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Article 66. Loss or Damage after Risk has Passed to Buyer

TEXT OF ARTICLE 66

Loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller.


OUTLINE OF ISSUES

Reproduced with permission of UNCITRAL

66A Conformity of goods determined as of time risk passes

66A1 Prior damage or deterioration at seller's risk

66B Loss or damage after risk passed

66B1 Buyer not relieved of obligation to pay unless:

66B12 Damage due to seller's act or omission (e.g., latent defect)

66C Other problems


DESCRIPTORS

Passage of risk


CASE ANNOTATIONS: UNCITRAL DIGEST CASES PLUS ADDED CASES

UNCITRAL has identified relevant cases in Digests containing case annotations for each article of the CISG. UNCITRAL cites nine cases in its Digest of Art. 66 case law: six cases from Germany and one each from Argentina, China and Hungary.

Presented below is a composite list of Art. 66 cases reporting UNCITRAL Digest cases and other Art. 66 cases. All cases are listed in chronological sequence, commencing with the most recent. Asterisks identify the UNCITRAL Digest cases, commencing with the 13 April 2000 citation reported below. Cases are coded to the UNCITRAL Thesaurus.

English texts and full-text English translations of cases are provided as indicated. In most instances researchers can also access UNCITRAL abstracts and link to Unilex abstracts and full-text original-language case texts sourced from Internet websites and other data, including commentaries by scholars to the extent available.

Switzerland 16 December 2008 Bundesgerichtshof [Supreme Court] (Laser microjet case) [translation available]

Spain 17 January 2008 Tribunal Suprema [Supreme Court] (Used automobiles case) [translation available]
 

Germany 14 December 2006 Oberlandesgericht [Appellate Court] Koblenz (Bottles case) 66B12 [translation available]
 

United States 23 May 2005 Federal Appellate Court [7th Circuit] (Chicago Prime Packers v. Northam)
 

Belgium 16 June 2004 Hof van Beroep [Appellate Court] Ghent (Pork meat case) 66A [translation available]

Spain 15 February 2003 Audiencia Provincial [Appellate Court] Valencia
 

China 27 November 2002 Higher People’s Court of Ningxia Hui Autonomous Region 66A1 [translation available]

Germany 29 October 2002 Oberlandesgericht [Appellate Court] Schleswig-Holstein (Stallion case) 66A [translation available]

Russia 6 August 2002 Arbitration Court [Appellate Court] for Western Siberia Region (Case No. F04/2712-494/A03-2002) 66B [translation available]
 

Switzerland 26 May 2000 Tribunal cantonal [Appellate Court] Vaud (Asphalt case)

* Germany 13 April 2000 Amtsgericht [Lower Court] Duisburg [translation available]
 

Austria 29 June 1999 Oberster Gerichtshof [Supreme Court] [translation available]

Russia 17 May 1999 Arbitration award 342/1998

China 7 April 1999 CIETAC Arbitration Award [CISG/1999/20] (PVC suspension resin case) 66A [translation available]

* Germany 24 March 1999 Landgericht [District Court] Flensburg 66A [translation available]

China 1999 CIETAC Arbitration award 66A1 [translation available]
 

Russia 30 December 1998 Arbitration award 62/1998 [translation available]

* Germany 22 September 1998 Oberlandesgericht [Appellate Court] Oldenburg 66A [translation available]

* Germany 23 June 1998 Oberlandesgericht [Appellate Court] Hamm 66A [translation available]

Russia 11 March 1998 Arbitration award 487/1996 66B12 [translation available]
 

* Germany 9 July 1997 Oberlandesgericht [Appellate Court] Köln

China 25 June 1997 CIETAC Arbitration Award [CISG/1997/16] (Art paper case) 66A [translation available]
 

* Hungary 10 December 1996 Budapest Arbitration award Vb 96074 [English text]
 

* Argentina 31 October 1995 Cámara Nacional de Apelaciones en lo Comercial [Appellate Court] 66B

* China 23 February 1995 CIETAC Arbitration award 66B12 [translation available]
 

