Question

If a supplier ships goods f.o.b. destination, when does title pass to the buyer?

1) When the supplier delivers the goods to the common carrier
2) When the buyer receives the goods
3) When the goods are loaded onto the delivery truck
4) When the supplier ships the goods

Answer 1

Title passes to the buyer when the buyer receives the goods in f.o.b. destination shipping terms. The title does not pass when the goods are delivered to the common carrier, when they are loaded onto the delivery truck, nor simply when the supplier ships the goods.

Step-by-step explanation:

When a supplier ships goods f.o.b. destination, title to the goods passes to the buyer when the buyer receives the goods. This means that the supplier retains the risk of loss and title to the goods until they are delivered to the buyer's specified location. The title does not pass when the goods are delivered to the common carrier, when they are loaded onto the delivery truck, nor simply when the supplier ships the goods.

Instead, the moment of title passage coincides with the buyer's receipt of the goods at the destination point. In terms of commercial trade, different types of ships, such as bulkers and container ships, follow different patterns and routes. Container ships, for instance, might make several stops along regular routes, loading and unloading containers, which may operate under various shipping terms including f.o.b. destination.

When a supplier ships goods f.o.b. (free on board) destination, the title passes to the buyer when the buyer receives the goods. This means that the supplier is responsible for the shipment until it reaches the buyer's specified destination. Therefore, the title passes to the buyer once they physically possess the goods. For example, if the buyer ordered products to be delivered to their warehouse, the title would transfer when the goods are delivered to their warehouse.