| Chapter: | Reading | Topic |
Lazur Corp. agreed to purchase 100 radios from Wizard Suppliers, Inc. Wizard is a wholesaler of small home appliances, and Lazur is an appliance retailer. The contract required Wizard to ship the radios to Lazur by common carrier, "F.O.B. Wizard Suppliers, Inc. Loading Dock." Under the UCC Sales Article
FOB, which stands for free on board, is a shipping term that indicates the point at which legal title to shipped goods is transferred from the seller (Wizard Suppliers, Inc.) to the buyer (Lazur Corp.).
There are two types of FOB designations:
If the goods are nonconforming, the buyer has a right to reject them. A buyer is not required to inspect the goods at the time of delivery, nor is inspection a requirement to sue for breach (Choice B). Title to the nonconforming goods reverts to the seller when the buyer sends them back.
(Choice C) When goods are sent FOB shipping point, the buyer is responsible for freight expenses unless the contract specifies otherwise.
(Choice D) Unless specified in the sales contract, the seller is not required to notify the buyer when shipment occurs.
Things to remember:
For goods shipped FOB shipping point, title passes from the seller to the buyer when the goods are delivered to the third-party transportation carrier, usually at the seller's loading dock. The buyer is responsible for freight expenses unless the contract specifies otherwise.
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