HBC 2243 Notes compiled by Njihia Kaburu

1) Sale of Goods
i) Formation of contract for sale of goods
ii) Classification of goods
iii) Implied conditions and warranties
iv) Transfer of property in goods
v) Rights and duties of the parties
vi) Remedies of the parties
vii) International sale contracts

INTRODUCTION
The law relating to the Purchase and Sale of Goods is contained in the Sale of Goods Act Cap. 31,
Laws of Kenya. SGA a substantial reproduction of the English SGA 1893. The English Act was made
part of the Kenyan law by the colonial administration on 1/10/1931. The English Act has been
significantly amended (notably in 1979 and 1994).

MEANING
Under s. 3.(1) SGA, a contract of sale of goods:
“ is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer
for a money consideration, called the price.”

CONTRACT
Thus the sale of goods is a contract, governed by contract law. All requirements for a valid contract
must be met e.g. offer to sell/buy and acceptance is necessary etc.

The contract can be either:

a) a sale: where transfer is immediate; or
b) an agreement to sell- where transfer is delayed

Difference between sale and agreement to sell

 Contract of sale
1. The property passes to the buyer (ownership) at the time of the contract.
2. The risk passes to the buyer immediately.
3. No resale of property.
4. The seller can sue for the price of the goods even when the goods are in his possession.
5. The seller must deliver the goods even when the buyer is insolvent.
6. Buyer can recover the goods from official receiver as the ownership of the property rests with the
seller if the buyer is adjudged insolvent.
 Agreement to sell
1. Possession passes to the buyer at the time of the contract
2. The risk e.g. theft remains with the seller.
3. Resale is possible
4. The seller can sue for damages only if the buyer refuses to pay and take the goods.
5. Delivery of the goods is not required.
6. If the buyer has already paid the price and the seller is adjudged insolvent, the buyer can only
claim a ratable dividend as a creditor. Therefore the property in them still rests with the seller.

Difference between sale and contract of sale and material

Where a contract is undertaking to use skill in producing a particular article e.g. paint, a portrait, the
contract is of work and material and not contract of sale of goods. The two must be distinguished
because of two main reasons:
- Contract of work and material does not require to be in writing while sale of goods must be in
writing.

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- The implied conditions and warranties under the sale of goods act does not apply to contract of
work and material.

SUBJECT MATTER OF THE CONTRACT

The subject matter of the contract is goods. These are defined in the interpretation section to includes
“all chattels personal other than things in action and money, and all emblements, industrial growing
crops and things attached to or forming part of the land which are agreed to be severed before sale or
under the contract of sale”

Definition covers most moveables but doesn’t include land, shares, debts, claims etc, which cannot be
moved away. Money sold as curio or collectors item qualifies but not when transferred as currency.

Further, Sec 7, 8 and 9 envisage the following types of goods;

a) Existing Goods
These are the goods which are physically in existence and which are in the seller’s ownership and/or
possession at the time of entering the contract. Where the seller is in possession, as an agent or a
pledge, he has the right to sell them. Existing goods may be either “specific” or unascertained.
b) Future goods
These are the goods to be manufactured, produced or acquired by the seller after making of the
contract of sale. These goods may be either not yet in existence or be in existence but not yet acquired
by the seller. It’s worth noting that there can be no present sale of future goods. Property can’t pass in
what is not owned by the seller at the time of the contract. So even if the parties purport to affect a
present sale of future goods, in law it operates only as an agreement to sell.
c) Contingent Goods
These are the goods which the acquisition of the seller depends upon an uncertain contingency.
Obviously they are a type of future goods and therefore a contract for the sale of contingent goods also
operates as “an agreement to sell” and “not sale” so far as the question of passing of the property to the
buyer is concerned. In other words, like the future goods, in contingent goods case also the property
does not pass to the buyer at the time of making the contract.
NB: A contract of sale of contingent goods is enforceable only if the event on the happening of which
the performance of the contract is dependent happens, otherwise the contract is not enforceable
(becomes void).
d) Perishable Goods
Under sec 8, where there is a contract for the sale of specific goods and the goods without the
knowledge of the seller have perished at the time of making the contract, the contract is void. Sec 9 of
the act states that where there is an agreement to sell the specific goods and subsequently the goods
without any fault on the part of the seller or buyer, perishes before the risk passes to the buyer, the
agreement is thereby avoided.

