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Reproduced with the permission of Oceana Publications

excerpt from

INTERNATIONAL SALES LAW

United Nations Convention on Contracts for the International Sale of Goods

Convention on the Limitation Period in the International Sale of Goods

Commentary by
Prof. Dr. jur. Dr. sc. oec. Fritz Enderlein
Prof. Dr. jur. Dr. sc. oec. Dietrich Maskow

Oceana Publications, 1992

Article 69 [Passage of risk in other cases]

[TEXT OF THE UNIFORM LAW]

(1) In cases not within articles 67 and 68 [1], the risk passes to the buyer when he takes over the goods [2] or, if he does not do so in due time [3], from the time when the goods are placed at his disposal [4] and he commits a breach of contract by failing to take delivery [5].

(2) However, if the buyer is bound to take over the goods at a place other than the place of business of the seller [6], the risk passes when delivery is due [7] and the buyer is aware of the fact [8] that the goods are placed at his disposal at that place [9].

(3) If the contract relates to goods not then identified [10], the goods are considered not to be placed at the disposal of the buyer until they are clearly identified to the contract [11].

[WORDS AND PHRASES, CONCEPTS

1. in cases not within articles 67 and 68
2. the risk passes to the buyer when he takes over the goods
3. or if he does not do so in due time
4. from the time when the goods are placed at his disposal
5. and he commits a breach of contract by failing to take delivery
6. however, 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
7. the risk passes when delivery is due
8. and the buyer is aware of the fact
9. that the goods are placed at his disposal at that place
10. if the contract relates to goods not then identified
11. the goods are considered not to be placed at the disposal of the buyer until they are clearly identified to the contract ]

[COMMENTARY]

[1] [in cases not within articles 67 and 68 ]

The cases referred to here cover instances in which carriage of the goods is not planned (Article 67) and in which no transiting goods are to be sold (68). Therefore, those cases are covered in which the buyer fetches the goods (corresponds approx. to the Incoterms clause "Ex works"). A distinction is made insofar whether:

  -     the buyer fetches the goods at the place of business of the seller (Article 69, paragraph 1, which corresponds to the place of delivery under Article 31, subpara. (c),
  -     or fetches them at another place (Article 69, paragraph 2, which corresponds to the place of delivery under Article 31, subpara. (b).

Those cases are also taken into consideration where the seller hands the goods over to the buyer (there is no respective Incoterms clause because a different rule governs the risk bearing for "carriage paid to" and "carriage and insurance paid to").

[2] [ the risk passes to the buyer when he takes over the goods ]

     [2.1] Unlike in paragraph 2, the actual taking over of the goods by the buyer is requested and not only the creation of the relevant conditions by the seller.

     [2.2] Here, where the buyer is required to act, the "taking over" is mentioned. Whereas Articles 67 and 68, which want to stress the seller's activities, refer to the "handing over" (Article 67, note 5). The processes in both cases are very similar.

[3] [ or if he does not do so in due time ]

The taking over is done in due time when, in the case where no information is necessary (note 4.3.), it is done within the planned time for fetching the goods and, in the opposite case, within a reasonable time after the information on the intended, provided it was indeed made available, or real placing of the goods at the buyer's disposal. This applies under the condition that the goods are not made available before the admissible time. When the buyer does not comply with this time and/or the contractually agreed time, he will not take over the goods in due time. The risk, nonetheless, [page 274] passes to him. The passing of the risk occurs also when in the event of the late placing of the goods at the buyer's disposal, the goods cannot be taken over in due time, unless the seller exercises his right to avoidance.

[4] [ from the time when the goods are placed at his disposal ]

     [4.1] The placing at the disposal presupposes that the goods can be identified to the contract (notes 10 and 11). The goods have to be ready to be fetched.

     [4.2] Although it is not prescribed that the goods have to conform with the contract, the seller cannot, in our view, by tendering an aliud, cause the risk to pass. He must place the goods at the disposal of the buyer at the envisaged place.

