1) Free-on-Board (F. O. B. ) is a shipping term which means the inclusion of delivery expense item in the price of the goods for the account of the seller. The term is used together with a designation of the place for determining the liability and “basis for payment of freight charges” and the reckoning point from which the title or ownership for the goods is transferred from the seller to the buyer (Western State College of Colorado web site, n. d. ). There two kinds of F. O. B. , i. e. F. O. B. origin also know as “shipment contract” or F.
O. B. Place of shipment and F. O. B. destination also know as “destination contract” or F. O. B. Place of destination (Long, n. d. ). In a shipment contract, the risk of loss of the goods is transferred from the seller to the buyer once it is accepted by the carrier and signs the bill of lading (Long, n. d. ). In this case, the title and control over the goods is assumed by the buyer including the risks in transport of the goods and in claims in case of loss or damage (Western State College of Colorado web site, n. d. ).
On the other hand, in a destination contract, it is the seller who assumes risk and title over the goods until they are delivered to the buyer. The seller is the one who chooses the carrier and he also assumes the risks of transport of the goods Western State College of Colorado web site, n. d. ). Thus, applying the principles above, should the F. O. B. be one of place of shipment, the buyer Grocery Inc. bears the loss; otherwise if the F. O. B. is one of place of destination, the seller, Organic Farms bear the loss of the goods. However, considering that the instant case is silent on the whether the F.
O. B. is one of destination or shipment, the default rule—place of shipment shall apply in which case, the buyer bears the loss. Courts have applied the default rule because for the destination contract to apply, such terms should be expressed and clear (Long, n. d. ). 2) The doctrine of promissory estoppel “provides that if a party changes his or her position substantially either by acting or forbearing from acting in reliance upon a gratuitous promise, then that party can enforce the promise although the essential elements of a contract are not present” (West’s Encyclopedia of American Law, 2008).
In order that this doctrine may be invoked, the following elements must be present, i. e. one who makes a gratuitous promise and from which he can reasonably expect the other to be induced in an action; the person with whom the promise had been made and who relies on it; and a substantial detriment which refers to loss and to avoid injustice, promise has to be enforced (Hornberger, 2007). In the instant case, Harry should win and Tom must be held liable based on the doctrine of promissory estoppel. Tom made a clear and definite promise [Schmidt v Bretzlaff, 208
Mich App 376, 379; 528 NW2d 760 (1995)]. On the basis of which, Harry relied on it and started building a room and raising the money with which to buy the trains. Tom knew about this and led Harry to believe that he had all the intentions of selling his trains to him. Thus, if said promise is not enforced, Harry would suffer economic loss. Moreover, the Supreme Court in the case of State Bank of Standish v Curry, 442 Mich 76 (1993), ruled that “promissory estoppel was developed to protect the ability of individuals to trust promises in circumstances where trust is essential” (Hornberger, 2007).
Hornberger, L. A Review of promissory estoppel law in Michigan. Retrieved on February 25, 2008, from http://leehornberger. com/UserFiles/File/PromissoryEstoppel. pdf. Long, B. Risk of loss (2-509, 2-510). Retrieved on February 25, 2008, from http://www. drbilllong. com/SalesLectures/RiskofLoss. html West’s Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. Western State College of Colorado web site. F. O. B. definition: shipping terms of sale. Retrieved on February 25, 2008, from http://www. western. edu/purchasing/docs/fob. pdf.