CAPACITY TO BUY AND SELL

Governed by law concerning capacity to contract and transfer and acquire property. Infants and insane
people must pay a reasonable price for necessaries and not necessarily the agreed price.

Definition of Necessaries: They are defined as goods suitable to the condition of life of such infant,
minor or other person and to his actual requirement at the time of the sale and delivery as per sec 4 sub
sec 2.

FORM OF CONTRACT
Under s. 5 a contract may be made:
1) In writing (either with or without seal) or
2) By word of mouth (oral), or
3) Partly in writing and partly by word of mouth, or

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4) May be implied from the conduct of the parties

Under s. 6 contracts for Kshs. 200/= or more is not enforceable unless:

a) The buyer accepts part of the goods sold, and actually receives them, or
b) Gives something in earnest to bind the contract or in part payment, or
c) Unless some note or memorandum in writing of the contract is made and signed by the party to be
charged or his agent

THE PRICE
Under s. 10.(1) The price for goods may be:
a) Fixed by the contract, or
b) Fixed in a manner agreed and stated in contract (e.g. independent valuation) or
c) Determined by the course of dealing between the parties.
Failing above, the buyer must pay a reasonable price; a reasonable price is a question of fact
dependent on the circumstances of each particular case.

Time of payment
S. 12.(1): Unless expressly stated in the contract, stipulation as to time of payment is not deemed to be
of the essence of a contract of sale. Seller can however give notice (post-contract) making time of
essence and fixing a reasonable time for payment. In absence of express agreement or Notice, the
seller cannot repudiate contract on ground of unreasonable delay in payment.

TERMS OF THE CONTRACT

These can either be:
- Conditions: the breach of which destroys the root/purpose of undertaking by a party (failure of
consideration) and entitles the other to repudiate contract and sue for damages.
- Warranties: breach doesn’t destroy main purpose of the contract and therefore cannot lead to
repudiation but only a suit for damages.
Under s. 13 parties may waive conditions or treat them as warranties.

Implied Conditions and Warranties

SGA and common law however impute/imply certain terms considered so fundamental and efficacious
as to require incorporation into transactions. If not expressly stated, these can be read into a contract.
Terms can also be implied by: parties’ conduct or custom and usage. Implied terms can either be
conditions or warranties. S. 16(d) SGA forbids contracting out, restriction/modification etc of implied
terms.

A breach of condition repudiates a contract and a breach of a warranty leads to claim for damages. The
SGA implies into contracts of sale the following conditions and warranties;

Implied Warranties:
1) Quiet possession: The buyer shall have quiet possession and enjoyment of the goods.
2) Free from encumbrance: The goods shall be free from any encumbrance of change in favour of
third parties.
3) Trade usage/custom: a warranty may be implied by a trade usage/custom.
4) The seller will disclose dangers of the goods bought to ignorant buyers.

Implied Conditions:
Unless a different intention appears, the following conditions are implied in a Sale of goods contract
i. Right to Sell: Under section 14 (a) of the Act there is an implied condition that the seller has a
right to sell the goods when property is to pass.

