Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 238-244. Reproduced with permission of the publisher, Kluwer Law International, The Hague.
§ 207 When the contract (interpreted in the light of practices and usages) does not state where the seller should deliver the goods, the question is answered by the present article.
The place for delivery, in addition to determining the duties of the parties, in several jurisdictions may also provide a basis for jurisdiction: E.g., the EC Convention on Jurisdiction and the Enforcement of Judgments (Brussels, 1968).
"If the seller is not bound to deliver the goods at any other particular place, his obligation to deliver consists:
(a) if the contract of sale involves carriage of the goods—in handing the goods over to the first carrier for transmission to the buyer.
(b) if, in cases not within the preceding subparagraph, the contract relates to specific goods, or unidentified goods to be drawn from a specific stock or to be manufactured or produced, and at the time of the conclusion of the contract the parties knew that the goods were at, or were to be manufactured or produced at, a particular place—in placing the goods at the buyer’s disposal at that place;
(c) in other cases—in placing the goods at the buyer’s disposal at the place where the seller had his place of business at the time of the conclusion of the contract."[page 238]
§ 208 A. Place for Delivery in Specific Settings
All sales involve movement of goods, at the very least by the buyer’s removal of the goods he has purchased. Article 31(a), however, is applicable only to contracts that involve "carriage." This refers to transport by a "carrier" to which the seller "hands the goods over" for "transmission to the buyer." This language shows that "carrier" does not include transport facilities, such as delivery trucks, operated by the parties. (This point is developed further in connection with rules on risk of loss. See Art. 67, infra at §368.)
Normally the contract will refer to the use of a carrier; in other cases the distance that separates the parties and their practices will often show that the contract involves the use of a "carrier." In these transactions, paragraph (a) applies and the seller completes its contractual obligation with respect to delivery by "handing the goods over to the first carrier for transmission to the buyer."
As we shall see (infra at §210), the question whether a party has complied with its contractual obligation is distinct from the allocation of loss from fire, theft or other casualty. However, when the seller dispatches the goods by carrier the rules on contract performance correspond closely to the Convention’s rules on risk of loss. Thus, Article 67(1) provides: "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..."
These rules reflect mercantile practice. As we shall see in greater detail in the commentary to the rules on risk of loss in Chapter IV (Arts. 66–77, infra at §§360-419), even when the seller undertakes to pay the freight costs to destination under "C.I.F." and "C. & F." ("CFR") quotations, it has long been settled that the seller both completes his delivery duties and transfers risk to the buyer when the goods are (at the latest) loaded on the carrier. And the 1990 version of Incoterms reflects modern transport practices by providing that even though the seller undertakes to bear transport costs under a quotation "Carriage Paid to..." ("CPT"), the seller completes its duties as to delivery (and transfers risk to the buyer) when the seller delivers the goods "into the custody of the first carrier." A similar approach is reflected in the definition of the important term—"Free Carrier...(named place)" ("FCA").[page 239]
Practical considerations underlie these rules. Damage in transit usually is discovered only when the goods arrive and are unpacked; at this point the buyer (especially in international shipments) is in a better position than the seller to salvage the goods and to file a claim against the carrier or the insurer. The provision that the seller’s responsibility is not discharged until he has "handed over" the goods to the carrier (as contrasted with leaving the goods on an unattended dock pending arrival of the carrier) means that the seller remains responsible until the carrier has taken possession of the goods and thereby has assumed some responsibility for them.
These basic rules are also embodied in the Uniform Commercial Code. Under UCC 2–509(1):
(a) if it does not require him to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (Section 2–505)..."
Paragraphs (b) and (c) of Article 31 apply to a small minority of international sales—sales that do not "involve carriage" and where "the seller is not bound to deliver the goods at any particular place." These provisions are most likely to apply when the seller and buyer are relatively near each other and the buyer operates trucks that can conveniently come to (b) where the goods are or (c) to the seller’s place of business. When the contract calls for the buyer to come for the goods, the seller completes its contractual duties with respect to delivery by "placing the goods at the buyer’s disposal."[page 240]
Decisions: Place for Delivery: (1) Delivery to First Carrier: (1) FR. CA Grenoble #156, 29 March 1995, Camara v. Magaron. Place for delivery decisive under EC Convention on Jurisdiction (Brussels 1968) (see above).
(2) Delivery to Buyer: GER. OLG Karlsruhe. 15 U 29/92, 20 November 1992. Evidence of receipt not clear; S was denied price recovery. UNILEX D.1992–28.
(3) Buyer to Come for the Goods. GER. LG Aachen, 43 O 136/92, 14 May 1993. Buyer to receive goods at place of manufacture. CLOUT 47, UNILEX D. 1993–16.
See also: Feltham, J.D., CIF, FOB Contracts and CISG, 43 J. Bus. L. (Lon.) 413–425 (1991); Schlechtriem, Com. (1998) 226–230, 234–240.
