II) Goods sold in Transit

III) General Residual Rules on Risk

Chapter II: Consequences of the Passing of Risk

I) Risk and Liability

II) Risk and Non-conformity

III) Risk and Remedies

Conclusion

INTRODUCTION

The rules on risk determine which party is bound to bear the risk of accidental destruction of, or damage to, the goods. Thus, they establish whether the buyer is liable for the price and must take delivery of the goods in spite of such loss or damage. The theory of risks must be clearly distinguished from the doctrine of force majeure, which is not concerned with the allocation of risk. The doctrine of force majeure, rather, exempts a defaulting party from liability in damages where failure to perform his obligation is due to an impediment beyond his control.[1] For instance, if the goods are at the buyer's risk and perish or deteriorate, the buyer may be liable for damages for non-acceptance if the seller has suffered any (e.g., storage charges). In some legal systems, only force majeure can discharge the buyer from such liability.[2] The rules as to risk are silent on this issue.

The theory of risks is also different from the doctrine of frustration. The doctrine of frustration regards the contract as terminated [3] when it is frustrated by some extraordinary and unforeseeable event, so that neither party is under any liability to the other.[4] It must be noted that under the English law of frustration, a contract of sale cannot be frustrated by the destruction of the subject matter, or part of it, after the risk has passed to the buyer.[5]

The United Nations Convention on Contracts for the International Sale of Goods, which was adopted on 11^th April 1980 in Vienna, and came into force on 1^st January 1988, sets out rules as to risk allocation.[6] Article 6 [page 247] of the Convention makes it clear that contractual provisions prevail over the rules of the CISG. Indeed, most contracts provide for the time of the passing of risk, i.e., the point from which the buyer must pay for the goods even though they have been lost or damaged. To this end, the parties sometimes specify precisely the time or place at which risk passes or, more frequently, refer to standard trade terms, such as those developed by the International Chamber of Commerce.[7] Thus, the Convention's provisions on risks merely provide a "legal safety net for use in the event that contractual arrangements are inadequate."[8]

When examining the problem of risk allocation under the Vienna Convention, the first issue is one of time: when does the risk pass from the seller to the buyer? This issue will be dealt with in the first chapter. The second chapter will be devoted to an examination of the consequences of the transfer of risk.

CHAPTER I: TIME OF THE PASSING OF RISK

The Vienna Convention, like the Incoterms, links the burden of risk with possession.[9] Indeed, for the purposes of the time of the passing of risk, the Convention refers to physical acts of transfer of possession: the "handing over" of the goods to a carrier or to the buyer, or "taking over" by the buyer. The draftsmen thought, not without reason, that the party who has the control of the goods is better placed to prevent losses or damages to the goods and, if need be, to limit the harmful consequences and assess the damages.

Having said that, almost all international sales involve to one degree or another carriage of the goods, so that a third party is likely to intervene. Then, none of the parties can genuinely be said to be in possession or to [page 248] have control of the goods. That is why the basic idea has had to be adjusted in order to take account of the different possible scenarios. Two main kinds of situations may be distinguished depending on whether the contract of sale involves carriage of the goods [10] or not.[11] The particular case of goods sold in transit shall be addressed separately in this article.[12]

I. CONTRACT OF SALE INVOLVING CARRIAGE OF THE GOODS

The majority of international sales call for carriage of the goods. The possible types of transport that one may conceive are extremely numerous, since every transport arrangement reflects particular circumstances such as geopolitical settings, kinds of goods and the needs of the parties. Thus, the transport may be operated by the seller, the buyer or an independent carrier. Also, the number of stages may vary too. In recent decades, the "container revolution" has led to the development of multimodal transport, in which the container is sealed at an inland point and the carriage is executed by a combination of different modes of transportation, such as by rail, truck and ship. The parties may also use unimodal transport. Obviously, no statutory instrument can provide for all these possibilities and it is difficult to make adequate provision for the passing of risk in general terms. Fortunately, aware of this fact, the parties to an international sale often provide for that issue, either by agreeing on a precise point at which the risk passes or by referring to a specified trade term, such as F.O.B. or C.I.F. (Incoterms 1990). As already noted, the rules of the Convention give way before contractual provisions [13].

As far as contracts involving carriage are concerned, the Convention's general rule on risk is stated in Article 67(1). The basic rule in Article 67(1) is that the risk is transferred to the buyer "when the goods are handed over to the … carrier" as discussed in Section A of Chapter One. The application of this provision may be disrupted by certain particular circumstances as discussed in Section B of this chapter.[page 249]

A. The basic rules in Article 67(1)

Article 67(1) establishes a distinction between two situations, which depends on whether the seller is bound to hand the goods over at a particular place or not. Article 67(1) holds that in both cases the risk is transferred from the seller to the buyer "when the goods are handed over to the … carrier."[14] Thus, the buyer bears the transit risk.[15] The logic behind this provision is that the buyer is usually in a better position to establish any damage which has occurred as a result of the transport, then limit the harmful consequences, salvage and if possible, repair the remaining goods and make an insurance claim. Nevertheless, in the case of "high-tech" goods that only the seller can repair, it may be advisable for the parties to decide to postpone the passing of risk until a trial run has been performed to check that the goods are in working order.[16] Above all, in view of the widespread use of containers, it is of paramount importance that risk does not pass during transit because of the difficulties of proof to which such a splitting of risk would give rise. Indeed, it is often of the utmost difficulty to determine the precise moment at which the loss or damage occurred.[17]

Article 67(1) is susceptible to potentially conflicting interpretations, which threatens the unification goals of the Convention. The ambiguities lie in the concepts of "contract of sale involving carriage of the goods" and "handing over" of the goods. Besides, as we shall see, the solutions provided by the Convention are not always satisfactory.

1. The concept of "contract of sale involving carriage of the goods"

One of the main difficulties of interpretation emerging from Article 67(1) is the ambiguity of the expression "contract of sale involving carriage of the goods."[18] "These words cannot simply mean that as a consequence of the sale the goods will be moved from one place to another, since this is true [page 250] of virtually every international sale."[19] Otherwise, there would be no scope for the application of Article 69, since this residual provision deals with cases not governed by Article 67 and 68.[20] What are the limits of the scope of Article 67?

First, the mere fact that a consequence of the sale is the carriage of the goods is not sufficient for Article 67(1) to apply. The term "involves" should be construed to require that the contract provides for the carriage of the goods.[21] In practice, in contracts that do not provide where the buyer is to arrange for collection of the goods, the requirement is met in cases where the seller is required or authorised to arrange for carriage.[22]

A second issue is whether the word "carriage" should exclude situations where the transport is wholly operated by one of the parties. As previously noted, contracts of sale seldom, if ever, provide for carriage arranged by the buyer [23]. Therefore, Article 67(1) is likely to be inapplicable anytime the party who employs his own transport facilities is the buyer. On the other hand, the question as to whether Article 67(1) applies when the seller engages to transport the goods in his own means of transport may be of great importance. If the seller is regarded as handing the goods over to a carrier when he loads the goods in his own trucks, the risk passes to the buyer at this time. Otherwise, the risk remains with the seller until the goods are handed over to the genuine carrier.[24] Following the language of the Convention, the second construction is by far preferable. Indeed, "hand over" denotes an actual transfer of possession,[25] which presupposes that the carrier is an independent entity.[26] It seems a contradiction to speak of the seller as handing over the goods to himself. It is also preferable, for practical [page 251] reasons, to hold the risk on the seller while the goods are being transported in the seller's vehicles. Otherwise, there would be a great likelihood of litigation, since the buyer would often claim that the seller failed to exercise due care and must therefore bear the liability for loss or damage on the ground of Article 66.[27]

This approach is consistent with the Incoterms 1990 CPT [28] and FCA.[29] Under these terms, the risk is transferred when the goods are delivered "into the charge of the carrier," which is defined as "any person who, in a contract of carriage undertakes to perform or procure the performance of carriage." This requirement of a contract of carriage clearly excludes carriage in one of the parties' own transport.[30] It is coherent to exclude the application of Article 67(1) when the transport is operated by one of the parties, since this provision is tailored to govern situations in which risk cannot be genuinely linked to control of the goods due to the intervention of a third party who undertakes to move the goods.

On the other hand, it has been suggested that handing over the goods to a freight-forwarder should cause the risk to pass. Indeed, "the decisive criterion is the fact that the seller hands over the goods to an independent entity for the purposes of their transmission to the buyer."[31] Now, a freight-forwarder undeniably fulfils this requirement of independence.[32]

2. The "handing over" of the goods

Under Article 67(1), the risk passes "when the goods are handed over to the … carrier."[33] One of the main issues arising from this provision [page 252] regards the meaning of "hand over," which occurs throughout the Convention.[34] This term denotes a physical act of transfer of possession, meaning that the goods are transferred from the control of the seller to that of the carrier. For instance, in the case of sea transport, it is sufficient that the goods are unloaded alongside the ship, provided that the carrier takes them into his custody.[35]

The reference to the "handing over" of the goods constitutes an evident gain in clarity over ULIS, in which the risk in the goods passed on "delivery [...] in accordance with the contract and the present law,"[36] delivery meaning the handing over of conforming goods.[37] Thus, it was not delivery in the English sense, since there was no delivery if the goods were defective.[38] "The main criticism was levied at the excessively complicated nature of 'delivery' owing to its quite different functions."[39] Particularly, the concept of delivery was an inadequate device for the purposes of the transfer of risk in the case of the handing over of defective goods because then the seller would have retained the risk indefinitely even if the buyer had kept the goods. Therefore, a special provision stated a different rule in this case.[40] As a result, ULIS's rules on risk were "unnecessarily complicated."[41]

3. The solutions provided by Article 67(1)

The first sentence of Article 67(1) states that "if the contract of sale involves carriage of goods and the seller is not bound to hand them over at a particular place, the risk passes to the buyer when the goods are handed [page 253] over to the first carrier for transmission to the buyer . . ."[42] On the other hand, the next sentence provides that "if the seller is bound to hand the goods over to a carrier at a particular place, the risk does not pass to the buyer until the goods are handed over to the carrier at that place."[43] Thus, the "first carrier" rule applies where the sale contract leaves the determination of the route of the goods at the seller's discretion. However, if the contract specifies a port through which the goods shall pass, the risk does not pass until the goods are handed over to the carrier at that port. It is clear that the situation governed by the second sentence is an exception, which must be specially agreed upon by the parties in advance.[44]

The "first carrier" rule

The first sentence of Article 67(1) attaches consequences to the handing over to the first carrier. Therefore, in principle, the whole transportation is at the buyer's risk. The advantage of this approach is that there is no need to establish the actual time at which the damage occurred, which is often nearly impossible where the goods are containerised. That is the reason why the special Incoterms for container traffic provide for similar rules.[45]

Having said that, the application of this rule poses problem where the seller uses his own personnel to transport the goods for part of the way. In such a case, the risk is split and passes to the buyer only when the goods are handed over to the independent carrier.[46] If the precise moment at which the breakage occurred cannot be determined, as is often the case with container traffic, it will be of the utmost difficulty to allocate the burden of the loss or damage.[47] "With the containerisation revolution and multimodal shipment, a policy against splitting the transit risk should be paramount."[48] One may deplore the absence of particular provisions dealing with [page 254] containerised cargo. Absent such rules, parties should introduce special contractual provisions to avoid splitting of the risk.

