Presentation of Schweizerisches Institut für Rechtsvergleichung ed., Wiener Übereinkommen von 1980, Lausanner Kolloquium 1984, Zürich: Schulthess (1985) 191-206. Reproduced with permission of the author.
A. General Remarks
Articles 66-70 of the UN-Convention on Contracts for the International Sale of Goods (CISG) contain provisions on passing of risk. Article 66 states the main effect of passing risk to the buyer. Articles 67-69 deal with the time at which the risk passes. Article 70 attempts to explain the relation between passing risk and breaches of contract by the seller. Passing of risk is also touched upon in Article 36.
The purpose of this paper is to describe the contents of these provisions and, to some extent, to explain how and why the provisions are elaborated. The relation between the provisions on passing of risk and certain other parts of the Convention will also be discussed. Finally, the paper contains a description of the results which follow from the application of the provisions on passing of risk in different situations. [page 191]
In order to understand the provisions on passing of risk in CISG, it might be useful to recall how the elaboration of the Convention started. The Working Group within UNCITRAL, which initially elaborated the drafts for the Convention, was entrusted with the task of considering the comments and suggestions of States on the Hague Convention of 1964, in order to "ascertain which modifications of the existing texts might render them capable of wider acceptance by countries of different legal, social and economic systems, or whether it would be necessary to elaborate a new text for the same purpose ...". ULIS was thus a starting point for work on what later became the UN-Convention.
In ULIS the provisions on passing of risk can be found in Articles 96-101 The key concept in these provisions is delivery (délivrance). As a rule, the risk passes when delivery of the goods is made in accordance with the provisions of the contract and the Convention [Article 97(1)]. Delivery is defined in Article 19(1) of ULIS as the handing over of goods which conform with the contract. However, the concept of delivery in ULIS is used not only for purposes of passing risk but also for a number of other purposes. According to Article 35(1), the issue whether the goods are in conformity with the contract shall be determined by their condition at the time when the risk passes, i.e., at the time when goods which conform with the contract are handed over to the buyer. In order to avoid this circle, an exception to the rule of conformity is necessary. Under Article 71, delivery of the goods and payment of the price shall be concurrent conditions.
When the same concept is used for a number of purposes, the concept must be defined in order to meet all these purposes or, alternatively, a number of exceptions to the rules applying that concept must be made. The latter is the case with the rules on passing of risk in ULIS. In order to achieve an acceptable result, a number of exceptions to the main rule had to be introduced.
In the analysis of ULIS, this approach was criticized. Some governments felt that the difficulties arising from the definition of "délivrance" would in turn be sources of difficulty for important transactions such as contracts in which the seller retained control of the goods by a bill of lading.
On the basis of this criticism, the approach adopted in ULIS was further analyzed and an alternative approach was explored. [page 192]
The general conclusion was that it is preferable not to describe passing of risk by using the concept of "délivrance". Instead, the time at which the risk passes to the buyer is described in CISG by reference to commercial events, mainly the physical transfer of possession of the goods. In the Convention this is done by the use of expressions like "handing over" or "taking over" the goods.
3. Risk and delivery
In CISG the concept of delivery is not used in order to describe the time at which the risk passes to the buyer. Nevertheless, there is a close relationship between the provisions on delivery and those on passing of risk.
In Article 31(a), it is stated that if the contract of sale involves carriage of the goods, the seller's obligation to deliver the goods consists in handing the goods over to the first carrier for transmission to the buyer. Under Article 67(1), first sentence, if the seller is not bound to hand the goods 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. If, on the other hand, the seller is bound to hand the goods over to a carrier at a particular place, the risk does not pass until the goods are handed over to the carrier at that place.
The reason why this distinction is made in the provisions on passing of risk but not in the provision on delivery is that the risk for misunderstandings is considerable in the former case but almost inexistent in the latter. As it is by no means impossible to provide that the risk passes to the buyer even before the goods arrive at the place where delivery is to take place, it was thought advisable to state expressly in the Convention that this was not intended.
