UCC Section 2-319 defines the FOB and FAS shipping terms used in domestic sales contracts, setting where the seller’s delivery duty ends, where the buyer picks up cost and risk, and what each side has to do to get the goods moving. FOB means “free on board” followed by a named location; FAS means “free alongside” a named vessel at a named port. Both are default rules the parties can rewrite, but when a contract uses them without further detail, Section 2-319 fills in the rest.1Legal Information Institute. Uniform Commercial Code 2-319 – F.O.B. and F.A.S. Terms
What FOB and FAS Mean
FOB is followed by a named location, and that location is the dividing line. The two common variations are FOB place of shipment, which puts the handoff at the seller’s end, and FOB place of destination, which puts it at the buyer’s end. Each produces a very different allocation of cost and risk, so the location in the contract is not a minor detail.
FAS applies only to waterborne shipments. Under FAS vessel at a named port, the seller’s job is to get the goods next to the ship. FAS shows up far less often than FOB in everyday commerce, but it remains the standard term for port-based deliveries where the buyer arranges the ocean voyage.
Both terms are defaults. Section 2-319 opens nearly every subsection with “unless otherwise agreed,” so parties can override any allocation in their contract as long as they do not disclaim the basic obligations of good faith and reasonableness.
Seller’s Duties Under FOB Place of Shipment
When a contract reads FOB place of shipment, the seller’s delivery obligation is satisfied at the seller’s end. The seller has to get the goods into the carrier’s hands and bear the expense and risk of doing so. But loading goods onto a truck is not the whole job. Section 2-504, which 2-319 incorporates, adds three specific duties:
- Arrange reasonable transportation. The seller must pick a carrier and negotiate terms that make sense for the type of goods involved.
- Provide the paperwork the buyer needs to take possession at the other end, such as a bill of lading.
- Promptly notify the buyer that the goods have shipped.
A failure to notify or to arrange a reasonable shipping contract gives the buyer grounds to reject the goods, but only if that failure actually causes a material delay or loss.2Legal Information Institute. UCC 2-504 – Shipment by Seller
Seller’s Duties Under FOB Place of Destination
FOB destination flips the arrangement. The seller must transport the goods all the way to the named destination at its own expense and risk, then tender delivery there. Tender at the destination means holding conforming goods at the buyer’s disposal and giving the buyer reasonable notice so the buyer can take possession. The goods have to be available at a reasonable hour and kept available long enough for the buyer to collect them.3Legal Information Institute. UCC 2-503 – Manner of Seller’s Tender of Delivery
The practical difference is large. Under FOB shipment, the seller is done at the loading dock and the buyer owns whatever happens next. Under FOB destination, the seller carries freight costs, transit damage, theft, and accident risk until the goods reach the destination and are made available.
The FOB Vessel or Vehicle Add-On
When a contract specifies FOB vessel, car, or other vehicle, the seller picks up an additional obligation under either shipment or destination terms: loading the goods on board at its own expense and risk. Without that qualifier, the seller’s job under FOB shipment ends when the carrier takes possession. Adding “vessel” or “vehicle” extends the seller’s risk through the loading process itself, which matters for heavy or fragile cargo where loading damage is a real concern.
Seller’s Duties Under FAS Vessel
Under FAS vessel at a named port, the seller must deliver the goods alongside the vessel at its own expense and risk, in whatever manner is customary at that port or on a dock the buyer designates. What “alongside” looks like varies. At some facilities the goods go directly on the wharf next to the ship; at others, placement is wherever the port’s loading equipment can reach. The statute defers to local practice rather than imposing a single physical standard.
The seller also has a documentary duty: obtaining and tendering a receipt for the goods in exchange for which the carrier will issue a bill of lading. That receipt-and-bill-of-lading sequence is how the buyer proves the goods were delivered as promised and ultimately takes possession at the other end.
When Risk of Loss Shifts to the Buyer
Section 2-319 defines delivery obligations. The companion provision that governs risk of loss is Section 2-509, and the two have to be read together to know who absorbs the loss when something goes wrong in transit.
Under a shipment contract (FOB place of shipment), risk of loss passes to the buyer when the goods are properly delivered to the carrier, even if the seller reserves a security interest.4Legal Information Institute. UCC 2-509 – Risk of Loss in the Absence of Breach If a truck overturns on the highway after the carrier accepted the goods, the buyer bears the loss, still owes the contract price, and has to pursue recovery against the carrier or its own insurer.
