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Reproduced with the permission of the author

The Passing of Risk A comparison between the passing of risk under the CISG and German law

© Annemieke Romein
Heidelberg
June 1999

Introduction

1. Passing of risk according to the CISG
     A. Introduction
     B. Article 67: Passing of risk with carriage of goods
     C. Article 68: Passing of risk with goods in transit
     D. Article 69: Passing of risk in residual cases
     E. Passing of risk in non-accidental cases (arts. 66(ii), 70)

2. Incoterms
     A. Introduction
     B. FOB
     C. CIF
     D. Container transport
     E. Other frequently applied terms (EXW, DEQ)

3. Passing of risk according to German law
     A. Introduction
     B. Passing of risk when the contract involves carriage of goods
     C. Passing of risk with goods in transit
     D. Passing of risk in residual cases
     E. Passing of risk in non-accidental cases

4. Comparison and findings
     A. In general
     B. Carriage of the goods
     C. Goods in transit
     D. Local sales
     E. Goods in storage
     F. Long distance sales
     G. Non-accidental loss or damage
     H. Findings

Abbreviations
Bibliography


INTRODUCTION

On April the 11th 1980 the United Nations Convention on the Internationale Sale of Goods was ratified. This Convention is the successor to the Hague Conventions of 1964. The Hague Conventions were not very succesful, for only nine States became a party to these Conventions. The interests of the developing countries were not sufficiently represented and the Conventions were severely criticized. The non-acceptance of the Hague Conventions was based on the unusual equalization of private sales and sales made in the course of business as well. The Hague Conventions applied to all international sales, with no difference between private and commercial sales.

The United Nations Commission on International Trade Law (UNCITRAL) developed a draft for a new convention, which was accepted at the Vienna Convention in 1980. After the deposit of the tenth certificate pursuant to art. 99 CISG, the CISG came internationally into force on the 1st of January 1988.

The German Parliament accepted the CISG together with the Statute implementing the Convention on April 20th, 1989. The CISG entered into force in Germany on the first of January 1991.[1] Herewith, the CISG became an integral part of German law.

The CISG has an important meaning in contemporary international trade. Its unifying effect is especially important. The CISG aims at the unification of the subject matter of the law applicable to international sale of goods. It contains rules on subject matters, which apply to the conclusion of such contracts of sale and their settlement instead of the otherwise applicable rules according to international conflict law.

The CISG is composed of four parts:

Part I: Sphere of application and general provisions

Part II: Formation of the contract

Part III: Sale of goods

Part IV: Final provisions

This commentary compares the passing of risk according to the CISG and German law. The CISG deals with the passing of risk in Chapter 4 (articles 66 through 70). German law deals with this in 275, 323 et seq., 446, 447 BGB.

Chapter 1 provides an introduction to the basic rules of the passing of risk according to the CISG. The separate provisions are explained: passing of risk when the contract involves the carriage of goods (art. 67); passing of risk with goods in transit (art. 68); passing of risk when the goods are in storage or when the goods must be collected by the buyer at the seller's place of business, or when the seller has to deliver the goods to the buyer or hand them over at a place other than his place of business (art. 69). The emphasis is on the passing of risk to pay the price. The passing of risk to perform is however also relevant and is explained in connection with each article.

The conditions on the passing of risk are concerned with accidental loss or damages only. In the last part of chapter 1, the conditions which apply when the goods are not accidentally lost or damaged are considered. What happens when goods have been delivered which are not in conformity with the contract, are explained as well.

As a special item to each article, the problems that arise in selling unascertained goods are discussed. Selling unascertained goods means that the object of the sale is not a specific, individual or seperate good (species), but just a generally defined good, for example defined by its kind, amount or weight. The identification of this kind of goods to the contract is crucial for the passing of risk.

Chapter 2 discusses Incoterms. These terms are very important in international trade and they are often utilized, because the CISG constitutes no positive law. Incoterms define the passing of risk in their own way, according to their own rules. The most frequently utilized Incoterms, that is, FOB (free on board) and CIF (cost, insurance, freight), are discussed.

Chapter 2 will deals with the international methods of payment, especially with documentary credits. The contemporary international sale of goods often takes place by container transport. Chapter 2 therefore contains a small insertion about the container system in connection with the passing of risk.

Chapter 3 discusses the German system of the passing of risk, which is regulated in 275,323 et seq. and specifically in 446,447 of the Civil Code (BGB). The sequence of chapter 1 is be maintained: first the passing of risk when goods are carried; then the passing of risk with goods in transit; and finally the residual cases. As a special item the selling of unascertained goods is discussed as well. At the end, the non-accidental loss of or damage to the goods is discussed.

Finally, Chapter 4 compares the CISG and German law and summerizes the differences and corresponding features and puts them in a comparative perspective.

CHAPTER 1: THE PASSING OF RISK ACCORDING TO THE CISG

A. Introduction

I. Passing of risk

1. The term

When goods are accidentally lost or damaged between conclusion and fulfillment of the contract, it must be decided who is going to have to bear this loss: the seller or the buyer. The rules on the passing of risk determine the moment in which the risk passes: the moment from which the buyer has to pay the price, although he does not receive the goods, or at least not undamaged. Article 66, first part, says:

"Loss or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price."

Articles 66-70 CISG only determine, according to current opinion, the risk of having to pay the price, which the buyer has to bear after the passing of the risk.

When art. 66 CISG mentions "loss of or damage to the goods", it means such incidents, which are not caused by one of the parties to the contract or by persons for whom they are responsible, but incidents which are caused by independent third parties or incidents which are not caused by human persons. It must happen accidentally from the point of view of the conracting parties, in other words, it must be casual loss or damage. This comprises factual losses as well, such as theft, vandalism, accidents, unloading in emergencies and other physical impairments.

2. Confiscation, etc.

Do governmental measures, such as confiscation and export and import prohibitions, constitute "loss of" or "damage to the goods" as stipulated in art. 66 CISG? The advocates for including such measures under the sphere of application of art. 66 argue that it is irrelevant what caused the loss of or damage to the goods. After the passing of risk, the buyer has to bear the risk, including the risk of governmental measures.

Current opinion however, does not comply with this and denounces the inclusion of governmental measures, because the provisions concerning the passing of risk deal with the impairment of the structure of the goods themselves (their loss or damage) and they assign the risk to the one who is normally insured or can get insurance. Governmental measures are meant to affect the owner of the goods since governmental acts are acts in law, against which the affected owner can defend himself. They are not concerned with the goods as objects, but with the rights related to the goods, which have nothing to do with the passing of risk. The fact that there are very few types of insurance available for this kind of risks, corresponds with this opinion.

The idea, to place the risk of governmental measures with the one who has better access to the public authorities, is confirmed by the case law concerning the responsibility to produce the necessary licences. The party, who is in the better postion to provide for the necessary licences is compelled to do so.

An exception, however, is to be made for the confiscation by an enemy country in the case of war. This kind of confiscation equals a physical loss of the goods since the buyer can take out insurance against this risk. In this case the provisions of the passing of risk apply.

II. Moment in which the risk passes

The moment in which the risk passes is - differing according to the kind of delivery - generally determined in articles 66 through 70 CISG. There are basically three starting points for the passing of risk, when one looks at the different solutions of the problem of passing of risk in other law systems: the moment of conclusion of the contract [2]; the moment of passing of ownership [3]; and the moment of handing over the goods.[4]

The moment of concluding the contract is not very suitable to determine the passing of risk in international sales. Usually, international sales involve the selling of unascertained goods to faraway destinations. At the time of conclusion of the contract, the goods are often not identified or even produced.

The moment of passing of ownership is not very suitable as well, because this moment is regulated differently in every country. Ownership and passing of risk have nothing to do with each other, because ownership affects first of all and foremost third parties, the passing of risk however, affects the contracting parties. Ownership is an absolute right, which the owner can invoke against anybody. The risk passes without taking into account who owns the goods. The passing of ownership is not regulated by the CISG according to art. 4(b).

Therefore, the moment in which the goods are handed over remains. This provision complies with the reciprocal nature of sales contracts, since by handing over the goods, the seller has fulfilled his obligations and earned the price. A practical argument advocates this solution as well, namely the parallel course of risk and of possession of the goods. The one who is in the better position to protect the goods against damage or who can sue for damages and who is usually insured, or at least can get insurance easily, has to bear the risk.

There is also the practical relevance of the question who should bear the risk of accidental loss of or damage to the goods. This risk is covered or reduced by insurance. However, the bearing of the risk has several disadvantages as well, for example the burden to see to arrange for insurance and the burden to deal with the insurance company in case of loss or damage. Furthermore, certain risks cannot be insured at all.

III. Risk of non-performance

1. Regulation in the CISG

Piltz takes the position that articles 66 through 70 CISG not only regulate the passing of risk but the risk of non-performance as well. In his opinion, this follows from a comparison with the effects of delivering goods which do not comply with the conditions as stipulated in the contract and the fact that many legal systems do not distinguish between the risk of having to pay the price and the risk of having to redeliver.

This argument is not convincing. The CISG is intended to unite the law of sales and therefore it is of no use to look at national legal systems. Besides, one cannot place the consequences that follow out of an accidental loss of or damage to the goods for the seller's obligations to perform, under the term "Leistungsgefahr/risk of non-performance". This would be inconsistent with the whole system, since these problems belong to the area of seller's and buyer's obligations and of breach of contract, and are thus to be solved according to these provisions.

There is no connection between delivery and the passing of risk. The passing of risk is not connected to the act of delivery, but is regulated independently in articles 66 et seq. CISG. Therefore, current opinion is to be accepted, that is, that articles 66 through 70 CISG regulate the passing of risk only.

2. Passing of risk to deliver

The CISG does not use the term "passing of risk of non-performance" (Leistungsgefahr) as does German law. One does not find this notion in the text. A better term would be the passing of the risk of having to deliver once more, although the goods have been lost or damaged by accident. There is no provision that regulates the question which influence the loss of or damage to the goods has on the obligation of the seller to deliver the goods. Is the seller discharged from his obligation to deliver the goods, or does he have to re-deliver, that is, does he have to deliver once more the goods as stipulated in the contract? This question is very important in connection with selling unascertained goods, for here the seller is able to fulfill his obligation to deliver, as long as there are other goods available from the unascertained mass. The seller has fulfilled his obligaton to deliver only after the identification of the goods to the contract. Articles 66 et seq. regulate expressly the passing of risk and are not applicable on the passing of the risk to deliver/perform.

The solution is to be found in articles 31 to 36 and 79, 80 CISG. The seller is discharged from his obligation to pay damages when the goods are lost or damaged by accident, according to art. 79(1),(2),(5). However, the seller remains in principle obligated to deliver the contract goods, since he has not yet fulfilled his obligation to deliver. Not until the seller has fulfilled his obligations to deliver as defined by arts. 31-34 CISG, meaning that he has done everything necessary to fulfill his obligations to deliver, will he be discharged from the obligation to re-deliver (in German law: will he be released from his "Leistungspflicht"), since from that moment on, the buyer bears this risk.

When the goods are just damaged, article 36 CISG applies since damage of the goods constitutes a breach of contract. According to art. 36(1) CISG, the seller is liable for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time. The seller is also liable for any lack of conformity which occurs after the time indicated in the preceding paragraph and which is due to a breach of any of his obligations, art. 36(2) CISG.

In the next part, the moment in which the seller has fulfilled his obligation to deliver, will be explained for every provision. The content of the obligation to deliver varies with the kind of contract that has been concluded and the responsibilities for the seller that follow out of that kind of contract. Art. 31 CISG determines this when the contracting parties did not agree upon something else, or when something else does not follow from customs or practices between them. Arts. 32 (special obligations for the seller concerning the carriage of goods), 33 (time of delivery) and 34 (handing over of documents) CISG have to be taken into account as well.

Example: A German seller, who has his place of business in Chemnitz, sells a machine tool FOB Hamburg to an English buyer. On the way to Hamburg by rail (meaning before the place of delivery and before the place where the risk passes) the machine is destroyed in a traffic accident, caused by a truck driver at a crossing (therefore, accidental). According to German law and according to the CISG as well, the risk is still with the seller, meaning that the buyer does not have to pay the price for the lost machine. Does the seller have to deliver another machine? Not according to 275 BGB, but according to the CISG he does, because he had not fulfilled his obligation to deliver.

B. Article 67: Passing of risk when the contract involves carriage of the goods

I. Passing of risk

"If the contract of sale involves carriage of the 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 over to the first carrier for transmission to the buyer in accordance with the contract of sale. 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."

Article 67 deals with the passing of risk in case the contract asks for forwarding of the goods. Primarily, the handing over of the goods at the place determined by the contracting parties is decisive. When no particular place is determined, the handing over of the goods to the first carrier decides.

1. Prerequisites

a) Handing over of the goods at a particular place

According to art. 67(1)(ii) when the seller has to hand over the goods at a particular place, the risk does not pass to the buyer until the goods are handed over to the carrier at this particular place (Incoterms especially regulate particular places). The seller is not bound to hand over the goods himself. Art. 67(1)(ii) applies without taking into account whether the seller himself (or his employees) transports the goods for the first part of the way or uses an independent carrier. It suffices that the goods are placed at the disposal - by whomsoever - of the carrier at the particular place or are already in the carrier's control (in case of a previous handing over of the goods). The goods must be placed in the carrier's care or control.

The particular place cannot be identical to the place of forwarding nor to the place of final destination, since in these cases art. 69 applies. The main application of art. 67(1)(ii) CISG will be the carriage of goods overseas, e.g., the seller, with his place of business inland, agrees upon delivery from seaport X. The first-carrier rule of art. 67(1)(i) does not apply; according to art. 67(1)(ii) the risk does not pass until the goods are handed over to the carrier at seaport X. The carriage over land takes place at the seller's risk, the carriage overseas at the buyer's risk.

b) Handing over the goods other than at a particular place

When the seller is not bound to hand over the goods at a particular place, the risk passes to the buyer at the time in which the goods are handed over to the first carrier for transmission to the buyer in accordance with the contract of sale (art. 67(1)(i)).

The requirement that the goods are handed over "in accordance with the contract of sale", only states that there has to be an agreement upon carriage in the contract, and not that the passing of risk depends on the observance of all the stipulations of the contract.

The basic rule for contracts involving carriage of goods is that the risk passes to the buyer at the moment in which the goods are handed over to the first carrier. In cases of combined transport (e.g. international transport and especially with container transport), the risk passes with handing over the goods to the first carrier. The complete transport takes place at buyer's risk. Investigations about when and where an eventual damage occurred are herewith avoided. This provision is especially fitting for modern container transport.

The carrier must be self-employed and independent. When independent assistants of the buyer take over the goods from the seller for carriage to the buyer, art. 67 CISG is not applicable. In this case art. 69(1) and (2) apply, because this involves a "long distance or local sale".

Handing over the goods to employees of the seller, who are to carry the goods to the buyer, does not suffice according to current opinion. Since handing over the goods to the carrier means giving up the control over the goods, this assumes that the carrier is self-employed and independent.

It remains doubtful, whether handing over of the goods to a forwarding agent suffices. Opinions differ between several cases. A forwarding agent can limit himself to the organization of the transport and contract a carrier. The risk passes when the goods are handed over to this carrier. The forwarding agent can conduct the carriage himself by his right of entering into the contract (Selbsteintrittsrecht): the risk passes at the time of entrance into the contract. Finally, the forwarding agent has the opportunity to take over the carriage at fixed costs (zu festen Gebühren). This is the moment in which the risk passes in this case.

Another argument is that the risk always passes to the buyer when the goods are handed over to a forwarding carrier. This opinion is to be preferred, since the decisive factor for the passing of risk is who has the goods at his disposal. The person who has the goods in his care can prevent their damaging or loss. When the contract involves carriage of the goods, whether the seller gives up the immediate care of the goods or not is decisive. When the seller hands over the goods to a forwarding agent, he loses any possibility to take care of the goods. For that reason, the handing over of the goods to a forwarding agent is in conformance with the prerequisites of art. 67(1) CISG.

c) Documents

Under art. 67(1)(iii) the fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passing of the risk. This restates the independence between the passing of risk and the passing of ownership.

d) Identification of the goods to the contract

Art. 67(2) determines that the risk does not pass to the buyer until the goods are clearly identified to the contract (compare art. 32(1) CISG). The seller has to prove that he did not just think about the part he wanted to deliver out of the unascertained mass, but that he marked the goods objectively as being "clearly identified to the contract". There are several ways in which the seller can do this: by placing markings on the goods; by shipping documents (e.g., bill of lading); by notice given to the buyer or otherwise. When a necessary identification notice is not made before the fulfilment of the prerequisites of art. 67 et seq., the risk passes at this later moment in which the identification has been made. Art. 67 CISG applies in principle to ascertained goods.