In other cases the seller's obligation to deliver the goods consists in placing them at the buyer's disposal, Article 31(b) and (c). Under Article 69 the risk passes if the goods have been placed at the buyer's disposal. In addition, however, the buyer must normally also take over the goods. It is not sufficient that the seller has done all that he is expected to do in order for the risk to pass if the buyer does not take over the goods in due time.
The reason is that the provisions on passing of risk have been elaborated in order to correspond to practical needs. The seller is likely to take out insurance covering the goods in his custody, therefore it was thought rational not to link passing of risk to delivery in these cases.
This solution acknowledges the importance of insurance for the formulation of rules on passing of risk. Taking account of the widespread use of marine insurance, passing of risk is today essentially a question concerning the duty to take out insurance to cover the losses that may occur during transmission of the goods [page 193] from the seller to the buyer and the duty to pay for that insurance. In addition, passing of risk is important in determining which of the parties is to settle a claim for compensation with the insurance company under the policy. If the loss is not insured against or not recoverable under the insurance, the rules on passing of risk settle the following questions: which of the parties is to press a claim against the carrier and to bear the financial consequences arising out of the fact that the carrier may not be responsible and what are the limitations on the carrier's liability? Lastly, risk is relevant for determining who has an interest in salvage of damaged goods.
4. Passing of risk and of property
In some legal systems passing of risk is linked to passing of property in the goods sold. This is not the case under the CISG. In Article 4, it is stated that the Convention only governs the obligations of the seller and the buyer arising from the contract of sale. The Convention is not concerned with the effect which the contract may have on the property interest in the goods sold. As the Convention is not concerned with those effects, it is clear that passing of risk cannot be linked to the passing of property. This would have meant linking the passing of risk to an element governed by national law and doing so in different ways in various jurisdictions. The problems related to passing of risk are thus treated separately from the relations between one of the parties to the sales contract and the other party's creditors, as well as similar relations. One of the consequences resulting from this policy is the provision in Article 67(1), last sentence, that the fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passage of the risk.
5. Non-mandatory nature of CISG
One of the corner pillars of the Convention is Article 6. It provides that parties may exclude the application of the Convention or, subject to Article 12, derogate from or vary the effect of any of its provisions. The non-mandatory character of the Convention of course extends to the provisions on passing of risk. The parties are thus at liberty to agree on the passing of risk as it pleases them. This may be done by reference to a trade term or in some other manner. Such a reference constitutes [page 194] a derogation from the Convention in respect of issues dealt with by that trade term. If the goods are sold, e.g., CIF Amsterdam, the parties have thereby decided on the following questions: who is to conclude the contract for carriage, who is to obtain export licenses, who is to insure the goods and on what terms, against which documents is payment to be made, etc.? Such a clause would also provide a rule for the passing of the risk; under rule B3 of the definition of CIF, the buyer must bear all risks of the goods from the time when they shall have effectively passed the ship's rail at the port of shipment. Trade terms other than Incoterms 1980 may be less precise and this may also be the case in respect of passing of risk. Even in cases where the parties have incorporated a trade term into their contract, one may be forced, in extreme cases, to revert to the Convention rules in order to determine at what moment the risk passes to the buyer.
B. Passing of Risk and Breach of Contract
1. Effects of passing of risk
The main provision on the effect of the passing of the risk is Article 66. According to this provision loss of, or damage to the goods after the risk has passed to the buyer does not discharge the obligation to pay the price. Risk is thus described as price risk (Preisgefahr).
If the goods are lost or damaged by accident before the risk has passed to the buyer, the buyer is not liable for the price. In addition, the seller may be liable for damages for non-delivery. This as well as the availability of other remedies for lack of conformity follows from Article 36(1), which states that the seller is liable for any lack of conformity which exists at the time when the risk passes to the buyer. If, on the other hand, the buyer wrongly refuses to accept the goods because they have been damaged, but only after the risk has passed to the buyer, he or she would, under Articles 85-88, be liable for costs caused by the preservation of the goods and probably also for damages because of breach of contract.
