Question
A contract was concluded for the sales of 30,000 metric tons of rice of origin of China. The contract stipulated the price term was FOB
A contract was concluded for the sales of 30,000 metric tons of rice of origin of China. The contract stipulated the price term was FOB Shanghai and the port of destination was Jeddah or Dammam, Saudi Arabia. The buyer guaranteed upon the signing of the contract that the contracted rice would be transported to and sold in Saudi Arabia only and hence there would be no entrepot trade. Shortly after the contract was concluded, the seller learnt that the buyer sold this lot of rice to a Hong Kong based company for entrepot onto Philippines. The seller required the buyer either to provide a bankers letter of guarantee for the rice to be transported to the destination of Saudi Arabia or to have the price term amended into CFR Jeddah/Dammam or CIF Jeddah/Dammam. The buyer admitted that there was entrepot trade but denied the entrepot trade breached the contract, because FOB means there is no restriction on destination, according to INCOTERMS 2020. Question: Do you think the buyers argument is tenable? Why?
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