2. Special features for the sale of unascertained goods

a) Cases of selling unascertained goods

In case of carriage of goods overseas, an identification to the contract often fails, e.g., when the seller forwards the goods without indicating the buyer as the recipient, or when he unloads an unascertained mass of goods for the fulfillment of several contracts of sale.

In trading raw materials, a ship, loaded with oil for example, is often sent in the direction of Europe without having a buyer, and the final destination will not be determined until a buyer (or buyers) has been found. Another possibility is the case in which collective freight entails goods for the fulfillment of several different contracts of sale and is not divided between the buyers until the goods have reached their place of destination, the country of the recipients.

These are cases of selling unascertained goods, where the goods are just generally defined. The sale does not involve specific, identified goods. The seller is not obliged to deliver specific goods out of the unascertained mass, but he has the right to choose out of this collective cargo which goods he wants to deliver.

The seller can still ask for the purchase price in case of accidental loss or damage when the prerequisites of articles 66 through 69 CISG are fulfilled. That the goods are damaged or lost by accident and that they have been identified to the contract is important, because the risk cannot pass to the buyer if the goods are not identified under art. 67(2) CISG.

b) Identification of the goods

The identification of the goods to the contract (Konkretisierung), which arts. 67-69 require for the passing of risk, can be carried out in the ways mentioned in art. 67(2). See above in B.I.1.d.

As a rule, the shipping documents, a bill of lading or (sea)waybill, will determine the fulfillment of which contract is involved with the carriage. The risk passes at the moment in which the goods are handed over to the carrier (art. 67(1)).

In the case of a collective cargo or of a shipment without identifying the buyers, the identification of the goods will be performed by sending a notice of consignment (compare with art. 32(1) CISG). This notice takes effect at the time of dispatch, according to art. 27 CISG. The risk passes ex nunc to the buyer with the mere dispatch of the notice and not at the time of access of the notice to the buyer. This could make investigations necessary about where and when an eventual damage occured. The buyer, however, is interested in goods without defects; the seller in receiving the purchase price. For this reason the seller will, out of his own interests, send the documents as soon as possible to the buyer or his bank.

At what time however, does the risk pass, when a collective cargo containing goods of the same kind, e.g., oil or wheat, is shipped in one container or on one ship for several recipients and the container is only identified for all?

One opinion states that identification of the collective cargo suffices. The buyers form an association for the risk. They carry the risk of damage or loss, which occurs during the transportation, in the ratio of their share in the collective cargo.

Another opinion is, that this is not sufficient for a clear identification, which follows out of the wording and genesis. The identification, and therefore the passing of risk, does not take place until the goods are divided between the buyers at the place of destination. If the goods are lost or damaged on the way over there, the buyers are released from their obligation to pay the purchase price.

II. Risk of non-performance

1. Ascertained goods

In the case the contract of sale involves carriage of the goods, the seller has fulfilled his obligation to deliver under art. 31(a) when he hands over the goods to the first carrier for transmission to the buyer. The obligation to deliver means the performance by the seller of all acts which are necessary to fulfill his obligation to deliver. The provision determines the place of delivery in case this place is not stipulated differently in the contract or defined differently by custom or practices. When the place of delivery is stipulated in the contract or otherwise defined, it would be logical to conclude that the seller has fulfilled his obligation to deliver when he has handed over the goods to the carrier at that particular place.

The notion "handing over" means that the carrier takes possession of the goods and that the seller [5] concludes a contract involving carriage with the carrier (art. 32(2) CISG). The seller also has to identify the goods to the contract (art. 32(1): Konkretisierung) and hand over the documents relating to the goods (art. 34 CISG). The goods must be delivered within the delivery time, of course (art. 33). From the moment in which the seller has fulfilled all his obligations, he is released from his obligation to deliver once more when the goods are lost or damaged by accident.

There is no problem in this area for the selling of ascertained goods, since this involves already specific, identified goods. The risk of non-performance passes to the buyer at the moment in which the goods are handed over to the carrier and when the prerequisites of arts. 33, 34 CISG are fulfilled.

2. Unascertained goods

In selling unascertained goods, the moment of identification is decisive for the passing of the risk of non-performance. As long as delivery out of the unascertained mass is still possible, impossibility cannot occur. The seller is able to deliver another good out of the mass if the goods get lost. When the identification has taken place and the seller owes a specific, identified item, impossibility can occur when this item gets lost.

The division of the risk of non-performance is to be deduced from the content of the obligation to deliver under arts. 31-36 CISG, as explained in A III.2. In handing over the identified goods to the carrier, the seller has done everything to fulfill his obligation to deliver, because identification is one of the prerequisites for fulfillment under art. 32(1) CISG. This is the same provision as in the case of selling identified goods (arts. 31(a) and 32(1) CISG). The obligation of procurement ends for the seller of unascertained goods when he owes identified goods. Therefore, only after identification does the question become relevant, whether the seller can still claim the purchase price. The risk of non-performance passes at the latest with the passing of the risk to the buyer. One could think of an earlier passing, but a later passing of the risk of non-performance is unthinkable.

How does identification of the goods take place in the case of selling unidentified goods? The identification of the goods to the contract can be carried out by placing markings on the goods, or by declarations in the documents relating to the goods. When the carrier issues an identifying document, e.g., bill of lading, the seller has fulfilled his obligation to deliver in handing over the goods to this carrier (Konkretisierung/identification, art. 67(2) and art. 32(1) CISG). Should the identification not have been carried out by markings on the goods or declarations in the documents, a notice of consignment of the goods must be provided. The seller has fulfilled his obligation to deliver at the moment in which he dispatches the notice (art. 27 CISG), because the notice constitutes the identification. At the same time in which the risk passes, the risk of non-performance passes to the buyer as well.

C. Article 68: The passing of risk with goods in transit

I. Passing of risk

1. Passing of risk at the time of conclusion of the contract

Article 68 CISG determines the passing of risk in selling goods which have already been handed over to an independent carrier for carriage at the time of conclusion of the contract. The basic rule of art. 68(i) CISG states that the risk in respect of goods sold in transit passes to the buyer from the time of the conclusion of the contract. The risk for goods in transit (rolling, floating, flying goods) passes ex nunc to the buyer. This provision can cause serious practical problems, since it will normally be impossible to determine the moment in which the damage or loss occured; this is especially the case when the goods are forwarded in containers. In fact, this risk lies with the seller who, in case of a difference of opinion, will have to prove that the risk had already passed to the buyer, if he wants to release himself from his liability.

Example: A freight of wheat is carried from Rotterdam to a trader in Calcutta. The trader sold the freight to a buyer in Singapore on October 15th, 1995. When the wheat arrives on October 30th, 1995, it is established that water has come through a defective hatch and that accordingly the wheat has partly perished. However, it is impossible to determine at what time exactly the damage occured: before the selling by the trader to the buyer in Singapore or afterwards. Who has to bear this risk?

2. Passing of risk at the time of handing over the goods to the carrier

As an exception, art. 68(ii) states a retroactive (ex tunc) passing of the risk:

"However, if the circumstances so indicate, the risk is assumed by the buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage."

The buyer takes over the risk from the time in which the goods were handed over to the carrier who issued the documents embodying contract of carriage. It is not necessary for the documents to entitle a disposal of the goods. It suffices that the documents give evidence of the contract of carriage. In selling floating goods, this will usually be a bill of lading. However, a seawaybill will suffice as well. When there are no documents at all, the provision is unapplicable.

"Circumstances" mean objective circumstances, independent of any legal arrangements. Here, one essentially considers the existence of transport insurance, since such insurance limits the buyer's risk fundamentally. That the buyer is insured for the passed time of carriage as well is a prerequisite. If the seller did not insure the goods and the buyer takes insurance, he can take insurance retroactively if he takes over the risk retroactively, because he will then have an insurable interest. The buyer must be in good faith, meaning that he has no knowledge of already occurred damage. When the buyer takes such insurance, art. 68(ii) is applicable. When the insurance only insures the risks from the time of conclusion of the contract or when the goods are not insured at all, the basic rule of art. 68, first sentence, CISG applies and the risk passes at the time of conclusion of the contract. This can cause arguments about the time of occurance of any damage. In these cases, the contracting parties often agree upon the CIF-clause. In that case there is transport insurance (more details in chapter 2).

The retroactive passing of the risk under art. 68(ii) ought to apply only in favor of a seller acting in good faith. Therefore, the third sentence states that, if at the time of the conclusion of the contract of sale the seller knew or ought to have known (meaning: negligently did not know) that the goods had been lost or damaged and did not disclose this to the buyer, the loss or damage is at the risk of the seller. He cannot charge for the purchase price anymore.

3. Extent of the risk

Several problems arise in defining the extent of the seller's risk. For which part of the loss or damage is the seller responsible, meaning, for which part will the buyer be released from his obligation to pay the purchase price? Does the seller only have to carry responsibility for the damage that has already occured at the time of conclusion of the contract and that he knew or ought to have known, or does he have to stand in for further damage as well, which occured after the conclusion of the contract but of which he knew nothing and did not need to know?

One opinion is, that the seller should only be liable for the damage which had already occurred at the time of conclusion of the contract and which he knew or ought to have known. Another opinion states, that the seller is liable for all damage which occurs after the conclusion of the contract. That the seller should bear the risk as far as the realization of the risk caused loss of or damage to the goods, of which the seller knew or ought to have known is decisive. For this part, the seller does not deserve the purchase price and remains obligated to perform.

4. Identification and impossibility

Article 68 does not contain the prerequisite that the goods must be clearly identified to the contract, as do articles 67(2) and 69(3) CISG. An anology, however, is generally accepted. Article 68 CISG applies basically to ascertained goods (Spezieskauf). The goods must be ascertained or identified for art. 68 CISG to apply. As with the sale of goods by carriage, the identification of the goods to the contract often takes place by declarations in the shipping documents (usually a bill of lading) or by sending a notice of consignment, with which the risk passes ex nunc.

What happens when the goods were already lost at the time of conclusion of the contract? Is the contract of sale still valid? The CISG does not regulate the invalidity of contracts (art. 4(a)), and according to German law, a contract aimed at an impossible obligation is void ( 306 BGB). However, it follows from art. 68, that in applying the first sentence, the legal consequences must be determined under the CISG. The seller keeps his claim to the purchase price, but not if he knew of the impossibility or ought to have known.

5. Special features for selling unascertained goods

One has to differ between two applications of art. 68 CISG: when the seller is allowed to provide a freight of unascertained goods according to the contract or trade usages, the risk passes to the buyer at the moment stipulated in art. 68 CISG, i.e., at the time of conclusion of the contract (1st sentence) or at the time of handing over the goods to the carrier (2nd sentence). The buyers bear an eventual loss proportionately.

When the provision of a freight of unascertained goods is not allowed, the risk does not pass to the buyer until the goods have been clearly identified to the contract.

II. Risk of non-performance

1. Ascertained goods

In case the contract of sale does not involve carriage, the seller has fulfilled his obligation to deliver under art. 31(b) CISG (long distance sale/Fernkauf, sale of goods in storage and in transit [6]) in placing the goods at the buyer's disposal at "that" place or at the place where the seller has his place of business according to art. 31(c) CISG (local sale/debt collectible at debtor's domicile by the creditor; more details in D). The goods are placed at the buyer's disposal when the seller has done everything necessary to enable the buyer or his representatives to pick up the goods.

In order to do this, the seller has to sort out the goods, and make them available to the buyer, informing the buyer of this (art. 27 CISG). It will not be necessary to sort out the goods when this is possible at the time of arrival of the buyer without any further complications. For example, when 1,000 boxes of preserved food have been sold, it suffices that there is a supply of enough boxes available at the place and when the buyer can serve himself, when there are at least 1,000. When a document controlling the disposition of the goods has been issued, which legitimates the holder to receive the goods from the carrier (e.g., bill of lading, storage certificate), the seller fulfills his obligation to deliver in handing over that document to the buyer. When there is no such document, the seller has to instruct the carrier to hand over the goods to the buyer. The obligation to deliver is fulfilled as soon as the instruction reaches the carrier, in whose care the goods are at that time. That the carrier is really obliged by the instruction to hand over the goods to the buyer at the place of destination is a prerequisite.

When floating or rolling goods are sold, this usually involves the sale of identified or at least unidentified goods to be drawn from a specific stock (freight on a ship or in a wagon) and the contracting parties usually know on which ship or in which wagon the goods are. This does not constitute any problems, because it involves ascertained, identified goods. The risk passes to the buyer at the time in which the goods are placed at his diposal and the notification thereof has been dispatched.

The term "placing at the buyer's disposal" has a special meaning when the sale of goods in transit is involved, which has to do with the kind of sale. The seller has to place the goods at the buyer's disposal "at that place", which is the place where the ship or wagon is at the time of the contract. The seller has done everthing necessary to fulfill his obligation to deliver when he enables the buyer to take over the goods at the place of destination. This can be done, as explained above, by handing over to the buyer a bill of lading or similar document which instructs the carrier to hand over the goods to the buyer at the place of destination or in which the seller assigns his rights to the goods in favor of the buyer.

In cases where the risk passes at the time of conclusion of the contract, there can be a problem, namely if the seller fulfills his obligation to deliver - the handing over of the bill of lading - afterwards. In any event, the seller would not be obliged to deliver once more when the goods are damaged or lost in between the conclusion of the contract and the handing over of the documents, because only the goods he owes the buyer (Species) are involved. The identifying bill of lading (or the instruction to the carrier) has already been issued at the time of loading.

2. Unascertained goods

The seller basically fulfills his obligation to deliver by placing the identified goods at the buyer's disposal, in the sense explained above. Usually, the sale of goods in transit involves ascertained/identified goods. It remains unclear when the risk passes in case of sale of unidentified goods in transit. It seems logical to say that when the seller is allowed to provide a mass of unidentified goods, he has fulfilled his obligation to deliver by doing so. "Placing the goods at the buyer's disposal" means, that the buyer is in a position to take control over the goods. This is often made possible by sending a bill of lading or by instruction to the carrier to hand over the goods to the buyer thus solving the problem, since these acts constitute identification of the goods.

When the seller is, however, not allowed to provide the buyer with a mass of unidentified goods, he has not fulfilled his obligation to deliver until the goods are identified. At that time, the risk of non-performance passes to the buyer, because only then has the seller fulfilled his obligation to deliver. The risk passes at the same time, since only at that time are the goods identified to the contract (art. 67(2), art. 69(3) CISG by analogy). This means that the risk might not pass until the goods are delivered at the place of destination.

D. Article 69: Passing of risk in residual cases

I. Area of application

Article 69 CISG regulates primarily the passing of risk in the cases not regulated by articles 67 und 68. This means, it deals with local sales (Plautzkauf)/debt collectible at debtor's domicile, the sale of goods in storage (collecting the goods at a warehouse) and the long distance purchase (Fernkauf)/debt payable at debtor's domicile (another place, e.g., buyer's place of business).

Article 69(1) covers with the local sale (Platzkauf) the case of a debt collectible at the debtor's domicile (Holschuld). This article applies namely only to cases which are not covered by articles 67, 68 CISG and it follows from the special provision of art. 69(2) that this 2nd paragraph applies to the passing of risk in case of the sale of goods in storage and in case of a distance purchase (Fernkauf). Therefore, only the case of a local purchase remains for art. 69(1).

II. Art. 69 (1): Local sales

1. Passing of risk

a) Prerequisites

When the goods are to be taken over at the seller's place of business, the risk passes to the buyer, according to art. 69(1)

"when he takes over the goods or, if he does not do so in due time, from the time when the goods are placed at his disposal and he commits a breach of contract by failing to take delivery."

To take over the goods means to take actual, physical possession. This can also be done by representatives of the buyer (forwarding agent, carrier). Placing the goods only at the buyer's disposal does not suffice.

When the buyer does not take over the goods (default of acceptance/Annahmeverzug), the risk passes anyway, as soon as the seller has placed the goods at the buyer's disposal at his place of business and the buyer commits a breach of contract by not taking over the goods. The seller has to place the goods at the buyer's disposal. He has done so when he has made all the necessary preparations, especially identified the goods, and informed the buyer about this. The buyer must be in the position to transport the goods without further ado.

The buyer must have committed a breach of contract by failing to take delivery. This is the case, when the time for delivery fixed in the contract is due or, in case nothing is stipulated in the contract, a reasonable time has passed since the notification that the goods are placed at the buyer's disposal has reached the buyer. It remains arguable, whether just the failure to take delivery by the buyer causes the risk to pass or whether other breaches of contract which cause the failing to take delivery, cause the passing of the risk as well. For example, when the buyer does not open a documentary credit as stipulated in the contract or, when the buyer does not give the necessary forwarding instructions.

Hager prefers the extensive opinion, which includes breach of cooperative obligations by the buyer into the facts that cause the risk to pass. Rudolph and Enderlein/Maskow/Strohbach criticize this opinion as being too extensive and limit the passing of risk to cases of failure to take delivery by the buyer. They hold to the text of article 69(1) CISG.