Serbia 12 July 1994 Foreign Trade Court of Arbitration, Yugoslav Chamber of Commerce (Baby beef hide case) [translation available]

Argentina 18 March 1994 Juzgado Nacional de Primera Instancia en lo Comercial [National Commercial Court of First Instance]
 

* Germany 20 November 1992 Oberlandesgericht [Appellate Court] Karlsruhe (Frozen chicken case) [translation available]

Germany 13 January 1992 Landgericht [District Court] Baden-Baden


UNCITRAL CASE DIGEST

The UNCITRAL Digest of case law on the United
Nations Convention on the International Sale of Goods
[*]

A/CN.9/SER.C/DIGEST/CISG/66 [8 June 2004]
Reproduced with the permission of UNCITRAL

[Chapter IV. Passing of Risk
Digest of Article 66 case law
-    Nature of risk
-    Parties agreement on passing of risk
-    Other binding rules on passing of risk
-    Burden of establishing the passing of risk
-    Risk of loss or damage following avoidance

Text of Article 66
Digest of Article 66 case law
-    Consequence of passing of risk to buyer
-    Exception when loss or damage due to seller's acts or omissions]

CHAPTER IV. PASSING OF RISK

1. Chapter IV deals with the passing to the buyer of the risk of loss of or damage to goods. The first article of the chapter (art. 66) states the consequences for the buyer after the risk of loss or damage to goods passes to the buyer. The following three articles (arts. 67-69) set out rules for when the risk passes to the buyer. The final article of the chapter (art. 70) states the allocation of the risk of loss or damage if the seller commits a fundamental breach.

2. As a general rule, a seller that satisfies its obligation to deliver goods or documents (see arts. 31-34) will cease to bear the risk of loss or damage. The language used in chapter IV and articles 31-34 is often identical. One decision concludes that therefore the same interpretation should be given to the word 'carrier' in both articles 31 and 67.[1]

3. The rules in chapter IV apply without regard to whether the seller or the buyer owns the goods.[2] Chapter IV therefore displaces domestic sales law that allocates risk to the "owner" of the goods although the outcome may be the same in any particular case under both the Convention and the applicable domestic law.[3]

Nature of risk

4. Chapter IV deals with casualty to the goods sold. This is stated expressly in the first clause of article 66 and implicitly in the other articles. The loss of goods includes cases where the goods cannot be found,[4] have been stolen, or have been transferred to another person.[5] Damage to the goods includes total destruction, physical damage,[6] deterioration,[7] and shrinkage of the goods during carriage or storage.

5. Several courts have applied a chapter IV provision to the passing of risks other than the risk of loss or damage to goods. These risks include the risk of delay by the carrier after the seller has handed over the goods to the carrier [8] and the risk that the attribution of a painting is incorrect.[9]

Parties' agreement on passing of risk

6. The seller and buyer may agree on when the risk of loss or damage passes to the buyer. They will frequently do so by expressly incorporating into their agreement trade terms, such as the International Chamber of Commerce's Incoterms.[10] They may agree to vary a standard trade term,[11] adopt a trade term that is local,[12] or use a trade term in connection with the price rather than delivery.[13] The parties may also agree to the allocation of risk in the standard terms or general business conditions of the seller or buyer.[14] In accordance with article 6, the parties' agreement will govern even if it derogates from the provisions of chapter IV that would otherwise apply. Notwithstanding article 6, however, a German court interpreted a trade term set out in a French seller's general business conditions in accordance with German law because the seller had used a clause common in German commerce, drafted in the German language, and the buyer was German.[15]

7. The Convention's rules in article 8 on interpretation of statements and acts of the parties apply. Thus, one court found that the parties had agreed that the seller would deliver the goods at the buyer's place of business because, in accordance with article 8(2), a reasonable person in the same circumstances as the buyer would understand use of the German term "frei Haus" ("free delivery") to mean delivery at the buyer's place of business.[16]