On the other hand, this also means that passing of the risk to the buyer does not necessarily mean that the seller is relieved of all duties in respect of the goods as some authors seem to believe. The fact that the risk under the Convention has passed to the buyer does not necessarily mean that the seller may leave the goods unattended where ever they are. The obligations in this respect are determined by Articles 85-88. [page 195]
The main rule in Article 66 does not apply if the loss or damage is due to an act or omission of the seller. The provision of ULIS corresponding to this rule is Article 96.
When the provision that later became Article 66 was first discussed in UNCITRAL, the view was expressed that the latter part of the provision referring to an act or omission of the seller should be deleted as it was too much of a simplification. This proposal was defeated on the ground that even if the risk had passed, the seller could still interfere with the goods and cause loss or damage. The second part of the provision made it clear that the buyer would not have to pay the price to the extent that loss or damage to the goods had been caused by such an act of the seller. The attention in the elaboration of the provision was thus directed towards interference which might take place after the risk had passed.
If this provision is seen in conjunction with Article 36(1), one can observe a basic pattern: if any lack of conformity exists at the time when the risk passes to the buyer, the seller is liable for that defect in accordance with the contract and the Convention. If the goods are lost or damaged after the risk has passed, the buyer is nevertheless under an obligation to pay the price. However, even if such an event takes place after the risk has passed, the buyer may be relieved of his or her obligation to pay the price if the loss or damage is due to an act or omission of the seller. The present rule does not state when the buyer is under such an obligation.
In the latter part of Article 66, reference is made to loss or damage which "is due to an act or omission of the seller".
Different interpretations have been offered as to the contents of this expression. Under one interpretation, the seller is responsible for breaches of contract after the risk has passed. This is certainly true but not necessarily exhaustive. During the deliberations in UNCITRAL on the draft, a proposal was made that the exception to the general rule should operate only if the act or omission on the part of the seller constitutes a breach of contract. However, this proposal was defeated. During the further preparation of the Convention, no one seems to have reconsidered this problem. It would thus seem inaccurate to conclude that the exception is limited to this situation alone.
In the Commentary an example of a situation where the exception should operate is offered, whereby the loss of, or damage to the goods is caused by an act or omission of the seller; this situation does not constitute a breach of the seller's [page 196] obligations under the contract. If the contract were on FOB terms, the risk would normally pass when the goods pass the ship's rail. If the seller causes damage to the goods at the port of discharge while he or she is recovering the containers, the damage to the goods may be considered not a breach of the contract, but rather a tort. The Convention provides that the buyer would, nevertheless, not be obliged to pay the price but would have a right to deduct the damages to which he or she might be entitled, as they would be calculated under the applicable law of tort. Several authors seem to support this view.
There are good reasons for this position. The wording may also cover situations where there is no breach of contract and where the damage was caused after the risk had passed to the buyer and without any fault on part of the seller after the risk has passed. The latter part of Article 66 is not intended to establish a basis of liability but simply to state that there may be other provisions in the Convention or in the applicable law under which the seller may be liable for such damage.
2. Deterioration during carriage
If the goods do not conform to the contract when the risk passes to the buyer, the buyer may exercise the rights mentioned in Article 45. This provision does not give rise to any problems in respect of passing of risk in cases where the defective goods reach the buyer in the same condition prevailing the moment the risk passed to him or her. If the goods deteriorate further while on their way, one may ask whether the additional deterioration is at the risk of the buyer and what effect the further deterioration has on the availability of remedies to the buyer. This problem is dealt with in Article 70. This Article says, "If the seller has committed a fundamental breach of contract, Articles 67, 68 and 69 do not impair the remedies available to the buyer on account of the breach."
