Article 67. Risk when Contract Involves Carriage of Goods

• Text of Article 67
• Outline of issues
• Descriptors
• Coded case annotations
  -  Guide to case codes
• Case digest and analysis
     -  UNCITRAL's case law digest; and
     -  An analysis of CISG jurisprudence

TEXT OF ARTICLE 67

(1) 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. The fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passage of the risk.

(2) Nevertheless, the risk does not pass to the buyer until the goods are clearly identified to the contract, whether by markings on the goods, by shipping documents, by notice given to the buyer or otherwise.

OUTLINE OF ISSUES

Reproduced with permission of UNCITRAL

67A Risk passes on handing goods over to first carrier (art. 67(1)

67B Seller's right to hold documents controlling disposition of goods:

DESCRIPTORS

Delivery ; Carriage of goods ; Passage of risk ; Incoterms

CASE ANNOTATIONS: UNCITRAL DIGEST CASES PLUS ADDED CASES

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

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

Germany 23 October 2006 Landgericht [District Court] Bamberg (Plants case) 67A [translation available]
 

Germany 29 November 2005 Landgericht [District Court] München (Frozen vegetables case) [translation available]

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

Germany 2 March 2005 Bundesgerichtshof [Federal Supreme Court] [translation available]
 

Germany 26 October 2004 Landgericht [District Court] Saarbrücken [translation available]

Denmark 8 July 2004 Randers Byret [County Court] (Mobile grain dryer case)

Switzerland 11 February 2004 Appelationshof [Appellate Court] Bern (Cable case) [translation available]

Germany 29 January 2004 Oberlandesgericht [Appellate Court] Frankfurt 67A [translation available]
 

Switzerland 19 August 2003 Tribunal Cantonal [Appellate Court] Valais [translation available]

United States 11 June 2003 U.S. Circuit Court of Appeals [5th Cir.] (BP Oil International v. Empresa) 67A

Germany 25 March 2003 Landgericht [District Court] Köln [translation available]

Germany 18 March 2003 Landgericht [District Court] Giessen

Spain 15 February 2003 Audiencia Provincial [Appellate Court] Valencia
 

China 27 November 2002 Higher People’s Court of Ningxia Hui Autonomous Region 67A [translation available]

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

China 10 September 2002 Wuhan Maritime Court (Nanjing Resources Group v. Tian An Insurance Co. Ltd., Nanjing Branch) 67D [translation available]

Germany 22 August 2002 Oberlandesgericht [Appellate Court] Schleswig 67A [translation available]

* United States 26 March 2002 U.S District Court [Southern Dist. NY] (St. Paul Insurance v. Neuromed) 67A
 

* Germany 13 April 2000 Amtsgericht [Lower Court] Duisburg 67A [translation available]

ICC 2000 International Court of Arbitration, Case 8790 67A [English text]
 

Spain 20 October 1999 Audiencia Provincial [Appellate Court] Alecante 67A
 

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

Finland 29 January 1998 Helsingin hovioikeus [Appellate Court] Helsinki 67A [translation available]

* Switzerland 15 January 1998 Tribunale d'appello [Appellate Court] Lugano 67A [translation available]
 

* Spain 31 October 1997 Audiencia Provincial [Appellate Court] Cortoba 67A

* Switzerland 28 October 1997 Tribunal Cantonal [Appellate Court] Valais

China 18 August 1997 CIETAC Arbitration Award [CISG/1997/26] (Vitamin C case) [translation available]

* Germany 9 July 1997 Oberlandesgericht [Appellate Court] Köln 67D [translation available]

China 25 June 1997 CIETAC Arbitration Award [CISG/1997/16] (Art paper case) 67A [translation available]

Switzerland 12 June 1997 Pretore [District Court] Lugano

Germany 10 June 1997 Landgericht [District Court] Paderborn
 

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

China 6 September 1996 CIETAC Arbitration Award [CISG/1996/42] (Engines case) 67A [translation available]
 

* Argentina 31 October 1995 Cámara Nacional de Apelaciones en lo Comercial [Appellate Court] 67A

China 10 March 1995 CIETAC Arbitration Award [CISG/1995/04] (Wool case) 67A [translation available]
 