Under a destination contract (FOB place of destination), risk of loss stays with the seller until the goods are tendered at the destination in a way that lets the buyer take delivery. The seller pays freight and absorbs any loss or damage along the way. The buyer’s financial exposure does not begin until the goods are at the destination, available for pickup.
Insurable Interest Before Delivery
Even before taking physical delivery, a buyer acquires an insurable interest in the goods the moment they are identified to the contract. Identification happens when the seller ships, marks, or otherwise designates specific goods as the ones the contract refers to.5Legal Information Institute. UCC 2-501 – Insurable Interest in Goods; Manner of Identification of Goods For buyers under FOB shipment terms, this matters: risk transfers at the carrier, so cargo coverage needs to be in place before the handoff. Standard carrier liability covers only a fraction of most cargo’s value, and without a declared-value endorsement or separate cargo policy, the buyer carries an uninsured gap on every shipment.
The Buyer’s Duty to Give Shipping Instructions
The seller’s delivery obligations do not exist in a vacuum. Section 2-319(3) requires the buyer to provide whatever shipping instructions the seller needs, and to do so in time. For FAS and FOB vessel contracts, this includes the loading berth, the vessel name, and sailing dates when the contract does not already specify them.
If the buyer fails to provide those instructions, the seller has two options under Section 2-311. The seller is excused from any resulting delay in its own performance, and the seller can either ship the goods in any reasonable manner or, once the deadline for a material part of its performance has passed, treat the buyer’s silence as a breach.6Legal Information Institute. UCC 2-311 – Options and Cooperation Respecting Performance A seller sitting on a warehouse full of goods because the buyer never named a vessel is not the one in breach.
Payment Against Documents
For FOB vessel and FAS contracts, Section 2-319(4) sets up a document-based payment system. The buyer pays when the seller tenders the required shipping documents. The seller cannot substitute actual delivery of the goods for the documents, and the buyer cannot demand physical delivery in place of the documents.
The buyer often pays before seeing or inspecting the cargo. Section 2-513 confirms that when a contract calls for payment against documents of title, the buyer generally has no right to inspect the goods before paying.7Legal Information Institute. UCC 2-513 – Buyer’s Right to Inspection of Goods The only exception is a contract term specifying that payment is due only after the goods become available for inspection. A buyer who wants inspection rights before paying has to negotiate that into the contract upfront.
Remedies When Delivery Goes Wrong
When a seller fails to deliver as the FOB or FAS terms require, the buyer’s primary remedy is cover: buying substitute goods elsewhere and recovering the price difference from the breaching seller, plus any incidental or consequential damages, minus any expenses saved because of the breach. The cover purchase must be made in good faith and without unreasonable delay. A buyer who waits too long or overpays for a replacement may not recover the full difference, though failing to cover does not bar other remedies.8Legal Information Institute. UCC 2-712 – Cover; Buyer’s Procurement of Substitute Goods
On the seller’s side, when a buyer wrongfully rejects a conforming shipment or refuses to accept the goods, the seller can recover damages measured by the difference between the market price at the time and place of tender and the unpaid contract price, plus incidental damages. If that formula does not make the seller whole, the seller can recover lost profit, including reasonable overhead.9Legal Information Institute. UCC 2-708 – Seller’s Damages for Non-Acceptance or Repudiation
UCC FOB Is Not Incoterms FOB
Both the UCC and the International Chamber of Commerce’s Incoterms use the abbreviation FOB, and they do not mean the same thing. Under the UCC, FOB can apply to any mode of transport. A contract can say “FOB seller’s warehouse” for a domestic truck shipment, and the UCC framework governs the cost and risk allocation. Under Incoterms 2020, FOB applies only to water transport, the named location must be a port of shipment, freight cost and vessel selection sit with the buyer, and the seller’s job ends once the goods are loaded on board.
For domestic U.S. sales, the UCC applies automatically unless the contract says otherwise. If the parties want Incoterms to govern, they have to state that in the contract, typically with wording like “FOB Port of Houston (Incoterms 2020).” Without that designation, a court will read FOB under the UCC. Companies that handle both domestic and international shipments and use FOB loosely are the ones who get caught by this.
Is Section 2-319 Still in Force?
Yes. In 2003, the Uniform Law Commission and the American Law Institute approved a revised Article 2 that would have deleted Sections 2-319 through 2-324. No state adopted those revisions, and both organizations formally withdrew them in 2011. As of the most recent official text of the UCC, published in a December 2024 report, Section 2-319 remains part of the code with its full text intact.10The American Law Institute. PEB Report on Official Text of the Uniform Commercial Code It continues to govern FOB and FAS terms in all 50 states and the District of Columbia.