This provision seems to lead to the following result. If the defect in the goods does not amount to a fundamental breach, the transferred risk remains with the buyer. The buyer may thus reduce the price under Article 50 or require the seller to remedy the lack of conformity by repair under Article 46(3), but only to the extent that the lack of conformity existed already at the time when the risk passed. The seller would be under an obligation to remedy only the defect that existed at that time, but not the defect that had occurred during the carriage. [page 197]
If, on the other hand, the defect which existed when the risk passed to the buyer does amount to a fundamental breach, the fact that the risk has passed does not impair the remedies available to the buyer. Destruction or further deterioration of the goods by accident after the risk has passed does not affect the buyer's right to request substitute goods or to avoid the contract. This seems to be the case irrespective of whether the parties at that stage are aware of the fact that the breach is fundamental. As Article 70 does not refer to the buyer's right to avoid the contract but rather to a fundamental breach, it seems irrelevant whether the seller has requested the buyer to remedy the defect; the seller thus loses his or her right to avoid the contract during the repair if the repair fails. If, on the other hand, the repair is successful, one would have to consider at what stage the defect ceased to amount to a fundamental breach. The risk can obviously not remain with the seller eternally if the buyer accepts the goods, irrespective of the fact that there was a fundamental breach, or that the right to rely on that breach was lost because of the lapse of the time stated in Article 39(1) or (2). The Convention does not give an answer to the question at what moment the buyer loses his or her right to rely on the remedies otherwise available and to make the seller bear the loss which happened after the risk had passed.
The questions dealt with in Article 70 are not questions of passing of risk. They were better solved in Article 82(2)(a), which deals with the right to avoid the contract irrespective of impossibility to make restitution for the goods.
C. When Does the Risk Pass?
Articles 67-69 deal with the time at which the risk passes from the seller to the buyer. Three main situations are distinguished: first, where "the contract of sale involves carriage"; second, where the goods are sold "in transit"; and third, all other situations.
1. Contracts involving carriage
Article 67 deals with situations where the contract of sale involves carriage of the goods. This expression covers situations where the seller is either required to ship the goods or authorized to ship them and actually does so. Shipping means handing over the goods to someone who has undertaken to transmit them to the buyer. The contract does not involve carriage if the buyer takes delivery of the goods at the seller's place of business. even if the goods may be shipped by an independent [page 198] carrier from that place, provided the seller is in no way involved in the arrangement of that carriage. The importance of this Article is diminished considerably by the use of trade terms defining the time at which the risk passes.
In Article 67, two different situations are distinguished. In the first situation, no particular place for handing over the goods has been specified. According to Article 67(1), first sentence, the risk passes when the goods are handed over the first carrier for transmission to the buyer, at the seller's place of business. If the goods are to be transported from Lausanne by rail to Marseille, from there by ship to New York and by road to Detroit, the risk would normally pass to the buyer when the goods are handed over for carriage in Lausanne.
In the second sentence of Article 67(1), the situation is discussed where the seller is bound to hand the goods over to a carrier at a particular place. In the example mentioned above, one could envisage that the contract specifies either that the seller shall hand over the goods to a sea-carrier in Marseille, or, alternatively, to a road-carrier in New York. Under the second sentence the risk would pass when the goods are handed over to the sea-carrier or the road-carrier, as the case may be.
The words hand over to a carrier employed in the Convention are not very specific.
Although the text is not explicit, it should be clear that the risk does not pass to the buyer during a carriage which the seller executes with his or her own vehicles; carrier means independent carrier. The seller cannot "hand over" the goods within the same legal entity. If the seller's company has its own department of transportation, the risk does not pass when the goods are handed over to that department. In the example mentioned above, if the seller takes the goods to the railway station on his or her own trucks, the goods have not been handed over to a carrier until they have been handed over to the railway.
The risk passes only if the transport operations are carried out by a separate legal entity. This requirement is also fulfilled if the goods are handed over by a State trading organization to a State carrier.
The expression "carrier" signifies a party which has undertaken to carry the goods. A forwarding agent who has undertaken only to organize the carriage as an agent for the seller would not be a carrier for these purposes. In practice the difficulties encountered in finding the borderline between a carrier and a forwarding agent will probably extend to the question of passing of risk. [page 199]
Another uncertainty might arise from the fact that there is no reference in the text to an interlocal carriage. In the example used above, this might be interpreted to mean that the risk passes when the goods have been handed over to the first carrier, even when they have been handed over to a local road-carrier engaged by the seller to take the goods from his or her premises to the railroad. In the Scandinavian Sale of Goods Act, Sec. 9, this problem has been solved by adding a provision which states that the risk passes only when the goods are handed over to a carrier for an interlocal carriage.