     [4.3] According to the formulation in paragraph 1, the placing of the goods at the disposal of the buyer does not necessarily include information on it. Cases are indeed thinkable where the information can be left out, for instance when in the contract the following is agreed: "Pick up of the goods at the seller's from May 15 to May 31, 1990." Where there is no concrete date agreed for picking up the goods and/or having them ready for pick up, a relevant information must be regarded as part of the placing at the disposal of the buyer, for the latter cannot reasonably be expected to have a means of transportation ready over a longer period of time or to come more than once.

Whether or not a required information needs to reach the addressee is not said here, unlike in paragraph 2, so that there is a choice between the general rule of Article 27, according to which dispatch is sufficient, or the analogy to paragraph 2. Because of the similarity of the problems and because in the event the goods are with the seller himself even greater demands can be made on the latter as when they were in a different place, we are in favour of an analogy. However, it has to be taken into account that this only refers to the effect of the information in regard to the passing of the risk. Where there are other consequences tied to it, e.g. the information in due time is a condition for complying with the time for delivery, the general rule of Article 27 applies.

[5] [ and he commits a breach of contract by failing to take delivery]

     [5.1] The term of taking delivery is taken up here which pursuant to Article 60 is broader than the term of taking over. But the former, too, does in no way cover all obligations of the buyer and, in particular, a breach of the obligation to pay the price, which de facto leads to the non-taking delivery of the goods, cannot be subsumed under not taking delivery. The problems involved here have been expounded above all in German publications (Schlechtriem, 83; von Hoffmann/Dubrovnik, 295; Hager/Freiburg, 401). [page 275]

We believe that the requirement of taking over and/or taking delivery embraces that the buyer creates all the conditions that are necessary for it. This, of course, includes that he provides the means of transportation, and, if so agreed, that the one picking up the goods brings along cash or a cheque or a guarantee (Nicholas/BB, 507, holds a different view). In our opinion it is decisive, therefore, that the act itself of handing over the goods is thwarted by the buyer displaying a non-conforming conduct, even if this does not constitute a breach of the obligation to take delivery in the strict sense. The buyer has no possibility for exemption because of impediments (Article 79). Having the consequence of deferring the passage of the risk because those impediments would only exempt from the payment of damages (Article 79, paragraph 5 -- Schlechtriem, 83). But the buyer could well rely on failure of the other party under Article 80, e.g. wrong information on the placing at the disposal of the buyer.

However, it goes too far in our view when Hager (Freiburg, 401) wants to infer from Article 69, paragraph 1, in connection with Article 7, paragraph 2, the general principle that the risk passes on to the buyer always when the seller, because of non-conforming conduct of the buyer, cannot cause the passing of the risk under the general rules. The requirement of identification under paragraph 3 would in any case have to be complied with, which in many cases would lead to the thwarting of reliance on the passage of risk in the event of many breaches of contract by the buyer. But what is to become of the placing of the goods at the disposal of the buyer? Must the seller place the goods at the disposal of the buyer declaring at the same time that the buyer must not get them before he has, for instance, opened up an agreed letter of credit? When is the risk to pass, always provided that the goods are identified to the contract? When should the letter of credit be opened up, at the beginning of the time for delivery? At its end? There is no well-founded answer to all of these questions, and this is not coincidence. The passing of the risk is no sanction which can be used to react to all breaches of contract by the buyer. This would greatly overstretch the functions of this legal institute. Besides, the seller would not be helped. Because of the passing of the risk, the goods might not be protected by his insurance. To stick to the example, the buyer who has not opened up a letter of credit, has not yet entered into an insurance for the goods. When they are destroyed, the seller has claims under the law of contract, but their assertion will often be very uncertain when there are problems already in regard to the opening up of the letter of credit. The CISG does contain a sufficient number of appropriate sanctions for breaches of the obligations of the buyer. [page 276]

     [5.2] The risk passes, in our view, at the latest when a surrogate, like in particular storage or deposit, replaces the taking over by the buyer. In the event of a re-sale by the seller, the new owner takes the risk.