It seems preferable to let the risk pass to the buyer, when the seller is unable to pass the risk according to the general provisions because of the buyer's defaulting conduct (that is, not just failure to take delivery, but for example also when the buyer fails to mention the vessel for an FOB sale). The seller has no possibilities from this time to influence the sale of the goods and it would be unjust to put the risk on the seller, when the buyer is in default.

b) Identification

According to art. 69(3) CISG the risk does not pass to the buyer until the goods have been clearly identified to the contract. The goods must be identified before art. 69(1) CISG can apply. The identification usually takes place by sorting out of the goods or by placing markings on the goods. The risk does not pass when the identification does not take place, except when the seller is allowed under the contract to deliver a part of a collective cargo.

2. Risk of non-performance

The seller has fulfilled his obligation to deliver under art. 31(c) CISG when he has placed the goods at the buyer's disposal, meaning that he has sorted out the goods, has provided them for the buyer, and has notified the buyer thereof (art. 27 CISG). The buyer must be able to transport the goods without further ado. At this time, the risk of delivery passes to the buyer and the seller is released from his primary duty. In case of an obligation in kind, this is exactly the same, since the seller identifies the goods in placing them at the buyer's disposal, namely the sorting out of the goods for the buyer. This is a prerequisite for "placing the goods at the buyer's disposal".

According to art. 69(1) CISG (a local sale), the risk does not pass to the buyer until he takes over the goods or, if he does not do so in due time, from the time when the goods are placed at his disposal and he commits a breach of contract by failing to take delivery. Here, there could be a time gap between the fulfillment of the obligation to deliver and the passing of the risk. When the goods are damaged or lost by accident in the meantime, the seller is no longer obliged to re-deliver since the risk of non-performance has already passed to the buyer by sending the notification. The buyer is no longer obliged to pay the purchase price since that risk has not yet passed to him.

III. Art. 69(2): Residual cases

When the buyer is bound to take over the goods at a place other than a place of business of the seller, according to art. 69(2) CISG the risk passes to the buyer when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place (compare with art.31 (b)).

This provision in art. 69(2) CISG comprises the sale of goods in storage and the sale of goods for which another place of fulfillment has been agreed, e.g., sales out of the warehouse (ab Lager), DEQ (ab Kai), EXW (ab Werk) (see chapter 2). It also covers the case in which delivery has to take place at the buyer's place of business or a third place (long distance sale/Fernkauf). Such a contract is identified by the clauses "frei haus" or "ex ship".

1. Long distance sale

a) Prerequisites

The passing of risk requires delivery being due, that the goods have been placed at the disposal of the buyer at the agreed place and that the buyer is aware of this. The goods must also be identified, according to art. 69(3). This last prerequisite also applies to the sale of goods in storage and will be discussed for both kinds of sale in III.3, as will be the passing of the risk of non-performance in III.4.

aa) Delivery is due

First of all, the maturity of delivery [7] will be explained. Under art. 33 CISG, when the contracting parties have fixed a date in the contract or when the period for delivery results from usage or practice, the seller has to place the goods at the buyer's disposal at that time (art. 33(a)) or within that period (art. 33(b)). If there is no such provision contracted, the seller has to place the goods at the disposal of the buyer at the warehouse, place of manufacturing or at the place of destination within a reasonable time after the conclusion of the contract. In case the buyer does not take delivery and thus commits a breach of contract, the risk of non-performance remains with the seller until he has placed the goods at the disposal of the buyer. When the goods are placed at the buyer's disposal too early, the risk does not pass to the buyer until delivery is due.

bb) Placing the goods at the disposal of the buyer

Contrary to art. 69(1), the risk does not pass at the time in which the goods are actually taken over by the buyer, but already at the time in which the goods are placed at his disposal when delivery is due. The tying to the act of placing the goods at buyer's disposal is justified by the argument that the seller normally does not insure goods which are not in his care, or at least when the seller is not in a more favorable position than the buyer to insure the goods, to watch over them, and to claim damages from the insurance company. In case of a long distance sale of goods, the seller places the goods at the disposal of the buyer at the place of business of the buyer or at a third place and he does not have the goods in his care. The goods do not remain on his premises.

The notion of "placing at one's disposal" in art. 69(2) corresponds to the one in art. 69(1)(ii) CISG (D II.1). An important case of application of the 2nd paragraph is the sale of goods, in which the place of fulfillment is the place of business of the buyer, the ship in the port of destination or the place of business of the manufacturer. In these cases the risk passes to the buyer when the seller offers the goods to the buyer at that place. When transport documents are required for handing over the goods, the goods are not placed at the disposal of the buyer until these documents have been handed over to him.

cc) Awareness of the buyer

The buyer must be aware of the fact that the goods are placed at his disposal. This awareness must be positive and can be brought about by the handing over of documents or by any other (informal) message. For the passing of risk, the moment in which the message reaches the buyer is decisive and not the moment in which it is sent by the seller. The notification travels at the seller's risk, contrary to the provision of art. 27 CISG.

2. Sale of goods in storage

Art. 69(2) CISG also governs the case of taking over the goods which are stored in a warehouse. The goods are placed at the disposal of the buyer when the storekeeper acknowledges the buyer's right of possession or when documents are handed over to the buyer which do not just constitute an instruction of the seller to the storekeeper to hand over the goods to the buyer, but which establish a real right of possession for the buyer as holder of the documents, to claim the handing over of the goods (e.g., a warehouse warrant to order). The risk passes to the buyer at the time of acknowledgement of the right of possession or at the time of handing over the document. The buyer must be in the position to collect the goods from the storekeeper.

A delivery note does not suffice to bring about the passing of risk, because it only constitutes an instruction. When the seller hands over such a document, the goods are stored at his risk until the buyer contacts the storekeeper and the storekeeper acknowledges his right of possession. The risk passes to the buyer with the storekeeper's statement that he will follow the instruction to hand over the goods to the buyer.

The other prerequisites are already discussed in the long distance sale above, and are the same for goods in storage.

3. Identification with long distance sale/sale of goods in storage

Art. 69(3) applies here as well and therefore the goods must be identified before the risk can pass. With the distance sale, identification often takes place inevitably, because the seller is bound to offer the goods to the buyer at the buyer's place of business or at an agreed place. With the sale of stored goods, the passing of risk usually leads to identification of the goods inevitably. For the passing of the risk the storekeeper must acknowledge the buyer's right of possession, or the seller needs to hand over documents to the buyer, which constitute a promise by the storekeeper to hand over the goods.

4. Risk of non-performance with distance sale/sale of goods in storage

According to art. 31(b) CISG (cases of long distance sales and sales of stored goods), the seller fulfills his obligation to deliver by placing the goods at the disposal of the buyer at "that" place, meaning that he sorts out the goods, makes them available to the buyer and notifies the buyer thereof. With the sale of stored goods, the goods are placed at the disposal of the buyer (as meant in art. 31(b) CISG) when the seller assigns his right of having the goods handed over to the buyer or when he directs the storekeeper to hand over the goods to the buyer. With the long distance sale, it suffices when the goods are placed at the disposal of the buyer (in the sense as explained above). The buyer is not bound to take over the goods.

This causes the risk of non-performance to pass to the buyer. The risk passes according to art. 69(2) at the time in which delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place (knowledge of the notification). In this case, there can be a time gap as well, namely between the sending off of the notification and the awareness thereof by the buyer. The seller is in that case not obliged to deliver once more and the buyer is not obliged to pay the purchase price when the goods are lost or damaged by accident.

IV. Can one revoke an identification?

Is the seller bound by his identification of the goods to the contract? When one looks at this reasonably and takes into account the trade customs, the buyer must be placed in the position to otherwise dispose of the goods which are meant for him from the time in which the risk has passed. The seller is therefore bound by his identification of the goods.

Legally, however, one is allowed under certain circumstances a revocation of an already carried out identification. The question whether the revocation is allowed depends on whether or not the buyer has a special interest in the identified goods. When such a special interest exists, he is not bound to accept an offer of substitute goods. For example, in the case in which a quality test has already been performed on the original goods. When the seller revokes the identification, he is bound by that himself as well. His obligation to deliver revives and the risk passes back to him.

In the overseas trade, there is no disagreement about the fact that the seller is not allowed to revoke the notice of consignment, meaning that he is bound by the identification he has carried out. The reason is that the buyer often resells the goods after he has received the notice of consignment.

E. Passing of risk in non-accidental cases

I. Art. 66 (ii)

As explained in I.1., art. 66 CISG only deals with the passing of the risk of having to pay the purchase price when the goods are lost or damaged by accident. According to art. 66(ii), the buyer does not bear the risk when the goods are damaged or lost after the time of passing of risk, which follows out of articles 67-69, when the loss or damage is due to an act or omission of the seller. When an act or omission of the seller causes the loss of or damage to the goods, the buyer is released from his obligation to pay the purchase price.

In cases where the act or omission by the seller constitutes a breach of contract as well, the liability of the seller can also be deduced from art. 36(2). Under art. 36(2) the seller is liable for any lack of conformity which occurs after the time in which the risk has passed and which is due to a breach of any of his obligations. The consequence thereof is that the buyer, in order to preserve his remedies, must observe the examination and noticing obligations of art. 38 et seq. CISG. To differentiate this from art. 66(ii), art. 66 also applies to cases in which the seller did not commit a breach of contract in the sense as meant in art. 45 et seq. CISG. These are cases of positive breaches of contract (Positive Vertragsverletzung = PVV: breaches of care). The buyer cannot exercise his rights out of art. 46 et seq., but the seller bears the risk.

How does one judge the case, in which the loss of or damage to the goods is caused by a lawful act or omission by the seller (e.g., when the seller prevents the handing over of the goods to the buyer under art. 71(2) CISG ("right of stoppage") and during this period the goods are damaged or lost by accident? If one would follow the text of the provision, the buyer is not bound to pay the price in this case as well. Another opinion is that lawful conduct of the seller should not cause the risk to pass back to him. This last opinion is to be preferred, because it conforms with the aim of art. 66(ii). Conduct which is contrary to the seller's obligations, releases the buyer of his obligation to pay the purchase price, but lawful conduct does not.

Current opinion is that with acts contrary to obligations, any breach of obligation is meant, including other duties of care. A minority opinion looks at art. 36(2) CISG and argues that by act or omission, only breaches of contract are meant.

The CISG does not expressly regulate the case in which the loss of or damage to the goods is caused by an act or omission by the buyer. Only the case in which the buyer does not take delivery in due time when the goods are placed at his disposal, is regulated in art. 69(1). The risk passes to the buyer in that case. One could look at art. 80 CISG, that states that a party may not rely on a failure of the other party to perform, to the extent that such a failure was caused by the first party's act or omission. In connection with art. 7(2) CISG one can deduce from art. 69 the general principle that the risk passes to the buyer in any case, when the seller is not able to transfer the risk because the buyer is in breach of his obligations. In connection with art. 66 CISG this means that the risk passes to the buyer and that he must pay the purchase price because he cannot invoke his right of breach of contract by the seller.

II. Art. 70

Until now, the rules concerning the passing of risk have been explained in the cases where the contract goods are lost or damaged, either by accident (B,C,D) or by acts or omissions of the seller or the buyer (E.I). However, how can one judge the case in which the breach of contract by the seller and the loss of or further damage to the goods have nothing to do with one another, in which the loss of the goods is caused by accident, regardless of the fact that the seller has breached the contract?[8] The most common case is the situation in which the seller has delivered goods which lack conformity and which are then lost by accident. The delivery of goods lacking conformity constitutes a breach of contract according to arts. 35, 36, 46(2), 51 CISG.

Article 70 CISG states that if the seller has committed a fundamental breach of contract, articles 67, 68, 69 do not impair the remedies available to the buyer on account of the breach. Art. 70 CISG extends art. 66(ii) by keeping remedies available when the seller commits a breach of contract and at the same time the goods are lost by accident, independent of the breach of contract by the seller. The fact that the seller has committed a fundamental breach of contract as meant in art. 25 CISG does not prevent the risk from passing to the buyer under the provisions of arts. 67-69 CISG.

Where the buyer can reject the goods lacking conformity pursuant to either the remedy to declare the contract avoided under art. 49(1) CISG or the remedy to require substitute goods under art. 46(2), the seller bears the risk since the execution of these remedies causes the risk to fall back on him. In both cases it is a prerequisite that the breach of contract is fundamental, as meant in art. 25 CISG.

Should the buyer choose the remedy of art. 46(3) to correct the lack of conformity by repair or of art. 50 to reduce the price in the case in which the breach of contract is fundamental, he can no longer declare the contract avoided. When the goods are damaged or lost after the buyer has declared a reduction of the price or asked for the remedy of the lack of conformity by repair, he remains bound to pay the previously reduced price or - in case of the remedy - the full price. In case the goods are damaged by accident before the price reduction or remedy by repair has been exercised, the buyer can only reduce the price to the extent of the original breach of contract and also only for the part asking for remedy by repair, but not for damages which occured afterwards. The buyer bears the risk for this when he chooses not to declare the contract avoided.

When the buyer claims damages (arts. 45(1)(b), 74 et seq. CISG), he can only claim damages which are justified by the (fundamental) breach of contract, not damages which occurred accidentally after the risk had passed to the buyer.

When there is a non-fundamental breach of contract, it follows from articles 70, 49(1)(a) CISG that, in spite of the breach of contract, the risk passes to the buyer at the time in which the normal conditions for the passing of the risk are fulfilled and that the risk cannot be transferred back to the seller retroactively, because the remedies of declaring the contract avoided or of requiring the seller to remedy the lack of conformity by repair are excluded in cases in which the breach of contract is not fundamental. The risk passes normally according to articles 66 et seq. CISG.

This discussion also applies to other breaches of contract by the seller. When the seller is too late in forwarding the goods, they travel at his risk when the buyer can exercise the remedy to declare the contract avoided because of this breach of contract.

According to current opinion, the seller fulfills his obligation to deliver (act of performance) in handing over the goods or placing them at the disposal of the buyer regardless of whether the goods are in conformity with the contract. Therefore, there is no difference in the passing of the risk of non-performance.

CHAPTER 2: INCOTERMS

A. Introduction

The CISG constitutes ius dispostivum. According to art. 6 CISG, the contracting parties can exclude the application of the CISG completely or partly or, subject to art. 12, depart from the separate provisions or change their effect. Basically, the notion of freedom of contract and of freedom of formality applies in the CISG. The contracting parties can change the place at which the risk passes either directly or indirectly (by agreeing to apply a trade clause from which the place of passing of the risk can be inferred) differing from articles 66 et seq. The notion of autonomy of contracting parties applies.

When the contracting parties have not expressly agreed upon something different than the CISG, certain trade clauses can still become applicable under art. 9(2) CISG [9], since this article states that the parties are considered (unless otherwise agreed) to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.

Some standard contracts even exclude the CISG completely, e.g., the contracts of the Federation of Oils, Seeds and Fats Association (FOSFA) and the Grain and Feed Trade Association (GAFTA).

Especially Incoterms (International Commercial Terms) of the ICC (International Chamber of Commerce) are often applied. Incoterms are the delivery clauses most frequently used in international trade. They determine the ways of delivery and divide the costs and risk.

In commercial trade, the clauses are often applied by incorporating abbreviations in capitals into the contract, as explained in the next part of this chapter. Incoterms can be divided into four groups according to the degree of obligations the seller has with regard to forwarding of goods:

a) The E-clause (EXW) does not contain any more obligations for the seller after he has placed the goods - which are in conformity with the contract - at the disposal of the buyer. EXW is therefore a collect-clause.

b) The F-clauses (FCA, FAS, FOB). The seller has to take care of the transport until the goods are handed over to the agreed carrier, but he does not have to conclude a contract of carriage nor pay for the main transport.

c) The C-clauses (CFR, CIF, CPT, CIP). The seller is bound to pay the main transport until the place of destination. The seller fulfills -as with the F-clauses- his contractual obligations in the country of dispatch. The seller bears the risk of loss of or damage to the goods until the goods are handed over to the main carrier. In contrast to FOB, the seller must bear the costs and bring the goods to the determined port of destination and take out an insurance for the transport overseas.

d) The D-clauses (DAF, DES, DEQ, DDU, DDP). The seller has to take care of the arrival of the goods at the place of destination at his own costs and risks. Whereas the C-clauses constitute forwarding clauses, the D-clauses constitute arrival clauses.

Incoterms 1990 state in ten points the obligations of the seller at the left hand side (A) and on the opposite side the obligations of the buyer (B). The passing of risk is regulated in section A 5 (seller's obligations)/ B 5 (buyer's obligations). With the E-, F- and C-clauses, the risk passes at the time in which the goods are placed at the buyer's disposal or are handed over to the carrier, with the D-clauses, however, the risk does not pass until the goods have arrived at the place of destination.