Under Article 67(1), the risk passes when the goods have been handed over to a carrier. This language may or may not coincide with the language in international Conventions and national laws on the period of carriers' responsibility. Under the CMR-Convention on the Contract for the International Carriage of Good) by Road, Article 17(1), the carrier shall be liable for loss of the goods occurring between the time when he or she takes over the goods and the time of delivery. "Taking over" in this context seems to correspond to the time when the risk passes, if the goods are handed over to a road-carrier. Under Article 4(1) of the Hamburg Rules on Carriage of Goods by Sea, a sea-carrier's responsibility for goods covers the period during which, the carrier is in charge of the goods at the port of loading, during the carriage and at the port of discharge. According to paragraph 2 of that Article, the carrier is deemed to be in charge of the goods from the time he or she takes over the goods either from the shipper or from an authority or another third party to whom, pursuant to law or regulations applicable at the port of loading, the goods must be handed over for shipment. It follows from this provision that the time when the risk passes would normally correspond to the time from which the carrier is responsible for the goods; this does not necessarily happen in all cases, however.
The implications of this situation may be of interest in two respects. First, there is a period of time during which bearing the risk would mean that in case of a loss, there would be no possibility of an action against a carrier. In view of limitations on the carrier's liability both in terms of titles of loss and in monetary terms, this does not seem to be a major issue. The second problem is that the carrier's duty to inspect goods refers to a time different from that when the risk passes from the seller to the buyer. The advantage of having a third party's statement as to the quantity and condition of the goods at the time when the risk passes is thus lost in these cases.
Article 67(1) does not specify the exact moment at which the risk passes to the buyer, nor do the provisions on the period of responsibility of the carrier. Does carrier take over the goods when the loading starts or when it is finished? This may cause difficulties as goods often are damaged during loading operations.
In contrast to Article 69(1), Article 67(1) does not deal separately with the situation where there is a delay in handing goods over to a carrier and this delay is due to the buyer. If the buyer should nominate a carrier but does not, or if the [page 200] carrier nominated is delayed and the goods cannot for that reason be handed over, it would seem that the risk remains with the seller. This might seem surprising. However, this situation does not seem to have caused difficulties under Incoterms, where there is a similar gap.
According to the last sentence of Article 67(1), the fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passage of the risk. The idea is that the risk shall pass when the goods are handed over to the first carrier even if the buyer acquires the bill of lading or consignment note controlling the disposition of the goods at a later stage. The provision was thought useful in view of the fact that the passing of risk in certain legal systems is linked to the delivery to the buyer of documents controlling entitlement to the goods.
The Convention does not specify what happens if the seller decides to redirect the goods to an agent or to another buyer, nor does any trade term. It would seem to follow from Article 71(2) that if this is done because of a deterioration of the buyer's capability to perform, such an act would not affect the risk. If the goods are destroyed after such a redirection, the buyer would not be relieved of his or her obligation to pay the price. If, on the other hand, the seller has misjudged the buyer's ability to perform, redirecting the goods in such a manner would probably amount to a fundamental breach of the contract. However, this situation could not conveniently be described as a loss due to an act of the seller, cf. Article __ in fine.
Even if the goods are handed over to a carrier, the risk does not pass to the buyer under Article 67(2) unless the goods are identified under the contract. This provision mentions some ways to identify the goods under the contract including markings on the goods, shipping documents, notice to the buyer, etc.
The requirement of identifying the goods under the contract is satisfied if, for example, 500 out of 1,000 cases of oranges carry a mark stating that they are intended for a specific buyer. Usually this fact would also appear in the shipping documents. The requirement would also be satisfied if the shipping document states that a specific container is to be delivered to buyer A. It would, on the other hand, be doubtful whether the requirement would be satisfied if the goods -- x cases of oranges -- in one container are intended for three different buyers without the seller having specified which cases are intended for which buyer. If all the oranges were damaged, one could argue, of course, that there is no doubt that the goods identified under each of the contracts have suffered damage and there would be little difficulty in allocating that loss to each of the three buyers. The [page 201] situation becomes less clear if only a part of the goods has been damaged For these reasons, it seems doubtful whether the identification of the goods in a number of contracts is sufficient for the purposes of Article 67(2). It would not be sufficient that the buyer received a notice that his or her goods are -- together with similar goods for a number of other buyers -- onboard a named ship or that they have arrived at a port where they may be picked up, unless the goods themselves have been marked or set aside for that specific buyer.
