1. Mr. MEHDI (Pakistan) introduced a compromise text, proposed by the sponsors of document A/CONF.97/L.15 and other delegations, which read:
"The risk in respect of goods sold in transit is assumed by the buyer from the time the contract is concluded. However, if the circumstances indicate a contrary intention, the risk is assumed by the buyer from the time the goods were handed over the carrier who issued the documents embodying the contract of carriage, except that if, at the time of the conclusion of the contract of sale, the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer, the loss or damage is at the risk of the seller."
2. That text was an attempt to combine the elements of the draft amendment (A/CONF.97/L.15) with the major elements of existing article 80 [became CISG article 68 ], so that, after stating the rule that the risk passed to the buyer from the time the contract was concluded, freedom was left to parties to arrange things otherwise if they so desired.
3. Mr. HJERNER (Sweden) said that his delegation, which had participated in the deliberations leading to thedraft proposal under discussion, strongly supported a compromise along the lines proposed. It was an attempt to combine the two main elements of article 80 [became CISG article 68 ] and draft amendment A/CONF.97/L.15. The expression "if the circumstances indicate a contrary intention", might beconsidered by some delegations as being either rather vague or too novel in the circumstances. He felt, however, that it was necessary to retain some flexibility and the phrase covered such situations as those where the seller transferred an insurance policy to the buyer, a point which had caused some concern on the part of several delegations.
4. Mr. ROGNLIEN (Norway) said that, if the content of the new proposal was analysed, it would be found to be exactly the same as that of the proposal contained in A/CONF.97/L.15. The only part that was new was the phrase "if the circumstances indicate a contrary intention". It was, however, already clear that, in cases where there was such an intention, it would be covered by article 5 of the Convention [became CISG article 6 ] or by an agreement between the parties. Consequently, it was self-evident that, in such cases, the intention would apply. The only difference that the proposed text would make would be to render the article longer and more complicated. The substance of the first sentence was unacceptable because it was impracticable. It might create uncertainty and mean additional insurance costs if the buyer were asked to assume the risk at a time when goods were in transit. Bad compromises might jeopardise the Convention, and that one would at least create difficulties of application.
5. No provision such as that contained in article 80 [became CISG article 68 ] was to be found in Scandinavian law nor, as far as he knew, in English or French law. There would be specific documents in virtually every case concerned with the sale of goods in transit and thus an indication of the intention of the parties. He therefore doubted whether anything would be gained by including the provision in the Convention and was convinced that it would be better to delete the article in its entirety.
6. Mr. MICHIDA (Japan) said that, to date, article 80 [became CISG article 68 ] was the one which had caused most difficulty to the Conference. His delegation, which had given serious thought to the question why the Conference was divided into two schools of thought over the matter, felt that it was due to the fact that there had been some confusion concerning on the one hand the insurance problem and on the other the sales problem, i.e. the relationship between the buyer and the seller. A perfect solution to the problem would require a considerable amount of time but, pending such a solution, his delegation found the text proposed by the representative of Pakistan acceptable in principle. The first sentence covered the sales problem very well and the second sentence dealt with the insurance problem. His delegation was therefore able to support the proposal, subject to some drafting changes.
7. Mr. POPESCU (Romania) said that his delegation was convinced that there were difficulties involved improving the moment at which damage or loss occurred, particularly where several sales transactions were involved. A reference point was thus essential and it felt that that had been satisfactorily found in the existing text of article 80 [became CISG article 68 ]. Consequently, his delegation was unable to support the proposed amendment.
8. Mr. PERROTT (International Chamber of Commerce) said that he wished to draw attention to the fact that, as it appeared in the new proposal, the phrase ". . . except that if, at the time . . ." applied only to the second sentence of the article and not to the first. It would appear that the risk did not remain with the seller when he knew or ought to have known at the time of the conclusion of the contract that the goods were lost or damaged in transit, where there were no circumstances indicating that the intention was that the risk should pass at a time other than that of the conclusion of the contract.
9. He wondered if that was, in fact, the intention of the draft text and suggested that it might be better to make it clear that the phrase in question applied to both the situations mentioned in the text.
10. Mr. LANDO (International Chamber of Commerce) said that the provision as set out in article 80 [became CISG article 68 ] had been the outcome of long deliberations and considerable experience. The rule laid down in that article, taken in conjunction with articles 79 and 81 [became CISG article 67 and CISG article 69 ], was one that was embodied in many standard form contracts and was also a rule of thumb when the difficulties concerning proof of damage or loss in transit were under consideration. None of the cases in which the rule had been applied had resulted in injustice to the buyer.
