Delivery point: Overview, definition, and example
What is a delivery point?
A delivery point is the specific location where goods, services, or products are delivered under a contract, shipment, or transaction. It refers to the agreed-upon place where the seller or supplier hands over the goods to the buyer or recipient. The delivery point can vary depending on the terms of the contract, and it plays a critical role in defining the seller's and buyer's responsibilities regarding shipping, risk, and costs.
In international trade, the delivery point is often specified using international commercial terms (Incoterms) to clarify who is responsible for transportation costs, insurance, customs clearance, and delivery.
Why is the delivery point important?
The delivery point is important because it helps determine the division of responsibility between the buyer and the seller in terms of shipping, risk, and costs. It ensures both parties have a clear understanding of where and when the goods are transferred, which can affect the timing of the transaction and the financial obligations of each party. Specifying the delivery point reduces potential disputes and misunderstandings regarding shipping and logistics.
Additionally, the delivery point impacts the risk of damage or loss during transportation. If a delivery point is defined as a location "Ex Works" (ExW), the buyer assumes responsibility once the goods are made available at the seller's premises. If it’s defined as "Delivered Duty Paid" (DDP), the seller assumes full responsibility until the goods are delivered to the buyer’s location.
Understanding delivery point through an example
Imagine a company in the United States purchases electronics from a supplier in China. The sales contract specifies that the delivery point is the buyer’s warehouse in New York (FOB New York). This means the seller is responsible for shipping the goods to New York, but the buyer assumes responsibility once the goods reach the warehouse. The buyer is then responsible for any further shipping or customs duties if necessary.
In another example, a business buys a bulk order of raw materials from a supplier located in another country. The contract specifies the delivery point as "FOB Shanghai," meaning the seller is responsible for transporting the goods to Shanghai’s port, after which the buyer assumes responsibility for shipping costs, risk, and insurance.
An example of a delivery point clause
Here’s how a clause related to the delivery point might appear in a contract:
“The Seller agrees to deliver the Goods to the Delivery Point located at the Buyer’s premises in [City, Country], on or before [Date]. Delivery will be considered complete when the Goods are unloaded at the specified Delivery Point and risk is transferred to the Buyer.”
Conclusion
The delivery point is a critical element in defining the terms of a contract, particularly for the delivery of goods. It establishes the location where the goods will be handed over from the seller to the buyer, clarifying each party’s responsibilities and the associated risks. By specifying the delivery point clearly, both parties can avoid misunderstandings related to shipping, risk, and costs, ensuring that the transaction proceeds smoothly and according to the agreed terms.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.