If goods are shipped in bulk to several buyers, they are not sufficiently identified under the Convention such that the risk would pass. If the shipment is divided while on its way and identified for specific buyers, this would probably result in the risk passing to the buyer.
2. Goods sold in transit
Article 68 deals with goods sold in transit. The main rule under this provision is that the risk in respect of goods sold in transit passes to the buyer from the time of the conclusion of the contract. If the circumstances so indicate, the risk is, however, assumed by the buyer from the time the goods are handed over to the carrier who issued the documents embodying the contract of carriage.
Article 68 applies in cases where the parties at the time of the conclusion of the contract were aware of the fact that the goods are in transit. In the cases envisaged in the Article, the parties to the contract of sale would normally create an obligation for the carrier to hand over the goods to the buyer instead of the seller at a specified destination. This is normally done by transferring to the buyer the bill of lading issued for the goods. However, the provision extends beyond goods carried under a bill of lading. There is no requirement in Article 68 that the document must be a negotiable one. The provision is also applicable to carriage under an international consignment note of the kind used in carriage by rail and or road in Europe. In these cases the carrier is under an obligation to deliver the goods to the consignee named in the consignment note. The holder of the relevant copy of the consignment note may, however, on presentment of that copy, instruct the carrier to deliver the goods to another person.
Whether the provision may also be applied in cases where no traditional paper document is issued for the transport is uncertain. If under the applicable national law an entry into an ADP-record is considered to be a document, Article 68 might be applied to sale of goods afloat where the sale is registered in such a manner.
The provision embodied in Article 68 caused considerable disagreements during the elaboration of the draft. The last reformulation took place at a very [page 202] late hour during the Diplomatic Conference. The result that was achieved gives rise to uncertainty.
The main problem that the provision intends to solve is the following: if the risk passes to the buyer at the time of the conclusion of the contract, one would have to establish the condition of the goods at that stage. If the goods upon their arrival at the port of discharge are found to have been damaged by seawater, the question arises whether the damage was caused before or after the conclusion of the contract. As the goods at that stage were onboard the ship, this is difficult to establish. The rule may therefore give rise to litigation. For these reasons an exception to the main rule was introduced. This exception, which contains an expansion of the corresponding -- and only -- rule in ULIS Article 99, leads to the result that the risk passes to the buyer retroactively from the time when the goods were handed over to the carrier who issued the document embodying the contract of carriage. When buying goods afloat, the buyer according to this rule assumes the risk as from a moment prior to the conclusion of the contract. The exception is modified by the provision that if the seller, at the time of the conclusion of the contract, knew or ought to have known that the goods had been lost or damaged but does not disclose this fact to the buyer, the loss or damage is at the risk of the seller.
The exception solves the problems relating to proof as the parties normally may establish the condition of the goods at the time they were handed over to that carrier.
According to Article 68, the exception is to be applicable "if the circumstances do indicate". This may not only produce litigation but also lead to different interpretations of the rule in different parts of the world. If the buyer has accepted a list of documents including, e.g., a bill of lading or an insurance policy payable to the order of the assured and endorsed by the seller, it might be appropriate under the circumstances to indicate that the buyer has assumed the risk for the whole period of transport by the carrier in question. However, it is still preferable for the parties to specify in their contract the moment at which the risk passes to the buyer in order to avoid the uncertainty caused by the provision.
3. Other situations
In international trade the cases covered by Articles 67 and 68 are probably the most important ones, and they have received detailed treatment in the Convention. The remaining situations are dealt with in Article 69 of the Convention. [page 203] This provision covers the case where the buyer is to take over the goods at the seller's place of business, i.e. where it does not follow from the contract that the goods are to be handed over to a carrier. It also covers the situations where the goods are to be handed over to the buyer at a warehouse which is operated by an independent party. In addition, Article 69 governs the cases where the seller has undertaken either to deliver the goods to an intermediate point during the carriage, e.g., at the port of discharge where the goods are to be carried on to the buyer's place of business, or to deliver them at the buyer's place of business.