§ 210 B. "Délivrance" in ULIS and the Contractual Approach
Article 31 of the Convention marks a change from the approach of ULIS that, at first glance, seems merely a change in theory but, in fact, affects the clarity and workability of the two versions.
In ULIS the concept of "délivrance" dominated the draft’s approach to several problems, including risk of loss and the time for payment of the price. This approach could have been successful in some of these settings if the draft had used a simple definition of "delivery"—the handing over of the goods. Instead, under ULIS 19(1) délivrance "consists in the handing over of goods which conform with the contract." This was a very plausible approach to the question whether the seller had performed his contractual duties but it complicated the drafting in other settings, such as risk of loss, and made this central concept so abstract (in French, délivrance as contrasted with remise) that no appropriate term could be found in English and in various other languages. ULIS was drafted in French. When, at a late stage, an English text was prepared, there was no escape from rendering délivrance as "delivery," although this led to the curious result that if the goods had a defect they were never "delivered" to the buyer while he used or even consumed the goods. More important, the use of délivrance produced untoward consequences with respect to risk of loss and payment of the price. Efforts to correct this problem were made [page 241] at the 1964 conference but délivrance was such an integral part of the draft’s structure that repairs were not feasible.
In UNCITRAL it was possible to deal with this problem. The Working Group at an early stage decided that the problems of risk and payment of the price should be disentangled from délivrance, and should be handled as separate problems. In addition, the provisions on Obligations of the Seller with which we are now concerned (Art. 31 and succeeding articles in the present Chapter) are stated in terms of whether the seller had performed his "obligation" with respect to delivery. The seller fails to perform his obligations if he tenders defective goods; with regard to this contractual issue it does not matter whether the buyer rejects the goods (no "handing over" or "delivery") or whether the buyer takes possession of and uses the goods, subject to a damage claim to compensate for the breach.
Thus, the Convention has no provision like that of ULIS 19(1): "Delivery consists in...." The contractual approach of the Convention is typified by the introduction to Article 31: the seller’s " obligation to deliver consists" in performing specified acts, regardless of whether "delivery" takes place. The same contractual approach is used in Chapter III— Obligations of the Buyer. E.g., Art. 60 (the buyer’s obligation to take delivery consists...).
The point deserves emphasis. Assume that the contract calls for the seller to place the goods at the buyer’s disposition at the seller’s plant by May 1 for removal by the buyer by the end of the month. If the seller on May 1 places the goods at buyer’s disposition Article 31 provides that the seller has fulfilled his " obligation to deliver" the goods. This provision does not state (and for the purposes of the Convention does not need to state) that the seller has "delivered" the goods, nor does Article 31 determine when the risk of loss passes to the buyer, for this issue is governed by the rules on risk of loss in Chapter IV. As we shall see at §374 [page 242] (Examples 69A and 69B), Article 69 provides that in the above situation risk of loss rests on the seller until the buyer "takes over" the goods; the result is different if the buyer "commits a breach of contract by failing to take delivery. E.g. If the buyer fails, as agreed, to come for the goods by May 30 risk passes to the buyer on June 1.
In short, Article 31 and the other provisions in this Chapter deal with the contractual obligations of the parties; problems such as allocation of risk are dealt with by provisions addressed directly to those problems.
§ 211 C. The Role of General Rules on Place and Time
Article 31, in addressing the question whether the seller has performed his contractual duties with respect to delivery, plays a modest role. In most cases, questions as to "place" and "time" will merge into a single issue: Did the goods get to the agreed place on time? Art. 33, infra at §216, is concerned with the time for delivery. But in most situations the combined place-time question will be answered by the contract, either in specific terms or by the meaning supplied by the circumstances mentioned in Article 8(3), by the parties’ practices (Art. 9(1) or by commercial usage (Art. 9(2)).
Export Licenses and Taxes. The rules on the place for delivery can also be useful, when the contract is silent, in allocating responsibility for matters such as export licenses and export taxes. For example, assume that the contract provides that the seller will place the goods at the buyer’s disposal at the seller’s place of business. Under Article 31(b) the seller fulfills his obligation to deliver at his own factory or warehouse; the buyer has the responsibility to remove the goods and to make any arrangements for exportation. Incoterms (1990) reflects a similar approach: Under a sale Ex Works "B. The buyer must...B2. Obtain at his own risk and expense any export or import license or other official authorization and carry out all customs formalities for the exportation and importation of the goods...". On the other hand, the seller must bear [page 243] these costs when the contract requires the seller to deliver the goods in the buyer’s country.
When the contract calls for the seller to dispatch the goods by carrier (Art. 31(a), allocating responsibility for export licenses and taxes is less clear-cut. Modern transport procedures call for expedited carriage as soon as the carrier receives the goods; these procedures have led to practices placing the responsibility for export clearances on the seller. Thus, Incoterms (1990) provides that under the modern quotation "Free Carrier...(named place)," "(FCA)" even when the designated point is inland, "A. The seller must...A2 Obtain at his own risk and expense any export license of other official authorization and carry out all customary formalities necessary for the exportation of the goods". The same result follows under the quotation "Carriage Paid to..." ("CPT") and also under the traditional quotations "C&F" (now abbreviated "CFR") and "CIF". On the other hand, Incoterms allocates export problems to the buyer under quotations "F.A.S.", "F.O.B." and "CFR" (Cost and Freight...named port of destination).