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

Hungary 17 January 1994 Budapest Arbitration award Vb 92068
 

* Germany 20 November 1992 Oberlandesgericht [Appellate Court] Karlsruhe (Frozen chicken case) 67A [translation available]

* Italy 19 November 1992 Corte Costituzionale [Constitutional Court] 67A [translation available]

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

CASE DIGEST AND ANALYSIS
-   UNCITRAL's case law digest; and
-   An analysis of CISG jurisprudence

DIGEST OF ARTICLE 67 CASE LAW

1. Article 67 provides rules for when the risk of loss or damage passes to the buyer if the contract of sale involves carriage of the goods.[1] In general, the risk passes to the buyer when the seller hands over the goods to the specified carrier. The risk passes without regard to whether the seller or the buyer has title to the goods [2] or to who is responsible for arranging transport and insurance.[3] The consequence of the passing of the risk on the buyer's obligation to pay is dealt with in article 66. The effect on the passing of risk in cases where the seller commits a fundamental breach is addressed in article 70.

2. Article 67 states a generally-accepted international rule. A constitutional court, hearing a challenge to a similar domestic rule on the ground that it was inconsistent with the constitutional principle of equality, cited articles 31 and 67 of the Convention as evidence of general acceptance.[4]

3. The parties may agree to derogate from the provisions of article 67 (article 6) or may be bound by usages of trade or a course of dealing that derogate (article 9). If the parties' agreement is consistent with article 67, courts frequently cite the article. This is also true when the parties agree on trade terms that address the passage of risk. Decisions have found the terms "CIF",[5] "C & F"[6] and "list price ex works"[7] to be consistent with article 67(1). If the trade term is inconsistent with article 67(1), the parties' agreement prevails in accordance with article 6. Thus, although the goods in the particular case were handed over to a third-party carrier, a court did not apply article 67 in a case where the parties agreed that the goods would be delivered "frei Haus" ("free delivery"), which the court construed to mean that the seller undertook to deliver the goods to the buyer's place of business.[8]

Contracts of sale involving carriage of goods

4. Article 67 does not define when a contract of sale involves carriage of goods. A similar formula is used in article 31 (a), which provides that if the contract of sale involves carriage of goods the seller satisfies its obligation to deliver the goods when it hands them over to the first carrier. Given the identical language in the two provisions, they should be read to cover the same transactions.[9]

5. Article 68 sets out special rules when goods are sold in transit. Therefore, a sale of goods in transit is not a contract 'involving the carriage of goods' within the meaning of article 67.

6. A contract of sale involves the carriage of goods when it expressly or implicitly provides for subsequent carriage. The contract may expressly provide that the goods are to be carried by including details with respect to the manner of carriage. This is often done most efficiently by incorporating trade terms, such as the International Chamber of Commerce's Incoterms (e.g. 'CIF'), that spell out the obligation of the seller to deliver the goods by a carrier. Other terms of the contract may, however, imply that the goods are to be carried. An arbitral tribunal found that the contract involved carriage when a contract provided that 'the buyer shall pick up the fish eggs at the Seller's address and bring the goods to his facilities in Hungary' and the price was stated to be 'FOB Kladovo'.[10]

7. Article 67 refers to the carriage of goods and does not expressly require that the goods be carried by a third-party carrier. One decision assumes that delivery to a freight forwarder is the equivalent of delivery to the 'first carrier'.[11]

Allocation of risk

8. Paragraph (1) of article 67 sets out separate rules for when the seller is not bound to hand the goods over to the carrier at a particular place (1st sent.) and for when the seller is so bound (2nd sent.). In both cases, the risk passes to the buyer when the seller hands over the goods to the specified carrier.

