Commercial and technology contracts legal A-Z: X is for Ex Works

Commercial and technology contracts legal A-Z: X is for Ex Works

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Ex Works is one of 11 Incoterms rules, which are used in both domestic and international trade contracts. Incoterms rules are published by the International Chamber of Commerce (ICC) to assist traders from different countries in understanding their contractual obligations.

Ex Works can be used for a trade contract regardless of the mode (or modes) of transport selected to carry the goods. Incoterms 2020 Ex Works requires that:

  • The seller must package the goods and make them available for collection at its premises or another designated location (this constitutes delivery), and
  • The buyer must collect from this location.

Ex Works is therefore considered extremely favourable to the seller, as it is not required to load goods onto a vehicle or clear them for export. Furthermore, the buyer assumes responsibility for all costs and risks related to the goods from delivery (defined above) onwards.

Ex Works is suitable for domestic trade, while Free Carrier or “FCA” is considered more appropriate for international trade. Unlike Ex Works, FCA obliges the seller to load the goods onto a means of transport at its own risk and expense, and to clear the goods for export where applicable.

Incoterms rules do not provide a complete contract of sale, and as such are often referred to or incorporated into a fuller set of contract terms. They are silent in relation to the price of the goods, method of payment, transfer of ownership, and the consequences of a breach of contract, these terms should be contained within the contract itself. Incoterms can deal with the following:

  • Which party to the sale contract has the obligation to make carriage or insurance arrangements
  • When the seller delivers the goods to the buyer
  • Which costs each party is responsible for

Different Incoterms will suit different commercial arrangements. The chosen rule will need to be appropriate to the goods, to the means of transport used, and to whether the parties intend to put additional obligations such as organising the carriage and insurance on the seller or on the buyer. The parties should note that the interpretation of their sale contract, including their chosen Incoterms rule, may be influenced by the mandatory local law or the customs of the port or place of delivery.

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