Other binding rules on passing of risk

8. Article 9(1) provides that parties are bound by any practices, including those allocating risk of loss or damage, that they have established between themselves. Courts have occasionally looked to the prior practices of the parties for evidence of the parties' intent with respect to risk of loss.[17] One court has concluded, however, that conduct by one party with respect to risk on two prior occasions is insufficient to establish a binding practice.[18]

9. The seller and buyer may also be bound by trade usages with respect to risk of loss or damage. Under article 9(1), they are bound if they agree to a usage, whether international or local. They are also bound under article 9(2) by widely-observed international usages which they know or should know unless they agree otherwise. If the parties expressly incorporate an Incoterm into their contract paragraph (1) makes the term binding, but the Incoterm is so widely-used courts will enforce an Incoterm even absent express incorporation.[19]

Burden of establishing the passing of risk

10. Article 66 and the other provisions of chapter IV are silent on who has the burden of establishing that the risk of loss or damage has passed to the buyer.[20] One court has endorsed the view that the burden is on the party that argues that the risk has passed.[21] The issue of who bears the risk arises, however, in the context of actions to enforce obligations of the seller (e.g. to deliver conforming goods) or buyer (e.g. to pay for the goods) under other provisions of the Convention.

11. The cases place the burden upon the seller that brings an action to recover the price in accordance with article 62. In several cases the sellers failed to establish that they had delivered the goods and therefore the buyers were not obliged to pay. In one case, the court found that a bill of lading that accurately described the goods sold but did not indicate the name of buyer as recipient was insufficient proof.[22] In a second case, the court found that a stamped but unsigned receipt was not sufficient proof of delivery at the buyer's place of business as required by the contract of sale.[23]

12. Where the goods are delivered but the dispute is over whether damage occurred before or after the risk of loss passed to the buyer, the buyer has the burden of establishing that the damage occurred before the risk of loss passed to it. Thus, where a seller produced a bill of lading with the master's annotation "clean on board" and the buyer produced no evidence that deterioration occurred before the seller handed over the goods to the carrier, the buyer bore the risk of deterioration.[24]

Risk of loss or damage following avoidance

13. If the parties agree to terminate the contract after the risk has passed to the buyer, the risks implicit in article 81 through 84 with respect to restitution following avoidance supersede the risk provisions of chapter IV.[25] When restoring the goods, the obligations of the parties restoring the goods should mirror the obligations of the parties in the performance of the avoided contract. If the seller agreed to deliver goods x factory then following termination the risk passes to the seller when the buyer hands over the goods to a carrier at the buyer's place of business.[26]

ARTICLE 66

     Loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller.

DIGEST OF ARTICLE 66 CASE LAW

1. Article 66 provides that the buyer is not discharged from its obligation to pay the price after the risk of loss or damage has passed to the buyer unless the loss or damage was caused by the seller. Article 66 does not create the obligation to pay the purchase price; that obligation is set out in article 53. Article 66 is also silent as to when the risk of loss or damage passes. The parties contract and articles 67-70 set out rules for determining when the risk passes.

Consequence of passing of risk to buyer

2. Once it has been established that the risk of loss or damage has passed, decisions routinely require the buyer to pay the price unless it is established that the seller was responsible for the loss or damage.[27] Most, but not all, of these decisions cite both article 53 and article 66.[28] Several decisions cite article 66 for the proposition that a buyer is not obligated to pay the price if the seller is unable to establish that risk of loss has passed.[29]

3. Other articles explicitly or implicitly state the consequences for the buyer of bearing the risk. If, for example, the buyer takes delivery of goods without notifying the seller of non-conformity, the buyer bears the burden of establishing that the goods did not conform at the time the risk of loss passed.[30]

Exception when loss or damage due to seller acts or omissions

4. The last clause of article 66 provides an exception to non-discharge of the buyer obligation to pay the price if it is established that the loss or damage is due to an act or omission of the seller. An arbitral tribunal found that the seller failure to give the carrier agreed instructions on the temperature at which the goods were to be stored during carriage caused the loss through melting and leakage.[31] Several cases place the burden of showing this exception on the buyer but in none of these cases has the buyer carried this burden.[32]

5. This exception to the buyer's obligation to pay is distinct from the seller's continuing liability under article 36 for nonconformities that exist at the time the risk of loss passes or for nonconformities that appear subsequently if the seller has guaranteed the goods against these latent non-conformities.


