Sometimes an agreement involves cargo or products that, if lost, would create more liability than either party is willing to accept. In these situations, where the risk of loss is disproportionally larger than the contract price, the parties may agree to include an insurance clause to ensure that, if the cargo is lost or destroyed, neither party will have to pay for the damage.
The term “force majeure” comes from French and means “superior force.” As a legal term, it refers to an unpredictable and extraordinary event that prevents the competition of a contract. Due to the extreme and unpredictable nature of force majeure events, a force majeure clause is often used in business agreements to relieve both parties of liability for non-performance of the contract during a force majeure event. In many cases, performance of the contract must be resumed after the force majeure event has ended.
An indemnity clause can be a powerful tool to control costs and manage risk when licensing technology. An indemnity clause, at its most powerful, can completely shield one party from liability, forcing the other party to cover all potential risk stemming from the agreement. However, more commonly, it will be used to cover specific areas of risk such as potential damage caused by use of the licensed technology or claims by 3rd parties for IP infringement.
When goods are shipped with the condition Free on Board (FOB), the seller is responsible for preparing the goods for shipping and loading them onto the ship for transport. The buyer is then responsible for paying the cost of transportation and any fees imposed at the eventual port of call. Insurance, if necessary, is also the buyer’s responsibility, as the risk of loss transfers to the buyer upon the seller loading the goods onto the transport. The term FOB can only be used in situations where goods are being shipped by land or sea.