Most writers ask for an explicit inclusion of Incoterms in the contract in order for Incoterms to become valid. A different opinion is that Incoterms are trade usages as meant by art. 9(2) CISG. However, the most certain way is to include Incoterms explicitly, by which they become part of the contract as an individual clause.

When Incoterms are not explicitly included, other trade terms are, according to current opinion, interpreted in the same way as Incoterms in the area of application of the CISG. The interpretation is made in the way of the so called "complementary interpretation of a contract" [10], unless the contracting parties have concluded an explicit interpretation which differs from that of Incoterms (a difference that will follows out of the contract), or practices between the contracting parties are ground for a different interpretation (art. 9(1) CISG) or, the clause concerned is explained differently from Incoterms, but in the countries of the contracting parties the interpretation corresponds.

It would go too far to explain all Incoterms and all the different ways of delivery in this. The application of which Incoterm in which case is explained in connection with the CISG. Then, the two most frequently applied Incoterms are explained in more detail, especially in connection to the passing of risk.

Art. 67 CISG: Contract of carriage

Here, one can apply the F- and C- clauses, FCA, FAS, FOB, CFR, CIF, CPT, CIP.

Art. 68 CISG: Goods in transit

In the case of sale of goods in transit, there is no special clause available. However, the parties often agree upon the CIF clause.

Art. 69 (1): Local sale

In the cases where a debt is collectible at the debtor's domicile, one can incorporate the EXW clause.

Art. 69 (2): Debt payable at debtor's domicile

Here the clauses DAF, DES, DEQ, DDU, DDP can be applied.

The following must be said in relation to art. 66(ii) and art. 70 CISG. Incoterms do not contain provisions that deal with acts or omissions of the seller which cause the loss of or damage to the goods. In this case, art. 66(ii) applies normally. When the goods are lost or damaged independently from the breach of contract, art. 70 CISG applies, since this deals with secondary remedies, which follow out of the breach of contract. Incoterms do not regulate this.

B. FOB (Free on board)

I. Contents of the FOB clause

According to the FOB clause (which contains the name of the port at which the carriage overseas shall begin) the seller has to bear every risk of loss of or damage to the goods until the goods have passed the ship's rail at the determined port of shipment, under the conditions of provision B 5.

1. Passing over the ship's rail

At what time have the goods passed the ship's rail?

On the one hand, one could argue that with FOB contracts the risk passes at the time in which the goods actually pass the ship's rail for the first time. According to this view, it is irrelevant whether the goods are still undamaged at the end of the loading or whether they have been damaged because of an incident which occured after the actual passing of the ship's rail. From the time in which the goods have passed the rail, the buyer bears the risk. However, it will be difficult to prove that the goods actually did pass the ship's rail before they were damaged by falling down. In this case, the place where, the goods have landed would be decisive: still at the quay or in the water (seller's risk) or already on deck (buyer's risk).

On the other hand, one could argue that with FOB contracts the risk does not pass until the goods are safely loaded on board and the loading has come to an end. The risk passes at the time in which the goods are placed on board (for the first time). When the goods fall on the quay or on deck, the seller bears the risk. A minority opinion states that an FOB transport has ended at the time in which the larger part of the goods or the excess weight has passed the ship's rail.

The second view is to be preferred, since according to the text of the FOB clause, the seller has to deliver the goods "on board". This also constitutes a moment which can be easily determined in practice and which avoids problems of evidence.

Actually, the time of passing of the ship's rail is not very appropriate to determine the passing of risk in modern trade. Usually, the goods are forwarded as collective cargo in containers. The forwarding often takes place in the form of combined transport, meaning that the goods are forwarded by two or more subsequent different means of transportation, which serves one uniform forwarding purpose. For example, forwarding the goods by truck to railway, from there to a seaport and by ship overseas and then transport by rail. That's why the so called Combiterms are often applied, which advance the time in which the risk passes to the time in which the goods are handed to the first carrier at the assemly point of the goods, the terminal.

2. Obligations of the buyer and the seller

When the parties agree to add to the actual obligation to deliver, the clause "stowed" or "stowed and trimmed", the seller is bound not just to deliver the goods "on board", but also to stow or trim the goods at his own costs. The time in which the risk passes does not change, this remains the time in which the goods pass the ship's rail.

The seller is bound to deliver the goods at his own costs at the named vessel (named by the buyer) in the agreed port of shipment at the time or within the period agreed upon in the contract (without regard to the place from which the goods are dispatched!). Contrary to the CIF clause, he is not bound to take out insurance for the transport overseas; this is part of the buyer's obligations. The buyer has to provide for the necessary loading capacity on a vessel. He has to conclude a contract for the carriage of goods overseas.[11] When he does not do so in due time and the seller is thus unable to load the goods, the risk passes to the buyer at the time in which he fails to conclude the contract.

The FOB seller is bound to provide for the usual loading documents (a bill of lading [12]) at his costs, as evidence that he delivered goods which are in conformity with the contract.

The FOB buyer has the right to and is obligated to determine the time of shipment more precisely by a so-called FOB instruction. Such FOB instructions contain a notification about the name of the vessel in which the loading space has been reserved and about the exact date, at which the vessel can take over the goods.

As with the CIF contract, the FOB contract is often used for the sale of unascertained goods. However, the identification of the goods does not constitute any problems with the classic FOB contract. The loading of the goods causes the clear identification of those goods to a certain contract, since it is the buyer's obligation to provide for the loading space in the vessel. Sending a consignment notice or a bill of lading respectively does not alter the fact that the goods are identified at the time in which they pass the ship's rail.

II. Extended FOB contract

Nowadays, parties often agree that the seller instead of the buyer, is bound to reserve the loading space on a vessel, at buyer's costs (compare art. 32(2) CISG). This is called an extended FOB contract. In this case, no FOB instructions are necessary, since the seller himself has knowledge about the exact date of delivery and future docking place of the vessel, because he has reserved this himself. With the classic FOB contract, the identification of the goods to the contract takes place at the same time in which the risk passes, namely at the time of delivery of the goods on board. This applies to the extended FOB contract as well. The fact that the seller and the buyer are in an order-relation to one another does not change the fact that, with an extended FOB contract it is still the buyer's obligation to take care of the shipment of the goods. When the vessel does not arrive in time, the buyer defaults in taking delivery of the goods and the risk passes to him, since there has been no change in the buyer's obligation to provide for a vessel.

C. CIF (Cost, Insurance, Freight)

I. Contents of the CIF clause

1. In general

In the cases of carriage of goods in modern trade overseas, parties often agree upon the CIF clause. Under the conditions of B 5 the seller bears every risk of loss of or damage to the goods until they have passed the ship's rail in the port of shipment. The buyer bears every risk of loss of or damage to the goods from the time in which the goods have passed the ship's rail in the port of shipment. The notion of "passing of the ship's rail" has the same meaning as explained above for the FOB contract (B.I.1).

The seller is bound to conclude the contract of carriage of the goods overseas on a vessel from the port of shipment till the port of destination at his own costs (compare art. 32(2) CISG), to load the goods on board of the vessel at his costs, to insure the goods at his costs, to have the carrier issue a bill of lading, an insurance policy and the bill and hand these over to the buyer as soon as possible (compare art. 34 CISG). The risk passes to the buyer at the port of shipment, so he bears the risk of the transport overseas.

2. Floating goods

Incoterms 1990 do not contain a special provision for the sale of floating goods. However, parties often agree upon the CIF clause in these cases. The objects of such CIF contracts are usually unascertained masses of goods, e.g., raw products. The seller ships the goods without identifying them with the name of the buyer. He has the bill of lading issued to his own order.[13]

When the parties have incorporated the CIF clause, one can basically assume that the seller has fulfilled his obligation to deliver under Incoterms 1990 in handing over the goods to the carrier at the place of shipment (place of loading), that means retroactively in handing over to the carrier, except when the seller knew or ought to have known, at the time of conclusion of the contract, that the goods had already been lost or damaged and he did not inform the buyer about this. According to A 4 CIF Incoterms 1990, the handing over of the goods at the place of shipment is regarded as the fulfillment of the act of performance. However, Incoterms do not contain an express provision for this case.

As a result of the agreement to apply the CIF clause in case of selling floating goods, the legal position differs fundamentally from the one under the CISG (Chapter 1 C.II.).

Under the CIF clause the risk passes retroactively to the buyer at the time in which the goods are delivered on board at the port of shipment, except when he knew or ought to have known about the damage or loss of the goods. Under the CISG, the risk passes at the time of conclusion of the contract or, in case there is a transport insurance, at the time of handing over the goods to the carrier who issued the documents embodying the contract of carriage (art. 68 CISG). Under certain circumstances, the risk passes later, namely at the time in which the goods are identified to the contract. For example, the passing of the risk ex nunc at the time of sending the consignment notice (Chapter 1, B.I.4.).

As mentioned above, the object of the sale of floating goods might be a collective freight. The CIF clause asks for the sending of a consignment notice in A 7, with which the identification to the contract takes place.

II. Payment

1. Ways of payment

When the CIF clause is incorporated, it is often agreed that the seller will get payment on presentation of the documents (payment against documents) [14], or that the buyer will open a documentary credit. This must be expressly agreed because Incoterms do not regulate the ways in which the purchase price might be paid. Under the CISG the buyer must pay the purchase price when the seller places the documents controlling the disposition of the goods at the buyer's disposal, when nothing else is agreed (art. 58 CISG).

When the parties have agreed upon a documentary credit to be opened by the buyer, the bank will only pay against presentation of the necessary documents. The documents which have to presented are, among others, charter party (written evidence of the fact that a freight is made available for the carriage of goods: voyage-, time- or bare boat charter), bill of lading, multimodal transport document, insurance documents, financial documents.

The buyer opens a documentary credit, when he requests his bank to pay the price to the seller against documents (the letter of credit specifies which documents [15] the seller/beneficiary has to present). The buyer can also request his bank, that it will accept a bill of exchange drawn by the seller/beneficiary on the issuing bank or that the confirming bank negotiate a bill of exchange and that the issuing bank pays.

The buyer has a special interest in the security of the documents, since he has to rely on the description of the goods in the documents. By issuing a documentary credit, the buyer performs in advance. Normally, the buyer is only willing to pay when he is in control of the goods and can examine them whether they are in conformity with the contract. By agreeing upon a documentary credit, the parties aim at a quick and secure payment to the seller.

The buyer has the advantage, that he has the disposition of the still floating goods with the documents (if a bill of lading [16] is involved). In case the buyer does not want to resell the goods during transport, there is no need for a bill of lading to be issued. In this case, a seawaybill which does not constitute a right of disposal of the goods, but only gives proof that the goods have been delivered on board and that there is a contract of carriage suffices.

Another advantage is that from the beginning it is clear how much the goods cost, since the CIF price includes the price of the goods, the costs of tranportation and of the insurance.

Incoterms as delivery clauses are only concerned with transport documents as far as they are relevant for the delivery of the goods and their handing over to the buyer. An example is a board-receipt, which proves that the seller has delivered the goods on board. Incoterms do not contain any provisions about the documents which are necessary in connection to the payment of the purchase price or to payment against documents and documentary credits.

2. Role of the bank in documentary credits

The bank can be involved in different ways. The bank that issues the documentary credit is called the "issuing bank". Usually, the issuing bank authorizes a bank in the country of the seller to control the documents. This bank is called "advising bank". This bank only checks the documentary credit for its authenticity. The issuing bank can also authorize another bank (a so-called "nominated" bank) to accept the documents of the documentary credit against payment. This bank does not undertake an independent obligation to pay. The nominated bank pays by order and for the account of the issuing bank and can take recourse on the issuing bank.

The bank in the country of the seller can undertake an independent obligation for payment. The seller has an independent claim on this so called "confirming" bank. After checking the documents, the confirming bank pays the purchase price and sends the documents to the issuing bank, which, after checking the documents, pays the purchase price "back" to the confirming bank. The issuing bank charges the buyer's (applicant) account to the sum of the purchase price.

The parties to the documentary credit are the issuing bank and the seller (beneficiary) and potentially the confirming bank, not however the buyer (applicant). The documentary credit is independent from the underlying contract. The buyer (applicant) cannot prevent the issuing bank from paying against the documents in case the goods lack conformity. The bank does not check whether the underlying contract has been fulfilled correctly. The bank only checks the appearant conformity of the documents.

3. Practice

For clarity, a short description of how things go in practice will follow. The seller arrives at the port of shipment with his goods. He hands them over to the carrier. The carrier issues the documents which confirm that he has received and checked the goods and found that they were okay (clean bill of lading). The bill of lading gives proof of receipt of the goods on board and that there is a contract of carriage. It also presents the goods (document of title) and gives the holder the right to take over the goods at the place of destination. The bill of lading places the buyer in a position in which he can dispose of the goods in such a way as if he really already had the goods at his disposal. The seller hands over these documents to the issuing bank (or the advising/confirming bank and this bank sends the documents to the issuing bank). After checking the documents, the bank pays the seller. The bank charges the account of the buyer and hands over the documents to him. (In case the buyer is insolvent, the bank has the documents and can recoup its loss out of the goods). The buyer goes to the port of destination and shows the documents which give him the right to get the goods handed over to him, to the carrier.

D. Container transport

I. Contents

As mentioned earlier, goods are nowadays practically always forwarded in containers. That is the reason for the following short insertion about the container system. This must be regarded as differing from the notion of a single container in a cargo. The single container as a packing box, belongs to the system of conventional handling of goods. With the notion of container transport is meant, the sale of goods on vessels which only carry containers.

The container transport takes place with containers of standardized sizes, so called ISO-containers (so-called after the International Standardisation Organisation) and the containers are interchangeable. The transport overseas takes place with so-called full-container vessels, which only carry containers. Two notions are important: LCL and FCL. With LCL (less than container load) the freighter forwards less goods than one container can comprise, with FCL (full container load) goods which suffice for a full container.

With LCL, the freighter delivers individual goods to the terminal of the carrier. In the port of arrival these individual goods are to be delivered at the terminal of the recipient. The transport in containers, the packing beforehand and the unpacking afterwards are internal courses of events of the carrier. The carrier can weigh and measure the goods and can determine their condition, etc. and put the corresponding loading clause in the bill of lading.

With FCL, the subject matter of the contract is the carriage of goods in containers. The freighter himself packs the containers and delivers them; the recipient collects the containers and unpacks them. The carrier is deprived of knowledge about the cargo in the container. He will put an "unknown" clause in the bill of lading and will not issue a clean bill of lading.

II. Passing of risk

The only and final possibility to say anything about the amount of, condition of, or kind of goods is the time in which the goods are loaded into the container. As explained in Chapter 1 B.I., the risk passes, when the contract involves carriage of goods, with the handing over of the goods to the carrier. The opening of containers is very inefficient and therefore checking the goods at the time of delivery is usually impossible. It remains uncertain, whether damages occurred before or after the passing of the risk.

This problem is not solved by law or by Incoterms. Finke tries to solve this problem by defining the containers as loading space shifted outwards. The risk passes to the buyer at the time in which the goods pass the container wall, thus in cases where the seller loads the goods the risk passes at the time in which the goods are loaded into the container. Where the carrier stows the goods himself, the risk passes to the buyer as soon as the goods are handed over to the carrier.

When one looks at containers as usual packing material, the risk passes at the time of passing of the ship's rail with FOB and CIF sales. This is not justified because the possibilities of the seller to deliver end at the container terminal of the port of shipment. The sea carrier determines and directs the delivery of goods stowed in containers on board the container vessel. There is always a handing over to the carrier or his representatives involved, before the shipment takes place.

Actually, there is no solution to this problem, since the container transport has developed itself in practice. The available provisions are not suitable. It all comes down to the onus of proof.[17]

More appropriate for container transport is the FCA-clause: the risk passes to the buyer at the time in which the goods are handed over to the carrier nominated and instructed by the buyer or to other nominated persons by the buyer, e.g., forwarding agent (compare the already mentioned Combiterms) at the agreed place (place of delivery). The carrier has to take over the goods.

E. Other frequently applied clauses

I. EXW

Here, the clause EXW has to be mentioned, because this clause is often incorporated into the contract and differs the most from art. 69(1) CISG (debt collectible at debtor's domicile). For delivery and thus for the risk to pass to the buyer, it suffices under the EXW clause to make the goods available at the place of delivery. The goods are placed at the disposal of the buyer when they have been sorted out, packed and the buyer has been notified. The buyer bears the risk from an earlier time than stipulated in the provision of art. 69(1) CISG, according to which the risk does not pass to the buyer until the goods have been taken over by him.

II. DEQ

When the parties agree to delivery ex ship (DEQ), the seller bears the risk of the sea transport. This is a so-called arrival contract. The risk passes when the goods are placed at the disposal of the buyer at the port of destination.[18] The question is, whether the buyer has to take over the goods before the risk passes or whether the risk already passes with delivery of the goods on the quay in the port of destination. The different clauses (Incoterms, German Trade Terms, UCC, ECE-Delivery clauses) all state something different. Since there is no conformity in this case, the best thing would be to incorporate into the contract the exact meaning of the clause.

