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Published in J. Herbots editor / R. Blanpain general editor, International Encyclopaedia of Laws - Contracts, Suppl. 29 (December 2000) 1-192. Reproduced with permission of the publisher Kluwer Law International, The Hague.

[For more current case annotated texts by this author, see Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed. (2003) and Lookofsky, Understanding the CISG in the USA, 2d ed. (2004).]

excerpt from

The 1980 United Nations Convention on Contracts
for the International Sale of Goods

Joseph Lookofsky

Article 68
Goods Sold in Transit

272. Article 68 deals with the special problem of goods sold while in transit. The main risk rule and its exception are as follows:

'The risk in respect of goods sold in transit passes to the buyer from the time of the conclusion of the contract. However, if the circumstances so indicate, the risk is assumed by the buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage ...'

The first point to note in this regard is that the sales contract for goods sold in transit will often contain a trade term which itself allocates the risk of loss, thus displacing the CISG gap-filling rule.[1]

The gap-filling rule set forth in the first sentence of Article 68, whereby the risk passes at the time of contracting, was intended by its proponents to protect buyers in developing countries,[2] but the rule has been criticized by Western experts as 'unworkable' in most cases:[3] particularly when damage during transport results from an event difficult to pinpoint in time (water seepage, etc.), the principle set [page 144] forth in the second sentence (which passes the risk, retroactively, at the time the goods were handed over to the carrier) seems preferable,[4] but this exception governs only where (arguably vague) 'circumstances' so indicate.[5] It is at least clear that the seller ought not to profit by a failure to disclose events which would lead to the passing of risk.[6]

1. See supra No. 267.
2. See Honnold, op. cit. at p. 410.
3. See Berman, H. and Ladd, M., op. cit. at p. 430.
4. This was originally the rule in the 1978 Draft Convention: See A/CONF./97/5, para. 1 of Secretariat's Commentary to Article 80 (purely practical concerns).
5. See Berman, H. and Ladd, M., op. cit. at p. 430, distinguishing between 'circumstances' and contract terms (the exception, like the rule, applies only where no trade term applies). Compare Honnold, op. cit. at pp. 410-411 (endorsement of insurance policy to buyer as 'circumstance').
6. The third sentence of Article 68 provides:
'Nevertheless, if at the time of the conclusion of the contract of sale the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer, the loss or damage is at the risk of the seller.' [page 145]

Pace Law School Institute of International Commercial Law - Last updated April 5, 2005