FOOTNOTES

* The present text was prepared using the full text of the decisions cited in the Case Law on UNCITRAL Texts (CLOUT) abstracts and other citations listed in the footnotes. The abstracts are intended to serve only as summaries of the underlying decisions and may not reflect all the points made in the digest. Readers are advised to consult the full texts of the listed court and arbitral decisions rather than relying solely on the CLOUT abstracts.

[Citations to cisgw3 case presentations have been substituted [in brackets] for the case citations provided in the UNCITRAL Digest. This substitution has been made to facilitate online access to CLOUT abstracts, original texts of court and arbitral decisions, and full text English translations of these texts (available in most but not all cases). For citations UNCITRAL had used, go to <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.]

1. CLOUT case No. 360 [GERMANY Amtsgericht [Lower Court] Duisburg 13 April 2000, available online at <http://cisgw3.law.pace.edu/cases/000413g1.html>] (see full text of the decision).

2. [UNITED STATES St. Paul Guardian Ins. Co. v. Neuromed Medical Systems & Support GmbH Federal District Court [New York] 26 March 2002 available online at <http://cisgw3.law.pace.edu/cases/020326u1.html>].

3. CLOUT case No. 163 [HUNGARY Budapest Arbitration Award case No. Vb 96074 of 10 December 1996, available online at <http://cisgw3.law.pace.edu/cases/961210h1.html>] (Yugoslav law that risk passes with title and that title passes on handing over goods yields same result as Convention) (see full text of the decision).

4. See, e.g., CLOUT case No. 338 [GERMANY Oberlandesgericht [Appellate Court] Hamm 23 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980623g1.html>] (goods cannot be found at insolvent warehouse).

5. See, e.g., CLOUT case No. 340 [GERMANY Oberlandesgericht [Appellate Court] Oldenburg 22 September 1998, available online at <http://cisgw3.law.pace.edu/cases/980922g1.html>] (insolvent processor of raw salmon transfers processed salmon to other customers)

6. See, e.g., CLOUT case No. 360 [GERMANY Amtsgericht [Lower Court] Duisburg 13 April 2000, available online at <http://cisgw3.law.pace.edu/cases/000413g1.html>] (physical damage).

7. See, e.g., CLOUT case No. 377 [GERMANY Landgericht [District Court] Flensburg 24 March 1999, available online at <http://cisgw3.law.pace.edu/cases/990324g1.html>] (deterioration); CLOUT case No. 191 [ARGENTINA Cámara Nacional de los Apelaciones en lo Comercial [Appellate Court] 31 October 1995, available online at <http://cisgw3.law.pace.edu/cases/9531031a1.html>] (deterioration).

8. CLOUT case No. 219 [SWITZERLAND Tribunal [Appellate Court] Valais 28 October 1997, available online at <http://cisgw3.law.pace.edu/cases/971028s1.html>] (buyer bears risk of subsequent delay) (see full text of the decision).

9. [NETHERLANDS Arrondissementsrechtbank [District Court] Arnhem 17 July 1997, available online at <http://cisgw3.law.pace.edu/cases/970717n1.html>] affirmed on other grounds, [NETHERLANDS Gerechthof [Appellate Court] Arnhem 9 February 1999, available online at <http://cisgw3.law.pace.edu/cases/990209n1.html>] (Convention not applicable).

10. Not all trade terms address the issue of risk of loss or damage. See, e.g., CLOUT case No. 247 [SPAIN Audiencia Provincial [Appellate Court] Córdoba 31 October 1997, available online at <http://cisgw3.law.pace.edu/cases/971031s4.html>] ("CFFO" allocates cost of shipment to the destination, but has no relevance to passing of risk).

11. See, e.g., CLOUT case No. 191 [ARGENTINA Cámara Nacional de los Apelaciones en lo Comercial [Appellate Court] 31 October 1995, available online at <http://cisgw3.law.pace.edu/cases/9531031a1.html>] (see full text of the decision).

