obligations under CPT, is also willing to provide and pay for insurance DAP Seller willing to deliver at a named place and to assume all costs and risks until the goods arrive there

DAT Seller, in addition to obligations under DAP, is also willing to unload the goods from the means of transport upon arrival at the named place or point

DDP Seller, in addition to obligations under DAP, is also willing to clear the goods for import and pay the duty

FAS Seller willing to deliver, or procure the goods delivered alongside the ship

FOB Seller willing to deliver, or procure the goods delivered on board the ship

CFR Seller, in addition to obligations under FOB, is also willing to provide and pay for a contract of carriage to the named destination

CIF Seller, in addition to obligations under CFR, is also willing to provide and pay for insurance

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What happens if:

EXW Seller fails to place conforming goods at the buyer’s disposal in time?

FCA Seller fails to timely deliver conforming goods at the carrier’s reception point and/or to clear the goods for export?

CPT Seller fails to timely deliver conforming goods at the carrier’s reception point and/or to clear the goods for export or to provide and pay for the contract of carriage?

CIP Seller, in addition to any non-performance of obligations under CPT, fails to provide and pay for insurance?

DAP Seller fails to timely deliver conforming goods at the agreed place and/or to clear the goods for export?

DAT Seller, in addition to any non-performance of obligations under DAP, fails to properly unload the goods from the arriving means of transport?

DDP Seller fails to timely deliver conforming goods at the agreed place and/or to clear the goods for export and import?

Under all terms Buyer fails to pay or take the goods?

Answer:

Seller incurs liability for the consequences following from non-conformity and delay but subject to the seller’s right to cure any non-conformity by providing substitute goods and the right to avoid further liability by payment of fixed amounts for period(s) of delay and for the buyer’s loss in the event of its termination of the contract due to the seller’s breach.

If, under CIP or CIF, the seller fails to fulfill his obligation to provide and pay for insurance, the buyer is entitled to get the same amount from the seller as the buyer could have recovered from the insurer in case the seller had fulfilled its insurance obligation.

Buyer incurs liability for his failure to pay or take the goods, which may result in a liability to pay default interest (2% above the average bank short- term lending rate; clause 6.2) and/or damages. If the buyer’s breach is fundamental, the seller may be entitled to terminate the contract.

Relief from liability may be obtained in some cases of so-called force majeure events.

What happens if:

FAS Seller fails to timely place conforming goods alongside the ship in the port of shipment and/or to clear the goods for export?

FOB Seller fails to timely place conforming goods on board the ship in the port of shipment and to clear the goods for export?

CFR Seller fails to timely place conforming goods on board the ship in the port of shipment and/or to clear the goods for export or to arrange and pay for the usual contract of carriage?

CIF Seller, in addition to non-performance of obligations under CFR, fails to arrange and pay for insurance?

Under all terms Buyer fails to pay or take the goods?

Answer:

The seller’s and the buyer’s obligations are strict and, in the sale of commodities, time is of essence. The possibility to obtain relief by invoking “impediments beyond control” according to article 79 CISG is limited and any non-performance may work to the detriment of the other party in such a manner that it is entitled to terminate the contract according to articles 47,49 ( buyer for seller’s breach) and articles 63,64 (seller for buyer’s breach) compared with article 25 CISG. Also, when documents are tendered by the seller under documentary credits, any discrepancy may cause the bank to reject noncompliant document(s). Hence, the seller or the buyer may not only risk the loss of a profitable bargain but also a liability in damages for all consequences of the breach, except where, at the time of the conclusion of the contract, it was impossible to foresee such consequences of the breach.

If, under CIF, the seller fails to provide and pay for insurance, the buyer is entitled to get from the seller the same amount as he could have received from the insurer if the seller had fulfilled his insurance obligation. The seller’s failure to provide a document evidencing insurance will prevent him from obtaining payment under a documentary credit and may entitle the buyer to terminate the contract.

Buyer, under all terms, has to pay the agreed price even if the goods have become lost or damaged and bear any additional costs, provided the goods have been delivered as defined in articles A4.

Buyer, under FAS and FOB , has to bear the risk and cost if he fails to give appropriate notice or the nominated ship fails to arrive in time or is unable to take the goods, provided the goods have been identified as the contract goods.

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