Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 264-266. Reproduced with permission of the publisher, Kluwer Law International, The Hague.
§ 241 Goods arrive in poor condition because of damage in transit. Does it follow that they fail to conform to the contract? Paragraph (1) of Article 36 sets forth a general rule; paragraph (2) deals with modifications of that rule that result from breach of the seller’s obligations.
"(1) The seller is liable in accordance with the contract and this Convention for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time.
"(2) The seller is also liable for any lack of conformity which occurs after the time indicated in the preceding paragraph and which is due to a breach of any of his obligations, including a breach of any guarantee that for a period of time the goods will remain fit for their ordinary purpose or for some particular purpose or will retain specified qualities or characteristics."
§242 A. Conformity as of Time When Risk Passes
The general rule set forth in Paragraph (1) may be illustrated as follows:
Example 36A. A contract called for Seller (located in Seattle) to ship No. 1 quality white wheat flour to Buyer, "F.O.B. Seattle." The F.O.B. term—as well as Article 67(1), in the absence of an inconsistent contractual provision—places the risk of loss in transit on Buyer. Seller shipped flour that conformed with the contract but during the shipment the flour was damaged by water so that when it reached Buyer (located in Bombay) the quality was "No. 4" rather than "No. 1." Buyer claimed that the goods did not conform to the quality required by the contract.
By virtue of Article 36(1), Seller complied with the contract since the goods conformed to the contract when risk passed to the Buyer. On the [page 264] other hand, if the contract had placed transit risks on Seller (e.g., " Ex Ship Bombay") Buyer’s claim based on non-conformity of the goods would have been correct.
Provisions similar to Article 36(1) appear in some Continental statutes; under common law formulations the result is the same as a necessary implication of the rules on risk of loss.
The language of paragraph (1), making the seller responsible "even though the lack of conformity becomes apparent only after" the time when risk passes, would protect the buyer when a latent defect appears at a later date, including a failure to comply with the requirement of Article 35(2)(a) that the goods be "fit for the purposes for which goods of the same description would ordinarily be used." This interpretation is supported by the action at the 1980 Conference to delete "express" from paragraph (2) (of draft Article 34) and thus to give effect to expectations of durability implied under Article 35(2) of the Convention. Stale claims may, however, be barred by applicable rules on limitation or prescription of actions. The UNCITRAL Convention on the Limitation Period in the International Sale of Goods is introduced at §§254.2 and 261.1, infra.
§243 B. Effect of Contractual Guarantee
Paragraph (2) reflects the fact that some warranties include undertakings that extend after delivery. Examples include a contract to service the goods for a designated period, or a guarantee that the goods will perform for a specified period— e.g., two years, 10,000 miles, or the like. Under some of these warranties, the buyer would not be required to prove that there was a non-conformity when risk passed (e.g., on shipment of the goods or delivery to the buyer). However, the effect of paragraph (2) depends on the contract. One would not expect to find a guarantee that protects a buyer from his failure to maintain and protect the goods; thus, in [page 265] substance, the guaranty applies only when a failure of performance results from a defect in materials or workmanship. Compare Article 80, infra at §436 (failure of performance by one party caused by the other party’s act or omission).
A special provision on express guarantees might not have been necessary in view of the general rule of the Convention giving effect to the agreement of the parties. Article 36(2) underscores the importance of the contract and may avoid doubt concerning the seller’s responsibility under the Convention when the seller’s failure properly to service the goods causes damage or deterioration.
See: Schlechtriem, Com. (1998) 290–299 (Schwenzer).[page 266]
FOOTNOTES: Chapter on Article 36
1. This article follows Art. 34 of the 1978 Draft, subject to drafting changes in paragraph (2); O.R. 105, 312–315, Docy. Hist. 533–536, 677. Paragraph (1) carries forward ULIS 35(1) (first sentence). The converse of Art. 36(1) is (perhaps unnecessarily) stated in Chap. IV on Risk of Loss, Art. 66, §§360-361, infra: the buyer is responsible for the price of the goods although they have been lost or damaged after risk of loss passed to the buyer.
2. See Rep. S-G, "Obligations of the Seller" para. 65, IV Yearbook 36, 45, Docy. Hist. 113, 122. Cf. Rep. S-G, "Pending Questions" paras. 94–96, VI Yearbook 88, 98 99, Docy. Hist. 213, 223–224. On the meaning of the trade terms, Rep. S-G, "Pending Questions" paras. 94–96, Docy. Hist., 223–224. For possible exemption of seller from damages (as contrasted with reduction of the price) if the loss or damage of the goods resulted from force majeure met by an independent carrier see Art. 79(2) §433, infra.
3. Similar to Art. 35(1): Swedish sales Act 44; German (F.R.G.) Civil Code 459. The same rule results by inference from (U.S.A.) UCC 2–509, 2–510 and 2–725(2). Cf. UCC 2–301, 2–312(1)(b).
4. O.R. 105 (C.6, proposal of Greece), 312–315 (paras. 30–31), Docy. Hist. 677 (text of proposal), 533–536.