12. See, e.g., CLOUT case No. 317 [GERMANY Oberlandesgericht [Appellate Court] Karlsruhe 20 November 1992, available online at <http://cisgw3.law.pace.edu/cases/921120g1.html>] ("frei Haus").

13. See, e.g., CLOUT case No. 283 [GERMANY Oberlandesgericht [Appellate Court] Köln 9 July 1997, available online at <http://cisgw3.law.pace.edu/cases/970709g3.html>] ("list price ex works").

14. See, e.g., CLOUT case No. 317 [GERMANY Oberlandesgericht [Appellate Court] Karlsruhe 20 November 1992, available online at <http://cisgw3.law.pace.edu/cases/921120g1.html>] (French seller's general business conditions enforced). Whether the parties have agreed to standard terms or general conditions is left to the applicable rules on contract formation and the validity of such terms and conditions.

15. CLOUT case No. 317 [GERMANY Oberlandesgericht [Appellate Court] Karlsruhe 20 November 1992, available online at <http://cisgw3.law.pace.edu/cases/921120g1.html>].

16. CLOUT case No. 317 [GERMANY Oberlandesgericht [Appellate Court] Karlsruhe 20 November 1992, available online at <http://cisgw3.law.pace.edu/cases/921120g1.html>] (art. 69 rather than art. 67 governed passing of risk).

17. CLOUT case No. 317 [GERMANY Oberlandesgericht [Appellate Court] Karlsruhe 20 November 1992, available online at <http://cisgw3.law.pace.edu/cases/921120g1.html>] (seller's practice of delivering in its own trucks used to interpret parties' agreement).

18. CLOUT case No. 360 [GERMANY Amtsgericht [Lower Court] Duisburg 13 April 2000, available online at <http://cisgw3.law.pace.edu/cases/000413g1.html>] (practice permitting buyer to offset value of physical damage).

19. See, e.g., [UNITED STATES St. Paul Guardian Ins. Co. v. Neuromed Medical Systems & Support GmbH Federal District Court [New York] 26 March 2002 available online at <http://cisgw3.law.pace.edu/cases/020326u1.html>]; CLOUT case No. 253 [SWITZERLAND Cantone del Ticino [Appellate Court] Lugano 15 January 1998, available online at <http://cisgw3.law.pace.edu/cases/980115s1.html>] ("CIF") (see full text of the decision); CLOUT case No. 340 [GERMANY Oberlandesgericht [Appellate Court] Oldenburg 22 September 1998, available online at <http://cisgw3.law.pace.edu/cases/980922g1.html>] (see full text of the decision); CLOUT case No. 176 [AUSTRIA Oberster Gerichtshof [Supreme Court] 6 February 1996, available online at <http://cisgw3.law.pace.edu/cases/960206a3.html>] ("FOB").

20. CLOUT case No. 253 [SWITZERLAND Cantone del Ticino [Appellate Court] Lugano 15 January 1998, available online at <http://cisgw3.law.pace.edu/cases/980115s1.html>] (unnecessary to decide whether to apply CISG general principles placing burden on buyer or to apply national law because same result under each alternative).

21. CLOUT case No. 338 [GERMANY Oberlandesgericht [Appellate Court] Hamm 23 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980623g1.html>].

22. CLOUT case No. 283 [GERMANY Oberlandesgericht [Appellate Court] Köln 9 July 1997, available online at <http://cisgw3.law.pace.edu/cases/970709g3.html>].

23. CLOUT case No. 317 [GERMANY Oberlandesgericht [Appellate Court] Karlsruhe 20 November 1992, available online at <http://cisgw3.law.pace.edu/cases/921120g1.html>].

24. CLOUT case No. 247 [SPAIN Audiencia Provincial [Appellate Court] Córdoba 31 October 1997, available online at <http://cisgw3.law.pace.edu/cases/971031s4.html>].

25. [AUSTRIA Oberster Gerichtshof [Supreme Court] 29 June 1999, available online at <http://cisgw3.law.pace.edu/cases/990629a3.html>].