The "particular place" rule

It must be noted that under the second sentence of Article 67(1), the seller is responsible for transport damages until the goods are handed over to the carrier at the "particular place". Thus, if a seller agrees to deliver the goods at a particular seaport, the risk does not pass to the buyer when the goods are handed over to the first carrier, but rather only when the goods are shipped at the port. The result achieved by this provision is inconsistent with the general principle of Article 67(1) that the buyer bears transit risk, but the Convention here reflects a judgement as to the likely intent of the parties.[49] Having said that, this provision again leads to a splitting of risk and the difficulties that follow from it.

A difficulty in interpretation arises where the seller is bound to hand the goods over at a particular place, arranges for the goods to be transported there by an independent carrier and for this carrier to place them on board the ship. In such a case it is not clear which sentence of Article 67(1) should apply. If this placing on board by the carrier on the instruction of the seller is treated as the equivalent of a handing over by the seller, the second sentence applies. On the other hand, it could be argued that the seller is not bound personally to hand the goods over at a particular place, but merely to arrange that the goods are so delivered. Then, the case would be presumably governed by the first sentence. Under this construction, the second sentence would apply only where the seller uses his own transport facilities to carry the goods on the first part of their journey. This article submits that the first interpretation is preferable.[50] If the second construction were adopted, it would make the distinction between the first and second sentences pointless. In any case, the risk remains with the seller while the goods are transported in his vehicles.[51] Therefore, in the case in which the "particular place" rule would apply, it would not provide a solution different from that of the "first carrier" rule, while the second sentence is supposed to be an exception to the first one. The same result would then follow [page 255] from a single sentence providing that the risk passes to the buyer when the goods are handed over to the first carrier.[52]

B. Disruptive circumstances

The normal application of Article 67(1) may be precluded in certain circumstances, particularly when the goods are not identified. This article also addressed the impact of the retention of documents controlling the disposition of the goods and the effect of minor deviations.

1. Unascertained goods

Article 67(2) provides that risk does not pass to the buyer "until the goods are clearly identified to the contract." This principle is part of many legal systems.[53] It is common that the seller ships undivided bulk goods for the performance of several contracts, or even a larger quantity of goods than is needed to fulfil the contracts he has made so far. The policy underlying that rule is to preclude the seller, in case of loss or damage to his consignment, from falsely claiming that the lost or damaged goods were those purchased by the buyer.[54]

Article 67(2) does not define what is sufficient to constitute identification. It merely states that the goods may be identified "whether by marking on the goods, by shipping documents, by notice given to the buyer or otherwise." The range of means for identification listed in Article 67(2) is not exhaustive. Given the purpose of that provision "any identification that would forestall this abuse should be sufficient under paragraph (2)."[55] Where the goods are identified by notice, it is the dispatch of the notice which is decisive, not the time when it reaches the buyer.[56] This conclusion follows from Article 27 and is reinforced by the example of markings on the goods, in which there is no immediate communication to the buyer. If the contract or a trade usage entitles the seller to deliver a collective consignment, the [page 256] identification of the goods needs to relate only to the collective consignment.[57] In such a situation, the buyers shall bear the risk collectively pro rata.

An interesting issue is whether the requirement of identification is satisfied in the case of shares of fungible goods contained in an identified bulk. For example, a buyer purchases 1000 litres of oil, which is a part of a total quantity of 2000 litres in a storage tank belonging to the seller. The oil deteriorates in quality between the handing over of the tank to the carrier and the time when the goods are divided. Which party shall bear the loss? There is no definite answer to this question. Following the case Stern Ltd v Vickers Ltd,[58] it seems that English case law tends to consider that the goods are not ascertained in the technical sense, but should be treated as being at the buyer's risk though. In Stern, the buyers had obtained a delivery order accepted by the third party to whom the storage tank belonged. However, the buyers had decided to leave the goods in the tank for some time for their own convenience. This approach may be approved, because the goods in which the buyer assumes the risk are specified, so that the policy of Article 67(2) is not subverted.[59] The mere fact that the bulk contains a larger quantity of goods than those purchased by the considered buyer should not prevent the passing of risk. Of course, in case of loss or damage to the whole bulk, the buyer would be liable only pro rata, (i.e., in proportion to the share represented in the bulk by the goods he has purchased). However, it can be argued that the goods cannot very well be regarded as "clearly identified" and should therefore not be treated as being at the buyer's risk unless it can be inferred from the circumstances that the parties have implicitly agreed that the risk would be borne by the buyer.[60]

Under ULIS, upon the sending of the notice the risk passed to the buyer retroactively with effect from shipment,[61] unless the seller "knew or ought to have known that the goods had been lost or had deteriorated after they were handed over to the carrier."[62] Article 67(2) of the CISG does not [page 257] provide for the risk to be transferred with retroactive effect as in the second sentence of Article 68.[63] This rule again leads to an undesirable splitting of transit risk.[64]

2. Retention of documents

The last sentence of Article 67(1) is concerned with the common practice of sellers of retaining document concerning the disposition of the goods (e.g., shipping documents, as a security for the payment of the price). It states that "the fact the seller is authorised to retain documents controlling the disposition of the goods does not affect the passage of the risk."[65] This rule is consistent with the fact that the Convention does not connect risk to ownership [66]. In actuality, "the sentence is simply declaratory of what would in any case follow from the other provisions of the Convention."[67] Be that as it may, this provision must be welcomed since a contrary rule would lead to a splitting of transit risk when the documents are transmitted while the goods are in transit.[68]

3. Minor deviations

The first sentence of Article 67(1) states that "the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer in accordance with the contract of sale."[69] Should this requirement be construed as meaning that the risk remains on the seller when he deviates from the contract? This construction would somewhat constitute a return to ULIS's concept of delivery.[70] Then, in case of where seller's deviation from the contract, the seller would retain the risk indefinitely even if the buyer kept the goods. Such a conclusion would be obviously absurd. If [page 258] the buyer does not refuse to take delivery in spite of the seller's breach of contract, it is inconceivable that the risk ever passes to him.

In actuality, two situations must be distinguished:

Thus, the phrase "in accordance with the contract of sale" should not be construed as controlling specifically the issue of breaches of contract.

Comments on Chapter One

In the final analysis, the main criticism of Article 67 is that its application will often result in a splitting of risk. As already said, particularly in view of the widespread use of containers, splitting of transit risk should be avoided, because of the difficulties of proof to which it gives rise. Indeed, it is often of the utmost difficulty to determine the precise moment at which the loss or damage occurred. In such cases, which party bears the risk will ultimately be decided by the question of which party bears the burden of proving either that he did not bear the risk at the time of the breakage, or the existence of conforming or non-conforming goods at the time of the passing of risk.[73] The CISG does not contain any rules concerning the burden of proof. This matter is, however, "inextricably linked"[74] to the issue of "the rights and obligations of the seller and the buyer"[75] and, consequently,[page 259] is governed by the CISG.[76] Therefore, in accordance with Article 7(2), that question is to be settled in conformity with the general principles on which the Convention is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.

In the context of the burden of proof, certain scholars suggested that the gap be filled by applying the principle actori incumbit probatio, whereby a person who relies on a fact or a rule bears the burden of proof with regards to this fact or the preconditions for the application of that rule, on the ground that it would be a "generally acknowledged principle of international trade."[77] This view is questionable because, it is doubtful that the rule actori incumbit probatio, though recognised in many legal systems,[78] is one of the principles on which the CISG is based.[79] Besides, one cannot very well believe in the aptitude of international trade practice to develop some rules designed only for the resolution of disputes.[80] Therefore, the issue of the burden of proof should be governed by the law applicable by virtue of the rules of private international law of the forum. This should not threaten the unification goals of the Convention, since the principle actori incumbit probatio is well established in most legal systems. In accordance to this rule, if the buyer claims that the seller is liable under Article 36(1) because the defects in the goods amount to a breach of contract by the seller, he must prove that the goods did not conform to the contract at the time of the passage of risk.[81] The buyer will try to give such evidence if he has paid the price and wishes to avoid the contract, and also as a means of defence if the seller claims payment of the price.[82] Thus, the buyer shall bear the burden of proof and the risk attached to it [83] in every case,[84] unless the law applicable [page 260] by virtue of the rules of private international law of the forum does not apply the principle actori incumbit probatio.

II. GOODS SOLD IN TRANSIT

The ordinary rule of Article 67(1) cannot apply where the goods are already in transit at the time of the contract of sale. For example, the goods have not been handed over to the carrier "for transmission to the buyer in accordance to the contract of sale."[85] Such situation is governed by Article 68.