It is to be preferred that "placing the goods at the disposal of the buyer" suffices for the passing of risk. With placing the goods on the quay, the goods are placed at the disposal of the buyer, meaning that the goods can be picked up by the buyer. However, it is a prerequisite that the necessary documents are handed over to the buyer. Otherwise, the goods would not actually be placed "at his disposal". It is not necessary for the buyer to pick up the goods in order to make the risk pass.

Usually, another clause is incorporated as well, namely "no arrival - no sale". This clause states that the seller is discharged from his obligation to perform when the goods are lost after the shipment and during the transport overseas. The risk of having to pay the purchase price passes when the goods are placed at the buyer's disposal at the place of destination, the risk of non-performance already passes when the goods are loaded on board. With an arrival contract, solely placing of the goods at the disposal of the buyer does usually not identify the goods to a certain contract, as with the CIF sale. The identification takes place by sending a consignment notice.

CHAPTER 3: PASSING OF RISK ACCORDING TO GERMAN LAW

A. Introduction

I. In general

In the BGB, the passing of risk is generally regulated in 275, 323-325 and for the sale of goods especially in 446 and 447 BGB. 275 regulates the risk of non-performance and 323 (with 324, 325 BGB) basically the risk of having to pay the purchase price. With the sale of goods, 446 determines the passing of risk in cases where the contract does not involve carraige of goods. 447 BGB determines the passing of risk in cases where the contract does involve the carriage of goods. These paragraphs deal with accidental loss or damage as well and 446, 447 BGB only regulate the passing of risk, as in the CISG. For the passing of the risk of non-performance there are no special provisions concerning the sale of goods.

The provisions for the passing of risk are inapplicable when the loss of or damage to the goods or other impossibility to perform has already occured before the conclusion of the contract. Here, 306, 459 et seq. BGB apply. The provisions for the passing of risk are also inapplicable when the object owed by the debtor is accidentally lost or damaged after final and complete fulfillment of the contract. The creditor then has nothing left to claim from the debtor and he has to perform in return, i.e., pay the purchase price.

For clarity, the next part will explain the general rules for the passing of risk of non-performance and for the passing of the risk to pay the purchase price. 446, 447 BGB are an exception to the regulation of the passing of risk under 323 BGB and will be explained afterwards. The order of chapter 1 will be followed as much as possible: firstly, the passing of risk when the contract involves the carriage of goods; secondly, the passing of risk with goods in transit, and lastly the passing of risk with local sales, long distance sales and the sale of stored goods.

II. General rules of 275, 276-278, 323 BGB

1. Risk of non-performance

a) Ascertained goods

When it is of no fault of the seller that his performance becomes impossible because of an event after the creation of the debtor/creditor relations (and before its fulfillment), the seller is discharged from his obligation to perform according to 275 (1) BGB [19] (Exception: impossibility with goods in kind - 279 BGB). The provision of 275 BGB rules that the risk of non-performance, meaning the risk of accidental loss of the owed performance, is on the creditor/buyer. He cannot claim another delivery. This is the case with identified goods, in that the debtor only has to deliver a specific, ascertained good.

b) Unascertained goods

The BGB has regulated seperately the sale of goods in kind and the ending of the seller's obligation to deliver in 243(2), 279, 300(2). As explained in chapter 1 (A.III), no impossibility can occur, as long as performance out of the mass of unascertained goods is still possible. As long as only unascertained goods are owed, the seller is liable for his inability to perform under 279, also in the case in which he has not been negligent. He would not be discharged until the total mass had perished. With that, 279 BGB regulates the risk of non-performance for unascertained goods.

When the seller of unascertained goods has done everything he was obliged to do under the contract, identification of the goods takes place according to 243(2): "When the debtor has done everything necessary as far as he is concerned, to deliver unascertained goods, the debtor/creditor relations are confined to this good. When this identified good gets lost by accident, impossibility occurs and the seller is no longer bound to re-deliver under 275(1) BGB. The seller has been discharged from his obligation to perform. From the time of identification, the buyer bears the risk.

The kind of debt determines the contents of what is "everthing necessary" .With a forwarding debt (the seller has to forward the owed goods to the buyer) [20], the risk of non-performance passes to the buyer at the time in which the goods are duly forwarded. With a debt collectible at debtor's domicile,[21] the seller has done everything necessary when he sorts out the goods that are determined for the buyer, places the goods at his disposal and notifies him thereof. In case of a debt payable at debtor's domicile, [22] the seller has done everything necessary as meant in 243(2) BGB, when he has actually brought and offered the goods to the buyer at his domicile, place of business or other third place. If there are any special features in this area, they will be explained with each paragraph.

When the debtor of unascertained goods cannot do everything necesary as meant in 243(2) BGB because of lack of cooperation of the creditor and therefore he cannot identify the goods according to 243(2), identification does take place at the time in which the creditor is in default in taking delivery ( 300(2) BGB).

2. "Not liable for"

275, 279, 323 mention the phrase "not liable for" The rules concerning the passing of risk only apply in cases of accidental loss or damage. To make clear what is meant by "accidental", one can examine what is meant by "non-accidental", thus, for which events the seller is liable.

According to 276(1) BGB the seller is liable for intent and negligence. With intent is meant knowing and wanting that the events which are decisive according to the law, occur. The notion of negligence is explained in 276(1)(ii) as disregard of the necessary care in trade dealings.

277 deals with the care in one's own affairs. 278 is also very important. According to this provision, the debtor is liable for a fault caused by his legal representative or by persons who are performing one of his obligations for him, in the same extent as a fault caused by himself. When the seller employs assistants, he is liable for the fact that they might negligently breach obligations which are incumbent upon him as debtor on the ground of the existing debtor/creditor relations between him and the buyer.

The seller is liable for defaults in adressing, packing or loading of the goods. The seller has to send the goods in a condition in which they are transportable. For example, when fresh meat is forwarded, he must provide a refrigerator truck. It is not allowed to forward the goods at a time which is inappropriate, meaning that he may not forward the goods, when it is to be expected from the circumstances that the goods will not arrive at the buyer or will not arrive undamaged.

The seller is not bound to insure the goods when such a clause is not incorporated. Trade customs (e.g., CIF clause) or the special circumstances of the case may, of course, establish an obligation to take out insurance.

3. Passing of risk

What happens with the performance in return: the purchase price? Does the buyer have to pay the purchase price when the contract is not performed (the object of the contract of sale/the goods), because the seller is discharged from his obligation to perform according to 275(1) BGB? According to 323(1) BGB, the seller loses his right to claim the purchase price in case the performance becomes impossible by an event, for which neither he nor the buyer have to accept liability. It must be accidental. In that case the buyer is no longer bound to pay the purchase price.

There are exceptions to the rule of 323 BGB, in which the seller does not bear the risk of the purchase price, but the buyer does. The buyer remains bound to pay the purchase price whereas he does not receive the goods. Here, 446 and 447 BGB apply. These paragraphs mention "the sold item" which leads to the fact that the risk can only pass to the buyer when an identified good is handed over to the carrier, thus after identification of the goods.[23] Before that, impossibility cannot occur.

B. Passing of risk when the contract involves carriage of goods

I. Passing of risk of non-performance

1. Ascertained goods

Here, the provision of 275(1) BGB applies normally, as explained above (A.II.1 a)).

2. Unascertained goods

In case of a debt to be forwarded (the seller is bound to forward the goods to the buyer), the risk of non-performance passes to the buyer when the goods are duly forwarded (A.II.1 b)). With the handing over of the goods to the carrier, the seller has done everything necessary to bring about the achievement of the contractual aim ( 243(2) BGB). As a rule, identification will take place at the same time as the goods are handed over to the carrier and the recipient is nominated ( 243(2) BGB). When this identified good is lost by accident, impossibility occurs and the seller is discharged from his obligation to perform under 275(1) BGB. With the handing over of the goods to the carrier, the risk of non-performance passes to the buyer.

The transport itself does not form part of the seller's contractual obligation when the contract involves carriage of goods. The seller is not liable for defaults caused by the carrier or his assistants according to 278 BGB. The so-called good faith performance obligations do continue to exist: the seller has to refrain from all acts which might jeopardize the achievement of the contractual aim and he has to do everything which may be expected to make the achievement possible.

II. Prerequisites for the passing of risk

"When the seller forwards the goods on request of the buyer to a different place as the place of performance, the risk passes to the buyer as soon as the seller has handed over the goods to the forwarding agent, the carrier or another person or institution destined to carry out the shipment", 447 (1) BGB.

1. Forwarding to a different place as the place of performance

As an exception to 323 BGB, 447 firstly requires that the place to which the goods are to be forwarded (place of destination) is different from the place where performance is usually to take place (place of performance). In this case, a forwarding debt is at issue. This is also the case when the goods are being forwarded within one place.

Therefore where the place of performance is, is decisive. This is firstly to be taken from the arrangements between the contracting parties, secondly from "the circumstances, especially the nature of the debtor/creditor relations". Commercial practices and customs are very important here. With forwarding debts, e.g., coal and oil deliveries, usually a debt payable at debtor's domicile is at issue. Deliveries of goods are, in case of doubt, forwarding debts in commercial trade.[24] When the place of performance cannot be determined according to these rules, the place of performance is the place where the seller/debtor had his place of business at the time of creation of the debtor/creditor relations, according to 269(1) BGB.

2. Forwarding from a different place as the place of performance

The seller often has the goods send directly to the buyer from a third person (the manufacturer). The forwarding thus does not take place from the place of performance, but directly from a third place. According to consistent case law,[25] the risk only passes to the buyer under 447 (1) BGB when the seller forwards the goods from the place of performance, unless the buyer has agreed to the forwarding from a third place. In the case of forwarding from a different place, the risk only passes at the time in which the goods are handed over to the carrier, when the buyer has agreed thereto. The seller may not surprise the buyer with a transport risk, which the buyer could not take into account.

In a case before the LG Köln it was determined also, that where the contract of sale involves carriage of goods and the goods are handed over by the seller not at the place of performance (here: Erfstad), but at a third place (here: seller's warehouse in Düren) to mail, the risk passes at the time in which the goods are handed over to mail. The prerequisite for 447 BGB to apply is that the parties have agreed to forward the goods from a different place as the place of performance.

When the goods are forwarded from a third place without the consent of buyer, the risk does not pass to the buyer when the goods are handed over to the carrier. I am of the opinion that 446(1) BGB should apply. The seller bears the risk until the goods are handed over to the buyer.

The buyer must state the place of destination. This does not have to be his domicile or place of business. The forwarding address can, at instruction of the buyer, also be a third place.

3. Forwarding at buyer's request

The goods must be forwarded at the buyer's request and this may not take place without or against his will. 447 BGB is also applicable when the forwarding of the goods follows from a contractual obligation or from a trade usage. When the seller forwards the goods without the buyer's request to do so, 447 is inapplicable and the goods travel at his risk until the goods are received by the buyer ( 446(1) BGB).

4. Handing over

The goods are handed over, when the seller has done everything necessary as far as he is concerned, to enable the transport to begin and to enable the delivery to the buyer. For this to be the case, the seller must conclude any contracts of carriage. He has to choose the carrier with care. The seller has to physically hand over the goods to the carrier. The carrier must obtain the goods in his care for the purpose of carriage.

The seller is liable for an event in which the carriage does not take place because of an event for which he has to accept liability in and which consequently causes the loss of the goods.

5. Carrier

447(1) BGB mentions the forwarding agent, the carrier or another person or institution destined to carry out the shipment. Contrary to the CISG, the handing over of the goods to the forwarding agent causes the risk to pass.

At first, case law did not accept that the handing over of the goods to the people under the responsibility of the seller would cause the risk to pass to the buyer, because the goods stay in control of the seller in this case. A later judgment of the Reichsgericht took the opposing view. The literature [26] has followed this opinion, but one should pay attention whether the facts of the case constitute a debt payable at debtor's domicile, for in that case, the seller bears the risk.

When the seller employs his own men for shipment, the risk passes to the buyer when the goods are handed over to these men. The seller keeps his rights to claim the purchase price in case the goods are lost during transport when this is of no fault of his men.

The seller, however, is liable for faults caused by his employees, according to 278 BGB.[27] This is justified with the argument that the buyer should not be in a worse position by a transport by the employees of the seller than by transport by complete strangers. Where an independent carrier negligently causes damage the buyer bears this risk, since faults of carriers belong to the risk of transport which has passed to him at the time in which the goods are handed over to the carrier.

6. Special features with goods in kind

According to 447(1) BGB the risk passes to the buyer when the goods are handed over to the carrier. Usually, this brings about the identification as well and thus the risk passes to the buyer at that time, since, as explained in A.II.3, the goods must be identified before the risk can pass under 447(1) BGB. In 447(1) BGB the notion "the sold item" is mentioned and with unidentified goods impossibility can only occur after identification ( 279, 243(2) BGB).

When the contract involves the carriage of goods, sorting out the goods usually takes place when the seller dispatches the goods; marking of the goods by consigning them to the buyer, or by issuing a waybill which identifies the buyer as the recipient. When this does not take place, the risk does not pass until the seller has determined that the buyer is the recipient by an additional instruction to the carrier and the carrier has handed over the goods to the buyer at the place of destination, 446 BGB.

In case of a FOB or CIF sale, the risk passes retroactively to the buyer with the sending of the consignment notice to the time of loading of the goods (Chapter 2). The sending of an endorsed bill of lading also causes the risk to pass retroactively. The risk cannot pass retroactively when the seller has knowledge of the loss of the goods.

When the seller has delivered to the carrier a mass of goods which is meant for several buyers, but is not yet specified (collective mass of goods: an unidentified mass of goods of the same kind, e.g., coal, oil or grain, which is sent in one cargo for several buyers), identification would not take place until the goods are sorted out for every buyer. When the contracting parties have agreed to a collective cargo or when this is usual in trade dealings, identification takes place at the time in which the goods are handed over to the carrier and at that the time the risk passes as well. It is a prerequisite that the cargo is clearly identified for all the buyers involved.

It can follow from a trade custom, that the sending of a consignment notice suffices for the identification. The sending of the consignment notices works retroactively to the time when the goods were handed over to the carrier. However, it is a prerequisite that the notice is dispatched in due time and that the seller was in good faith at the time of sending of the notice or other documents, meaning that he had no knowledge of damage to the goods and could not have known that they were damaged or lost when one applies the standard of necessary care in trade dealings.

When the risk has passed, the buyer bears the risk of the full or partial loss of the collective cargo during transport. Each buyer is liable for partial loss in accordance with their share in the collective cargo. When the seller cancels the identification, it does not matter whether he is allowed to do so or not, the passing of risk ends. The risk passes back to the seller.

III. Extent of the risk

With the notion "risk" is meant the accidental loss of or damage to the goods (text of 446(1), 447(1) BGB). Because the seller must be in the position as if the goods were already handed over to the buyer with the handing over to the carrier, 447 also applies when the goods are not delivered to the buyer or at least not unrestricted. For example where the goods, which have been taken over by the forwarding agent, cannot be localized or the case in which the goods are handed over to an unauthorized third person.

According to a widespread opinion, 447 should only comprise typical transport risks. With typical transport risks are meant the risks of accidental loss of or damage to the goods, such as theft, accident, damage by temperature effects, delivery to the wrong recipient, unclearified whereabouts of the goods (compare with the notion of "risk" in the CISG). These cases deal with such damage, which is caused by the carriage or for which the carriage is jointly responsible.

A different opinion, however, states that when the carriage takes place at the request of the buyer, the buyer must let himself be treated as if the goods had been handed over to himself. The buyer is therefore liable for all risks from the time of handing over the goods to the carrier, e.g., delay, loss or damage to the goods caused by a defect at the time of handing over for carriage, emergency sale in case of war or other unusual trouble during transport or costs which occur because the goods must be diverted, stored or reloaded.

This last opinion corresponds better to the idea of 447 BGB. The notion "risk" means the risk of having to pay the purchase price whereas one does not receive the goods and not the risk of actual endangering of the goods by the carriage. The reason why the goods cannot be handed over the buyer is irrelevant for the application of 447 BGB.

IV. Liquidation of third party damages (Drittschadensliquidation)

When the sold goods are damaged by a third person (e.g., collision of ships) after they have been handed over to the carrier (thus during transport), only the seller can claim on the ground of tort (unerlaubte Handlung, 823 et seq. BGB) since he is still the owner of the goods. Ownership does not pass to the buyer until he actually has the goods in his possession ( 929 BGB). When a document of title has been issued, it is different since this represents the possession of the goods and handing over the document causes the property to pass to the buyer according to 929 BGB. In this case, the buyer has become the owner of the goods by handing over of the documents and he can claim damages himself. The buyer has no claims out of contract since he has no contract with the carrier.

