Cite as Nicholas, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 502-507. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.
1. History of the provision
2. Meaning and purpose of the provision
3. Problems concerning the provision
(1) In cases not within articles 67 and 68, the risk passes to the buyer when he takes over the goods or, if he does not do so in due time, from the time when the goods are placed at his disposal and he commits a breach of contract by failing to take delivery.
(2) 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 when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place.
(3) If the contract relates to goods not then identified, the goods are considered not to be placed at the disposal of the buyer until they are clearly identified to the contract.
1. History of the provision
1.1. - This article lays down the residual rules for the passing of the risk in cases not covered by the preceding two articles. Paragraph (1), which states the main rule, corresponds in substance to Articles 97(1) and 98(1) of ULIS. Paragraph (2), which has no counterpart in ULIS, was introduced by the Commission principally in order to provide for the situation in which the goods are placed in a third party's warehouse (see Yearbook, VIII, (1977), 64). Paragraph (3) corresponds to some extent to Article 98(2) of ULIS.
2. Meaning and purpose of the provision
2.1. - Within this residual provision the first paragraph is itself residual. The second provides the rule for the case in which «the buyer is bound to take over the goods at a place other than a place of business of the seller». The first paragraph therefore [page 502] has to be read as applying where neither Article 67 nor Article 68 nor Article 68(2) applies. It envisages accordingly a case in which the contract of sale does not «involve carriage of the goods» in the sense explained above (see commentary on Article 67, supra, § 2.2.) and in which the buyer either is bound to take over the goods at a place of business of the seller or (less probably) is not bound to take them over at any specified place (see Article 31).
The policy underlying paragraph (1) is that so long as the seller has control of the goods, he should bear the risk; he is in the better position to protect the goods and to provide for their insurance. Indeed, they are likely to be covered by the standing policies held by the seller in respect of his premises and their contents, whereas the buyer would probably need a special policy to cover the particular risk. The buyer would also face difficulties in proving that any loss or damage was «due to an act or omission of the seller» (Article 66).
2.2. - The second part of paragraph (1) provides for cases of delay in the buyer's taking over the goods. The risk passes at the moment when such delay amounts to a breach of contract or when the goods are placed at the buyer's disposal, whichever is the later. If, for example, Buyer agrees to take delivery of one hundred video-recorders at Seller's warehouse during the month of March and on March 1 Seller sets aside one hundred recorders, marked for collection by Buyer, but Buyer does not collect until April 10, Buyer will bear the risk of loss occurring after the close of business on March 31. But if Seller does not set aside and mark or otherwise identify to the contract any recorders until April 5, there has until then been no placing of the goods at Buyer's disposal and no risk will therefore pass to Buyer until his failure to take delivery amounts to a breach of contract. It follows from Article 60 that Buyer is entitled to a reasonable time after April 5 in which to take delivery.
2.3. - Paragraph (2) is concerned with cases in which the contract provides for the buyer to take over the goods from a third party, most commonly from a public warehouse. Here the policy considerations are different. The seller is in no better position than the buyer to protect and insure the goods or to [page 503] prosecute claims arising out of their loss. The policy of the paragraph is therefore that the risk should pass as soon as the buyer is in a position to collect the goods. The paragraph requires in particular that delivery should be due and that the buyer should be aware that the goods are at his disposal at the particular place. If, for example, Seller undertakes to place the goods at Buyer's disposal at X's warehouse during the month of March and Seller so places them on March 1, the risk will pass to Buyer as soon as he is aware of this fact. For delivery is due on or after March 1. By contrast therefore with the similar case, governed by paragraph (1), which has been considered in § 2.2., supra, (a) the risk passes immediately, rather than when Buyer's failure to collect the goods constitutes a breach of contract, but (b) it passes only if Buyer is aware that the goods are at his disposal. In Article 67(2), however, mere dispatch of a notice is not sufficient; there must be actual awareness.
The policy of the article suggests that the goods «are placed at the buyer's disposal» when the seller has done everything necessary to enable the buyer to take control of them, as by giving instructions to the warehouseman or by giving a delivery order to the buyer.
2.4. - Paragraph (2) is not concerned only with cases in which the buyer is bound to take over the goods at a public warehouse in which the seller holds, or has undertaken to place, the goods. It applies also to the case in which the contract of sale involves carriage of the goods, but which is not covered by Article 67, because the seller is required to hand the goods over to the buyer at a particular place. (On the wide sense of «hand over» see commentary on Article 67, supra, § 2.3, 4.). A typical instance is one made on EX SHIP terms (see commentary on Article 67, supra, § 2.5.(c)). Risk will pass when the goods are placed at the disposal of the buyer at the designated destination and the buyer is aware of this fact.