At the Vienna Conference, the drafting of this provision unexpectedly gave rise to much controversy. The working group's draft reproduced the substance of Article 99 ULIS, according to which the risk was assumed retroactively by the buyer from the time the goods were handed over to the carrier. Such rule has practical advantages since it prevents splitting of transit risk.[86] Nevertheless, some delegates of developing countries objected that it was unfair to put the risk on the buyer before the time of the conclusion of the contract. It was added that the buyer could not have any insurable interest until he contracted to buy the goods. The supporters of this proposal replied that the buyer was not put in an uncomfortable position since the goods should be covered by insurance assigned to the buyer. The objectors retorted that the rule led to mandatory insurance of the goods, which resulted in a further transfer of resources from Third World to developed countries,[87] since the world insurance market was generally controlled by the latter. Such result was also unfair to buyers in developing countries, who would often prefer not to insure the goods but rather to bear the risk themselves.[88]

As a result, a compromise provision was adopted. Thus, the first sentence of Article 68 lays down the primary rule that the risk passes "from the time of the conclusion of the contract," but is qualified by the second sentence, which makes the risk pass retroactively from the moment the goods are handed over to the carrier "if the circumstances so indicate." This [page 261] provision shall preclude recourse to domestic provisions which declare the contract void where the goods had ceased to exist at the time of the making of the contract.[89]

The applicability of the second sentence is dependent on "circumstances" which "indicate" that the buyer assumed the risk. Generally, the word "circumstances" should be construed as referring to the intention of the parties, whether it is expressed or to be inferred from the circumstances.[90] There is general agreement that this precondition is satisfied where the contract of sale requires the seller to transfer an insurance policy to the buyer [91] or the buyer takes out a retroactive insurance cover, which is possible if he is not yet aware of the loss.[92] Such interpretation is consistent with the legislative history of the provision. Since contracts of the kind envisaged in Article 68 customarily so provide, this interpretation has the effect of making the rule in the second sentence widely applicable.[93] Otherwise, there are very few scenarios where the buyer shall assume the risk retroactively. It has been suggested that the second sentence should be applied when the precise moment at which the loss or damage occurred cannot be precisely determined.[94] Such a solution would certainly have the practical advantage of avoiding the difficulties of proof to which splitting of risk gives rise and to prevent disputes between the parties, but cannot very well be reconciled with the legislative history of Article 68. It is all the more difficult to believe that such a solution was that intended by the draftsmen, since the CISG generally is not very concerned about preventing the problems arising from splitting of risk.[95] Besides, such construction would not add much to what is likely to follow from the application of the rules governing the burden of proof. As previously noted,[96] in most cases, the buyer shall bear the burden of proving that he did not bear the risk at the time of the breakage and consequently, if he fails to do so, that of the loss. In short, [page 262] if the time when the loss or damage occurred cannot be established, it is likely to be assumed by the buyer.

Under the second sentence, the risk is borne by the buyer "from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage."[97] It must be noted that there is no reference, as in Article 67(1), to "documents controlling the disposition of the goods". It is sufficient that the documents prove the existence of the contract of carriage.[98] Absent such documents, the rule does not apply.[99] If the transport involves a chain of carriers, as is the case with multimodal transport, it is the handing over to the carrier who issued the documents in question that is relevant.[100]

The third sentence of Article 68 states that there is no retroactive assumption of risk if, at the time of the conclusion of the contract of sale, the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer. This provision raises a problem of interpretation. The issue is whether under this provision the seller is also liable for additional damage which occurred after the conclusion of the contract or which already existed at this time but of which the seller was not aware. Assume, for example, that half of the goods had already been destroyed when the contract was concluded, that the seller knew or ought to have known that this was the case in respect of a quarter of the goods and that the other half of the goods was subsequently lost. Under the third sentence of Article 68, "the loss or damage is at the risk of the seller." The UNCITRAL Draft Convention provided "if the seller knew or ought to have known that the goods had been lost or damaged … such loss or damage is at the risk of the seller." This formulation clearly restricted the risk borne by the seller to the loss that he was or ought to have been aware of. The French wording was slightly less clear and referred to "la perte ou la deterioration," which is equivalent to the actual wording of Article 68. One may therefore assume that the intended meaning of the third sentence of Article 68 is similar to that of the draft provision.

During the debate on the compromise provision,[101] a proposal to substitute "that loss or damage" was rejected on the ground that it would have [page 263] limited the loss borne by the seller to the loss which had occurred before the making of the contract.[102] The conclusion to be drawn is that under the third sentence of Article 68, the seller is liable not only for the loss or damage that he knew or ought to have known, but also for all subsequent damage which was causally connected with the original damage. This provision should have no impact on the parties' liabilities in respect of other losses, which once more has the practical disadvantage of splitting the risk. However, it has been suggested that the buyer should not be inflicted with sharing the loss when the seller's conduct amounts to a serious breach of his obligations. Accordingly, under the third sentence the seller should bear every loss.[103] Such a construction disregards both the meaning of the phrase "the loss or damage" and the actual purpose of Article 68, which is only concerned with the allocation of risks.[104] Non-disclosure of the loss when the seller was aware of it amounts to fraud and constitutes a serious breach of contract. Therefore, the main protection for the buyer against the seller's bad faith shall lie in the Convention's system of remedies. Particularly, such conduct of the seller should empower the buyer to avoid the contract.[105] Besides, the lex contractus may provide that in such circumstances the contract can be void.[106]

According to certain scholars, a problem of interpretation arises from the third sentence of Article 68.[107] The issue would be whether the exception it creates applies also to the first sentence. In actuality, such interpretation would not add anything to what the first sentence itself provides. Since the risk passes to the buyer at the time of the conclusion of the contract, it is immaterial whether the seller was then aware of the loss or not.[108] In both cases, it is at the risk of the seller.

It must be noted that Article 68, unlike Articles 67 [109] and 69,[110] does not seem to require the goods to be ascertained before the risk passes. [page 264] However, particularly in view of the policy underlying the requirement of individualisation, it is submitted by this author that it should be expanded by analogy to Article 68.[111]

III. GENERAL RESIDUAL RULES ON RISK

Article 69 lays down the residual rules on risk in cases not covered by the two preceding Articles.[112] Since Article 67 provides for contracts "involving carriage of the goods"[113] and Article 68 also governs contracts in which the goods have been handed over to a "carrier,"[114] Article 69 applies nearly to all contracts that do not "involve carriage of the goods" by a "carrier."

"Within this residual provision, the first paragraph is itself residual."[115] The second applies when the "the buyer is bound to take the goods at a place other than a place of business of the seller." All other cases [116] fall within the scope of the first paragraph.[117] In either context, Article 69(3) states that the risk remains on the seller until the goods have been identified to the contract.

A. The residual rule on risk

By a tortuous process of exclusion,[118] Article 69(1) applies in two situations, provided of course that the contract does not involve carriage of the goods. It is primarily concerned with contracts in which the buyer is bound to take over the goods at a place of business of the seller. Article 69(1) is also applicable to the quite rare case in which the buyer is not bound [page 265] to take them over at any specified place, since the other provisions of the Convention do not envisage this situation.[119]

Pursuant to Article 69(1), risk normally passes to the buyer when he takes over the goods (i.e., upon the change in control over them).[120] The policy underlying this rule is that the party in custody of the goods is in better position to protect them and take out an insurance cover. As the goods are very likely to be in the seller's premises, they will probably be covered by a standard "building and contents" insurance policy.[121] Moreover, if the buyer bore the risk while the goods are in the seller's custody, the former would always claim that the loss or damage which occurred was caused by the latter's negligence, so that such a rule would be at the root of many disputes, along with all the attendant difficulties of proof.

The rule in Article 69(1) leaves some room for factual disputes over whether or not such transfer of control had occurred.[122] One may wonder whether the buyer should be considered to have taken over the goods as soon as he is handed over documents of title, such as a bill of lading.[123] In this sense, it could be put forward that Article 69(1) does not specify physical handling of the goods as the time when risk passes. Nevertheless, it is doubtful that the Convention allows such an interpretation since that would result in a rule that the goods are taken over as soon as they are placed at the buyer's disposal.[124] The second part of Article 67(1) clearly distinguishes between the activities of making the goods available and taking control of them and makes such a construction dubious. "Taking over" by the buyer implies that the buyer or his agent has actual control of the goods. This is consistent with the policy underlying the first part of Article 67(1), in that the seller should bear the risk as long as he has control of the goods and therefore the means of protecting them.

However, the seller cannot indefinitely bear the risk. Thus, the second part of Article 69(1) provides that if the buyer fails to take delivery in due [page 266] time, risk passes to the buyer from the time when the goods are placed at his disposal and such delay amounts to a breach of contract.[125] The goods shall be considered to be placed at the buyer's disposal only when the seller has taken all the steps to enable the buyer to take control of them, especially by identifying the goods to the contract.[126]

A failure to take over the goods in due time constitutes a breach of contract if the agreed time for taking delivery has passed, or if no time has been agreed, if a reasonable period has expired after the buyer has received notice that the goods are ready for delivery.[127] When the parties have agreed on the time for taking delivery, a notice should not be necessary since the buyer has no reason to think that the seller has not complied with the contract.

The buyer also "commits a breach of contract by failing to take delivery" if, though prepared to take over the goods, he does not pay the price that has become due, so that the seller retains the goods.[128] As a result of the buyer's breach, risk and custody are dissociated and the buyer assumes the risk while the goods are under the seller's control. The Convention takes account of the dangers of such a situation and Article 85 provides that in such a case the seller is under the obligation to preserve the goods.

B. The rule in article 69(2)

Article 69(2)[129] governs cases in which the buyer is bound to collect the goods at a place of custody other than the seller's place of business. This includes a public warehouse or another party's manufacturing premises where the finished goods are located, as in a sale "Ex Warehouse", "Ex Works" or "Ex Quay." It applies also where the contract of sale requires the seller to hand the goods over to the buyer at a particular place.[130] Typical examples are "Ex Ship" and "FOB buyer's city" contracts. In such destination contracts, the destination is very often the port nearest to the buyer's place [page 267] of business.[131] The duty to hand the goods over to the buyer at the destination port does not imply handing them over to a carrier there. Indeed, under international trade practice, the seller's obligation ends when the goods are unloaded from the transnational carrier. Therefore, the second sentence of Article 67(1) does not apply to such a contract, even in the unusual case where the contract of sale provides for the subsequent inland transport,[132] since the seller is not "bound to hand the goods over to a carrier."[133]

Here, the policy considerations mentioned above [134] do not apply. The seller is prima facie in no better position than the buyer to protect and insure the goods. Therefore, there is no reason for the risk to remain on the seller; it should pass as soon as the buyer is in a position to pick up the goods. That is why Article 69(2) provides that "the risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal."[135] Thus, three conditions must be met for the risk to pass.

