eLifespaces

FOB is the first of three items that potentially may derail our company from doing business with a manufacturer (or distributor). The term “Freight on Board” (commonly referred to as ‘FOB’) is often used when shipping goods to indicate who pays loading and transportation costs and the point at which the responsibility of the goods transfers from shipper to buyer. For our company, FOB Destination is the signature of a reputable company, a company who takes great care in the delivery of their product up until it gets into the customer’s hands. Alternatively, FOB Shipping Point is a company with a completely different set of agendas. Their mantra – as soon as it leaves their dock, it’s the customer’s problem.

In our negotiations with prospective manufacturers, we address the fairness doctrine, “Is it fair to all involved?” You decide. Written below is a recent series of emails discussing FOB with a manufacturer with a hidden agenda:

From: Sales Rep / To: Company Controller cc: Company Attorney / Subject: Dealer Agreement
Hey guys, I don’t have the legal background to understand everything below, but what Fred wants is: As a Prepay account, in the event that a unit is refused at his dock due to physical damage, he wants a new one sent without having to prepay for a second unit. It actually makes sense because we can verify with the shipper that the damaged one is on the way back.

From: Sales Rep / To: Company Controller / Subject: Dealer Agreement
Anything going back and forth on eLifespaces, my Charleston prospect? I REALLY need to get him going. The only thing he needs is to have, in writing, that if he refuses a damaged shipment - we will send a replacement piece without charging him again (while waiting for the original piece to hit our dock and be credited). In the grand scheme of things, he's not asking for much. PLEASE CONSIDER.

While we are able to accommodate the other request to our Agreement by eLifespaces – the one request to put in writing “if Lifespaces refuses a damaged shipment – we will send a replacement piece without charging him again (while waiting for the original piece to hit our dock and be credited)” – we cannot put such a statement in the Agreement.

1. We have not done this with any other dealer.
2. Even if open account, and the same situation occurred, we still charge the dealer and offset it with a return credit.
3. From the accounting side, you have a debit (invoice), offset by a credit (payment). Having another debit (invoice) and wait on a credit (return credit) would raise issues about financial controls.

Legal and I have spent considerable time trying to come up with a way around this. I’m sorry but there is no way we can do this.

Sorry it has been so long, but legal guys are slow, and our legal guys are extra slow.
This is what they have come back to me with. It’s killing me that a theoretical situation is holding us up from doing business and I certainly understand your point if shipping damage did occur, but our guys are very reticent to rewrite something for one dealer when they haven’t done it for others.
It seems that the worst that could happen is the damaged prodct would be refused and returned to our dock. This might be a 4-5 day delay until we could credit your account and get another piece rolling. In the 4 years I have been selling projectors for 9 states, I have yet to have this happen, but since product purchases are usually planned far in advance, hopefully a 1 week delay wouldn’t be a problem.
Would like to work my way down there next week and spend a few minutes with you, if you haven’t forgotten me.

You’re always welcome for a quick visit – but I don’t think we’ll be doing business with as a dealer. It is apparent that they do not have any of the dealer’s interest in mind.