The seller does not suffer any damage, because he can claim the full purchase price under 447 BGB, since the buyer bears the risk. Here, the legal position differs from the liability (the risk has already passed to the buyer). The risk passes earlier to the buyer than the ownership.

This is a typical case of "liquidation of third party damages". In this case. the seller has the right to liquidate the buyer's damages. The seller claims in the interest of the buyer. The seller must liquidate his claims and assign the outcome to the buyer.

C. Passing of risk with goods in transit

I. Passing of risk of non-performance

1. Ascertained goods

There are no special features here, so 275 (1) BGB applies.

2. Unascertained goods

a) Floating goods

German law does not have the notion of "placing the goods at the disposal of the buyer" as the CISG does in art. 31(b). There are no special rules for the sales of floating goods. This is neither a forwarding debt nor a debt collectible at debtor's domicile nor a debt payable at debtor's domicile. Basically, the risk of non-performance and the risk of having to pay the purchase price pass to the buyer at the same time.[28] One could therefore argue, that the seller has done everything necessary ( 243 (2) BGB) when he enables the buyer to take over the goods.[29] As a rule, this takes place by handing over a bill of lading.[30] It is clear at that time which part of the goods is meant for whom (identification) since this is embodied in the bill of lading. At that time, the risk of non-performance passes to the buyer.

b) Rolling goods

The sale of rolling goods is also not regulated when a collective mass of goods is involved, since the sale of rolling goods usually involves identified goods. It remains unclear at what time the seller has fulfilled his obligation to perform. One could argue, that the seller has fulfilled his obligations when he gives the carrier the instructions for delivery.[31] At that time, identification takes place. From that time on, the buyer bears the risk of non-performance.

II. Passing of risk

1. Floating goods

In German law the sale of floating goods is not expressly regulated, as mentioned above. First of all, there has to be made a distinction between the sale of floating goods and of rolling goods. With the sale of floating goods, 447 should not apply because the carriage has already taken place and the goods are already in the possession of the carrier. The carriage does not take place "at the request of the buyer". According to case law, the risk does not pass to the buyer, according to 446, until the (endorsed) bill of lading has been handed over to him. The time in which the risk passes is thus the time in which the buyer acquires ownership of the goods, since the bill of lading represents the goods.

However, the risk passes retroactively to the buyer from the time in which the goods are loaded, when the buyer has agreed thereto, either expressly (by incorporating such a trade clause into the contract, e.g., CIF clause) or tacitly, unless the seller knew or ought to have known about the loss of the goods at the time of conclusion of the contract. This is justified with the argument that it is often unclear at what time the floating cargo was lost or damaged and that the tying of the passing of risk to the handing over of the documents prevents arguments between the contracting parties from arising.

2. Rolling goods

With the sale of rolling goods, 447 is not directly applicable, since the carriage does not take place "at the request of the buyer" and the goods are already in the possession of the carrier at the time of conclusion of the contract. According to the judgments of the BGH, 447 is applicable by analogy provided for the fact that the risk passes to the buyer at the time in which the instructions for delivery of the goods at the buyer's domicile or to a nominated third person are effectively given to the carrier.

As a rule, the buyer requests that the goods are to be delivered at a specific place, usually his place of business. The seller must supply the goods to the buyer. This usually takes place by giving a corresponding instruction about the carriage to the carrier. The seller has fulfilled his contractual obligations by giving these instructions and therefore the passing of risk is tied to the instruction.

3. Special features for unidentified goods

As mentioned before, there are no special provisions for the sale of unidentified goods in transit. Because the risk basically passes with the handing over of the goods - either to the carrier or to the buyer - , it seems just to follow this concept for goods in transit as well.

a) Floating goods

With the sale of floating goods the risk passes to the buyer at the time in which the bill of lading is handed over to him. At that time, it is clear which part of the cargo is meant for whom (identification). The handing over of the bill of lading is the handing over of the goods to the buyer as meant in 446 BGB since the bill of lading represents the goods. However, the risk passes retroactively to the buyer from the time of loading of the goods, when the buyer has expressly (e.g., CIF clause) or tacitly agreed thereto.

Here, I apply the regulation for the sale of identified floating goods. The provision that the risk passes retroactively at the time of handing over the goods to the carrier is to be preferred, because this constitutes a clear moment to determine the occurance of possible damage and because the tying to the passing of ownership is not very practical or usual in international trade. One can avoid such evidence problems by incorporating an arrival clause into the contract, such as "ex ship" or "ex quay". The seller bears the risk during transport (until the place of destination).

b) Rolling goods

I see no reason as well to apply a different rule for the sale of rolling unidentified goods than the rule for identified goods. The risk passes to the buyer at the time in which the instruction for delivery of the goods is effectively given to the carrier. At that time it has become clear, for whom the goods are destined. By giving the instruction, the goods are finally handed over to the carrier ( 447(1) BGB analogous).

D. Passing of risk in residual cases

I. Local sale

1. In general

In the normal case regulated by law, movables have to be picked up by the buyer at the seller' place of business or domicile ( 269(1) BGB). As a rule, debts are debts collectible at debtor's domicile. As explained in the introduction, 446 BGB constitutes an exception to 323 BGB. 446(1) i) BGB states that the risk of accidental loss of or damage to the goods passes to the buyer at the time in which the goods are handed over to him. The second sentence about uses and burdens and the second paragraph about property will not be discussed here. It is possible to agree to different regulations than the one of 446 BGB.

2. Risk of non-performance

a) Ascertained goods

The risk of non-performance passes to the buyer according to 275(1) BGB.

b) Unascertained goods

The debtor of a local sale has done everything necessary ( 243(2) BGB) when he sorts out the goods which are destined for the buyer (identification), places the goods at his disposal and notifies the buyer thereof. The risk of non-performance passes to the buyer in that moment.

3. Prerequisites for the passing of risk

a) Conclusion of a valid contract of sale

The prerequisite for 446(1) to apply, is the conclusion of a contract of sale. 446 is not applicable when a different contract has been concluded, e.g., commission. Furthermore, the contract must be valid. In cases where the contract is void or contested and the goods have already been handed over, the provisions of the law of enrichment ( 812 et seq.) determine the risk in case the goods are lost or damaged.

b) Sale of goods

Another prerequisite is, that it must be a sale of goods. 446 only applies to the sale of goods, meaning movables and immovables ( 90 BGB).

c) Delivery

As said before, 446 ties the passing of risk to the time of delivery because by acquiring possession the buyer gets hold of the goods and the goods are thus in his care and for his risk. It does not suffice to place the goods at the disposal of the buyer. It is not required that ownership passes as well. Basically, it is required that the buyer obtains direct possession of the goods. The delivery must take place for the purpose of fulfillment of the contract.

As a rule, delivery takes place when the buyer gets the actual control of the goods ( 854(1) BGB). The BGH decided in its judgment of 2 May 1997, that the seller is liable for the loss of containers which were not placed at the buyer's business premises during opening hours. In this case the buyer did not have the opportunity to get actual possession of the goods. When the execution of delivery (e.g., the loading of available goods in trucks of the buyer) is an obligation of the buyer, delivery takes place at the time of beginning of loading.

According to 854(2) an agreement on acquiring possession of the goods suffices when the buyer is able to control the goods; for example, when the goods are freely accessible, e.g., building land or wood. It also suffices when the goods are delivered to an agent, assistant or employee of the buyer ( 855 BGB).

It remains doubtful whether the acquirement of indirect possession of the goods suffices for delivery as meant in 446(1). One must differ between two cases, namely whether the seller is only bound to transfer ownership according to 930, 931 and not bound to deliver the goods or whether he is also bound to deliver, meaning that he has to provide the direct possession of the goods. This is to be deduced from the contractual agreement.

In the first case, the risk passes with acquiring indirect possession of the goods, for example, when the goods have been let to a third person. The contracting parties can agree that indirect possession suffices for the passing of risk.

In the second case, when the seller owes delivery but he cannot deliver yet (for example, the seller has to keep the goods for the buyer or wants to use the goods on loan), the risk does not pass until the buyer acquires actual possession of the goods ( 446(1) BGB).

The risk passes to the buyer as well, when as a result of his conduct, which is contrary to the terms of the contract, delivery cannot take place, according to 324(2) BGB.

4. Extent of the risk

"Loss" means the physical destruction of the goods, and also the actual loss of the goods when the buyer is irrevocably deprived of the goods and when the seller is unable to fulfill his obligations of performance, e.g., due to theft or confiscation. When the confiscation is based on grounds which already existed before the goods were handed over and which have their basis in the condition or origin of the goods or in the person of the seller, the buyer does not have to accept liability. When the confiscation is based on provisions of law which have been created after the handing over of the goods or due to irregular events (confiscation by enemy troops), the buyer is liable for the period after the goods have been handed over to him. Until the handing over of the goods, the seller is liable.

"Damage" means that the goods contain faults as meant in 459 BGB. This relates to the phycisal condition of the goods, to decreased quality.

"Accidental" means "caused by events for which neither the seller nor the buyer are liable". When the seller is liable for the loss or damage, he is liable under 325 or under the rules of PVV (positive breach of care under a contract). When the seller is liable for the event causing the loss or damage, 324 applies.

5. Special features for the sale of unascertained goods

With a local sale the risk of non-performance passes to the buyer, as explained in D.2.b), when the seller has sorted out the goods and notified the buyer thereof. At that time, the seller has done everything necessary. The risk to pay the purchase price does not pass until the buyer takes over the goods ( 446(1) BGB) or is in default of acceptance ( 300(2) BGB). Here, the same time divergency can occur as in the CISG with art. 69(1) and (2) (Chapter 1 D.II,III).

II. Goods in storage

1. Risk of non-performance

With the sale of stored goods, the seller has done everything necessary by handing over identifying delivery notices. With that he has sorted out the goods (identification) and notified the buyer thereof. At that time, the risk of non-performance passes to the buyer.

2. Passing of risk

446 BGB applies to the sale of stored goods since this is not a contract involving carriage. The risk passes to the buyer by handing over the goods ( 446(1) BGB). Current opinion is that handing over a warehouse warrant to order, issued by the storekeeper, causes the risk to pass ( 424 HGB) because a warehouse warrant to order represents the goods. It is a document controlling the disposition of the goods (a document of title).

The question is, whether a delivery certificate suffices for the passing of risk. A delivery certificate contains an instruction of the seller to the storekeeper to hand over the goods. Since a delivery certificate is an instruction, it contains a double authorization, namely one for the buyer to have the goods handed over to him and one for the storekeeper to hand over the goods to the person who is authorized by the certificate. The delivery certificate is issued by the seller and therefore it does not give the buyer any guaranties that the goods are actually at his disposal at the warehouse. The seller can also issue an opposing instruction and the storekeeper can hand over the goods to another person without presentation of the delivery certificate. A delivery certificate is not a document of title.

When the seller hands over such a delivery certificate to the buyer for the fulfillment of the contract, he could, together with the delivery notice, assign his claim on the storekeeper (out of the storage contract) to the buyer with the consequence that the buyer gets ownership of the goods under 929, 931 BGB and that the risk passes to him. This must however be incorporated in the contract. When there is no such agreement, one must look at how the conduct of the parties may be explained.

Case law is not inclined to explain the handing over of a delivery certificate as assigning of the claim against the storekeeper to hand over the goods and to connect the passing of ownership or risk to the handing over of the documents. The seller thus bears the risk until the goods have been actually handed over to the buyer.

When the buyer resells the goods by handing over the delivery certificate, the risk does not pass until the goods are handed over to the last buyer. The seller can protect himself by including a time limit for collecting the goods. When the buyer exceeds this time limit, he is liable under the provisions of default of acceptance.

A time divergency exists where the seller hands over a simple delivery certificate and thus fulfills his obligation of performance but where the risk does not pass until the goods are actually handed over to the buyer, because a simple delivery certificate does not suffice for the risk to pass to the buyer.

III. Long distance sales

1. Risk of non-performance

The seller has done everything necessary as meant in 243(2) BGB when he has actually brought the goods to the buyer's domicile, place of business or third place on time and offered them to the buyer. His debt is then restricted to the offered goods.

2. Passing of risk

When the goods have to be delivered to the place of business of the buyer, there exists a debt payable at debtor's domicile. With a long distance sale, the goods have to be delivered at a third place (e.g., place of business of the manufacturer). The risk passes to the buyer when the goods are handed over to the buyer or to a third person nominated by the buyer, at the agreed place, according to 446(1) BGB. At that time, the buyer gets control of the goods. Indirect possession does not suffice, because in that case the goods are not in the actual control of the buyer. The seller bears the transport risk.

It also suffices for the risk to pass, when the seller deposits the goods at the agreed place and when the buyer is able to pick them up without further assistance of the seller.

When the buyer does not take over the goods, which are offered to him on time, he is in delay of acceptance and the provisions of 293 et seq. BGB apply. With the sale of unascertained goods the debt of the seller is restricted to the offered goods as a result of the delay in acceptance ( 300(2) BGB). When the goods are lost during the delay by an event for which the seller is not liable, the seller keeps his right to claim the purchase price according to 324(2) BGB.

E. Passing of risk in non-accidental cases

When one of the contracting parties is liable for the impossibility to perform, 324, 325 BGB apply. These paragraphs remain unchanged in the law of sales. The 446 and 447 only modify 323, the provision for the accidental loss of goods.

I. 324 BGB

324(1) BGB states that the seller can still claim the purchase price from the buyer when he cannot perform as a result of an event for which the buyer is liable. The risk passes to the buyer, when the seller is unable to transfer the risk under the normal rules because of buyer's conduct which is contrary to the contract. One could say, that it is not allowed for the buyer to make it impossible for the seller to perform by way of his conduct. For example, the buyer bears the risk when he does not pick up the goods which have been placed at his disposal or when he does not give the necessary instructions for carriage or does not nominate the vessel with FOB sales.

For the rest, the same rules apply as those stated for the seller in 276 et seq. BGB.

II. 325

325 determines the consequences in law, when the seller cannot perform as a result of an event for which he is liable. The buyer can sue for damages out of non-performance or withdraw from the contract ( 325(1)(i)) or enforce the rights mentioned in 323 BGB ( 325(1)(iii)). One has to differ between the case of breach of contract by delivering defective goods and other breaches of contract in order to determine the passing of risk when the seller's conduct is not in conformity with the stipulations in the contract.

In cases where defective goods have been delivered and these goods get lost or damaged after the normal passing of risk because of the defect, the seller bears the risk, because the buyer can cancel the contract anyway, according to 467, 350 BGB which causes the risk to pass back ex tunc and the buyer is no longer obliged to pay the purchase price. It remains doubtful whether this also applies when the goods are lost or damaged independent from their defect. Renck and Hager argree to this but Soergel/Huber are of the opinion that the risk stays with the buyer.

When the seller or one of his employees breaches a secondary contractual obligation concerning orderly carriage - with respect to the packing, loading or addressing of the goods - and this breach causes the loss of the goods, the seller cannot invoke 446, 447 BGB. He bears the risk. However, when the seller breaches a secondary obligation for after fulfillment of the contract, he is only liable when the breach is grave enough to justify that the effect of the positive breach of contract (PVV) is that the buyer may invoke the right of cancellation of the contract and that the seller thus bears the risk of accidental loss again, according to 350 BGB.

CHAPTER 4: COMPARISON AND FINDINGS

A. In general

I. Passing of risk

Both the CISG and German law mean with "risk" the risk of having to pay the purchase price where the goods have been lost or damaged by accident.

In both legal systems only the passing of risk is regulated in the mentioned articles (66-70) and paragraphs (446, 447). The passing of risk of non-performance is regulated according to different rules.

In both legal systems the notion "accidental" is explained in the same way. The goods are lost by accident, when neither the seller nor the buyer are liable for the event which caused the loss.

In the CISG, one did not think about which risks are covered by the notion of "passing of risk". In German law, there was a discussion whether the notion "risk" meant only transport risks or also other risks in case the contract involved carriage of goods. As explained in B.III, I prefer the broad view, meaning that the buyer has to bear all risks from the time of handing over to the carrier and not just the risks which are connected to the carriage itself. One can assume that this also applies to the CISG. It is safe to assume that the passing of risk should be understood in the same way in both legal systems. Only confiscations, etc. are not comprised in the risk under the CISG, contrary to German law.

II. Time in which the risk passes

Basically, both the CISG and German law connect the passing of risk to the delivery of the goods, either to the carrier (art. 67(1)(i) and (ii), art. 68(ii) CISG, 447(1) BGB) or to the buyer (art. 69(1) CISG, 446(1) BGB). There are two other possibilities in the CISG, namely the time of conclusion of the contract (art. 68(i)) and the time in which the goods are placed at the disposal of the buyer (art. 69(1)(ii) and (2) CISG). The reason for this is that by handing over the goods to the buyer, the buyer gets control of the goods and the one who has control of the goods is better able to protect the goods from being damaged. Therefore, he has to bear the risk of loss or damage.