1. Delivery must be due

The requirement that delivery be due presents a problem when the goods are prematurely [136] placed at the buyer's disposal. In such a hypothesis, the buyer need not take delivery but may do so.[137] A strict and literal interpretation of Article 69(2) might suggest that the risk should remain on the seller even if the buyer picks up the goods. Such a result would obviously be contrary to the general policy of the Convention. Therefore, in circumstances such as these, the risk should pass to the buyer when he possesses the goods.[138]

2. The goods must have been placed at the buyer's disposal

By contrast with the rule in Article 69(1), the passing of risk does not depend on the buyer's taking of the goods Article 69(2) refers to "the [page 268] unilateral act of placing the goods at the buyer's disposal".[139] "Placing the goods at the buyer's disposal"[140] has the same meaning as in the first paragraph:[141] the seller must have done everything necessary to enable the buyer to take control of the goods. For instance, when the buyer has to collect the goods at a warehouse, the goods are at his disposal if he can require the warehouseman to deliver them to him.[142] This presupposes that the seller has given instructions to the warehouse keeper or has handed over an effective delivery order to the buyer.[143]

3. The buyer must be aware that the goods are at his disposal

If the parties have agreed on the time for placing the goods at the buyer's disposal, the seller need not send a notice to the buyer. In this case, buyer has no reason to think that the seller has not complied with the contract. Absent such agreement, the seller must notify the buyer that the goods have been placed at his disposal. Since "awareness" implies actual knowledge, it is clear that the notice is not effective unless received by the buyer.[144]

C. Unascertained goods

Article 69(3) requires that the goods be "clearly identified in the contract" before they can be considered to be placed at the buyer's disposal and risk can pass.[145] As the buyer must be aware that the goods are placed at his disposal,[146] the seller must notify the buyer that the goods have been specified. This applies unless the parties have agreed on the time for placing the goods at the buyer's disposal.[147]

The requirement of identification in Article 69(3) is parallel to that in Article 67(3) and the same considerations should therefore apply.[148] [page 269] Particularly, as already mentioned, it is not clear whether the requirement of identification is satisfied in the case of shares of fungible goods contained in an identified bulk.[149] Article 69(3) poses a particular problem in this respect. In the context of this provision, situations are conceivable in which the goods can be taken from the tank only when the buyer takes them over as, for instance, in the case of the sale of oil stored in large containers. If one considered that the goods are not at the buyer's disposal in such cases, there would be then a conflict between the wording of Article 69(3) and the policy of the first two paragraphs. Indeed, such an interpretation would subvert the clearly drawn distinction in the second part of Article 67(1) between the activities of making the goods available and taking control of them. Furthermore, Article 69(3) would prevent the passing of risk when the seller may have done everything necessary to enable the buyer to take delivery. The difficulty would be even greater where the buyer failed to take over the goods in due time: such a lack of cooperation would preclude the identification of the goods and therefore the passing of risk. Risk could then pass neither under Article 69(2) nor under the second part of Article 69(1), even though this provision is designed precisely to make risk pass where the buyer does not take delivery in due time. In the final analysis, many drawbacks and inconstancies would follow from a strict interpretation of the requirement of identification. Therefore, it is submitted that it should be regarded as satisfied in the case of shares of fungible goods contained in an identified bulk. The problem was provided for in Article 98(3) ULIS, which stated "where unascertained goods are of such kind that the seller cannot set aside a part of them until the buyer takes delivery, it shall be sufficient for the seller to do all acts necessary to enable the buyer to take delivery."[150]

CHAPTER II: CONSEQUENCES OF THE PASSING OF RISK

I. RISK AND LIABILITY

The purpose of the allocation of risk is to determine which party shall bear loss of or damage to the goods, provided that such loss or damage is actually covered by the provisions as to risk. Thus, Article 66 provides that "loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller." This provision corresponds essentially to ULIS Article 96. It was recurrently objected to in the discussion of both texts as a provision that was superfluous in that it merely stated a self-evident consequence of the passing of risk. Nevertheless, the majority at all stages thought that such explanatory statement was useful.[151] In reality, the importance of this provision should not be underestimated. Indeed, Article 66, in spite of appearances, deals with complex issues and may be regarded as a key-provision.[152]

A. Liability for loss of or damage to the goods

As we have just seen, the question as to which party is liable for loss of or damage to the goods under the rules on risk is answered by Article 66. This provision leads to a distinction depending on whether the breakage occurs before the risk has passed or after.

1. Loss or damage after the passing of risk

The buyer must bear loss of or damage to the goods from the moment at which risk passes to him. This has two implications.

First, Article 66 expressly provides that the buyer must pay the price even though what he has received, if anything, is damaged. More generally, the buyer must perform his obligations under the contract. Particularly, "he must take delivery, to the extent, if at all, that it is tendered."[153] This solution necessarily follows from Article 66 and "the general principles on which [the Convention] is based."[154] The rule in Article 66 may be offset under certain circumstances by Article 28, which states that "a court is not bound [page 271] to enter a judgement for specific performance unless the court would do so under its own law in respect to similar contracts of sale not governed by this Convention".[155] Indeed, an action for the price falls within the scope of this provision. Therefore, the court is not bound to order the buyer to pay the price if it would not do so under the law of the forum in a similar situation. Assume, for example, that the seller preserves fungible goods for the buyer for an unreasonably long period after that the latter has breached the contract by failing to take delivery of them and the goods are then accidentally lost. In such a case, under American law, the Uniform Commercial Code (hereinafter UCC)[156] prevents the seller from bringing an action for the price.[157]

The buyer cannot find relief under Article 79, since this provision provides exemption only when performance is prevented by an "impediment beyond [the party's] control," and no such impediment prevents payment of the price. Moreover, there is no exemption under Article 79 when the considered party could have "avoided or overcome [the impediment] or its consequences."[158] A party may overcome the consequences of the burden of risk by taking out an insurance cover.[159]

On the other hand, the buyer is entitled to any benefit or increase which is accrued on the goods after the passing of risk.[160]

The second consequence of the passing of risk is that the buyer has no rights against the seller arising out of a seller's non-performance that is due to the casualty that the buyer has to bear by application of Article 66.[161] The availability of remedies arising out of the breakage itself should prima facie not be altered by Article 66. On the one hand, absent any breach of contract by the seller, there is no room for remedies.[162] On the other hand, as we shall see, loss or damage due to the seller's breach of contract falls outside the sphere of risk, so that the restriction on the buyer's rights laid down in [page 272] Article 66 does not apply in respect to such loss or damage.[163] Nevertheless, as we shall see, a difficulty arises when the loss of or damage to the goods is the result of a conduct for which this party is exempted under Article 79.[164] As regards breaches having no connection with the loss or damage considered in Article 66, the issue is governed by Article 70.[165]

2. Loss or damage before the passing of risk

As we have just seen, loss or damage after the risk has passed does not affect the existence of the contract: the buyer must pay the price. It does not follow a contrario from this statement that the contract is terminated when the object of the contract is destroyed before the passing of risk. The situation of the parties has then to be considered. If the casualty to the goods makes it definitively impossible for the seller to deliver the goods, the buyer is undeniably entitled to the remedy of avoidance of the contract, which releases both parties from their obligations and entails restitution of whatever may have been supplied or paid in performance of the contract.[166] On the other hand, if delivery remains possible, the parties are still bound to perform the contract. This is likely to happen in the case of sale of generic goods, since others may be obtained,[167] except in rare circumstances, (e.g., if the goods are of a rare kind). The seller will have to bear the loss and deliver undamaged goods. However, the delay in delivery due to the loss or damage may be sufficiently serious to lead to the avoidance of the contract.[168] The seller may also be liable for damages, unless he receives exemption under Article 79 or 80.[169]

B. The limit of liability: the concept of risk

Article 66 is a key-provision in that it defines the concept of risk, which is a limitation on the buyer's liability. The relationship between this notion and exoneration is unclear.[page 273]

1. The concept of risk

Article 66 limits the buyer's liability to "loss of or damage to the goods" which is not "due to an act or omission of the seller."[170] Both phrases define the boundaries of the concept of risk in the context of the Convention.

a. The nature of the event

The phrase "loss of or damage to the goods" refers to physical casualty to the goods. It is not always clear whether the rules on risk apply to particular situations. When the loss or damage is due to fire, theft or sinking, the applicability of the theory of risks is certain because such rules are intended to cover such accidents and have been so applied historically.[171]

On the other hand, the difficulty is greater when a change in the characteristics of the goods, rather than an external event, renders the goods unusable provided that such deterioration is the result of internal characteristics. Such an issue falls within the scope of Article 36.[172] Indeed, this provision specifically provides for the issue of lack of conformity, as defined by Article 35.[173]

Should the loss not relate directly to the goods, the theory of risks should not apply. Thus, it does not cover acts of state, (e.g., the confiscation of the goods or the adoption of export or import bans). Its rules provide for actual casualty to the goods, and generally speaking allocate the risk to the party who can insure against that risk.[174] "The latter situation has nothing to do with risk and, accordingly, it is practically impossible to obtain insurance protection against it."[175] On the contrary, the rules on the bearing of risk should apply in the event of goods confiscated by an enemy state in wartime, since such confiscation is equivalent to physical loss of the goods, and corresponding insurance coverage can be obtained.[176]

It has been suggested that an exception should be made as for unexpected transport costs, (e.g., the costs resulting from a necessary change of route). Such circumstances should be considered as transport risk.[177] This [page 274] interpretation, though consistent with the practice of international trade, cannot very well be said to be in accordance with the phrase "loss of or damage to the goods."

b. The cause of the event.

The most important limit of the buyer's liability lies in the last clause of Article 66: even after the passing of risk, the seller is responsible for loss or damage which is due to his "act or omission." Generally, Article 66 limits the scope of the rules on risk to casualty to the goods that is not the consequence of an "act or omission" of either party, who would then bear the burden of the loss.[178] Article 66 must also be read in the light of Article 80, which states that a party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party's act or omission.

The rules on remedies [179] cover loss or damage resulting from a breach of contract. Article 36(2)[180] clearly expresses the distinction between breach of contract and passing of risk for any lack of conformity that occurs after the time of the passing of risk as a consequence of his breach of contract. However, Article 66 is broader than Article 36(2) in that it is not confined to breaches of contract.[181] It merely requires an "act or omission" on the part of the seller.[182] Having said that, the use of this phrase is confusing. It is unrealistic to think that the seller [183] shall be liable for the loss or damage whenever his act or omission has somehow contributed to the happening, since his conduct may be perfectly lawful and have only a remote connection with the breakage. Consequently, "the nebulous dimensions of "omission" show that the seller's liability must be derived from the violation of some binding standard."[184] The issue then is to determine what rules or [page 275] standards decide what "act or omission" will make the other party liable for the loss or damage,[185] or in more theoretical terms, whether such loss or damage shall be considered as a risk.

The legislative history of the provision provides some guidance in this respect. It seems that the intention of the draftsmen was to exempt the buyer from the obligation to pay the price, in cases of breach of contract, and in cases where the seller's conduct constituted a tort. This construction is upheld by the Secretariat Commentary.[186] Thus, if the act of the seller is unlawful under the law of tort, but not under the law of contract, none of the buyer's remedies under Articles 45 to 52 is applicable.[187] Article 66, however, protects the buyer in these cases. He can deduct the damages that the seller would be liable to pay under the applicable law of tort from the price he must pay.[188] On the other hand, acts or omissions that are clearly lawful do not prevent the application of the provisions on risk.

In the final analysis, under the CISG, risk may be defined as any physical casualty relating directly to the goods which is not due to an unlawful act or omission of the party who does not bear the risk at the time of casualty. The unlawful nature of such conduct may result from the law of contract or the applicable law of tort.