Of these four situations, the first one is dealt with in Article 69(1). All the others fall under the provisions of Article 69(2).
According to Article 69(1), when the goods are to be delivered at the seller's place of business, the risk passes to the buyer when he or she takes over the goods. If this is not done in due time, the risk passes from the time when the goods having been identified under the contract, are placed at his or her disposal; the buyer commits a breach of contract by failing to take delivery.
If delivery is to take place on a specific date, e.g. November 18, and the buyer takes over the goods on that date, the risk passes when the goods are actually accepted. If there is a delay on the part of the seller -- i.e. the buyer is prepared to take over the goods, but the seller is incapable of delivering them on that date -- the risk remains with the seller until the buyer takes over the goods. The Convention seems to provide that if the seller should have delivered the goods on November 18, but is capable of delivering only on November 26, and the buyer actually takes over the goods on November 29, after being informed that the goods are available, the risk passes when the goods are actually taken over by the buyer, i.e., on November 29.
If, on the other hand, the buyer takes over the goods before the agreed date of delivery, the risk passes to the buyer when he or she takes over the goods. The Convention does not address the additional question: what happens in respect of the risk if the seller in such a case wishes to remedy a lack of conformity in the goods and they are returned for that purpose?
If the buyer delays and does not take over the goods on the agreed date of delivery, i.e. November 18, the risk passes on that date provided the seller has identified the goods under the contract and has placed them at the buyer's disposal by the agreed time.
If delivery is to take place during a specified period of time, e.g., in November, and the buyer takes over the goods on November 20, the risk passes when the goods are taken over. If the buyer has not taken over the goods before November 30, the risk passes on that day because the buyer is in breach of contract on December 1; again it is assumed that the goods are identified under the contract and placed at the buyer's disposal at the specified time. [page 204]
Placing the goods at the buyer's disposal means that the seller must have done what is necessary in order for the buyer to be able to take possession of the goods. Pre-delivery preparation of the goods, such as packing in accordance with the requirements of Article 35(2)(d), etc., must have been completed.
According to Article 69(2), if the buyer is bound to take over the goods at a place other than the place of business of the seller, the risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his or her disposal at that place. According to this provision, the buyer must have actual knowledge of the fact that this the goods are placed at his or her disposal. This requirement does not necessarily mean that this information must come from the seller. It would seem sufficient if the buyer has received a notice of the arrival -- or even expected arrival -- of the goods from the carrier or from the seller.
In this context, placing the goods at the disposal of the buyer may mean that the buyer is authorized to withdraw the goods from the terminal or warehouse where they are stored; This can be done by handing over a warehouse receipt to the buyer. In other cases it might be sufficient if the warehousekeeper is informed in some other manner that the buyer is entitled to the goods.
If the requirements of Article 69(2) are met -- delivery is due and the buyer is aware of the fact that the goods are at his or her disposal -- the risk passes irrespective of whether he or she actually takes possession of them.
One may conclude, first, that the Convention does not eliminate the need for the parties to solve questions relating to passing of risk by reference in their contract to an adequate trade term. By including such a reference in their contract, they may also find a solution which fits the means of transportation they envisage.
Secondly, one may conclude that the Convention obviously could be more clear, that it could have solved problems which have now been left unsolved, and that other solutions could have been chosen. In passing judgment, it might be useful to bear in mind that a number of different solutions were certainly tested during the elaboration of the Convention and at the Diplomatic Conference, but without success. Others were never tested and the question remains unanswered whether they would have received a more favourable treatment by the Conference. In addition, one must recall that a Diplomatic Conference always works under pressure and this is something we shall have to live with. Finally, the opinion that the Convention might have been better is not only trivial but also of little interest. It is not likely that any international organization is going to start preparations of a new international convention on sales within the next decade. [page 205]
The interesting issue is rather whether the solutions embodied in the Convention represent an improvement in comparison with the present law. When considering this issue, lawyers in different parts of the world tend to compare the Convention to their own well known legal systems. With respect, that is not the point. The point is that the Convention constitutes an improvement upon the rules of other legal systems. If in making this comparison, you find yourself in difficulties because you do not know American, Soviet, Chinese, Nigerian or Finnish law, you actually have a good case for ratifying the Convention. [page 206]
1. Report of the United Nations Commission on International Trade Law on the Work of its Second Session (1969), para. 38, UNCITRAL I Yearbook 99.
