Published by Manz, Vienna: 1986. Reproduced with their permission.

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D. The Passing of Risk (Articles 66-70)

The buyer's obligation to pay is dependent on the seller's performance of his obligations. In general, once the seller has performed, the buyer must pay even if the [goods are] thereafter destroyed or damaged. The buyer thus carries the risk of having to pay despite the loss of the goods. In ULIS, the concept of "delivery" was used to describe the closely related concepts of the seller's performance of his obligation and the passing of risk to the buyer.[342] This "very elegant legal solution" [343] was dropped by UNCITRAL [344] as too conceptual. The passing of risk is therefore no longer determined by the legal concept of "delivery" but rather by a description of the prerequisites for the passing of risk.

Article 66 states the principle: Once the risk has passed to the buyer, he must pay the full price, even if the goods have been damaged or destroyed. There is an exception for the case where the loss or damage was "due to an act or omission of the seller." The Secretariat's Commentary gives the example of goods which, after delivery, are damaged by the seller as he recovers his containers.[345] Whether the seller has thereby breached the contract is, in principle, irrelevant. Nonetheless, the seller's act which leads to the loss of the goods will almost always constitute a breach of contract. That is the case when the goods are not packaged correctly, or a defect causes further deterioration and destroys the goods after the risk has passed. However, these problems exceed the scope of the rule on the passing of risk, which is limited to the distribution of risk for accidental loss. The exception concerning loss or damage due to the seller's act may apply even where the seller is not responsible in the sense of Article 79(1) and (2). If the seller is "responsible" for the destruction of the goods, his act not only releases the buyer from his obligation to pay but also may permit the buyer to claim damages for breach of contract (or for non-contractual liability under domestic law).[346] [page 86]

If the seller's breach of contract is fundamental, the buyer may avoid the contract and is released from his obligation to pay.[347] The fact that the buyer cannot return the Articles destroyed as a result of the breach - such as where a defect caused further deterioration - does not prevent him from avoiding the contract nor does it prevent the "passing back" of the risk: the seller must return the full purchase price to the buyer, even when the goods cannot be returned (Article 82(2)(a)).[348] If the buyer neglects to notify the seller of non-conformities (including a delivery of entirely different goods) or defects in title, such as encumbering industrial property rights, the buyer remains obligated to pay the purchase price, even if the goods are lost and the contract would have been avoidable had timely notice of the lack of conformity been given.

The Convention distinguishes in particular between sales involving carriage and simple sales for which the seller's obligation to deliver is fulfilled at his place of business or a third place.[348a] [page 87]

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FOOTNOTES

* The author of this book participated at the Conference as a member of the delegation from the Federal Republic of Germany. The views expressed here are personal to the author and do not necessarily represent the position of the F.R.G. or its delegation.

342. See generally Dölle (Huber) ULIS Article 19 § 12 et seq. (development of the concept of delivery).

343. Huber at 451.

344. Regarding the attempts to define "delivery" and the further developments related to the term in the Draft Conventions, see Huber at 451 notes 61, 63; Roth at 294 et seq.; Honnold, Draft Convention at 229; Sevón, Lausanner Kolloquium at 192.

345. A/Conf. 97/5 at 199 § 6 (= O.R. 5 et seq.).

346. See Neumayer, "Zur Revision des Haager Einheitlichen Kaufrechts - Gefahrtragung, Gehilfenhaftung, Fait du Vendeur und Lückenproblem", in Festschrift von Caemmerer 960 et seq. (1978). Huber's view that only a breach by the seller would fall under the exception in Article 66 contradicts both the wording and structure of the Convention as well as the intention of its authors. Nevertheless, his view should take preference as a matter of policy. Although loss or damage caused, partially or entirely, by the seller's proper behaviour (e.g., exercise of his right to stop the goods in transit, or timely and proper delivery) may be excluded from the exception in Article 66 by reasonable interpretation of "due to", Article 66 could be an extraordinary remedy for damage and loss of goods due to behaviour not "covered" by the contract even though the seller would not normally have been liable on the basis of Articles 45-52 in conjunction with Articles 30-44 for such behaviour. These unintended consequences undermine the coherence of the buyer's remedies and their underlying principles and should be avoided by a restrictive interpretation. See also the rather guarded comment by Sevón, Laussanner Kolloquium at 196, 197.

347. Whether, in such a case, the risk does not pass at all to the buyer or whether it passes back to the seller is essentially a question of terminology. See Dölle (Huber) ULIS Article 19 § 159. A motion by the U.S. delegation that would have clarified the matter in Vienna (A/Conf. 97/C.1/L.299 Rev. 1= O.R. 140) caused a lively discussion. See A/Conf. 97/C.1/SR.32 at 10-11 (= O.R. 408). In the end, it was decided that the risk passes back to the seller. Otherwise, it was feared that the risk would remain with the seller, even if he did not exercise his right to avoid the contract. See also Roth at 302 et seq.

348. For German law, see Judgment of Oct. 9, 1980, BGH, 1981 NJW 224, 226.

348a. For a very clear analysis of the basic rules see Bucher, Lausanner Kolloquium at 212 et seq.

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