[6] [however, 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 ]

This case differs from that of Article 67, paragraph 1, sentence 2, in that the seller does not have to hand over the goods at a particular place, but that he only needs to place them at the disposal of the buyer. This applies to Ex works deliveries when the plant is not located at the place of business of the seller, hence when the goods manufactured in several factories are sold by specialized sales companies. Other examples include Ex ship and Ex quay deliveries like those starting at the storage facility. We are of the opinion that the buyer can have himself represented by a carrier when taking over the goods. For Bucher (Lausanne, 215) it is exactly the fact that the buyer himself acts, which is the decisive criterion for the application of this provision; otherwise, he would want to rely on Article 67. We fail to see any reason why personal acting should be required here because the CISG generally allows the inclusion of third parties.

There is a problem in deciding whether FOB deliveries should be covered by this rule. Hager (Freiburg, 401) seems to proceed on this assumption, and Nicholas (BB, 506 fol) has, in our view contrary to earlier explanations (491), provided extensive grounds for it. They take into consideration, above all, that the risk would not pass in applying Article 67 when the buyer fails to provide the hold needed. This is indeed a hardly desirable result and, in regard to such questions, it would be useful if the Incoterms were supplemented by the Convention. Therefore, we are in favour of the solution offered in note 7.3. of Article 67.

[7] [ the risk passes when delivery is due ]

The becoming due follows from Article 33 which, on its part, refers to the contract in the first place. Nicholas (BB, 506) following Roth (306) rightly points out that where the goods are placed at the buyer's disposal before delivery is due, the risk is passed when the buyer takes over the goods, hence not, as we would wish to add, where he has received the goods only in order to meet his obligation to preserve them (Article 86 fol).

[8] [ and the buyer is aware of the fact ]

Positive knowledge is therefore required. This means, on the one hand, that in deviation from the general rule of Article 27, dispatch of the notice is not sufficient to cause the passing of the risk. On the other hand, it has to be proceeded on the assumption that a notice which was received in the meaning of Article 24 suffices, even when exceptionally it has not informed the buyer. Article 24, which expressly relates to the conclusion of the contract, thus has to be applied [page 277] by analogy to other cases where the receipt or similar conditions are required.

The information can in our view also refer to a future placing at the disposal, but would then naturally cause the passing of the risk only when the goods are indeed placed at the disposal of the buyer. Pursuant to the general provisions of the CISG, the seller is responsible for the correctness of the information.

Notice does, of course, not necessarily have to be given by the seller, but can also originate from the carrier or the warehouse keeper, etc. (Sevón/Lausanne, 205).

[9] [ that the goods are placed at his disposal at that place]

Apart from the factory where they are manufactured, the goods will be placed at the disposal of the buyer very often in a warehouse. Notice of it can be given by handing out a relevant document relating to the goods (warehouse certificate) or also other documents, probably a delivery note which only instructs the warehouse keeper to deliver. The view has been expressed in publications that, in the former case, the risk passes when the documents are handed over; in the latter, however, only when the warehouse keeper declares that he wants to follow the instruction (Hager/Freiburg, 400). This differentiation is not supported by the CISG, as we believe. It would amount to adding, in certain cases, a fourth to the three conditions under the Convention for the passing of the risk (becoming due, placing at the disposal, including identification, and notice). When the manufacturer or the warehouse keeper refuses to hand the goods over to the buyer, they will not have been placed at the latter's disposal. The risk has, therefore, not passed even when a document relating to the goods has been handed over.

[10] [if the contract relates to goods not then identified ]

Identification is basically a form of attribution of the goods to the contract. It is done by separating the goods in question from the rest of the goods. The separated goods are clearly identifiable, in particular, because their quantity corresponds to the quantity that was agreed in the contract and because they may be marked with the name of the buyer. Frequently, there are also other identification features.

[11] [ the goods are considered not to be placed at the disposal of the buyer until they are clearly identified to the contract]

Compare Article 67, notes 9 to 13.

There was a specific article contained in ULIS (98, paragraph 3) which referred to non-selectable unascertained goods (in particular Neumayer/Dölle, 640 fol). We hold that under these circumstances the rules developed in note 13.2. of Article 67 should be applied to the passage of the risk where the goods are not taken over and/or placed at the disposal of the buyer. This means, in particular, that [page 278] in the event of the destruction of part of the goods, the defaulting buyers, have to bear, possibly pro rata, the risk in regard to the price and performance.

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Pace Law School Institute of International Commercial Law - Last updated September 25, 2002
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