-  Where seller is not bound to hand over goods to carrier at particular place

9. If the seller is not bound to hand over the goods to a carrier at a particular place, the risk of loss or damage passes when the goods are handed over to the first carrier. This rule is consistent with the seller's obligation to deliver the goods as set out in article 31 (a). In the absence of proof that the parties agreed on delivery at another location, one court found that the seller delivered and the risk passed when the seller handed over the goods to the first carrier.[12] Another court found that the risk had passed when a seller that handed over the good to a carrier in a timely fashion and therefore the seller was not responsible for any subsequent delay in delivery.[13]

10. Where the parties agreed that the goods would be delivered 'frei Hause' ('free delivery'), a court construed the term to mean that the seller undertook to deliver the goods to the buyer's place of business even though the goods in the particular case involved carriage. The court therefore did not apply article 67(1).[14]

-  Where seller is bound to hand over goods to carrier at particular place

Retention of documents by seller

12. The third sentence of paragraph (1) provides that the passage of risk under article 67 is not affected by the seller's retention of documents controlling the disposition of the goods. There are no reported decisions interpreting this provision.

Identification of goods

13. Paragraph (2) of article 67 conditions the passage of risk on clear identification of the goods to the contract of sale.[15] This rule is designed to protect against the possibility of a seller identifying lost or damaged goods after casualty. One court found that the requirement that the goods be clearly identified was satisfied by the description of the goods in the shipping documents.[16] Another court noted that the parties to a CIF contract agreed that the risk of loss passed when cocoa beans clearly identified to the contract of sale was handed over to the carrier at the port of shipment.[17]

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. [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>] (plaintiffs' experts wrongly asserted that Convention did not include rules on passage of risk).

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>] (passage of risk and transfer of title need not occur at the same time).

3. CLOUT case No. 247 [SPAIN Audiencia Provincial [Appellate Court] Córdoba 31 October 1997, available online at <http://cisgw3.law.pace.edu/cases/971031s4.html>] (risk passes without regard to who must arrange for transport or insurance).

4. CLOUT case No. 91 [ITALY Corte Costituzionale [Constitutional Court] 19 November 1992, available online at <http://cisgw3.law.pace.edu/cases/921119i3.html>].

5. 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>] (see full text of the decision).

6. 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>].

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

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

9. 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>] (the word 'carrier' means the same in both article 31 and article 67).

10. 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>].

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

12. CLOUT case No. 360 [GERMANY Amtsgericht [Lower Court] Duisburg 13 April 2000, available online at <http://cisgw3.law.pace.edu/cases/000413g1.html>]

13. CLOUT case No. 219 [SWITZERLAND Tribunal [Appellate Court] Valais 28 October 1997, available online at <http://cisgw3.law.pace.edu/cases/971028s1.html>].

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

15. Article 32(1) requires the seller to notify the buyer of the consignment of the goods if they are not otherwise clearly identified.

16. CLOUT case No. 360 [GERMANY Amtsgericht [Lower Court] Duisburg 13 April 2000, available online at <http://cisgw3.law.pace.edu/cases/000413g1.html>].

17. 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>].

Reprinted by special permission of Northwestern University School of Law. 34 Northwestern Journal of International Law and Business (Winter 2004) 299-440.[*]

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A. Passing of Risk

The CISG sets forth the basic principle for the passing of risk in Article 67.[667] A pivotal issue for determining risk is whether the contract requires the seller to hand over the goods. If the seller is not bound to hand over the goods 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.[668] If, however, the seller is bound to hand over the goods 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.[669] In any event, risk of loss does not pass to the buyer until the goods are clearly identified in the contract. [670] Identification can be demonstrated by markings on the goods, shipping documents, notice to the buyer, or other appropriate means.[671] [page 408]

Courts interpreting Article 67 have focused on two issues. The first issue pertains to the consequences of damage or deterioration to goods after they are handed over to the carrier. A number of courts have considered the liability of buyers and sellers in this context. A second issue regards the effect of additional contract terms on the application of Article 67. When risk of loss passes to the buyer pursuant to Article 67, the seller is not responsible for any deterioration or damage to the goods. In B.P. Oil International, Ltd. v. Empresa Estatal Petroleos De Ecuador, [672] the buyer refused to accept delivery claiming that the goods did not conform to the contract specifications.[673] The contract provided that the goods were to be delivered "CFR" and undergo a pre-shipment inspection for conformity.[674] The U.S. Fifth Circuit Court of Appeals found that the goods should have been tested for conformity before risk of loss passed to the buyer at the port of shipment.[675] The court also stated that the general principle in the event of subsequent damage or loss was that the buyer must first seek a remedy against the carrier or insurer. [676]