In German law, one must pay attention to the fact that the 446 and 447 BGB are exceptions to the general provisions of 275, 323 BGB. According to these general rules, the seller normally bears the risk. When the 446, 447 BGB apply, the buyer bears the risk.

III. Identification to the contract

The goods must be clearly identified to the contract in both legal systems before the risk can pass to the buyer. The buyer bears the risk only for his own goods. Art. 67(2) and 69(3) CISG state this expressly. According to current opinion, this is to be assumed for art. 68 CISG as well. In 446, 447 BGB the notion "the sold item" is stated and that means a specific, identified good.

IV. Risk of non-performance

The risk of non-performance is not expressly regulated in the CISG, since arts. 66-70 CISG only regulate the passing of risk. This problem belongs to the area of obligations of the buyer and the seller. The kind of debt in art.31 in conjunction with arts. 32-34 CISG determines when exactly the seller has fulfilled his obligation to perform/deliver. With the sale of unidentified goods, the seller has basically fulfilled his obligation to deliver with the identification of the goods.

In German law, the seller is basically (namely, in case of identified goods) discharged from his obligation to perform according to 275(1) BGB. According to 323 the buyer is discharged from his obligation to pay as well. 446 and 447 however establish an exception. When the prerequisites of 446, 447 BGB are fulfilled, the buyer remains bound to pay the purchase price.

With the sale of unascertained goods, the seller remains liable for his inability to perform under 279 BGB as long as he owes goods which are only determined in kind. When the seller of unidentified goods has done everything necessary to fulfill his obligation to perform, identification takes place according to 243(2) BGB. In case these identified goods are lost by accident, the seller is not bound to re-deliver under 275 BGB. When the prerequisites of 446, 447 are fulfilled, he can however claim the purchase price.

B. Contract of carriage

I. Notion

A contract of sale involving carriage and thus a debt to be forwarded exists when the seller sends the goods to a different place than the place of fulfillment. Here, both law systems are identical.

II. Passing of risk

The risk passes in both law systems to the buyer at the time of handing over of the goods to the carrier (art. 67(1) CISG, 447(1) BGB). The goods must be in the control of the carrier.

The CISG has, contrary to German law, a special provision for the case in when the goods have to handed over to the carrier at a specific place. The risk does not pass to the buyer until the goods have been handed over to the carrier at that specific place (art. 67(1)(ii) CISG). This is, for example, the case when the parties have agreed to an FOB sale, since the seller then has to hand over the goods to the carrier at a specific place, namely at the agreed port of shipment. This indicates the international orientation of the CISG.

III. Carrier

When one looks at the persons who can be carriers there are divergencies in the CISG and in German law. According to the CISG, the carrier must be independent and self-employed. In German law, 447(1) BGB indicates self-employed carriers as well. However, there are differences.

Under the CISG, current opinion is that handing over of the goods to persons under the responsibility of the seller, who have to forward the goods, does not suffice for the risk to pass. Current opinion in German law is, contrary to current opinion in the CISG, that the risk does pass to the buyer when the seller uses his own men for the carriage of the goods. However, the seller is liable for faults caused by his men according to 278 BGB.

When persons employed by the buyer take over the goods for carriage, there exists a local sale or a long distance sale, according to art. 69(1) and (2) CISG. The risk passes to the buyer according to these provisions. In German law there exists no forwarding debt either when the goods are handed over to the employees of the buyer, since they are no self-employed carrier as meant in 447 BGB. The passing of risk is regulated by 446 BGB.

Whether handing over of the goods to a forwarding agent suffices, is contentious. As explained in chapter 1 B.I.2, this suffices in my opinion for the risk to pass, since by handing over of the goods to a forwarding agent, the seller loses control of the goods as well and that is decisive here (compare chapter 1 A.II. about the time in which the risk can pass). In German law, 447 mentions the forwarding agent expressly as carrier. Therefore, it suffices for the risk to pass to hand over the goods to him.

IV. Risk of non-performance

According to the CISG, the seller has fulfilled his obligation to perform in case the contract involves the carriage of goods, when he hands over the goods to the carrier (art. 31(a)) and when he has fulfilled the prerequisites of arts. 32-34 CISG: identification of the goods to the contract, among others.

In German law, 275(1) BGB basically applies. The seller has done everything necessary as meant in 243(2) BGB when he orderly forwards the goods. The seller has fulfilled his obligation to deliver by handing over the goods to the carrier and the risk of non-performance passes to the buyer.

V. Sale of unidentified goods

The provisions for the passing of risk in the CISG and in German law relate to the sale of identified goods (art. 67(2), art. 69(3), art. 68; analogous, "the sold item" in 446, 447 BGB and the fact that impossibility cannot occur until an identified goods are lost, 279, 243(2) BGB). The goods must be identified before the risk can pass to the buyer. In the CISG, identification can take place by placing markings on the goods, by transport documents, by a notice to the buyer or by different means (art. 67(2)).

As a rule, the shipping documents, e.g., bill of lading or sea waybill, will state for the fulfillment of whose contract the shipment is meant. In case of a collective mass of goods or of a shipment without identification of the recipients, the identification takes place by sending a consignment notice. This notice takes effect ex nunc at the time of sending, according to art. 27 CISG. The risk (art. 67(1), (2) CISG) and the risk of non-performance (arts. 31(a), 32(1) CISG) pass to the buyer at that time.

In case an unidentified mass of goods of the same kind is forwarded and the goods are carried in one container that is only marked for all recipients, the risk and the risk of non-performance pass to the buyer at the time in which the goods are handed over to the carrier, thus by delivering the goods to the carrier (art. 67(1) CISG). At that time, the seller has fulfilled all his obligations to perform.

In German law, identification ( 243(2) BGB) usually takes place by handing over the mass of goods to the carrier ( 447(1) BGB) and with nomination of the recipients and, as a consequence, the risk (and the risk of non-performance) pass to the buyer in that moment. When the parties have agreed to the sale of a mass of unidentified goods or when this is customary, the risk passes at the time of handing over of the goods to the carrier, as in the CISG. It can follow from a trade custom, that sending a consignment notice suffices for the identification. The sending of the consignment notice takes effect, contrary to the CISG, retroactively to the time in which the goods were handed over to the carrier, except when the seller knew about damage that had already occurred.

C. Goods in transit

I. Passing of risk

There are two different moments in the CISG in which the risk passes to the buyer with the sale of goods in transit. The risk passes to the buyer at the time of conclusion of the contract according to art. 68(i) as a basic rule. However, the risk passes to the buyer at the time of handing over the goods to the carrier who has issued the documents embodying the contract of carriage when the circumstances so indicate (art. 68(ii)). Such a circumstance is, for example, the existence of transport insurance. A prerequisite in both cases is that the seller neither knew nor ought to have known that the goods had already been lost or damaged (art. 68(iii)).

German law regulates this completely different. The applicable rules have been developed in case law. With the sale of floating goods, the risk passes to the buyer according to 446 when a bill of lading is handed over to him, meaning when the goods are handed over and at the time of acquiring ownership of the goods. The risk passes retroactively from the time of loading of the goods, when the buyer has agreed thereto. This last rule is to be preferred because it prevents problems in giving evidence and because tying the passing of risk to the time in which the buyer acquires ownership is not very practical in international trade, as explained in Chapter 1 A.II.

With the sale of rolling goods, the risk passes to the buyer at the time in which the instruction about the delivery of the goods to the buyer or a nominated third person is effectively given, under analogous application of 447 BGB. At that time the seller has also done everything necessary to fulfill his obligation to perform.

II. Risk of non-performance and the sale of unidentified goods

It is assumed for art. 68 CISG that the goods must be identified to the contract. This is not the case when an unidentified mass of goods is sold. The seller has fulfilled his obligation to deliver under art. 31(b) CISG when he places the goods at the disposal of the buyer at a specific place, meaning in this case when he hands over a bill of lading to the buyer. The buyer must be able to take over the goods at the place of destination. When the seller is allowed to place an unidentified mass of goods at the disposal of the buyer according to trade custom, the risk passes in the CISG at the time of conclusion of the contract or at the time of handing over of the goods to the carrier who has issued the documents embodying the contract of carriage, art. 68. When this is not allowed, the risk does not pass to the buyer until the goods have been clearly identified to the contract. This identification usually takes place in a bill of lading. In that case, the risk and the risk of non-performance pass at the same time.

There is no special regulation in German law concerning the sale of unidentified goods in transit. However, the rules for the sale of identified goods are applicable. The risk (and the risk of non-performance) passes to the buyer at the time in which the bill of lading is handed over or retroactively at the time of loading of the goods (floating goods) or at the time in which the instruction about the carriage and place of delivery of the goods to the buyer is given to the carrier (rolling goods).

The CISG mentions another possible time in which the risk can pass: the time of conclusion of the contract. This time is not very suitable to determine the passing of risk. As explained earlier, the time of conclusion of the contract is not very practical to determine the passing of risk in international trade. Besides, this would cause serious problems for giving evidence when damage occured.

D. Local sales

I. Passing of risk

In this case, the buyer is bound to pick up the goods at the seller's place of business. The risk passes in both legal systems at the time in which the goods are actually taken over, according to art. 69(1) CISG and 446 (1) BGB. According to the CISG, the risk also passes to the buyer when he does not take over the goods at the time in which they are placed at his disposal and as a result of that commits a breach of contract, art. 69(1)(ii).

According to German law, the buyer is in default of acceptance when he does not take over the goods. In that case, 324 (2) BGB applies: as a result of the fact that the buyer (creditor) did not take over the goods, the seller (debtor) is unable to fulfill his obligation to perform. When the goods are lost by accident during the buyer's delay of acceptance, the buyer remains bound to pay the purchase price. He has to pay. The seller is only liable for intent and grave negligence during the delay ( 300 (1) BGB). When the goods are lost because of mere negligence of the seller, he is discharged from his obligation to perform. However, he can still claim the purchase price.

II. Risk of non-performance

According to art. 31(c) CISG, the seller has fulfilled his obligation to deliver when he has placed the goods at the disposal of the buyer at his place of business and notified the buyer thereof. At that time, the risk of non-performance passes to the buyer and identification takes place. However, the risk does not pass to the buyer until he takes over the goods or, when he does not take over the goods in due time and commits a breach of contract by that (art. 69(1)CISG). Here, the risk and the risk of non-performance pass at different times.

This applies in German law as well. The risk of non-performance passes to the buyer when the seller has sorted out the goods and notified the buyer thereof. The risk passes when the goods are handed over to the buyer ( 446(1) BGB) or when the buyer is in default of acceptance ( 324(2), 300(2) BGB).

E. Goods in storage

I. Passing of risk

According to art. 69(2) CISG the risk passes to the buyer in case of sale of stored goods, when delivery is due and the buyer has knowledge of the fact that the goods are at his disposal at that place (meaning at a place different from the place of business of the seller). The goods are at the disposal of the buyer when documents, which constitute an actual right of possession to the holder of the documents, to claim the handing over of the goods from the storekeeper, e.g., a warehouse receipt to order, have been handed over to the buyer. A simple delivery notice does not suffice, because this only contains an instruction. The risk does not pass to the buyer until the storekeeper has acknowledged the buyer's right of possession.

This subject is decisive in German law as well. The risk passes to the buyer, according to 446(1) BGB when the goods are handed over to the buyer. Handing over a warehouse warranty to order causes the risk to pass, because it is a document controlling the disposition of the goods; it represents the goods. A delivery notice does not suffice in general, since this is not a document controlling the disposition of the goods. Handing over such a document does not equal the handing over of the goods. In this case, there is no "handing over of the goods" and therefore no passing of risk under 446 BGB. Both legal systems apply the same rules here.

II. Risk of non-performance

According to art. 31(b) CISG, the seller has fulfilled his obligation to deliver by placing the goods at the disposal of the buyer, meaning that he has issued and sent (art. 27 CISG) the necessary documents. The risk does not pass to the buyer until delivery is due and the buyer knows that the goods are at his disposal (art. 69(2) CISG). The goods are at his disposal when he has an actual right of possession. It is required to send a warehouse warranty or similar security. The buyer must have received the notification, otherwise he cannot have knowledge. There can be a time divergency as with the local sale.

According to German law, the seller has done everything necessary by handing over identifying delivery notices. At that time the risk of non-performance passes to the buyer. The risk passes at the same time, when it is a warehouse warranty to order, since handing over a warehouse warranty equals the handing over of the goods ( 446(1) BGB). When a simple delivery notice has been issued, the risk does not pass to the buyer until the goods are actually handed over to the buyer according to 446(1) BGB. Here, there can be a time divergency as well between the passing of the risk and the risk of non-performance.

F. Long distance sales

I. Passing of risk

In this case, the place of fulfillment is the place of business of the buyer (debt payable at debtor's domicile) or a third place, e.g., the vessel in the port of destination (long distance sale). In the CISG the risk passes when delivery is due and the buyer has knowledge of the fact that the goods are at his diposal at that place (meaning, a place other than the seller's place of business), art. 69(2). The risk thus passes by placing the goods at the disposal of the buyer.

In German law the risk does not pass to the buyer until the goods are handed over to the buyer or to a third person nominated by the buyer, according to 446(1) BGB.

II. Risk of non-performance

The same rules as for the sale of stored goods apply under the CISG, since both cases are comprised in art. 69(2) CISG.

According to German law, the risk of non-performance passes to the buyer at the time in which the seller has actually offered the goods to the buyer in due time. The seller has done everything necessary as far as he is concerned at that time and identification takes place.

G. Non-accidental loss or damage

When the goods are not lost or damaged by accident, different provisions apply. In the CISG this is regulated in the same chapter, namely in the articles 66(ii) and 70. When the loss or damage is caused by an act or omission of the seller, the buyer is discharged from his obligation to pay the purchase price, according to art. 66(ii) CISG. This does not apply, according to current opinion, when the loss or damage is caused by a lawful act of the seller. Only unlawful conduct of the seller prevents the risk from passing to the buyer. The CISG looks to conduct.

When the buyer's conduct, which is contrary to the contract, causes the loss or damage, he has to pay according to arts. 66, 80 CISG.

When the goods are lost independently from the seller's breach of contract, this has no effect on the passing of risk, according to art. 70 CISG. The risk passes to the buyer under the normal rules, but the buyer keeps the claims which arise out of the breach of contract. It is a prerequisite that the breach of contract is fundamental.

In the German law of sales, there are no special provisions for this constellation. The solution is to be found in the general provisions of 324, 325, 276-278 BGB. A prerequisite under these provisions is that someone must be "liable" for the event which caused the impossibility to perform. The seller (or buyer) must have acted with intent or acted with gross negligence in damaging the goods. This only involves conduct contrary to the contractual obligations (e.g., breach of obligations of care or protection). The BGB requires liabilty ( 351 BGB) whereas the CISG looks only at conduct.

When the buyer is liable for the impossibility, the seller can claim the purchase price under 324(1) BGB. When the seller is liable for the impossibility, the buyer has several claims under 325 BGB. The buyer will usually cancel the contract according to 467, 359 BGB. Contrary to the CISG, the breach does not have to be fundamental in order to cancel the contract or claim for substitute goods. The buyer can always cancel or claim substitute goods.

H. Findings

The most important differences between the CISG and German law are:

The BGB regulates in seperate provisions, the ending of the obligation to perform for the seller of unidentified goods ( 243(2), 279, 30(2) BGB: "risk of non-performance/Leistungsgefahr"). The CISG has no special provisions and therefore the rules must be deduced from arts. 31-34: fulfillment of the obligation to deliver. The systems thus differ.

Basically, the risk and the risk of non-performance pass to the buyer at the same time. Only in case of a local sale (art. 69(1) CISG, 446(1) BGB), the sale of stored goods (art. 69(2) CISG, 446(1) BGB when a simple delivery notice has been issued) and the long distance sale (art. 69(2) CISG, 446(1) BGB) there can be a time divergency and the risk and the risk of non-performance pass at different times.

Contrary to German law, handing over of the goods to employees of the seller does not suffice in the CISG for the passing of risk.

The rules for the passing of risk differ greatly with the sale of goods in transit. The CISG generally pays more attention to the facts and requirements of international trade. It would be sensible to choose for a retroactively passing of the risk from the time of loading of the goods (as in art. 68(ii) and in German law with the sale of floating goods when the buyer has agreed to retroactive passing) or for passing of risk at the time of delivery of the goods at the place of destination.

In cases of a debt collectible at debtor's domicile, the fact that the buyer does not take over the goods forms a breach of contract in the CISG, which causes the risk to pass (art. 69(1)(ii)). According to German law, the fact that the buyer does not take over the goods brings about default of acceptance. The consequences are regulated by the general provisions for default of acceptance.

In cases where the goods are not lost or damaged accidentally, the consequences in law are regulated in the same chapter in the CISG: art. 66(ii) and 70. In German law, one has to fall back on the general provisions of 324, 325, 350, 467 BGB. The system is therefore again different. The CISG is more strict, since cancellation of the contract and the claim for subsequent supply are only possible when the breach of contract is fundamental.