2. Risk and exoneration

The relationship between Articles 66 and 79 is controversial.[189] The issue is whether a party can be responsible for loss of or damage to the goods that is the result of a conduct for which the party is exempt when applying the criteria of Article 79. An affirmative answer seems to follow from Article 79(5). Indeed, this provision provides that the only effect of the exemption is to remove the basis for secondary liability for damages, and to preserve all rights under the Convention other than the right to damages. Thus, Article 79(5) makes it clear that non-performance generally remains [page 276] a breach of contract in spite of the existence of exempting circumstances.[190] Then, there are prima facie no grounds for considering that conduct for which a party is exempt when applying the criteria of Article 79 is not an "act or omission" in the sense of the Article 66 final clause primarily intended to cover breaches of contract.[191] Therefore, the rights (and consequently the obligations) of the parties under Article 66 should not be altered by the application of Article 79. In short, since the impact of exoneration is restricted to liability for damages, it should logically have no effect on the allocation of risk. The exempted conduct should remain a breach of contract for the purposes of Article 66.

Nevertheless, there is general agreement that loss of or damage to the goods as the result of circumstances, granting the non-performing party exemption under Article 79 must be treated as a risk event and must be borne as such by the buyer if it occurs after risk has passed to him.[192] The best explanation is that if non-performance results from an impediment beyond the party's control, the loss cannot be regarded as "due" to the "act or omission;" the causal relationship is lacking. In other words, the loss or damage is not due to an "act or omission," but to an inescapable event. Such construction is in accordance with the theory of risks: a device for allocating the consequences of imponderable events.[193]

Having said that, such a solution risks being illusory since, in case of exemption, Article 79(5) normally preserves all remedies other than damages.[194] That is why, as suggested by Nicholas,[195] it should follow from Article 66 that the party bearing the risk is not entitled to assert the remedies set [page 277] out in Articles 45 et seq in so far as they arise out of the casualty in question.[196]

II. RISK AND NON-CONFORMITY

Article 36(1) lays down the basic rule that the goods must conform with the contract in the sense of Article 35 [197] at the time when the risk passes to the buyer.[198] The underlying idea is that what may occur after that time is no longer the seller's concern; the events affecting the goods are then chances of the buyer. Nevertheless, Article 36(2) makes it clear that the first paragraph does not exempt the seller from the consequences of his breach of contract. Thus, Article 36 is the counterpart of Article 66.[199]

A. Lack of conformity when risk passes

Article 36(1) states that the seller is liable for any lack of conformity existing at the time of the passage of risk, even though this lack of conformity becomes apparent only afterwards. This provision raises the issue of the burden of proof .

1. Latent defects

Article 36(1) makes it clear that the fact that the defects show themselves later is irrelevant to the assumption of risk. This solution is perfectly coherent. What becomes apparent in this situation is a defect which already affected the goods to a full extent at the time of the passing of risk, although [page 278] its discovery requires further examination, or the development of a condition which existed in an embryonic form at that time.[200] The buyer's protection against latent defects covers failure to comply with the requirement of Article 35(2) that the goods be fit for their ordinary purpose or for "any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract."[201]

Examples are unstable dye in material causing it to fade when first washed, and edible goods which deteriorate early because of the use of an inadequate preservative. Another example is the delivery of goods that deteriorate during transport due to defective packaging. In such a case, it follows from Article 35(2)(d) that the goods are not in accordance with the contract at the time of the passing of risk.

2. Burden of proof

Article 36 again raises the question of the burden of proof.[202] Here, the issue is whether the seller must prove that the goods were in conformity with the contract when risk passed to the buyer or if the buyer must prove that the goods were already non-conforming at that time. As already explained,[203] the CISG does not lay down any rules concerning the burden of proof. Thus, this issue should be governed by the law applicable by virtue of the rules of private international law of the forum. This solution is likely to lead to the application of the principle actori incumbit probatio.[204] Under this rule, the buyer would always bear the burden of proof.[205] However, his task should be easier in the context of Article 36 than under article 66. When the lack of conformity relates to the nature or the structure of the goods, it is self-evident that the defect was already inherent at the time of delivery and therefore when the risk passed to the buyer.[206] Similarly, the breach of contract is obvious where the non-conformity is "the result of a natural process which requires more time than the time elapsed from the passage of risk".[207] For instance, in the case of foodstuffs, a breach of [page 279] contract by the seller may be inferred from an advanced state of decomposition of the goods.

B. Lack of conformity after risk has passed

The buyer must normally bear the risk of any lack of conformity subsequent to the passing of risk. However, the limit of the risk rule, stressed in Article 66,[208] also emerges from Article 36(2): breaches of contract by the seller are not part of the coverage of risk.[209] The particular case of breaches of guarantee shall be dealt with separately.

1. Seller's breach of an obligation

The second paragraph of Article 36 lays down the delimitation between buyer's risks and seller's liability for lack of conformity. This provision places on the seller the burden of any lack of conformity occurring after the passing of risk which is due to "a breach of any of his obligations."[210] This phrase is more restrictive than that of Article 66,[211] and it seems that Article 36(2) is not intended to cover defects caused by the breach of a non-contractual obligation, though its formulation is not perfectly clear in this respect. This construction is supported by the legislative history of the provision. Under ULIS Article 35(2), the seller was liable for any lack of conformity if it was due to an "act" of the seller. The draftsmen did not want to reproduce this more extensive rule on the ground that it would have made the seller liable for a lack of conformity due to the breach of a non-contractual obligation. On the other hand, the reference to the seller's "act or omission" was carefully retained for the purposes of Article 66.[212] This lack of coordination between Article 66 and 36(2) is extremely regrettable. When the seller's conduct which has led to the lack of conformity is contrary to a legal duty but is not a breach of contract, much uncertainty is likely to follow from Article 28, since the court may not be bound to order the buyer to pay the price.[213] Here again, no regard should be given [page 280] to the breach for the purposes of Article 36(2) when there is a ground for exemption under Article 79.[214] In such circumstances, the lack of conformity is due to an inescapable event rather than a breach of contract.[215]

The breach may have occurred before the passing of risk. The seller, for instance, may have nominated an unreliable carrier or chosen a wrong route. The obligation may also be breached after that time. For example, the seller may not have given the necessary instructions as to how to handle the goods.

2. Breach of a guarantee

Under Article 36(2) the seller is liable for any lack of conformity occurring after the passing of risk and which is due to a breach of a "guarantee that for a period of time the goods will remain fit for their ordinary purpose or for some particular purpose or will retain specified qualities or characteristics"[216](i.e., a guarantee of durability).

Such guarantee may be express or implied.[217] Implicit warranties may follow from various circumstances such as the nature of the goods, a trade usage or the seller's advertising materials. In the case of an express guarantee, the period of durability will be expressly stipulated, (e.g., 6 months or 5000 km). On the other hand, it may be difficult to determine this period when the guarantee is implicit. If an agreement between the parties cannot be inferred from the circumstances, the court will presumably consider to what reasonable persons would have agreed in such circumstances.[218]

The impact of Article 36(2) is unclear. On the face of it, this provision looks redundant since Article 35(2) states that the goods do not conform with the contract if they are not fit for their ordinary purpose or for "any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract."[219] The ordinary qualities of the goods presumably include a reasonable duration. Therefore, if after risk has passed, the goods endured only for an abnormally short period or, a fortiori,[page 281] did not satisfy a warranty of durability given by the seller, the seller is anyway liable under Article 35 and 36(1) for latent defects.[220]

In the final analysis, it seems that Article 36(2) primarily serves to ease the burden of proof in favour of the buyer. If the goods fail to conform with the seller's guarantee, the seller is indeed "per se liable,"[221] unless he proves that the failure has been caused by an event which is not covered by the warranty, such as an inappropriate handling of the goods.[222] The goods are improperly handled when they are used without the caution and skill required or without following the operation instructions of the seller.[223] The fact that it is a third party who inappropriately used the goods is irrelevant, so long as the seller is not responsible for the conduct of this person.[224]

Nevertheless, Article 36(2) has a greater effect in the quite rare situation where the guarantee covers defects not resulting from the seller's sphere of risk, such as defects due to the buyer's improper use of the goods or an inescapable event in the sense of Article 79.[225] In such circumstances, the seller would not be liable under Article 36(1).[226] Such guarantees are extremely unusual and should not be held to exist unless the contract expressly provides for them.[227]

III. RISK AND REMEDIES

Article 70 deals with the relationship between the passing of risk and the buyer's remedies on account of the seller's fundamental breach.[228] This [page 282] provision is only concerned with cases in which the fundamental breach is unconnected with the loss of or damage to the goods.[229] Indeed, if the casualty is due to the seller's breach, it is irrelevant which party bears the risk since such loss is outside the sphere of risks.[230] The impact of Article 70 is not immediately obvious, whether the seller's breach is fundamental or not .

A. Fundamental breach of contract

Article 70 states that "if the seller has committed a fundamental breach of contract, Articles 67, 68 and 69 do not impair the remedies available to the buyer on account of the breach."[231] On the face of it, Article 70 looks superfluous insofar as it is not obvious that those articles could, but for this provision, create barriers to the buyer's remedies. Particularly as the seller's breach is unconnected with the casualty.

The buyer's remedies on account of the seller's fundamental breach of contract are:

Article 70 makes it clear that Articles 67, 68 and 69 do not impair the buyer's right to avoid the contract or to require the delivery of substitute goods. Nevertheless, other provisions may establish barriers to these remedies. Thus, Article 82(1) states that "the buyer loses the right to declare the [page 283] contract avoided or to require the seller to deliver substitute goods if it is impossible for him to make restitution of the goods substantially in the condition in which he received them."[237] It must be noted that this provision merely requires the seller to return the goods in the same condition as received. Thus, its impact is not particularly great in the event of transit loss. Moreover, the requirement of Article 82(1) is subject to an exception in Article 82(2)(a) when the impossibility of making such restitution of the goods is not due to the buyer's act or omission.

1. Avoidance of the contract

If the buyer declares the contract avoided, he is released from his obligation to pay the price and is entitled to recover what he may have already paid under the contract. This applies even though the risk has passed and the goods have been lost or damaged. Thus, the effect of the remedy of avoidance is to throw the risk back upon the seller,[238] to bear loss or damage that occurred during transit or after the buyer has received the goods, unless the casualty is due to an act or omission of the buyer.[239] The seller then bears the risk of goods that are under the buyer's control. The policy problems which result from this divorce between risk and possession are attenuated by the fact that the right to avoid the contract must be exercised within a reasonable time.[240]

Article 51(1) provides that "if the seller delivers only a part of the goods or if only a part of the goods delivered is in conformity with the contract, Articles 46 to 50 apply to the part that is missing or does not conform." Nevertheless, Article 51(2) makes it clear that the buyer may avoid the contract in its entirety if such failure to deliver the goods amounts to a fundamental breach of the contract.[241] Thus, under Article 51(2), the buyer is given an option to limit avoidance of the contract. It is debated to what extent the buyer is entitled to such partial avoidance.