11. However, as set out in the proposed text, the rule introduced ambiguities since it was by no means clear what was meant by the phrase "if the circumstances indicate a contrary intention" and it was also unclear what relation the rule bore to article 5 of the Convention [became CISG article 6 ]. He thus urged the Conference to consider whether existing article 80 [became CISG article 68 ] might not really be the best and most carefully thought out expression of the provision concerned.
12. Mr. HONNOLD (United States of America) said that his delegation was less concerned about the drafting of the phrase "if the circumstances indicate a contrary intention" than about the substantive relationship between the intention of the parties and the rule expressedin article 80 [became CISG article 68 ]. The proposed draft would appear to state that, if the circumstances seemed to indicate that the risk should pass at the point of receipt, then risk should not pass at the place the parties had agreed upon but at a different place, i.e. the place of shipment.
13. While it was quite usual to have rules that could be superseded by the intention of the parties, it was a very different matter to introduce a rule stating that, although the circumstances indicated a specific intention, the result should in fact be a different one. The phrase might perhaps be intended to cover situations where there was a doubt concerning the relations between the parties, but it seemed to him to be a complex and unrealistic way of dealing with the intention of the parties. His delegation found it difficult to believe that the proposed compromise could bring any satisfaction or clarity to the problem.
14. His delegation was neutral on the question whether the basic rule, subject to the intention of the parties, should be that the risk would pass at the point of delivery to the carrier or at the point of receipt, both of which were places where damage or loss could be established. However, the basic premise of the proposed text seemed difficult to accept as there could be doubts as to when damage or loss had occurred. It was therefore difficult to conclude that the proposal provided a practical and clear solution in that respect also.
15. His delegation was of the opinion that the problem did not require the statement of a statutory rule. TheUnited States of America was one of those countrieswhich had not found it necessary to deal with thesituation by statute, since it was a situation that was normally controlled by the intention of the parties and bythe transmission of insurance policies. Consequently, hisdelegation believed that the Conference would betterserve the unification of law by leaving the problem wherein practice it resided, i.e. in the agreement between theparties involved.
16. Mr. SAMI (Iraq) said that the proposed text, which represented a commendable effort to reconcile different points of view, confirmed a rule to the effect that the risk was the seller's but included an exception to apply when the will of the parties provided otherwise and retained the last part of existing article 80 [became CISG article 68 ], a point which had been much discussed. His delegation endorsed the new proposal, which, it felt, was both clear and realistic.
17. Mr. LOEWE (Austria) said that, although he too appreciated the efforts that had been made to find a compromise solution, he was unable to support the proposed new article 80 [became CISG article 68 ] which, as it stood, lacked clarity and gave merely a fallacious impression of being a compromise. Its core was, in fact, its first sentence, which was identical with the former A/CONF.9/L.15. Of all the solutions proposed, his delegation would prefer the text of article 80 [became CISG article 68 ] that had been adopted in the First Committee. It could, however, agree to the first sentence of the new proposal without the rest of the paragraph, in which case it would at any rate be clear.
18. Mr. ZIEGEL (Canada) said that his delegation had been one of those which had joined in the attempt to arrive at a formulation that would accommodate the divergent opinions. A situation had arisen in which a substantial number of delegations had felt that the concept stated in article 80 [became CISG article 68 ] was significant, and that the deletion of the article would leave a gap in the Convention. His delegation had therefore taken the view that a reasonable effort should be made to achieve an article with a balanced content.
19. Those delegations which felt that an article was unnecessary should remember that article 80 [became CISG article 68 ] was not mandatory in character. The proposed text, subject perhaps to further amendment, accommodated a reasonable spectrum of views and he hoped that it would receive wide support.
20. Mr. KIM (Korea) said that his delegation, as one of the sponsors of the joint proposal in A/CONF.97/L.15, appreciated the effort that had been made to arrive at a compromise text. However, a careful reading of the new text showed that the second sentence was not only ambiguous but offered a possibility of misuse, because a contrary intention might be construed as meaning a unilateral declaration, corresponding to the opting-out clause. In that way, the basic principle stated in the first sentence could be evaded.
21. His delegation's view of the whole situation which had been reflected in the joint proposal (A/CONF.97/L.15) was that the passage of risk in the sale of goods in transit was a very complicated question. Although article 80 [became CISG article 68 ] appeared simple in itself, it related not only to parties concluding a contract for the international sale of goods but also to the international carriage of goods and to matters of international insurance.