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ii. Correspond to description: Under section 15 where there is a contract for the sale of goods by
description there is an implied condition that the goods shall correspond with the description and if
by sample and description the goods must correspond with the sample and description.
iii. Fitness for Purpose: Under section 16 (a) of the Act where the buyer expressly or by implication
makes known to the seller the particular purpose for which the goods are required so as to show
that the buyer relies on the sellers skill or judgement, and the goods are of a description which it is
in the course of the sellers business to supply here is an implied condition that the goods shall be
reasonably fit for such purpose.
iv. Merchantable Quality: Under section 16 (b) of the Act where goods are bought by description
from a seller who deals in goods of that description whether there is an implied condition that the
goods shall be of merchantable quality.
v. Correspond with sample: Under section 17 (2) (a) of the Act in a sale by sample there is an implied
condition that the bulk shall correspond with the sample in quality.
vi. Comparing bulk and sample: Under section 17 (2) (b) in a sale by sample there is an implied
condition that the buyer shall be afforded a reasonable opportunity of comparing the bulk with the
sample.
vii. Free form defect: Under section 17 (2) (c) of the act in a sale by sample there is an implied
condition that the goods shall be free from any defect rendering them un-merchantable which
would not be apparent on reasonable examination of sample.
viii. Trade usage or custom: Under section16 (c) of the Act an implied condition as to quality or
fitness for a particular purpose may be annexed by the usage of trade.

THE RULE OF CAVEAT EMPTOR

The rule of caveat emptor (Buyer be aware) is applied in the sale of goods contract. According to this
doctrine, it is the duty of the buyer to be careful while purchasing goods of his requirement and in the
absence of any inquiry from the buyer; the seller is not bound to disclose any defects in the goods.

Exceptions
This doctrine is subject to the following exceptions:
1. Where the seller makes a misrepresentation and the buyer relies on it this doctrine does not apply.
2. Where the seller makes a false representation amounting to fraud or where he conceals a defect of
the goods
3. Where the buyer makes it known to the seller the purpose of which he requires the goods; so as to
rely on the sellers skill or judgement, then the seller should ensure that the goods serve the
purpose. In this case the doctrine does not apply.
4. Where the goods are purchased by description the doctrine does not apply.
5. The doctrine does not apply where the goods sold by samples does not correspond with the sample
earlier given.
7. Where the seller deviates from any of the implied conditions and warranties the doctrine does not
apply.

TRANSFER OF PROPERTY IN GOODS

Determination of the exact point at which property in the goods is transferred is important for reasons:
- in the event of loss or damage i.e. goods perish or deteriorate so as to determine which party
bears the risk
- In the event of bankruptcy, so as to determine whether the goods belong to the trustee in
bankruptcy

Rules of determining when the property passes

General rule: the property passes in accordance with the intention of the parties, express or implied (s.
19).

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Where intention is not discernible, the following statutory rules apply
1. Unconditional contract of sale: Where there is unconditional contract of sale of specific goods in a
deliverable state, the property passes to the buyer when the contract is made and its immaterial that
at the time of payment or delivery was postponed.
2. Where there is contract of sale of specific goods not in a deliverable state i.e. the seller has still to
work on them, to put them in a deliverable state the property does not pass to the buyer until the
seller does the work required and gives notice to the buyer.
3. Where there is a contract for sale of specific goods in a deliverable state but the seller is bound to
weigh, measure, test, packaging etc for the purpose of ascertaining the price, the property does not
pass to the buyer until the seller does the above.
4. Where the goods when goods are delivered to the buyer on approval or "on sale or return," the
property passes
- when buyer signifies approval or acceptance; or
- does any other act adopting the transaction (e.g. consuming, pledging etc); or
- if he does not signify his approval/acceptance he retains the goods without giving notice of
rejection:
o beyond the time fixed for return; or
o the expiration of a reasonable time if no time has been fixed.
5. Where there is a contract for the sale of unascertained or future goods by description, and goods of
that description, and in a deliverable state, are unconditionally appropriated to the contract, either
by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property
in the goods thereupon passes to the buyer on;
- Delivering goods to a carrier for transmission to buyer is an e.g. of appropriation
6. Where seller reserves the right of disposal of the goods until certain conditions are fulfilled,
property passes- when the conditions are fulfilled.
7. In an auction sale- property passes at the fall of the hammer unless otherwise agreed.

TRANSFER OF TITLE
Nemo Dat Quod Non Habet Rule
Its a common law maxim which meaning that “a person cannot give what he doesn’t have.” Where
goods are sold by a person who is not the owner, the buyer acquires no better title than the seller had.
The rule protects the true owner of the goods against anyone who buys his goods from a person who
has sold without his authority or without having any right to them.