Assume that a French seller and an English buyer make a contract calling for the seller to ship to the buyer 1000 boxes of cut flowers. 500 of the boxes shipped by the seller are seriously defective. This constitutes a [page 284] fundamental breach of the contract as a whole. Article 67(1) is applicable to pass risk to the buyer when the goods are handed over to the first carrier. On the way to England, the ship collides with another vessel, and 250 boxes which were not defective are damaged. Thus, only 250 boxes conform with the contract when the buyer receives the goods. It is clear that the buyer may, instead of exercising his right to avoid with respect to the entire shipment of 1000 boxes, effect a partial avoidance limited to the 500 boxes that did not conform when they were shipped,[242] keep the 250 boxes which arrived in good condition, and bear the loss of the 250 boxes which were damaged during transit. He has a limited interest in this option because the risk then remains with him for the 250 damaged boxes.

It has been suggested that the buyer could also avoid as to only 750 boxes and keep only the 250 boxes which arrived in good condition.[243] This interpretation of Article 51(2) is dubious, since the wording of this provision clearly seems to limit partial avoidance to the goods that were not in conformity with the contract when they were shipped. Having said that, it is still to the advantage of the seller to agree to a partial avoidance limited to the 750 boxes that are not in good condition. Since his burden of redisposition is lightened, the seller is still in a better position that if the buyer avoided the contract in its entirety.[244]

2. Delivery of substitute goods

If the seller's fundamental breach lies in a lack of conformity, the buyer may, as an alternative to avoidance, require the seller to deliver substitute goods even though the non-conforming goods have been destroyed. The effect of this remedy is similar to that of avoidance: risk reverts to the seller for the goods he must replace. Having said that, the buyer has a limited interest in this option, since the impact of this remedy is limited by the extent of the lack of conformity. In the example just considered, the buyer will have to keep the 250 boxes which were damaged during transit and pay for them because they were in conformity with the contract when risk passed. Article 70 does not state that the risk is shifted back on to the seller in case of fundamental breach, but that the provisions governing the time of the [page 285] passing of risk do not impair the buyer's remedies. Now, the only remedy that retrospectively passes the whole risk back to the seller is the avoidance of the contract. It is regrettable that Article 70 encourages the buyer to exercise his right to avoid the contract rather than to salvage what he could from the damaged consignment. It would have been more sensible to leave transit risk on the seller in such circumstances.[245]

It has been argued that the buyer could only require the replacement of the non-conforming goods that have not been lost or damaged after risk has passed.[246] This interpretation is irreconcilable with the language of Article 70. Since this provision makes it clear that the buyer's remedies on account of the seller's fundamental breach are preserved in spite of the passing of risk, the buyer's right to require substitute goods cannot be restricted to the goods that have not perished. This result is also consistent with Article 82(2)(a).[247]

3. Reduction in price

Likewise, the right for the buyer to reduce the price applies with respect to all the non-conforming goods, whether they have subsequently perished or not. For instance, if the seller shipped bags of No.2 quality soybeans while the contract required him to deliver bags of No.1 quality soybeans, he cannot ask the buyer to pay the price of No.1 quality soybeans on the ground that the goods were lost during transit.

In practice, since the avoidance of the contract or the delivery of substitute goods will nearly always be more advantageous to the buyer,[248] he [page 286] will not take recourse to the reduction in price unless he has not exercised the former remedies within a reasonable time and is therefore no longer entitled to them.[249]

4. Repair of the goods

On the other hand, any claim for the repair of the goods after they have been destroyed is likely to be excluded for practical reasons.[250] Otherwise, the remedy of repair of the goods would in practice amount to a right to require the delivery of substitute goods. The Convention clearly distinguishes between both remedies. Besides, contrary to the delivery of substitute goods, the repair of the goods does not presuppose a fundamental breach of contract by the seller. This solution is also supported by Article 46(3), which provides that the buyer is not entitled to repair of the goods if "this is unreasonable having regard to all the circumstances."[251]

If this is possible, the buyer may require the seller to remedy the lack of conformity by repair and fix an additional period of time for this purpose.[252] If the goods perish before the defect is repaired, the buyer may resort to other remedies with respect to the seller's breach of contract because repair is no longer workable.[253] This solution follows from Article 47(2), which applies where the buyer has fixed "an additional period of time for performance by the seller of his obligations,"[254] and may be expanded by [page 287] analogy to cases in which such period has not been fixed. A different solution would encourage the buyer to avoid the contract rather than to accept a less drastic course, the repair of the goods.

5. Damages

In spite of Article 70, it seems that loss of the goods after the passing of risk precludes the buyer from recovering damages for non-conformity at the time of delivery. Indeed, the buyer cannot claim to suffer any loss as a consequence of the seller's breach:[255] since the goods have been destroyed, it is difficult to conceive that an actual damage may result from their initial non-conformity. Therefore, if the goods have been lost, the buyer may claim damages only in respect to seller's breaches that do not lie in a lack of conformity.[256]

B. Non-fundamental breach of contract

Article 70 states that the rules on risk do not interfere with the buyer's remedies "if the seller has committed a fundamental breach of contract."[257] This provision could be interpreted to mean that the passing of risk impairs the remedies available to the buyer on account of a non-fundamental breach. Such construction is questionable in three respects. First, it would be absurd that the risk rules exempt the seller from the consequences of a breach of contract that is unconnected with the casualty of the goods, all the more so as these rules do not have such an effect in respect to breaches which are the cause of the loss or damage.[258] Second, as regards fundamental breaches, Article 70 is merely declaratory of what would, in any case, follow from the other provisions of the Convention. Indeed, it does not seem that Articles 67, 68 and 69 would, but for Article 70, create barriers to the buyer's remedies. The only purpose of this provision is probably to make it clear that the rules on risk do not impair buyer's remedies that have the effect of shifting the risk back on to the seller. Thus, it is likely that the draftsmen had in mind only the right to avoid the contract and the right to require delivery of substitute goods, because these are the only remedies [page 288] which have the effect of throwing the risk back upon the seller. Now, these remedies have been created precisely for the case of fundamental breach of contract.[259] That is likely the reason why Article 70 does not envisage non-fundamental breaches. Besides, it would be paradoxical, to say the least, that Article 70 have an implied exempting effect with respect to non-fundamental breaches, when its express purpose is merely explanatory and therefore absolutely neutral. Last, but not least, it appears that the intention of the draftsmen was to remove "fundamental" from this provision, and that this word remained in the text due to a mere error.[260]

The buyer's remedies on account of seller's non-fundamental breach of contract are the rights to require repair of the goods, to reduce the price and to claim damages.[261] Besides, in the case of non-delivery, Article 49(1) allows the buyer to avoid the contract "if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph 1 of Article 47 or declares that he will not deliver within the period so fixed."[262]

CONCLUSION

The Convention's provisions on risk must be first appraised in the light of the policies and purposes they pursue. The primary aim of the Convention is to unify the law of international sales and thus to eliminate uncertainty as to which domestic law governs the contract. This implies that the Convention be self-regulating in its interpretation,[263] which requires that its provisions be well-drafted with a minimum of ambiguity. It is clear that the CISG is not fully satisfactory in this respect and sometimes raises hardly surmountable problems, e.g., as regards the definition of identification of the goods.[264] It is inevitable that interpretation of ambiguous parts [page 289] of the text will be left to the discretion of the courts, which threatens the unification goals of the Convention.

In addition, the policy underlying the Convention's risk provisions is to link the burden of risk with control of the goods, which must be approved for numerous reasons.[265] It has been pointed out that, however, in certain circumstances, risk and possession are dissociated, so that the buyer bears the risk while the goods are in the seller's custody, (e.g., under Article 69(1)).[266] The CISG takes account of the dangers of such a situation, and Article 85 opportunely provides that in such a case the seller is under the obligation to preserve the goods.[267]

Those rules must also be assessed with regard to an objective consideration: does the CISG allocate risk in an efficient way, consistent with modern international trade practices? In this respect, the Convention's risk provisions are quite questionable. As already explained, they are clearly inadequate in view of the widespread use of containers. Indeed, their application will often result in a splitting of transit risk, with all the attendant difficulties of proof. There is an obvious need for particular provisions governing containerised cargo shipments. Nevertheless, this uniform, if flawed, law of risk allocation is certainly preferable to the vagaries of domestic laws.[page 290]

FOOTNOTES

* L.L.M, University of Paris.

1. See, B. Starck, H. Roland & L. Boyer, Les obligations: le contrat (6^th ed., 1998), n.2000 in French Law.

2. Id.

3. Under the theory of risks, the contract is of course not terminated. See Honnold, Uniform Law for the International Sales under the 1980 UN Convention n.369-1, n.369-2. See discussion infra Ch.II, Part I.A.1, A.2.

4. See generally, G.I. Treitel, Frustration and force majeure ( London, Sweet & Maxwell, 1994); Ewan McKendrick, Force majeure and frustration of contract (Lloyds of London Press, 1991).

5. See generally, Treitel, supra note 4 , at n.3-032; Taylor v. Caldwell, 122 Eng.Rep. 309 (1863).

6. Final Act of the United Nations Conference on Contracts for the International Sale of Goods, U.N.Doc.A/CONF.97/18 (1980), available in S.Treaty Doc.No. 98-9 (1983) and in United Nations: Conference on Contracts for the International Sale of Goods, May 1980, 19 I.L.M. 668 [hereinafter CISG].

7. Hereinafter "INCOTERMS."

8. Douglas Goodfriend, After the Damage is Done: Risk Under the UN Convention on Contracts for the International Sale of Goods 22 Colum. J. Transnat'l L. 575, 577 (1984).

9. Other circumstances such as the passing of ownership or the time of the conclusion of the contract should be irrelevant for the purposes of the transfer of the risk (but see infra Ch. I, Part II). It would have been illogical to link the burden of risk to property since the Convention does not deal with the passing of property. See CISG, supra note 6, art. 4(b).

10. See infra Ch.I, Part I.

11. See infra Ch.I, Part III.

12. See infra Ch.I, Part II.

13. See supra Introduction.

14. Article 67(1) covers the case where delivery is effected by handing over the goods to the carrier. See CISG, supra note 6, art. 31(a).

