NAEGA Contract Terms
NAEGA Contact Terms No. 2
Most of the export grain shipped from the USA and/or Canada sold free on board (FOB) is contracted under the terms and conditions of the North American Export Grain Association, Inc. No. 2 contract, often referred to as simply, NAEGA No. 2. 
Under this type of transaction, the seller is obliged to have grain available for delivery at the export loading facility to buyer’s nominated vessel at the delivery time specified in the contract, and to effect delivery to the vessel at the end of the loading spout. This signifies that the risk of loss shall pass to buyer on delivery at discharge end of the loading spout. However, unless otherwise spelled out in the contract, seller retains title to the commodity until he has been paid in full (clause 25 of NAEGA No. 2).
Some of the terms and conditions spelled out in this contract are: the complete names and addresses of the buyer and seller, quantity, quality, dates of delivery, price, payment terms, and shipping documents seller is required to present to buyer for payment. In addition to these important terms, the contract will also include clauses that spell out the rights and obligations of both parties when situations make delivery impossible or outside of the agreed upon terms and conditions. These clauses include provisions for failure to take delivery on time or take delivery, carrying charges to be paid for situations where seller is obliged to carry the commodity for buyer’s account, strikes or other causes of delay in delivery, default by either party, and a clause that limits the liability of seller to the act of delivering the commodity at the discharge end of the loading spout and to presentation of the contractually required documentation (clause 26, Limitation of Liability).
Additionally, as most FOB contracts are sold with a loading rate guarantee, the NAEGA No. 2 contract may include Addendum No. 1 which will incorporate the terms and conditions governing settlement of laytime (time lost and/or gained, demurrage and/or despatch) at load.
Another important addendum is the arbitration clause. This clause specifies how buyer and seller agree to settle any controversy or claim that results from a dispute or breach of contract by either party. Arbitration under NAEGA No. 2 is settled in New York City subject to, and in accordance with International Arbitration rules of the American Arbitration Association .