26. [AUSTRIA Oberster Gerichtshof [Supreme Court] 29 June 1999, available online at <http://cisgw3.law.pace.edu/cases/990629a3.html>].

27. CLOUT case No. 360 [GERMANY Amtsgericht [Lower Court] Duisburg 13 April 2000, available online at <http://cisgw3.law.pace.edu/cases/000413g1.html>] (obligation to pay not discharged after risk of loss has passed to buyer); CLOUT case No. 340 [GERMANY Oberlandesgericht [Appellate Court] Oldenburg 22 September 1998, available online at <http://cisgw3.law.pace.edu/cases/980922g1.html>] (risk had passed to the buyer by delivery of raw salmon to processing plant and buyer's obligation to pay therefore not discharged even though plant delivered processed salmon to other customers) (see full text of the decision); CLOUT case No. 338 [GERMANY Oberlandesgericht [Appellate Court] Hamm 23 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980623g1.html>] (buyer not obliged to pay because risk had not shifted to buyer under art. 69(2)); CLOUT case No. 163 [HUNGARY Budapest Arbitration Award case No. Vb 96074 of 10 December 1996, available online at <http://cisgw3.law.pace.edu/cases/961210h1.html>] (risk having passed to buyer under FOB term, buyer's obligation to pay not discharged even if buyer was unable to make proper use of goods because of subsequent U.N. embargo); CLOUT case No. 191 [ARGENTINA Cámara Nacional de los Apelaciones en lo Comercial [Appellate Court] 31 October 1995, available online at <http://cisgw3.law.pace.edu/cases/9531031a1.html>] (obligation to pay not discharged despite deterioration of goods during transit because risk of damage had passed on shipment and buyer was unable to establish that seller was responsible for the deterioration).

28. The following cases cite article 53: CLOUT case No. 377 [GERMANY Landgericht [District Court] Flensburg 24 March 1999, available online at <http://cisgw3.law.pace.edu/cases/990324g1.html>]; CLOUT case No. 340 [GERMANY Oberlandesgericht [Appellate Court] Oldenburg 22 September 1998, available online at <http://cisgw3.law.pace.edu/cases/980922g1.html>] (see full text of the decision); CLOUT case No. 338 [GERMANY Oberlandesgericht [Appellate Court] Hamm 23 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980623g1.html>]; CLOUT case No. 163 [HUNGARY Budapest Arbitration Award case No. Vb 96074 of 10 December 1996, available online at <http://cisgw3.law.pace.edu/cases/961210h1.html>] (see full text of the decision).

29. CLOUT case No. 283 [GERMANY Oberlandesgericht [Appellate Court] Köln 9 July 1997, available online at <http://cisgw3.law.pace.edu/cases/970709g3.html>] (no obligation to pay price under articles 66 and 67(1) where seller did not establish delivery to first carrier); CLOUT case No. 317 [GERMANY Oberlandesgericht [Appellate Court] Karlsruhe 20 November 1992, available online at <http://cisgw3.law.pace.edu/cases/921120g1.html>] (no obligation to pay price under articles 66 and 67(1) because risk of loss had not passed under "Frei Haus" trade term).

30. CLOUT case No. 377 [GERMANY Landgericht [District Court] Flensburg 24 March 1999, available online at <http://cisgw3.law.pace.edu/cases/990324g1.html>].

31. [CHINA CIETAC Arbitration Award case of 23 February 1995, available online at <http://www.cisg.law.pace.edu/cisg/wais/db/cases2/950223c1.html>].

32. CLOUT case No. 163 [HUNGARY Budapest Arbitration Award case No. Vb 96074 of 10 December 1996, available online at <http://cisgw3.law.pace.edu/cases/961210h1.html>] (see full text of the decision); CLOUT case No. 191 [ARGENTINA Cámara Nacional de los Apelaciones en lo Comercial [Appellate Court] 31 October 1995, available online at <http://cisgw3.law.pace.edu/cases/9531031a1.html>].


Pace Law School Institute of International Commercial Law - Last updated September 14, 2009
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