S. 23 provides for maxim: where the seller is not the owner and is selling without owner’s consent or
authority, buyer acquires no better title than the seller had i.e. If seller’s title is valid, void or voidable,
buyer acquires the same title.

The maxim is however subject to exceptions stated in the Act.

Exceptions to “Nemo Dat Quod non Habet”

- Sale under voidable title: Under section 24 of the Act if the seller’s title is voidable but he sells the
goods to a bona fide purchaser who takes without notice of the seller’s defective title, before the title is
avoided, he passes a good title, as was the case in;
Phillips V. Brooks Ltd.
Though Mrs North’s title to the ring was avoidable for fraudulent misrepresentation, he pledged it to
Brooks Ltd before his title was avoided and hence Brooks Ltd. got good title.
- Sale by Merchant Agent/ Factor: Under the provisions of the Factors Act 1889, which applies in
Kenya as a statute of general application, According to Kapadia V. Laxmidar a sale by factor passes a
good title if:
- The agent has possession with the principal’s consent
- The agent sells in his capacity as mercantile agent
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- The agent sells in the ordinary course of business as a mercantile agent
- The buyer takes in good faith and for value
Thus, a person who buys goods from a factor/ broker/ auctioneer will get full title to them even though
the seller has exceeded his authority or authority has been revoked by the true owner before sale.
- Sale by buyer in possession: If the buyer obtains possession with consent of the seller, sells or
pledges them either himself or through an agent, a person who buys such goods obtains a good title of
the goods as long as he bought them in good faith. Under sec 26 (2) of the Act, if a person who has
agreed to buy goods obtain their possession or documents of title before ownership passes to him and
as a consequence he sells to a bonafide purchaser who takes in good faith without notice of the
original sellers Lien he acquires a good title.
- Sale by seller in possession: Under section 26 (1) of the Act, if a seller who has already sold
goods but retains their possession or documents of title disposes them off to a bona fide purchaser for
value without notice of the previous sale, he passes a good title.
- Sale by court order: On sale by order of court of competent jurisdiction or under any special
common law or statutory powers of sale, the buyer gets a good title.
- Title by Estoppels: Estoppels may arise where the owner by any act leads the buyer to believe that
the seller has a right to sell. If the buyer buys such goods he gets a better title than the seller had.
Under section 23 (1) of the Sale of Goods Act the buyer gets a better title if the owner is by his
conduct precluded from denying the seller’s authority to sell. i.e. the owner has represented some
other person as the owner. He cannot deny the apparent ownership. However, the requirements of
estoppel must exist.
- Sale in Market Overt: Market overt means “open, public and legally constituted market.” This the
oldest exception to Nemodat but does not apply in Kenya. At common law, buyers in market overt
acquired a good title even in relation to stolen goods provided that:
- The buyer took them in good faith without notice of any defect in title and
- The sale took place in public place.
- Sale under Statutory Power: A sale made in exercise of a power conferred by statute, passes a good
title. For example:
- Sale by a liquidator under the Companies Act.
- Sale under the Disposal of Uncollected Goods Act.
- Sale by a chargee or mortgagee under the Registered Land Act.
- Sale under Common Law Power: A sale made in exercise of a power conferred by the common
law passes a good title for example sale by an agent of necessity or by a pledge.

TRANSFER OF RISK
Under s. 22 unless otherwise agreed, the goods remain at the seller's risk until the property therein is
transferred to the buyer whether delivery has been made or not.

Where delivery has been delayed through the fault of either buyer or seller the goods are at the risk of
the party at fault as regards any loss which might not have occurred but for that fault.

DUTIES OF THE PARTIES TO THE CONTRACT

It is the duty of a seller to deliver the goods, in the right quantity and at the right time. It is the duty of
the buyer to accept and pay for the goods delivered. Once each party has performed his duty then the
contract of sale is said to be performed.