In short, the "delivery" concept does not avoid doubt over who has the responsibility for export licenses and export taxes; the parties should deal specifically with this question in the contract. When the contract is silent, modern practices governing export sales often indicate that the seller’s responsibility to dispatch goods to a foreign destination calls for him to deal with export licenses and export taxes.[page 244]
FOOTNOTES: Chapter on Article 31
1. Art. 31 is substantially the same as Art. 29 of the 1978 Draft, O.R. 8, Docy. Hist. 385. Cf. ULIS 23. The Convention’s rejection of the approach of ULIS 19 is considered infra at §210. See, in general, Schlechtriem, Com. (1998) 221–251 (Huber).
2. Incoterms (1990) substituted "CPT" for the 1980 term "DCP" and substituted "FCA" for the 1980 term "FRC". These quotations are expected in practice to supersede the older quotations, like C.I.F., C. & F., and F.O.B., which, in some situations, fail to make delivery (and risk) pass on delivery to the carrier.
3. See Honnold, A Uniform Law for International Sales, 107 U. Pa. L. Rev. 299, 322–323 (1959).
4. See United Nations Convention on Carriage of Goods by Sea, 1978 (the Hamburg Rules) Art. 4. The United States COGSA implementation of the 1924 Brussels Convention (46 U.S.C. §1311) preserves the wider scope of the Harter Act of 1893 (46 U.S.C. §190) and thus is closer to the 1978 Hamburg Rules than to the narrow scope of the 1924 Brussels Convention.
5. As has been noted at §208, the fact that the seller has complied with its contractual obligations does not necessarily mean that risk of loss passes to the buyer. Under Art. 69, when the contract does not involve carriage, risk passes to the buyer only when he "takes over" the goods or "commits a breach of contract by failing to take delivery." This rule becomes important when the contract (e.g.) provides: "Buyer shall remove the goods within thirty days following notification by the seller that the goods are at the buyer’s disposal." See the Commentary to Art. 69, infra at §373, Cf. (U.S.A.) UCC 2–308(b).
6. See A. Tunc, Commentary, I. Records, 1964 Conf. 356 at §371 (Col. 2). The use of délivrance was designed to avoid difficulties with the civil law concept of "guarantee." Ibid.
7. II Records 1964 Conf. 236; Honnold, A Uniform Law for International Sales 107 U. Pa. L. Rev. 317–320 (1959) and Honnold, ULIS: The Hague Convention 1964, 30 Law & Contemp. Pr. 326 at 350 (1965). For criticism of ULIS and approval of the UNCITRAL approach see Huber, 43 Rabels Z 413, 451 (1979); Tallon in Rechtsvergleichung 753, 757–759 (unfortunate) departure from simpler physical (material) text of early French law); Lando, B-B Commentary 245–246. Similar difficulties resulted from the abstract concept of property in the (U.K.) Sale of Goods Act (1893) and the (U.S.A.) Uniform Sales Act (1906). For similar problems in Continental Law see Zweigert & Kötz II (1987), 3–7 (German law: "juristic act"), 8 (French law: "object").
8. Rep. S-G, "Delivery in ULIS," III Yearbook 31–41, Docy. Hist. 73–82; W/G 4 paras. 16–21, IV Yearbook 62–63, Docy. Hist. 140–141; Rep. S-G, "Obligations of the seller" paras. 6–14, IV Yearbook 37–38. Rep. S-G, "Pending Questions" para. 82, VI Yearbook 97, Docy. Hist. 114–115, 222.
9. On the artificial nature of the distinction between place and time see the Intro. to Ch. II, Sec. III, infra at §274. Cf. Treitel, Remedies (Int. Enc.) §75. In a few situations, the place for delivery (set by the contract or, failing guidance from the contract, by Art. 31) will be relevant in measuring damages for breach. See Art. 76(2), infra at §409. The Convention’s approach is supported in Barrera-Graf, Comparative Study §3(b), Barrera-Graf Colloquium.
10. Accord: Incoterms (1990) "Delivered ex ship...(named port of destination) (DES)" B2.
11. Where the delivery point is at the water’s edge in the buyer’s country, as under a sale Ex Quay, the seller clearly has responsibility for any export license or tax, but the situation as to import controls and duties is so ambiguous that Incoterms provides separately for "Ex Quay" contracts (a) "duty paid...named point" and Ex Quay contracts "duties on buyer’s account."
12. One way to clarify the issue is for the contract to refer to Incoterms and use one of the trade terms defined therein.
13. Accord: GAFTA No. 1 §14; No. 30 §15; No. 119 §12; General Conditions (ECE) Cereals No. 5B §13. See Article 41, infra at §262, which requires that the seller deliver goods that are "free from any right or claim of a third party".