In most areas, the CISG and German law are basically the same. The discussions focus on the same areas, e.g., the notions of "carrier", "risk" and "accident". The outcome is usually the same.

Both legal systems primarily accept the agreements of the contracting parties and customs as binding. Incoterms are especially important since they are often incorporated and change the legal position compared to the CISG or German law. Incoterms are explained uniformly and other trade clauses are often explained in the sense of Incoterms by way of the so-called complementary explanation. Secondarily, the provisions of both legal systems apply.

The system of the CISG is structured more distinctly and is thus more clear than the BGB, because everything in connection to the passing of risk is regulated in the same chapter IV (art. 66-70). One does not have to fall back on the provisions of a general part as in German law. The crucial moments for the passing of risk are the handing over/taking over of the goods and placing the goods at the disposal of the buyer.

The CISG regulates the passing of risk pragmatically and takes into account insurance aspects and technical shipment aspects. For example, when the goods have to be picked up at the seller's place, the risk passes to the buyer when the goods are taken over because the seller will, in case of doubt, have insured the goods which are stored on his premises. When the goods have to be delivered at a third place, the risk already passes when the goods are placed at the buyer's disposal at that place.

However, with the sale of floating goods under the CISG, the time of conclusion of the contract is not very suitable to determine the time in which the risk passes. It would be better to choose the moment in which the goods are handed over to the carrier. However, the regulation in the CISG is more practical than the ones developed by case law in German law, since in most cases there will exist insurance and in that case the risk passes retroactively to the buyer from the time of handing over the goods to the carrier.

In German law, however, the case of deferred identification of the goods is better regulated when a mass of unidentified goods is sold. The retroactive passing of the risk from the time of sending a consignment notice prevents discussions about when eventual damage has occured from arising. According to the CISG, the risk passes ex nunc at the time of sending of a consignment notice (art. 27 CISG). This should not be stressed too much, since this problem will not occur very often in practice.

In general one could say that the CISG forms a clear, for the businessman easily accessible, international legal mechanism. It was meant as such. German law focuses more on the internal trade of goods and, logically, does not always take sufficiently account of international requirements.


FOOTNOTES

1. The CISG had entered into force in the former German Democratic Republic on the 1st of March 1990.

2. This rule is still in force in Swiss law.

3. The connection of passing of risk and ownership applies in French law (Code Civil) and in the English Sale of Goods Act (Hager, in Schlechtriem, Fachtagung, p.388).

4. In the CISG, in the BGB and in the Uniform Commercial Code of the United States (Hager, in Schlechtriem, Fachtagung, p.389).

5. The conclusion of a contract of carriage or of a contract with a forwarding agent by the seller is not necessary, when the seller is not obligated by the contract to do so, e.g., FOB sales.

6. Art. 31(b) includes the sale of goods in transit: Renck, p.95; Herber/Czerwenke, art. 31 Rdn.7; Karollus, p.110; different opinion: Caemmerer/Schlechtriem in art. 31 Rdn.48, but they come to the same result in connection with the notion of "placing at the disposal of the buyer" in Rdn.83.

7. A delivery becomes mature at the time in which the debtor/seller is obligated to deliver and the creditor/buyer has the right to claim the delivery (Musielak, Rdn.449).

8. The seller bears the risk of loss of goods lacking conformity when the loss is caused by the lack of conformity/defect. When the buyer has caused the loss, he has to bear that risk, art. 82(2a) CISG (Hager, Die Gefahrtragung beim Kauf, p.163-164,166).

9. Compare with art. 346 HGB: A trade usage is, in commercial trade among traders, a binding rule, which is based on an actual practice and on the consent of the circles involved. The practice must have been established during an adequate passage of time for comparable trade dealings Kolter, p.10).

10. Renck, p.57-75; Hager, in Schlechtriem, Fachtagung, p.389. There are many different opinions in the literature concerning the incorporation and explanation of trade clauses. I confine myself to refer to the clear discussion of this controversy in Renck: "Der Einfluß der Incoterms 1990 auf das UNKR".

11. The buyer as freighter concludes a contract with the shipper. Under German law, the kinds of contract for carriage overseas are: Raumfrachtvertrag, Stückgütervertrag ( 556 foll. HGB), Zeitchartervertrag and Mengenvertrag (both developed in practice).

12. Under German law, this document does not have to be a bill of lading in case of doubt. A board- or quay-receipt suffices as well, but it is the obligation of the buyer to get the bill of lading at his own costs. Since he as freighter has to deliver the goods to the shipper under the contract of carriage overseas, he as freighter can therefore claim that the carrier issues the bill of lading according to 642 HGB (Finke, p.150-151).

13. Under German law, the freighter can claim the issuing of a bill of lading as well ( 642 (1) HGB). Freighter is the one who actually hands over the goods to the carrier for carriage. Often, the freighter is identical with the discharger.

14. "Payment against documents" means, that the buyer receives the documents sent by seller and is obligated to pay. This obligation to pay on presentation of the documents, can also follow from the applicable law (e.g., from art. 58 CISG). When the buyer refuses to take over the documents and pay because of evident lack of conformity of the delivered goods, the onus of proof is on him. When the buyer pays against the documents, but after the delivery of the goods demands the purchase price back because the goods are defecient, the seller has to prove whether the deficiency occured before or after the passing of the risk. (Hager, Die Gefahrtragung beim Kauf, p.127-130).

15. The ICC has drawn up general rules in the UCP: "Uniform Customs and Practice for documentary credits". Some countries, e.g., France, accept the UCP as customary law. Most countries, e.g., the Netherlands, Belgium and the United Kingdom, are of the opinion that the UCP, as Incoterms must be expressly incorporated in the contract (Van Houtte, p.267).The UCP contain some special prerequisites in art.23 for the form of the bill of lading, to make it presentable under a documentary credit. First of all, it must be an "on board" bill of lading. It must prove that the goods are actually delivered on board a certain vessel. Secondly, the bill of lading must give proof of the contract of carriage and state the name of the carrier. Lastly, it must be a clean bill of lading, meaning that it contains no specifications that the goods are damaged or deficient. Only for a documentary credit must the bill of lading be clean, not however under Incoterms for these do not contain provisions for the documents of a documentary credit (Bredow/Seiffert, p.54).

16. Bills of lading are securities. They vest the contractual right against the carrier to hand over the goods in such a way that only the holder of that document - or the one to whose order it is issued - can claim the right against presentation of the documents. The handing over of the bill of lading equals the handing over of the goods. One can dispose of the goods without it being necessary that the goods are handed over. During the transport, the buyer can exercise the rights over the goods by handing over the documents to a third party. In order to be a security document, the goods must be taken over by the carrier at the time of issuing of the bill of lading and the goods must still be in possession of the carrier when they are handed over.

17. It would go too far to explain every single rule, so therefore I refer to a clear explanation of this in Finke, "Die Bedeutung der internationalen Handelsklauseln für den Gefahrübergang nach deutschem und US-amerikanischem Recht", p. 181 et seq.

18. The Incoterm provision for ex ship/ex quay states: "The seller must bear all risks...of the goods until such time as they shall have been effectively placed at the disposal of the buyer."

19. According to 275(2) BGB, the inability of the debtor which occurs after the creation of the debtor/creditor relations, equals impossibility. In case of inability, the debtor is unable to produce the owed performance. By the way, the seller is also discharged from his obligation to perform, in case he does have to stand in for the impossibility, since something impossible cannot be produced. Here, the regulations 280, 325 BGB apply with secondary claims (Musielak, Rdn.401, 410, 411).

20. The place of performance lies with the debtor, the place of fulfillment with the creditor. The place of performance is the place where the debtor has to perform his actions of performance. Actions of performance are those actions which are necessary as far as the debtor is concerned, to enable the achievement of the contract to occur. With the contract of sale the achievement of the actions performed by the seller is that the buyer obtains property and possession of the goods. The place where this achievement takes place is the place of filfillment (Musielak, Rdn.183, 186).

21. The place of performance and the place of fulfillment lie with the seller (Musielak, Rdn.183).

22. In cases where both places are identical, when the seller thus has to perform his contractual obligations at the place of destination, a debt payable at debtor's domicile exists, meaning that the the place of performance and the place of fulfillment lie with the buyer (Musielak, Rdn.186).

23. Dreher, p.43; Soergel/Huber, 447 Rdn.29; Münchener Kommentar, 447 Rdn.13. The 446, 447 BGB are orientated to the sale of identified goods.

24. Staudinger/Köhler, 447 Rdn.7; LG Köln, Urt. v. 07.06.1989, NJW-RR 1989, 1457: Debts of goods in commercial trade are, when seller and buyer have their places of business in different places, in case of doubt forwarding debts. BGH, Urt. v. 24.03.1965, NJW 1965, 1324: OLG Nürnberg, Urt. v. 11.17.1977, MDR 1978, 492; BGH, Urt. v. 05.12.1990, NJW 1991, 915-917: The contracting parties had agreed to foward the goods directly from the third place. The risk passes to the buyer in this case, as soon as the seller has handed over the goods at that third place to the person destined to carry out the transport.

26. Larenz, Schuldrecht BT, 42 II; Staudinger/Köhler, 447 Rdn.30; Münchener Kommentar, 447 Rdn.21; Palandt/Putzo, 447 Rdn.8; Soergel/Huber, 447 Rdn.35 et seq.; Hager, in Schlechtriem, Fachtagung, p.392; different opinion: Hager in: Die Gefahrtragung beim Kauf, p.84: He advocates a return to the old case law, according to which 447 does not apply when the seller hands over the goods to his own men, taking into consideration that the mentiones examples in 447 all refer to independent enterprises. The history of this paragraph and a comparison with foreign law would lead to the same conclusion.

27. Brox, Besonderes Schuldrecht, Rdn.56; Staudinger/Köhler, 447 Rdn.30; Münchener Kommentar, 447 Rdn.21; Soergel/Huber, 447 Rdn.37; OLG Karlsruhe, Urt. v. 03.12.1974, BB 1975, 537: The seller is liable for the damage caused by negligently wrong loading of the goods by his employees.

28. Hager, in Schlechtriem, Fachtagung, p.408. This follows out of this dissertation as well.

29. Compare with the provision for the passing of risk in C.II.1.

30. Compare for different possibilities the CISG in chapter 1, C.II.1.

31. See more specifically C.II.2.


ABBREVIATIONS

a.A. anderer Ansicht (different view)
Abs. Absatz (Paragraph)
Art. Artikel (article)
Bearb. Bearbeiter (revisor)
BB Betriebs-Berater (magazine)
BGB Bürgerliches Gesetzbuch (Statute of civil law)
BGH Bundesgerichtshof (highest court)
BGHZ Entscheidungen des Bundesgerichtshofs in Zivilsachen (cases report)
bzw. beziehungsweise (or...respectively)
d.h. das heißt (meaning)
ECE United Nations Economic Commission for Europe
et seq. folgende (subsequent)
Fn. Fußnote (footnote)
FCL Full Container Load
HansRZ Hanseatische Rechtszeitschrift (magazine)
HGB Handelsgesetzbuch (Staute of Trade law)
h.M. herrschende Meinung (prevailing opinion)
HS Halbsatz (part of a sentence (ii))
ICC International Chamber of Commerce
IGH Internationale Handelskammer (ICC)
Incoterms International Commercial Terms (in Appendix 2)
iSd. im Sinne des/der (as defined by)
ISO International Standard Organisation
Kap. Kapitel (chapter)
KG Kammergericht (court)
L/C Letter of credit
LG Landgericht (court)
lit. litera (subparagraph)
LZ Leipziger Zeitschrift (magazine)
MDR Monatsschrift für Deutsches Recht (magazine)
NJW Neue Juristische Wochenschrift (magazine for case law)
NJW Neue Juristische Wochenschrift-Rechtsprechungsreport (magazine for case law)
OLG Oberlandesgericht (court)
OLGE Oberlandesgerichtentscheidungen (case law report)
Rdn. Randnummer
RG Reichsgericht (court)
RGZ Reichsgerichtentscheidungen in Zivilsachen (case law report)
S. Seite (page)
sog. sogenannte (so called)
u.a. unter anderem (among other..)
UCP Uniform Customs and Practice for Documentary Credits
UNCITRAL United Nations Commission on International Trade Law
UNKR UN-Kaufrecht (Convention on the International Sale of Goods)
vgl. vergleiche (compare)
Wbl. Wirtschaftliche Blätter (magazine)
z.B. zum Beispiel (for example, e.g.)


BIBLIOGRAPHY

Bredow/Seiffert. J. Bredow und B. Seiffert, Incoterms 1990, Bonn 1994.

Brox. H. Brox, Besonderes Schuldrecht, 21. Auflage, München 1996.

Brox. H. Brox, Handelsrecht und Wertpapierrecht, 13. Auflage, München 1998.

Caemmerer/Schlechtriem. E. von Caemmerer und P. Schlechtriem, Kommentar zum einheitlichen UN-Kaufrecht - CISG, 2. Auflage, München 1995.

Dreher. F-J. Dreher, Gefahrtragungsprobleme beim Versendungskauf. Inaugural-Dissertation, München 1970

Feltham. J.D. Feltham, "CIF and FOB Contracts and the Vienna Convention for the International Sale of Goods", The Journal of Business Law (9) 1991, S.413-425.

Ficker. H.C. Ficker, 'Die Gefahrtragung im Haager Einheitlichen Kaufrecht und im deutschen Schuldrecht', in: Leser/von Marschall, Das Haager Einheitliche Kaufgesetz und das deutsche Schuldrecht, Karlsruhe 1973

Finke. K. Finke, Die Bedeutung der internationalen Handelsklauseln für den Gefahrübergang nach deutschem und US-amerikanischem Recht, Frankfurt a.M./Bern/New York 1984.

Hager. G. Hager, Die Gefahrtragung beim Kauf. Eine rechtsvergleichende Untersuchung, Frankfurt a.M. 1982.

Hager. G. Hager, 'Gefahrtragung nach UN-Kaufrecht im Vergleich zu EKG und BGB', in: Schlechtriem, Einheitliches Kaufrecht und nationales Obligationenrecht. Referate und Diskussionen der Fachtagung Einheitliches Kaufrecht am 16/17-12-1987, Baden-Baden 1987.

Herber. R. Herber, Seehandelsrecht, Berlin/New York 1999.

Herber/Czerwenka. Herber/Czerwenka, Internationales Kaufrecht. UN-Übereinkommen über Verträge über den internationalen Warenkauf. Kommentar, München 1991.

Honsell. H. Honsell, Kommentar zum UN-Kaufrecht-Übereinkommen der Vereinten Nationen über den internationalen Warenkauf (CISG), Berlin 1997.

Houtte. H. van Houtte, The law of international Trade, London 1995.

Karollus. M. Karollus, UN-Kaufrecht. Eine systematische Darstellung für Studium und Praxis, Wien/New York 1991.

Kolter. M. Kolter, Zur rechtlichen Einordnung typischer Handelsklauseln unter besonderer Berücksichtigung des EAG, EKG und UN-Kaufrechts, Marburg 1991.

Münchener Kommentar. H.P. Westermann (Red.), Münchener Kommentar zum BGB, Band 3, 433-606, 2. Auflage, München 1988.

Musielak. H-J. Musielak, Grundkurs BGB, 5. Auflage, München 1997.

Palandt/Putzo. O. Palandt (Bearb. Putzo), Bürgerliches Gesetzbuch Kommentar, 57. Auflage, München 1998.

Pilz. B. Piltz, Internationales Kaufrecht. Das UN-Kaufrecht (Wiener Übereinkommen von 1980) in praxisorientierter Darstellung, München 1993.

Piltz. B. Piltz, UN-Kaufrecht. Gestaltung von Export- und Importverträgen, 2. Auflage, Bonn 1996.

Puttfarke. H-J. Puttfarken, Seehandelsrecht, Heidelberg 1997.

Reinhart. G. Reinhart, UN-Kaufrecht. Kommentar zum Übereinkommen der Vereinten Nationen vom 11.April 1980 über Verträge über den internationalen Warenkauf, Heidelberg 1991.

Reinicke/Tiedtke. D. Reinicke und K. Tiedtke, Kaufrecht, 4. Auflage, Neuwied/ Frankfurt 1989.

Renck. A.W. Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht. Eine Untersuchung zu den rechtlichen Wirkungen der INCOTERMS 1990 im Recht des internationalen Warenkaufs, Münster 1995.

Rudolph. H. Rudolph, Kaufrecht der Export- und Importverträge. Kommentierung des UN-Übereinkommens über internationale Warenkaufverträge mit Hinweisen für dieVertragspraxis, Berlin 1996.

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Staudinger/Köhler. J. von Staudinger (Bearb. Köhler), Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen. Zweites Buch: Recht der Schuldverhältnisse 433-534, 13. Auflage, Berlin 1995.


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