SELLERS DUTY: DELIVERY

It is the voluntary transfer of possession from one person to another.
Rules of Delivery
1. Delivery is at the buyers place of business and if he does not have one, his residence unless if
the contract states otherwise.

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2. Where no time of delivery is specified, the seller should deliver the goods within a reasonable
time.
3. Where the goods at the time of sale are in possession of third parties, there is no delivery by
the seller to the buyer unless and until such third parties acknowledges to the buyer that he
holds the goods on his behalf.
4. Where the goods are not in a state of delivery unless otherwise agreed, the seller must bear all
the expenses of putting the goods in a deliverable state.
5. Unless otherwise agreed, delivery expenses should be met by the seller.

Delivery of wrong quantity

The seller is under a strict duty to deliver the correct quantity as agreed. Breach of this duty entitles
the buyer to reject the goods but if he accepts the goods he must pay the contract price. If the quantity
is larger than agreed the buyer may accept the goods indicated in the contract and reject the excess or
reject the whole lot.

Delivery by installment
The buyer is not obliged unless he agrees to delivery of the goods by installments.

BUYER’S DUTY:
1. ACCEPTANCE
It takes place when the buyer:
1. Communicates with the seller confirming that he has accepted the goods.
2. When the goods have been delivered to him and does any act to the goods inconsistent with the
ownership of the seller.
3. Retains the goods after the lapse of a reasonable time without telling the seller that he has rejected
them.
2. PAY

BREACH OF CONTRACT BY BUYER

Rights of unpaid seller
The seller is deemed to be unpaid when:
1. The whole price is not paid.
2. When a negotiable instrument e.g. a bill of exchange has been received by the seller but the same
has been dishonoured.

(a) Rights of the seller against goods

1. Right to lien
It is the right to retain the possession of goods and refuse to deliver them to the buyer until the price
due is paid. The seller can exercise the right in the following circumstances.
 Where the goods have been sold without any stipulation as to credit.
 Where credit is stipulated but the duration of credit has expired.
 Where the buyer becomes insolvent even though the period of credit may not have expired
Termination of Lien
 When the seller delivers the goods to a carrier or a bailee for the purpose of transmission to the
buyer without reserving the right of disposal of the goods.
 When the buyer or his agent lawfully obtains possession of the goods.
 By waiver of the lien: The seller may avoid the right of lien voluntarily.

2. Right of Stoppage in transit

The seller may reclaim the goods in the hands of the railway or any other carrier in the process of
delivery. Majorly, the right to stop the goods in transit arises only when they have been delivered for
transmission to the buyer and the buyer becomes insolvent.
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Difference between Stoppage in transit and lien

 Lien
- Arises when the buyer is insolvent or not.
- Available when goods are in actual possession of the seller
- Ends when the goods are surrendered to the buyer.
- Stipulation of credit can destroy lien.
- Seller retains possession.
 Stoppage in transit
-Arises mainly when the buyer is insolvent.
-Exercisable only when the goods are still in transit.
-Right starts and remains as long as the goods are in transit.
-Can be enforced inspite of credit having been agreed upon.
-Seller Regains possession

Stoppage in transit ends in the following cases:

 If the buyer or his agent obtains delivery of the goods before they arrive to the appointed
destination
 If on arrival at the appointed destination the carrier acknowledges to the buyer or his agents
that he holds the goods on his behalf.
 If the carrier wrongfully refuses to deliver the goods to the buyer.
 If the goods are delivered to the master of the buyers ship.
 When a section of the goods have been delivered with an intention of delivering the other part.
 If the seller instructs a carrier to take the goods to a different place rather than the buyers.
N/B The unpaid seller who exercises the right of lien is only entitled to retain the goods until the buyer
pays the contract price.

3. Seller’s right to resale

The seller may re-sell:
 If the goods are perishable
 Where the right is expressly reserved in the contract
 Where he has given notice to the buyer of his intention to resale but the buyer does not collect them
within a reasonable time.
Loss due to Resale
The unpaid seller will be able to recover this loss from the buyer. If a profit is got after resale the seller
is not bound to hand it over to the buyer.

