Academy topic · Delivery risk
Incoterms and Contract Risk in International Trade
Incoterms 2020 are three-letter shorthand for who arranges transport, who insures cargo, and where risk transfers — but they are not a full contract. This topic teaches how to pair Incoterms with payment, compliance and dispute clauses.
What Incoterms do and do not do
Incoterms regulate seller/buyer obligations for carriage, insurance (where relevant), export/import clearance at defined points. They do not determine ownership, payment timing, remedies for non-conforming goods, or governing law. Students often conflate "FOB Shanghai" with "all risk on buyer forever" — your seminar should unpack transfer points precisely.
Common student mistakes
- Using Incoterms that do not match transport mode (e.g. FOB for container)
- Omitting named place or port with precision
- Assuming Incoterms cover sanctions or export licence failures
- Ignoring insurance gap under FCA/CPT without added clause
- Conflicting Incoterms rule with payment (LC release vs DAP delivery)
Classroom exercise
Present a sale from EU manufacturer to Middle East distributor. Teams choose DAP vs DDP vs CIP and draft the delivery schedule, insurance certificate requirements and inspection rights. Discuss who bears delay risk if customs inspection extends beyond Incoterms handover assumptions.
Link to GAFTA/FOSFA and CISG cases
Commodity contracts often embed Incoterms-like delivery logic inside standard forms. Connect this topic to GAFTA/FOSFA teaching cases and CISG hardship when price and delivery risks collide.
Related resources
FAQ
Do Incoterms govern all contract risk?
No — they address delivery/transport/insurance mechanics; payment, title and disputes need separate terms.
Can students practice Incoterms in the ContractBot simulator?
Yes — use the Academy simulator cross-border presets.
Educational topic guide only. Not legal advice.