15. See Budapest, 10 December 1996, Arbitration proceeding Vb 96074 at <http://cisgw3law.pace.edu/cases/961210h1.html>.

16. See Honnold, supra note 3, at n.368-2.

17. See infra Ch.I, Part I.B.

18. This concept is previously mentioned in Article 31(a).

19. See B. Nicholas in Bianca & Bonell, Commentary on the international sales law - the 1980 Vienna Sales Convention 490 (Giuffrè, Milan, 1987).

20. See infra Ch.I, Part III. As will be later discussed in this article, Article 68 is concerned with the particular case of goods sold in transit.

21. See Nicholas, supra note 19.

22. See id.

23. See infra Ch.I, Part I.A.1.

24. Unless the situation then falls within the scope of Article 69.

25. See Honnold, supra note 3, 369-1. See also, supra note 11.

26. For a further analysis, see D. Flambouras, Transfer of risk in the Contract of sale involving carriage of the goods - a comparative study in English, Greek law and the United Nations Convention for the International sale of Goods p.30 et seq, reprinted in <http://www.law.pace.edu/cisg/biblio>.

27. See infra Ch.II, Part I.B; the incidence of the rules on liability on those on risk. Having said that, this solution leads to an undesirable splitting of risk. See infra Ch.I, Part I.B.

28. See Honnold, supra note 3, at 369-1.

29. Free Carrier. See Oberman, Transfer of risk from seller to buyer in international commercial contracts: a comparative analysis of risk allocation under the CISG, UCC and Incoterms (1997) reprinted in <http://www.law.pace.edu/cisg/biblio>.

30. See Honnold, supra note 3, at 369-371.

31. G. Hager in Schlechtriem, Commentary on the UN Convention on the International Sale of Goods (CISG), at 506 (Clarendon Press, Oxford,1998).

32. For further analysis, See Flambouras, supra note 26, at 31.

33. See Cámara Nacional de Apelciones en lo Comercial (Supreme Court Argentina, 31 October 1995,), Bedial SA v Paul Müggenburg and Co. Gmbh, CSJN, 31 Oct. 1995, available in <http://cisgw3law.pace.edu/cases/951031a1.html>.

34. See CISG, supra note 6, arts. 31(a), 34, 58(2), 68, 71(2).

35. The Vienna Convention follows the approach of modern trade definitions, e.g. CPT and CIP (Incoterms 1990) under which the risk in the goods passes when the goods are "delivered into the custody of the [...] first carrier". Some of the older trade terms, such as FOB, CFR and CIF (Incoterms 1990), make the risk pass only when "the goods have passed the ship's rail at the named port of shipment". See Honnold, supra note 3, n.367, 368-371. Hager, supra note 31.

36. Under ULIS, the concept of délivrance (delivery) played a "fundamental role." ULIS art.97(1); see also Tunc, Commentary on the Hague Conventions of 1st July 1964 on the International Sale of Goods and on the Formation of Contracts of Sale, 46 (1964).

37. ULIS, art. 19.

38. See Roth, The Passing of Risk, 27 Am. J. Comp. L. 295 (1979).

39. Hager, supra note 31, at 504.

40. See ULIS art. 97(2).

41. Hager, supra note 31, at 2.

42. CISG, supra note 6, art. 67(1).

43. CISG, supra note 6, art. 67(1).

44. See Oberman, Transfer of risk from seller to buyer in international commercial contracts: a comparative analysis of risk allocation under the CISG, UCC and Incoterms n.111 (1997), available at <http://www.law.pace.edu/cisg/biblio>.

45. Free Carrier, A3, B2; Freight or Carriage paid to, A3, B2.

46. See supra Ch. I.A.1

47. See infra Ch. I. cmts.

48. Goodfriend, supra note 8, at 580.

49. See Honnold, supra note 3, at 369-2.

50. For a different view, see Goodfriend, supra note 8, at 597; Honnold, supra note 3, at n.369-2.

51. See supra Ch. I.A.1

52. See Nicholas, supra note 19, at 492; Hager, supra note 31, at 506.

53. See e.g. C. Civ. arts. 1138, 1585 (Fr.).

54. See Heuzé, La vente internationale de marchandises n.368; Honnold, supra note 3, at n.371.

55. Honnold, supra note 3, at n.371.

56. See Nicholas, supra note 19, at 494; Hager, supra note 31.

57. See Hager, supra note 31, at 507.

58. See Stern Ltd v Vickers Ltd [1923] 1 KB 78. This case was of course not decided under the CISG, but the reasoning can be applied by analogy. It was held that the goods had not been ascertained in the technical sense but that however the risk had passed to the buyers. This decision seems to have been approved by the House of Lords. See Comptoir d'Achat et de Vente SA v Luis de Ridder Limitada (The Julia) [1949] AC 293, 319.

59. See supra Ch.I, Part I.B.1.

60. The author notes that as will be seen, the first approach is preferable in many respects. See infra Ch.I, Part III.C.

61. ULIS, art. 19(3). See Hager, supra note 31, at 507.

62. ULIS, art. 100.

63. See infra Ch.I, Part II.

64. See Hager, supra note 31, at 507.

65. CISG, supra note 6, art. 67(1).

66. See Heuzé, supra note 54, at 367. In actuality, this principle applies even in legal systems which link risk with property. See Hager, supra note 31.

67. See Nicholas supra note 19, at 494.

68. See Honnold, supra note 3, at 370.

69. CISG, supra note 6, art. 67(1) (emphasis added).

70. See supra Ch.I, Part I.A.2.

71. See infra Ch.II, Part I.B.1

72. See infra Ch.II, Part III.

73. See Hager, supra note 31. Depending on whether the applicable provision is Article 66 or Article 36. See infra n.53. The terms of the problem are the same in both cases. See also infra n.56.

74. See Hager, supra note 31.

75. CISG, supra note 6, art.4: "this Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract". Id.

76. See C.M. Bianca in Bianca & Bonell, Commentary on the International Sales Law - the 1980 Vienna Sales Convention 287-288 (Giuffrè, Milan, 1987).

77. Id.; See also Audit, La vente internationale de marchandises - Convention des Nations-Unies du 11 avril 1980 n.102; Hager, supra note 31, at 508.

78. Heuzé, supra note 54, at 294; See e.g., U.C.C. § 2-607(4); c. civ. art. 1315 (Fr.).

79. See Hellner, Gap-filling by analogy - Article 7 of the UN Sales Convention in its historical context, Studies in international law: festkrift til lars hjerner (Stockholm, 1990) at 219, reprinted in <http://www.law.pace.edu/cisg/biblio>.

80. See Heuzé, supra note 54.

81. See Hager supra note 31, at 508; Bianca, supra note 76, at 288.

82. For a different view, See Hager supra note 31, at 508.

83. See Heuzé, supra note 54, at 294.

84. See Audit, supra note 77, at n.102, Bianca, supra note 76, at 288; Goodfriend, supra note 48, at 593-594. But see, Hager supra note 31, at 508.

85. See Landgericht Trier (Germany, 12 October 1995), available at <http://cisgw.3.law.pace.edu/cases/951012gl.html>.

86. See supra Ch.I, Part I.B.

87. Such a result was allegedly contrary to the New Economic Arrangements.

88. See D.L.Perrott, The Vienna Convention on contracts for the international sale of goods, L. Fin. Rev. 582 (1980).

89. See e.g., § 306 BGB (F.R.G.); C. Civ art 1601 (Fr.). See also, Hager, supra note 31, at 510; Nicholas, supra note 19, at 501.

90. See Nicholas, supra note 19, at 498.

91. See Hager, supra note 31, at510, Nicholas, supra note 19, at 498, Honnold. supra note 3, at n.372-2. But See Heuzé, supra note 54, at n.370.

92. See Hager, supra note 31, at 510.

93. See Nicholas supra note 19, at 498.

94. See Heuzé, supra note 54, at n. 370.

95. See supra Ch. I, Part I.B.

96. See id.

97. See CISG, supra note 6, art. 67(1).

98. See Hager, supra note 31, at 510.

99. See id.

100. See id.

101. See supra Ch.I, Part II.

102. This view itself was contested. See Nicholas, supra note 19, at 498-499.

103. See Audit, supra note 77, at n.94.

104. See Heuzé, supra note 54, at n.315.

105. See supra Ch.II, Part III.

106. Questions of validity are not governed by the Convention. See CISG, supra note 6, art.4.

107. See Nicholas, supra note 19, at 500.

108. See Heuzé, supra note 54, at n.315.

109. See supra Ch.I, Part I.B.

110. See supra Ch.I, Part III.C.

111. See Hager, supra note 31, at 511.

112. See ICC Arbitration case n.7197 of 1992 reprinted at <http://cisgw.3.law.pace.edu/cases/927197i1.html>.

113. See supra Ch. I, Part I.A for the meaning of this phrase.

114. See id. for the meaning of this word. Article 68, which speaks of the "handing over of the goods to the carrier who issued the documents embodying the contract of carriage", clearly does not apply when the goods are being transported in the seller's vehicles; See also CISG, supra note 16, art.68.

115. Nicholas, supra note 19, at 502.

116. Except those governed by Articles 67 and 68.

117. In this respect, Article 69(1) amounts to a "catch-all" provision. See Hager, supra note 31 at 513.

118. As previously noted, Article 69(1) lays down the residual rule on risk.

119. See Nicholas, supra note 19, at 503.

120. See ULIS arts. 19(1), 97(1).

121. See Honnold, supra note 3, at n.375.

122. See Goodfriend, supra note 8, at 584.

123. Id.

124. See infra Ch.I, Part III.A.

125. This rule is the counterpart of Article 98 ULIS.

126. See CISG, supra note 6, art. 69(3). See infra Ch.I, Part III.C.

127. See CISG, supra note 6, art. 48(4); Hager, supra note 31, at 513.

128. See Hager, supra note 31, at 513.

129. See Honnold, supra note 3, at n.377.

130. See Goodfriend, supra note 8, at 597.

131. See id.

132. i.e., the transport from the destination port to the seller's place of business, or any other place, ( e.g. if the seller has agreed to arrange such transport. The contract can then be said to involve transport of the goods).

133. See Goodfriend, supra note 8, at 597. The first sentence cannot apply either, since the seller is "bound to hand the goods over at a particular place."