(b) Rights against the Buyer

1. Action for the price-where property has already passed to buyer or a payment date has been agreed
2. Action for damages – where buyer wrongfully refuses to accept goods. The seller can sue the
buyer for damages if the property in goods has already passed to the buyer. Damages awarded will be
the difference between contract price and the current market price at the time when the goods ought to
have been accepted. i.e. D= M.P- C.P

BREACH OF CONTRACT BY SELLER

Rights of the Buyer
1) Can sue for damages if the seller does not deliver the goods
2) Can sue to recover the price if the goods are not delivered.
3) Can sue for specific performance.
4) Suit for breach of warranty: Where there is a breach of warranty by the seller or where the buyer
elects or is compelled to treat any breach of condition as a breach of warranty, the buyer may set
up against the seller:
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 The breach of warranty in diminution or extinction of price.
 maintain an action against the seller for damages for breach of a warranty
5) If breach of condition: Entitles the buyer to reject the goods and the contract is repudiated.
Exceptions: The buyer cannot reject the goods in the following cases
 If he elects to treat a breach of condition as a breach of warranty.
 If the contract of sale cannot be cancelled and the buyer has accepted the goods or part
thereof.
 If the contract is for specific goods and property has passed to the buyer.
6) Right to recover price and interest accruing.

SPECIAL SALE: AUCTION SALE

Sec 58 enacts the following rules incase of sale by auction
 Where the goods are put on sale in lots, each lot is prima-facie deemed to be subject of a
separate sale.
 The sale is complete when the auctioneer announces the completion by the fall of the
hammer and until such an announcement is made any bidder may withdraw his bid.
 If the sale is not notified to be subject to a right to bid on behalf of the seller, it is unlawful to
the seller to bid himself or employ any other person to bid on his behalf.
 A sale by auction may be notified to the subject (buyer) to a reserved price.
 If the seller makes use of pretending bidding to raise the price, the contract is voidable at the
option of the buyer.

INTERNATIONAL TRADE

INTERNATIONAL COMMERCIAL TERMS (INCOTERMS)

The INCOTERMS (International Commercial Terms) is a universally recognized set of definitions of
international trade terms, such as FOB, CFR and CIF, developed by the International Chamber of
Commerce (ICC) in Paris, France. It defines the trade contract responsibilities and liabilities between
buyer and seller. It is invaluable and a cost-saving tool. The exporter and the importer need not
undergo a lengthy negotiation about the conditions of each transaction. Once they have agreed on a
commercial term like FOB, they can sell and buy at FOB without discussing who will be responsible
for the freight, cargo insurance, and other costs and risks.

The INCOTERMS was first published in 1936---INCOTERMS 1936---and it is revised periodically to

keep up with changes in the international trade needs. The complete definition of each term is
available from the current publication---INCOTERMS 2000. The publication is available at your local
Chamber of Commerce affiliated with the International Chamber of Commerce (ICC).

Many importers and exporters worldwide are accustomed to and may still use the INCOTERMS 1980,
the predecessor of INCOTERMS 1990 and INCOTERMS 2000.

Under the INCOTERMS 2000, the international commercial terms are grouped into E, F, C and D,
designated by the first letter of the term (acronym), as follows:
GROUP TERM Stands for
E EXW Ex Works
F FCA Free Carrier
FAS Free Alongside Ship
FOB Free On Board
C CFR Cost and Freight
CIF Cost, Insurance and Freight
CPT Carriage Paid To
CIP Carriage and Insurance Paid To
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D DAF Delivered At Frontier
DES Delivered Ex Ship
DEQ Delivered Ex Quay
DDU Delivered Duty Unpaid
DDP Delivered Duty Paid
In practice, trade terms are written with either all upper case letters (e.g. FOB, CFR, CIF, and FAS) or
all lower case letters (e.g. fob, cfr, cif, and fas). They may be written with periods (e.g. F.O.B. and
c.i.f.).