22. His delegation had supported the joint proposal not because it was to the advantage of the developing countries or of the buyer, but from a purely technical and analytical point of view. There were many delegations that endorsed the principle that the risk passed at the time the goods were delivered, a principle that had perhaps been an effective one in the past. However, the terms of article 80 [became CISG article 68 ] would appear to apply not only to contracts that were primarily between the seller and the buyer but also to contracts for the resale of goods in transit. In the case of goods sold CIF, for example, even though the insurance policy and shipping contract were provided by the seller, the risk passed at the point when the goods were effectively taken on board, and the buyer bore the risk from the point of departure. From that point on, the party selling the goods in transit was not the original seller but the buyer and, if that buyer resold to a third party, under article 36 of the Convention [became CISG article 38 ], the third party in question should be entitled to an opportunity to inspect the goods on arrival at them destination.
23. The passage of risk was, of course, intimately connected with the right of inspection but, in the case of resale, the matter became very complicated because,under the Convention, there could be redirection or redispatch of goods after resale. Under article 36(3) [became CISG article 38(3) ], the right to inspect goods at the ultimate place of destination applied only where, at the time of the conclusion of the contract, the seller knew or ought to have known of the possibility of redirection or redispatch. If the seller did not know of that possibility, the opportunity of the third party to make such an inspection was excluded. His delegation felt, therefore, that the time criterion must be as proposed in A/CONF.97/L.15 or else article 80 [became CISG article 68 ] should be deleted altogether.
24. Mr. KRISPIS (Greece) said that the first of the two sentences in the text proposed by the delegation of Pakistan was virtually identical with the joint amendment (A/CONF.97/L.15), which his delegation had already supported. The second sentence stated an exception, followed by an exception to the exception, which meant a return to the rule in the first sentence, and was also acceptable. He felt, however, that there was some illogicality in referring to both intention and circumstances, and suggested therefore that the phrase "if the circumstances indicate a contrary intention" should be replaced by: "if the circumstances so indicate".
25. Mr. PLANTARD (France) said he regretted that he was unable to accept the compromise proposal. He agreed with the representative of Austria that possibly because it was a compromise, it was the most ambiguous of all the proposals made so far. While ready to accept the principle in the first sentence that the risk should be transferred at the time of the conclusion of the contract, his delegation found the second sentence unacceptable, since it would, as the representative of the United States had pointed out, deprive the will of the parties of its effect.
26. His delegation would thus vote against the proposal as a whole and, if it were rejected, would put forward another proposal, based on the text of the representative of Pakistan, which would run: "The risk in respect of goods sold in transit is assumed by the buyer from the time the contract is concluded, unless the circumstances indicate a contrary intention", and would stop there. The intention, whatever it might be, should be applied. His wording would convey the same essential message as the text proposed by the representative of Pakistan, but the ambiguity would be removed.
27. Mr. MEHDI (Pakistan) said he accepted the sub-amendment proposed by the representative of Greece.
28. The PRESIDENT invited the Conference to vote on article 80 [became CISG article 68 ] as proposed by the representative of Pakistan, the second sentence being amended to start "However, if the circumstances so indicate, the risk, etc.".
29. The proposal was adopted by 26 votes to 12, with 9 abstentions.
30. Mr. NICHOLAS (United Kingdom) proposed that the text that had just been adopted should be referred to the Drafting Committee.
31. Mr. KHOO (Singapore), Chairman of the Drafting Committee, said that, although he had voted in favour of the proposal as it stood, he felt that the wording might well be refined.
32. Mr. PLANTARD (France) said that, although his delegation had agreed to consider the proposal in English as it was drafted, it had to insist that an official French version be produced by the Drafting Committee.
33. Mr. VIS (Executive Secretary) said that, in the interest of the quality of the Convention, the wording of article 80 [became CISG article 68 ] as adopted should go to the Drafting Committee to be polished. He suggested, therefore, that the meeting should close early, so that the Drafting Committee could start work at 10 p.m. and produce a text of article 80 [became CISG article 68 ] which could be reproduced and distributed in time for adoption at the next plenary meeting.
34. It was so decided.
The meeting was suspended at 8.55 p.m. and resumed at 9.15 p.m.
35. Article 81 [became CISG article 68 ] was adopted by 38 votes to none, with 1 abstention.
36. Article 82 [became CISG article 70 ] was adopted by 46 votes to none.
Title of chapter V (Provisions common to the obligations of the seller and of the buyer)
37. The title of chapter V was adopted by 43 votes to none.
38. Mr. SAM (Ghana), introducing his delegation's proposed amendment of article 62 [became CISG article 71 ] (A/CONF.97/L.12), said that it was necessary to retain the phrase "if it is reasonable to do so" since its deletion would make the text less objective and enable one party to suspend performance of his obligations in an arbitrary manner.