134. See supra Ch.I, Part III.A.

135. See CISG, supra note 6, art. 69(2).

136. For example, before delivery is due.

137. See CISG, supra note 6, art. 52(1).

138. See Heuzé, supra note 54, at note 319.

139. See Hager, supra note 31, at 514.

140. See CISG, supra note 6, art. 69(2).

141. See supra Ch.I, Part III.A.

142. See Hager, supra note 31, at 514.

143. See id.

144. See supra Ch.I, Part III.A.

145. See Germany, 14 December 1994, Oberlandesgericht Hamburg, available in (last visited March 20, 2000) <http://cisgw.3.law.pace.edu/cases/941214gl.html>.

146. See supra Ch.I, Part III.A. Ch.I, Part III.B.3.

147. See id.

148. See supra Ch.I, Part I.B.1.

149. See id.

150. See CISG, supra note 6, art. 98(3).

151. See Nicholas, supra note 19, at 484.

152. In particular, it defines the concept of risk. See infra Ch.II, Part I.B.

153. Nicholas, supra note 19, at 484.

154. CISG, supra note 6, art. 7(2).

155. Hager, supra note 31, at 502.

156. Uniform Commercial Code.

157. See U.C.C. §§ 2-510(3), 2-709 (1a,b); Hager, supra note 31, at 502-503.

158. See CISG, supra note 6, art. 79.

159. See Honnold, supra note 3, at n.361.

160. See Oberman, supra note 26, at n.105.

161. See Nicholas, supra note 19, at 484.

162. The author noted that, indeed, Article 45(1) makes remedies for breach of contract by the seller applicable only "if the seller fails to perform any of his obligations under the contract or this Convention." CISG, supra note 6, art. 45(1).

163. See infra Ch.II, Part I.B.1.

164. See infra Ch.II, Part I.B.2.

165. See infra Ch.II, Part III.

166. See McKendrick, supra note 4, at 267.

167. The author noted that this idea is expressed by the adage genera non pereunt.

168. See Heuzé, supra note 54, at n.377.

169. See Honnold, supra note 3, at n.423-2.

170. See CISG, supra note 6, art. 66.

171. See Goodfriend, supra note 8, at 581.

172. See infra Ch. II, Part II.

173. See infra note 197.

174. See Hager, supra note 31, at 501.

175. See id.

176. See id.

177. See id.

178. The author noted, therefore, if the loss is due to the seller's act or omission, he is bound to deliver other goods and may be liable for damages. On the other hand, if the casualty is due to the buyer's act or omission, he must pay the price and generally perform his obligations, even though what he has received is damaged.

179. See CISG, supra note 6, art. 45, 61.

180. See infra Ch. II, Part II.B.1.

181. The author notes that a proposal which would have had this effect was rejected. See Nicholas, supra note 19, at 485.

182. The author noted that the phrase "act or omission" obviously includes breaches of contract.

183. Or the buyer (if the loss or damage occurred before risk passes to him).

184. See Honnold, supra note 3, at 362.

185. See id.

186. See Secretariat Commentary, available in (last visited March 20, 2000) <http://www.cisg.law.pace.edu>.

187. Indeed, Article 45(1) makes these remedies available only "if the seller fails to perform any of his obligations under the contract or this Convention."

188. See Secretariat Commentary, supra note 186; Nicholas, supra note 19, at 485.

189. See supra Ch.II, Part I.B.1 (regarding the relationship between Articles 66 and 80).

190. See H. Stoll in Schlechtriem, Commentary on the UN Convention on the International Sale of Goods (CISG) 604 (Clarendon Press, Oxford, 1998); McKendrick, supra note 4, at 267.

191. See supra Ch.II, Part I.B.1

192. See D. Tallon in Bianca & Bonell, Commentary on the International Sales Law - the 1980 Vienna Sales Convention 575 (Giuffrè, Milan, 1987); Hager, supra note 31, at 502 n.20; Audit, supra note 77, at 172 n.1 regarding Article 79 as the actual scope of the risk provisions.

193. This view is also entirely consistent with the usual approach in French law. See Starck, Roland & Boyer supra note 1, at 2000. This comparison is quite significant since exoneration in Article 79 corresponds to the mechanism of the French concept of force majeure. See Nicholas, Force Majeure and Frustration, Am.J.Comp.L. 234 (1979).

194. Thus, the injured party may be entitled to claim specific performance or avoidance.

195. Nicholas, supra note 19, at 485.

196. See infra Ch.II, Part III. This construction is not contradicted by Article 70. Indeed, it is based on Article 66, while Article 70 merely provides that Articles 67, 68 and 69 do not impair the remedies available to the buyer on account of the seller's fundamental breach. In any case, this provision is only concerned with cases in which the fundamental breach is unconnected with the loss of or damage to the goods. The solution would of course be different if the casualty was due to a breach of contract outside the coverage of Article 79.

197. Other problems relating to the goods fall within the scope of Article 66. Thus, Article 35 draws the delimitation between the respective scopes of application of Articles 36 and 66.

198. See SA Matis v SNC Laborall, Cass.Com., Paris, 28 Oct. 1997.

199. The forerunner of Article 36 is Article 35 ULIS.

200. Bianca, supra note 76, at 285.

201. See CISG, supra note 6, art. 35(2).

202. See supra Ch.I, Part I.B.

203. See id.

204. See id.

205. See id.

206. See Bianca , supra note 76, at 288.

207. See id.

208. See supra Ch.II, Part I.B.

209. Symmetrically, a breach of contract by the buyer should exempt the seller from liability. Such a hypothesis is quite theoretical.

210. See CISG, supra note 6, art. 36.

211. See supra Ch.II, Part I.B. As already explained, liability under the last clause of Article 66 generally presupposes the breach of an obligation, whether it is contractual or not.

212. See Hager, supra note 31, at 502.

213. See supra Ch.II, Part I.A.1.

214. See supra Ch.II, Part I.B.2. One shall have recourse to Article 79 in order to resolve the question of the seller's liability for acts of persons for whose conduct he is responsible.

215. See id. See also I. Schwenzer in Schlechtriem, Commentary on the UN Convention on the International Sale of Goods (CISG) 292 (Clarendon Press, Oxford,1998).

216. See CISG, supra note 6, art. 36(2).

217. The word "express" was indeed deleted from the UNCITRAL draft.

218. See CISG, supra note 6, art. 8(2).

219. See id. art. 36(2).

220. See Heuzé, supra note 54, at 296.

221. Bianca, supra note 76, at 287.

222. See id.

223. See id.

224. See supra note 214.

225. See supra Ch.II, Part I.B.1.

226. See Schwenzer, supra note 215, at 292; Heuzé, supra note 54, at 296.

227. See CISG, supra note 6, art.6. Besides, a specific provision on contractual guarantees might not have been essential since the Convention generally gives effect to the agreement of the parties.

228. See CISG, supra note 6, art.25. The concept of fundamental breach is defined in Article 25 as follows: "a breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind would not have foreseen such a result." Id.

229. See Hager, supra note 31, at 517; Heuzé, supra note 54, at n.378. For example, cases of non-conformity of the goods.

230. See supra Ch.II, Part I.B.1. See also Ch. II, Part I.B.2 dealing with the relationship between articles 66, 36(2) and 79.

231. See CISG, supra note 6, art. 70.

232. See id. art. 49(1)(a).

233. See id. art. 46(2).

234. See id. art. 46(3).

235. See id. art. 50.

236. See id. art. 74 et seq.

237. See CISG, supra note 6, art. 82(1).

238. But see Goodfriend, supra note 8, at 601-602.

239. This follows from both Articles 66 and 82(2)(a).

240. See CISG, supra note 6, art. 49(2).

241. See Goodfriend, supra note 8, at n.76.

242. The author notes that the fact that some of them were possibly further damaged during the collision is irrelevant.

243. See Honnold, supra note 3, at n.381.

244. See id.

245. A proposal was made at the Vienna Conference to amend the provision in this sense, but was rejected. See Nicholas, supra note 19, at 510.

246. See Audit, supra note 77, at n.95.

247. See supra Ch. II, Part III.A.; See also Heuzé, supra note 54, at n.378.

248. The author notes that there can be uncommon situations in which reduction in price is more advantageous due to Article 50 calculation formula. Under this provision, "the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time". Thus, the CISG adopts a relative method; the proportion between the stipulated price and the actual value of the goods is maintained. See Will in Bianca & Bonnell, Commentary on the international sales law - the 1980 Vienna Sales Convention at 370-371. If the market price of non-conforming goods has risen spectacularly, the buyer may hold, at the time of delivery, goods of inferior quality but higher market value. In such case, the buyer may have an interest in keeping the non-conforming goods, even though some of them have been subsequently lost or damaged, all the more so as he may reduce the purchase price. Assume that an American seller and an English buyer make a contract calling for the seller to deliver 100 boxes of No.1 quality cigars. The stipulated price is £ 10000. The seller delivers in fact No.2 quality cigars, then 10 boxes are lost after the risk has passed to the buyer. However, the market value of cigars has singularly increased since the conclusion of the contract. At the time of the delivery, the objective value of each box of No.2 quality cigars was £ 150 and is even greater when the buyer actually receives the cargo. Similarly, the actual value of a box of No.1 quality cigars was £ 200 at the time of the delivery and has increased since then. Under Article 50, the reduced price will be 10000 ´ 150/200 £ 7500, while the actual value of the goods he has received is higher than (100 10) ´ 150 £ 13500. In such a case, the avoidance of the contract is the least advantageous of the remedies, since it shifts the increase in the value back on to the seller.

249. See CISG, supra note 6, arts. 46(2), 49(2).

250. See Hager, supra note 31, at 517.

251. CISG, supra note 6, art. 46(3).

252. See id., art. 47(1).

253. See Hager, supra note 31, at 519.

254. This author notes that indeed, it results a contrario from Article 47(2) that the buyer may resort other remedies if he "has received notice from the seller that he will not perform during the period so fixed." CISG, supra note 6, art.47(2).

255. See id., art.74.

256. See Heuzé, supra note 54, at n.378.

257. CISG, supra note 6, art. 70.

258. See supra Ch. II, Part I.B.1.

259. But see infra Ch.II, Part III.B. (regarding avoidance after the fixing of an additional period of time).

260. See Roth, supra note 38, at 305-306.

261. See supra Ch. II, Part III.A.

262. This is the only case in which the buyer may avoid the contract though the seller has not committed a fundamental breach of contract. See CISG, supra note 6, art. 49(1).

263. This aim is stated in the preamble and in Article 7(1). See id.

264. See supra Ch. I, Part I.B.1, Ch. I, Part III.C.

265. See supra Ch. I and Ch. I, Part III.A.

266. See id. Such divorce between risk and possession may also occur when the contract is avoided. See supra, Ch. II, Part III.A.

267. See CISG, supra note 6, art. 85.

Pace Law School Institute of International Commercial Law - Last updated May 11, 2001

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