In international trade, it would be best for exporters to refrain, wherever possible, from dealing in
trade terms that would hold the seller responsible for the import customs clearance and/or payment of
import customs duties and taxes and/or other costs and risks at the buyer's end, for example the trade
terms DEQ (Delivered Ex Quay) and DDP (Delivered Duty Paid). Quite often, the charges and
expenses at the buyer's end may cost more to the seller than anticipated. To overcome losses, hire a
reliable/ customs broker or freight forwarder in the importing country to handle the import routines.
Similarly, it would be best for importers not to deal in EXW (Ex Works), which would hold the buyer
responsible for the export customs clearance, payment of export customs charges and taxes, and other
costs and risks at the seller's end.

EXW{+ the named place} Ex Works

Ex means from. Works means factory, mill or warehouse, which is the seller’s premise. EXW applies
to goods available only at the seller's premises. Buyer is responsible for loading the goods on truck or
container at the seller's premises, and for the subsequent costs and risks.
In practice, it is not uncommon that the seller loads the goods on truck or container at the seller's
premises without charging loading fee.
In the quotation, indicate the named place (seller's premises) after the acronym EXW, for example
EXW Mombasa and EXW Cape Town.
The term EXW is commonly used between the manufacturer (seller) and export-trader (buyer), and the
export-trader resells on other trade terms to the foreign buyers. Some manufacturers may use the term
Ex Factory, which means the same as Ex Works.

FCA {+ the named point of departure} Free Carrier

The delivery of goods on truck, rail car or container at the specified point (depot) of departure, which
is usually the seller's premises, or a named railroad station or a named cargo terminal or into the
custody of the carrier, at seller's expense. The point (depot) at origin may or may not be a customs
clearance centre. Buyer is responsible for the main carriage/freight, cargo insurance and other costs
and risks.
In the air shipment, technically speaking, goods placed in the custody of an air carrier are considered
as delivery on board the plane. In practice, many importers and exporters still use the term FOB in the
air shipment.
The term FCA is also used in the RO/RO (roll on/roll off) services.
In the export quotation, indicate the point of departure (loading) after the acronym FCA, for example
FCA Mombasa and FCA Nairobi.
Some manufacturers may use the former terms FOT (Free On Truck) and FOR (Free On Rail) in
selling to export-traders.

FAS {+ the named port of origin} Free Alongside Ship

Goods are placed in the dock shed or at the side of the ship, on the dock or lighter, within reach of its
loading equipment so that they can be loaded aboard the ship, at seller's expense. Buyer is responsible
for the loading fee, main carriage/freight, cargo insurance, and other costs and risks. In the export
quotation, indicate the port of origin (loading) after the acronym FAS, for example FAS New York
and FAS Mombasa.

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The FAS term is popular in the break-bulk shipments and with the importing countries using their own
vessels.

FOB {+ the named port of origin} Free On Board

The delivery of goods on board the vessel at the named port of origin (loading), at seller's expense.
Buyer is responsible for the main carriage/freight, cargo insurance and other costs and risks.
In the export quotation, indicate the port of origin (loading) after the acronym FOB, for example FOB
Vancouver and FOB Mombasa.
Under the rules of the INCOTERMS 1990, the term FOB is used for ocean freight only. However, in
practice, many importers and exporters still use the term FOB in the air freight.
In North America, the term FOB has other applications. Many buyers and sellers in Canada and the
U.S.A. dealing on the open account and consignment basis are accustomed to using the shipping terms
FOB Origin and FOB Destination.
FOB Origin means the buyer is responsible for the freight and other costs and risks. FOB Destination
means the seller is responsible for the freight and other costs and risks until the goods are delivered to
the buyer's premises, which may include the import customs clearance and payment of import customs
duties and taxes at the buyer's country, depending on the agreement between the buyer and seller.
In international trade, avoid using the shipping terms FOB Origin and FOB Destination, which are not
part of the INCOTERMS (International Commercial Terms).

