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Cite as Nicholas, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 483-486. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.

Article 66

Barry Nicholas

1. History of the provision
2. Meaning and purpose of the provision
3. Problems concerning the provision

ARTICLE 66

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.

1. History of the provision

     1.1. - Article 66 introduces Chapter IV on the Passing of Risk and states the principal consequence of that passing. The subsequent articles in the chapter are concerned with the moment at which the risk passes (Articles 67 to 69) and the relationship between the passing of the risk and fundamental breach. The corresponding chapter of ULIS (Chapter VI) was placed at the end of the Uniform Law, but at the Vienna Conference the new chapter was brought forward to its present position because of the connection between the passing of risk and the performance of the obligations of the parties.

     1.2. - Article 66 is based on Article 96 of ULIS, which provided:

Where the risk has passed to the buyer, he shall pay the price notwithstanding the loss or deterioration of the goods, unless this is due to the act of the seller or of some other person for whose conduct the seller is responsible.

The changes made were not, however, intended to alter the substance of the ULIS text (see Yearbook, VIII (1977), 62-63). The final phrase in the ULIS text («or of some ...») was omitted [page 483] on the ground that the principle embodied in it had been taken for granted throughout the Uniform Law and therefore to state it expressly in this one place might cast doubt on its general applicability (see Yearbook, V (1974), 47). A proposal to state the principle in a general article within Chapter II (see Yearbook, VI (1975), 109) was not adopted. The reason for the replacement of «deterioration» by «damage» was that «deterioration» might be taken to refer only to natural spoilage or evaporation, whereas the article is concerned with all casualties to the goods (see Yearbook, VI (1975), 109). The addition of the words «or omission»was made for the sake of clarity (see Yearbook, VIII (1977), 63).

     1.3. - A recurrent objection made in the discussion both of the ULIS text and of the present article (see Official Records, I, 158; Yearbook, V (1974), 47 and 91; Yearbook, VIII (1977), 62) was that the article was superfluous in that it contained either a self-evident (though inadequate, see § 2.1., infra) definition of risk or a statement of an obvious consequence of the passing of risk. The majority view at all stages, however, was that a simple explanatory statement was useful.

2. Meaning and purpose of the provision

     2.1. - The word «risk» can have a wide range of meanings. Thus it is sometimes said that the main purpose of the whole law of contract is to allocate between the parties the risk of all the various losses which may result from the contractual relationship. In the Convention, however, the word is used in the narrower and more traditional sense of the incidence of the loss resulting from any casualty to the goods which is not due to an act or omission of the other party. In this sense the statement that the risk passes to the buyer at a certain moment means that from that moment the buyer must bear that loss. In terms of practical consequences this means that the buyer (a) must perform his obligations under the contract even though the object sold is lost or damaged and (b) has no rights against the seller arising out of any non-performance by the seller which is due to such loss or damage. More particularly he (a) must pay the price and must take delivery, to the extent, if at all, that it is tendered (see [page 484] Articles 54 to 60), and (b) cannot assert the remedies set out in Article 45 in so far as they arise out of the casualty in question. On the other hand, he may have remedies which do not arise out of that casualty. This possibility is considered in connection with Article 70, infra.

     2.2. - Article 66 therefore states the main consequence of the passing of the risk to the buyer, that he must pay the price, even though the goods are lost (in whole or in part) or damaged. The other consequence set out in § 2.1., supra, may be taken to follow necessarily from this or from «the general principles on which [the Convention] is based» (Article 7(2)).

It is to be noted that the final phrase, «unless the loss or damage is due to an act or omission of the seller», is not confined to acts or omissions of the seller which constitute a breach of his obligations under the contract. A proposal that would have had this effect was rejected when the draft was discussed by the Commission. No doubt the act or omission in question will usually constitute such a breach (e.g., damage to the goods resulting from their not being packaged in the manner required by the contract (Article 35(1)), but it was pointed out that this need not always be so. The following example was adduced. The contract (e.g., an F.O.B. contract) provided for the risk to pass when the goods are shipped, and they were shipped in containers which remained the property of the seller. After the goods had been unloaded, the seller removed his containers and in so doing he damaged the goods (culpably, but not, it is assumed for the purpose of the illustration, in breach of his contractual obligation). The buyer's obligations to pay the price is diminished by the damages which the seller would be liable to pay under the applicable law of tort or delict (see Yearbook, VIII (1977), 63 and Secretariat's Commentary, Official Records, I, 63-64).

3. Problems concerning the provision

     3.1. - A question may arise as to what constitutes loss or damage arising after the risk has passed to the buyer. The answer is to be found by consulting Article 36, which in substance states the converse of the proposition in Article 66, that is to say that [page 485] the seller's liability for lack of conformity is confined to that which exists at the time when the risk passes. Article 36 differs, however, from Article 66 in that it provides some guidance as to what constitutes an existing lack of conformity; and this guidance can be applied by conversion to Article 66. For what is excluded from Article 36 must be included in Article 66. For example, a deterioration in the goods which begins only while they are in transit (i.e., after the risk has passed), but which would not have occurred but for the seller's failure to dispatch the goods by the agreed time, is not within Article 66 (see Article 36(1)).

     3.2. - A rule which is usually regarded as a corollary of the proposition in Article 66 is that the buyer is entitled to any benefit or increase which accrues to the goods after the risk passes. The matter is not mentioned in the Convention (and it is not likely to be important in international sales), but the rule is generally accepted in domestic legal systems and rests on the simple principle that it is fair that benefits should go with burdens.

     3.3. - While the legal consequences of the passing of risk are those set out above, the determination of the moment at which the risk passes is also important in other ways. It will usually determine which party shall prosecute any claim against the insurer or make arrangements for salvage of the goods. Conversely therefore it is important that the practice of businessmen in regard to these matters should be reflected in the legal rules which determine the moment at which the risk passes. These rules are laid down in Articles 67 to 69. [page 486]


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