39. He reminded delegations that, when the wording proposed by the ad hoc working group in A/CONF.97/C.l/L.252 had been submitted to the First Committee, it had been stressed that the phrase was one of the essential elements in the article.
40. Mr. MATHANJUKI (Kenya) said he supported the view of the Ghanaian delegation. The omission of the phrase in question would not only give one party an unfair advantage but would also make the text less objective and that would be unfortunate since sub-paragraph (a) was already based on subjective criteria namely, " serious deficiency" and "creditworthiness" .
41. Mr. VINDING KRUSE (Denmark) said he wished to remind delegations that, in the First Committee, they had voted to delete the phrase in question, the inclusion of which was unnecessary since it would be difficult to imagine any circumstances in which it would not be reasonable for one of the party to suspend performance of his obligations if it became apparent that the other party would not be performing a substantial part of his obligations.
42. Mr. NICHOLAS (United Kingdom), who agreed with the Danish representative that the phrase was unnecessary, said it would compel a party contemplating suspension to consider whether or not a court would subsequently decide that his action had been reasonable. Since it was difficult to see what criterion the court would apply in reaching such a decision, the phrase did not increase the protection afforded by the article while introducing a further element of uncertainty.
43. Mr. STALEV (Bulgaria) said that he too was of the opinion that the inclusion of such a requirement might be dangerous for a party wishing to suspend performance of his obligations, as he might be held liable if a court found he had not been entitled to do so under the terms of the article. Sufficient protection was already given by the article as it stood.
44. Mr. KRISPIS (Greece) said that two different expressions were used to convey the same meaning in paragraph 1 of the proposal by Ghana and in paragraph 2 of the text approved by the Drafting Committee, namely, "becomes apparent" and "become evident". He therefore proposed that the word "evident" in paragraph 2 should be amended to "apparent".
45. Mr. HARTKAMP (Netherlands) said that the same expression had been used in the French texts of articles 62 and 63 [became CISG article 71 and CISG article 72 ] to translate both the English expressions in question. He suggested that one or other of the two language versions should be amended to align it more closely with the other.
46. Mr. ROGNLIEN (Norway) said he thought that the distinction in the English text should be maintained and that the term "devient manifeste" in the French text of article 62(1) [became CISG article 71(1) ], as proposed by the delegation of Ghana, should be amended to bring it closer to the English term "becomes apparent".
47. Mr. BONELL (Italy) said he agreed that the French text should de amended to bring out the difference between the ideas underlying the two paragraphs.
48. Mr. SHORE (Canada) also agreed that the French text should be harmonized with the English text, in view of the discussion that had taken place in the First Committee on the reasons behind the choice of words in the paragraphs in question.
49. Mr. KHOO (Singapore) said that the harmonization of the different language versions of article 62 [became CISG article 71 ] was a matter for the Drafting Committee. The same applied to article 63 [became CISG article 72 ], on the assumption that it was agreed that the terms used had to indicate a distinction between the meanings in the two articles.
50. He recalled that the choice of the words "it is clear" for article 63 [became CISG article 72 ] had been intentional.
51. Mr. NICHOLAS (United Kingdom) said that it wasuseful to employ two different terms in order to indicate the difference between opinion and fact in paragraphs 1 and 2.
52 Mr. HARTKAMP (Netherlands) said he hoped that the Drafting Committee would not tamper with the English text, but would simply bring the French version into line with it.
53. It was so agreed.
54, The PRESIDENT put to the vote the proposal by the delegation of Ghana (A/CONF.97/L.l2).
55. The Ghanaian proposal (A/CONF.97/L.12) was rejected by 12 votes to 15, with 16 abstentions.
56. The PRESIDENT put to the vote the oral amendment by the representative of Greece to replace the word "evident" in article 62(2) [became CISG article 71(2) ] by the word "apparent".
57. The Greek amendment was rejected by 7 votes to 9, with 23 abstentions.
58. Mr. PLANTARD (France) said that, while his delegation had no quarrel with the French text as it stood, various delegations had objected to it. Consequently, it should be referred to the Drafting Committee for harmonization with the English text.
59. Mr. HONNOLD (United States of America) said that the fact that articles 62 and 63 [became CISG article 71 and CISG article 72 ] provided for very different remedies should be reflected in the wording of those articles. The discussion of the articles had taken place on the basis of the English text, and had resulted in the deliberate choice of a stricter wording for article 63 [became CISG article 72 ]. It would be quite wrong, therefore, to use the same term in both articles, whatever the language version concerned.