CFR {+ the named port of destination} Cost and Freight

The delivery of goods to the named port of destination (discharge) at the seller's expense. Buyer is
responsible for the cargo insurance and other costs and risks. The term CFR was formerly written as
C&F. Many importers and exporters worldwide still use the term C&F.
In the export quotation, indicate the port of destination (discharge) after the acronym CFR, for
example CFR Karachi and CFR Mombasa.
Under the rules of the INCOTERMS 1990, the term Cost and Freight is used for ocean freight only.
However, in practice, the term Cost and Freight (C&F) is still commonly used in the air freight.

CIF {+ the named port of destination} Cost, Insurance and Freight

The cargo insurance and delivery of goods to the named port of destination (discharge) at the seller's
expense. Buyer is responsible for the import customs clearance and other costs and risks.
In the export quotation, indicate the port of destination (discharge) after the acronym CIF, for example
CIF Pusan and CIF Singapore.
Under the rules of the INCOTERMS 1990, the term CIF is used for ocean freight only. However, in
practice, many importers and exporters still use the term CIF in the air freight.

CPT {+ the named place of destination} Carriage Paid To

The delivery of goods to the named place of destination (discharge) at seller's expense. Buyer assumes
the cargo insurance, import customs clearance, payment of customs duties and taxes, and other costs
and risks.
In the export quotation, indicate the place of destination (discharge) after the acronym CPT, for
example CPT Los Angeles and CPT Kisumu.

CIP {+ the named place of destination} Carriage and Insurance Paid To

The delivery of goods and the cargo insurance to the named place of destination (discharge) at seller's
expense. Buyer assumes the import customs clearance, payment of customs duties and taxes, and other
costs and risks.
In the export quotation, indicate the place of destination (discharge) after the acronym CIP, for
example CIP Paris and CIP Kisumu.

DAF {+ the named point at frontier} Delivered At Frontier

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 HBC 2243 Notes compiled by Njihia Kaburu
The delivery of goods to the specified point at the frontier at seller's expense. Buyer is responsible for
the import customs clearance, payment of customs duties and taxes, and other costs and risks.
In the export quotation, indicate the point at frontier (discharge) after the acronym DAF, for example
DAF Buffalo and DAF Welland.

DES {+ the named port of destination} Delivered Ex Ship

The delivery of goods on board the vessel at the named port of destination (discharge), at seller's
expense. Buyer assumes the unloading fee, import customs clearance, payment of customs duties and
taxes, cargo insurance, and other costs and risks.
In the export quotation, indicate the port of destination (discharge) after the acronym DES, for
example DES Mombasa and DES Stockholm.

DEQ {+ the named port of destination} Delivered Ex Quay

The delivery of goods to the quay (the port) at destination at seller's expense. Seller is responsible for
the import customs clearance and payment of customs duties and taxes at the buyer's end. Buyer
assumes the cargo insurance and other costs and risks.
In the export quotation, indicate the port of destination (discharge) after the acronym DEQ, for
example DEQ Mombasa and DEQ Maputo.

DDU {+ the named point of destination} Delivered Duty Unpaid

The delivery of goods and the cargo insurance to the final point at destination, which is often the
project site or buyer's premises, at seller's expense. Buyer assumes the import customs clearance and
payment of customs duties and taxes. The seller may opt not to insure the goods at his/her own risks.
In the export quotation, indicate the point of destination (discharge) after the acronym DDU, for
example DDU Mombasa and DDU Mumbai.

DDP {+ the named point of destination} Delivered Duty Paid

The seller is responsible for most of the expenses, which include the cargo insurance, import customs
clearance, and payment of customs duties and taxes at the buyer's end, and the delivery of goods to the
final point at destination, which is often the project site or buyer's premises. The seller may opt not to
insure the goods at his/her own risks.
In the export quotation, indicate the point of destination (discharge) after the acronym DDP, for
example DDP Bujumbura and DDP Kisumu.

COMPILED BY:
Francis Njihia Kaburu. IMIS, LL.B (Hons.), LL.M,
Lecturer, Business Department,
JKUAT.

*****************************More notes to come************************************

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