Issues of the application of Article 67 often hinge on a court's interpretation of contract terms that impact the passage of risk of loss. In one case, a French seller sold goods to a German buyer pursuant to a contract with a clause that it would deliver the goods to a carrier in accordance with its general business conditions of "free delivery, duty-paid, [page 409] untaxed."[677] The dispute arose after the buyer denied that delivery had taken place, even after the seller produced an unsigned receipt with the buyer's stamp.[678] The court held that the clause "free delivery ..." should be interpreted under German law. As such, the seller bore the risk for transportation of the goods.[679] Moreover, the parties' past course of dealings included the seller using its own means of transportation to deliver to the buyer. The court found this to be additional evidence of the parties' intention to pass the risk to the buyer's place of business in Germany. Because the seller was unable to prove that the goods were delivered to the buyer, no passing of risk to the buyer took place, and the seller was not entitled to claim the purchase price.[680] It should be noted that when the risk of loss passes to the buyer pursuant to Article 67, the risk passes irrespective of whether the contract contains a C & F clause [681] or whether the buyer has arranged to insure the goods while they are being transported.[682] [page 410]

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FOOTNOTES

* For a subsequent text on this subject by these authors, see Larry A. DiMatteo, Lucien Dhooge, Stephanie Greene, Virginia Maurer & Marisa Pagnattaro, "International Sales Law: A Critical Analysis of CISG Jurisprudence", Cambridge University Press (2005) 241 p.

[...]

667. CISG, supra note 4, at art. 67.

668. Id. at art. 67(1). See generally, Secretariat Commentary to Art. 67, available at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-67.html> (if the contract specifies the passage of the risk of loss by the use of trade terms or otherwise, Article 67 does not apply).

669. Id.

670. Id. at art. 67(2).

671. Id.

672. 332 F.3d 333 (5th Cir. 2003).

673. Id. at 335.

674. Id. at 338.

675. Id.

676. Id. at 338, (citing In re Daewoo Int'l (Am.) Corp., No. 01-Civ-8205, 2001 U.S. Dist. LEXIS 19796, at *8 (S.D.N.Y. Dec. 3, 2001)). Because there was a question of fact, however, as to whether the seller fulfilled its contractual obligations regarding the specifications of the goods before they passed the ship's rail, the court ordered the district court to permit the parties to conduct discovery on this limited issue. Id. at 339. German courts have likewise held that under Article 67 the seller is not responsible for the depreciation of goods. OLG Schleswig 11 U 40/01, Aug. 22, 2002 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/020822g2.html> [English translation by Veit Konrad, translation edited by Mark Beamish]. Another German court held that a seller is not responsible for subsequent damage to goods once they are handed over to the carrier. AG Duisburg 49 C 502/00, April 13, 2000, (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/000413g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen]. In that case, the court held that Article 67 applied because the buyer was not able to prove that there was an agreement between the parties for risk of loss to pass to the buyer at a different location. A third German court stated that a seller is only liable for a defect if it gave a mandate to the carrier regarding the means of shipment. OLG Schleswig-Holstein 11 U 40/01, Aug. 22, 2002, supra note 676. An Argentina court reached the same conclusion and held that after the risk of loss passed to the buyer, it was obligated to pay the purchase price unless the loss or damage to the goods was due to an act or omission of the seller. CN Buenos Aires 47.448 (Bedial, S.A. v. Paul Müggenburg and Co. GmbH), Oct. 31, 1995 (Arg.), CLOUT Case No. 191, available at [<http://cisgw3.law.pace.edu/cases/951031a1.html>].

677. OLG Karlsruhe 15 U 29/92, Nov. 20, 1992 (F.R.G.), CLOUT Case No. 317, available at [<http://cisgw3.law.pace.edu/cases/921120g1.html>].

678. Id.

679. Id.

680. Id.

681. CN Buenos Aires 47.448 (Bedial, S.A. v. Paul Müggenburg and Co. GmbH), Oct. 31, 1995, supra note 676.

682. Audiencia Provincial de Córdoba [Division 3], Oct. 31, 1997 (Spain), CLOUT Case No. 247, available at [<http://cisgw3.law.pace.edu/cases/971031s4.html>].

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