Under the UCC, in determining the seller's delivery obligations while using a common carrier, what is FOB (Free on Board)?

An FOB establishes a goal line. "FOB California" means "The moment the goods make it to California, the risk shifts from the seller to the buyer." It's a way for buyers and sellers to determine what part of the package's journey is covered by which party's risk. For example, imagine we go back in time before cars and airplanes, to where only horses and trains existed for transportation.

Imagine a buyer in New York wants to buy a glass vase from a seller in California. The seller usually sells the vases for $10, but when he looks at a map and realizes it is a 2,700 mile journey from his factory to the buyer's home, the seller may think, "Look, I'm happy to sell this to you, but I'm not responsible if it doesn't survive the trip." The buyer may respond, "Woah, come on, please, I really want it. Look, the second it leaves your factory in Los Angeles, I'll take responsibility for the risk." The seller agrees and the term "FOB, Seller's Factory in Los Angeles" is included in the contract. Legally, this means that the moment the package arrives at that location (which is the same location it is created), risk transfers to the buyer. If the carrier picks it up from the seller and drops it on the way to the truck, the buyer has agreed they bear the risk, not the seller.

But let's change things around a bit. Imagine if the super rich buyer in New York said, "Look, I need this vase in my life. It's amazing. I won't settle for anything other than it getting here in 1 piece. But I'll pay you $100,000 to make sure it gets here." Suddenly the buyer is motivated to take on the risk. The contract would likely say, "FOB, New York" or "FOB, Buyer's House". This means that the seller is responsible for the fragile item making its way across the country, but at $100,000, seller can afford to buy some extra blankets, or straw, or even hire a better delivery driver to make the risk worth it.

And that, ultimately, is the purpose of FOB. It creates a specific line in the sand. A goal post. An objective way to say "this made it this far, and we agreed who would be liable once it goes further." Such objectivity can then be bargained for in a contract and assessed monetarily.