2.5. - The requirement of identification in paragraph (3) is parallel to the requirement in Article 67(2) and is presumably to be read in the light of the illustrations given there of what constitutes identification. [page 504]
3. Problems concerning the provision
3.1. - The relationship of paragraph (3) to paragraph (2) may pose a problem. If the goods are sold in individual units, as in the example in § 2.2., supra, the application of paragraph (3) is both clear and consistent with the policy of paragraph (2), in that the seller has not done everything necessary to enable the buyer to take control of the goods until he has identified the particular units, and any loss or damage to the goods may affect different units differently. The matter is different, however, if the goods are sold by weight or measure from a larger bulk which is held in the warehouse. For example, Seller agrees to sell to Buyer 100,000 litres of white spirit, Buyer to take delivery from bulk held in a tank at X's warehouse. Seller gives to Buyer a delivery order addressed to X, which entitles Buyer to collect the spirit immediately. The policy of paragraph (2) suggests that the risk should be on Buyer and so also does the policy of paragraph (3), since any loss or damage to the spirit will affect the whole bulk equally. But the words of paragraph (3) suggest that the risk will not pass until Buyer takes delivery of 100,000 litres, either by actually removing them or possibly, if this can be said to constitute clear identification to the contract, by obtaining from X an acknowledgement that he holds that quantity to Buyer's behalf. The conflict between policy and the words of paragraph (3) is even clearer if Seller gives on Buyer a negotiable document of title.
The problem was expressly provided for in ULIS (Article 98(3)) in terms of what has been identified here as the policy of paragraph (2): «Where unascertained goods are of such a kind that the seller cannot set aside a part of them until the buyer takes delivery, it shall be sufficient for the seller to do all acts necessary to enable the buyer to take delivery». Moreover, the expressed purpose of introducing paragraph (2) into the Convention was to deal with this problem (see Yearbook; VIII (1977), 64). The apparent conflict between the new paragraph and paragraph (3) seems not to have been noticed.
The difficulty is perhaps best met along the lines of Article 98(3) of ULIS, i.e., by accepting that where identification is for practical purposes inseparable from the taking of delivery, the goods have been sufficiently identified when the seller has done everything necessary to enable the buyer to take delivery. [page 505]
3.2. - The requirement in paragraph (2) that delivery be due (see § 2.3., supra) may present a problem where the goods are placed at the buyer's disposal before delivery is due (see ROTH, Passing of Risk, 306). The buyer need not take delivery (Article 52(1)), but he may choose to do so and in that event a strict interpretation of the paragraph could leave the risk on the seller. This would obviously, however, be contrary to the policy of the whole article; it is preferable to accept that the paragraph has not envisaged this possibility. In circumstances such as these Article 7(2) directs the application of «the general principles on which the Convention is based». The relevant general principle is plainly to be found in the opening passage of paragraph (1): «the risk passes to the buyer when he takes over the goods».
3.3. - Paragraph (2) extends, as has been said (§ 2.4., supra), to contracts involving carriage of the goods in which the seller is required to hand the goods over at a particular place to the buyer. Does it also extend to contracts involving carriage of the goods in which the seller is required to hand over the goods at a particular place to a carrier nominated by the buyer? A typical example is that of the contract in which the seller is required to place the goods on board a ship to be named by the buyer. The question becomes important if the buyer fails to name a ship (see discussion in commentary on Article 67, supra, § 3.3.). If the case is governed by Article 67, there is no provision for default by the buyer. The policy of that article is that the risk should remain on the seller until the goods are shipped, a policy which pre-supposes that the shipment of the goods lies entirely in the power of the seller. The only obstacle to applying paragraph (2) of the present article lies in the words «if the buyer is bound to take oyer the goods ...». In this case it can be said that the buyer is not bound to take over the goods himself but to name a carrier who is to take them over. It is submitted, however, that just as the words «hand over» in Article 67 must mean «hand over or cause to be handed over» (see commentary on Article 67, supra, § 2.3, 4. and § 2.4., supra), so also «take over» must mean «take over or cause to be taken over». The risk then passes when the delivery is due (in the sense that the buyer is in default in not naming a ship) and the buyer is aware that the goods are ready to be shipped (see also SCHLECHTRIEM, UN-Kaufrecht, 83; Uniform Sales Law, [page 506] 91, who, however, assumes that here there is a gap in the Convention, which has to be filled under Article 7(2) by the application of general principles).
3.4. - It is to be noted that a breach of contract by the buyer will affect the passing of the risk only if it consists in a failure to take delivery under paragraph (1) or in a failure to make possible the handing over of the goods in circumstances such as those envisaged in § 3.3., supra. Other breaches do not affect the passing of the risk (Article 70 is not applicable to breaches by the buyer). In particular, a breach which does not make it impossible for the seller to hand over the goods, but removes or suspends his obligation to do so, is not sufficient. If, for example, the price is to be paid when the seller tenders delivery of the goods (see Article 58), and the buyer fails to pay the price, with the result that the seller does not deliver the goods, the buyer's breach does not cause the risk to pass to him. A proposal at the Vienna Conference that the Convention be amended to cover this situation was not accepted (see Official Records, II, 406-407). [page 507]