2. Analysis of replies and comments by governments on the Hague Conventions of 1964 para. 141-143, UNCITRAL I Yearbook 175.
3. "Delivery" in the Uniform Law on the International Sale of Goods (ULIS): report of the Secretary-General, UNCITRAL III Yearbook 31.
4. Progress report of the Working Group on the International Sale of Goods on the Work of its Third Session, Annex II, para. 17, UNCITRAL III Yearbook 84.
5. Cp. Heliner, Tidskrift for Rettsvitenskap 1983, p. 455, footnote 19.
6. Delivery in the Uniform Law on the International Sale of Goods (ULIS), UNCITRAL III Yearbook 32, Lando, Udenrigshandelens kontrakter, 3 ed., København 1981, 268 Roth, The Passing of Risk, 17 Am. J. Comp. L. 1979, 291 (Roth), Honnold, Uniform Law for International Sales, Deventer 1982, 367 (Honnold).
7. Commentary on the Draft Convention on Contracts for the International Sale of Goods prepared by the Secretariat, A/Conf. 97/5, United Nations Conference on Contracts for the International Sale of Goods. Official Records, 63. References to the commentary are made below to the commentary as printed in the Official Records. See also Roth 192.
8. The commentary, Official Records p. 63.
9. Huber 453, Schlechtriem 78.
10. Huber 453, Roth 291-292.
11. de Vnes, European Transport Law 1982, 497.
12. Report of Committee of the Whole I relating to the draft Convention on the International Sale of Goods, para. 527-529, Annex I to the Report of UNCITRAL on the Work of its Tenth Session, UNCITRAL VIII Yearbook 62-63.
13. Honnold 362.
14. Report of Committee of the Whole I relating to the draft Convention on the International Sale of Goods, para. 531-532, UNCITRAL VIII Yearbook 63.
15. The Commentary 63-64.
16. Hartley, A Study of The Uniform Law on the International Sale of Goods including the Uniform Law on the Formation of Contracts for the International Sale of Goods (The Hague Convention 1964) and the Draft Convention on Contracts for the International Sale of Goods prepared by the United Nations Commission on International Trade Law, 8.03, and Schlechtriem, Einheitliches UN-Kaufrecht. Tübingen 1981, 79.
17. Roth 302.
18. Cp. Roth 303.
19. Schlechtriem 79, footnote 347.
20. The Commentary, Article 79, para. 2, Official Records 64.
21. Honnold 368; Honnold, Risk of Loss, in International Sales: The United Nations Convention on Contracts for the International Sale of Goods, 1984, p. 8-10, Schlechtriem 80.
22. Huber, Der UNCITRAL-Entwurf eines Übereinkommens über Internationale Warenkaufverträge, Rabels/43 (1979) 454.
23. Roth 308. A proposal for a similar situation was made during the Diplomatic Conference, but was defeated, see Report of the First Committee, Article 81, para. 3, Official Records 128 and 406-407.
24. Commentary Article 69, para. 9, Official Records 64.
25. Report of Committee of the Whole I relating to the draft Convention on the International Sale of Goods, para. 542-543, UNCITRAL VIII Yearbook 63.
26. Official Records 403-406, 213-218. Eörsi, A propos for the 1980 Vienna Convention on Contracts for the International Sale of Goods, 31 Am. J. Comp. L. (1983) 352.
27. Roth 298-299 criticizes an earlier version of the text.
28. Eörsi 352.
29. Honnold 372.
30. Cp. The Commentary Article 81, para. 3, example 81C, Official Records 65.