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Published by Manz, Vienna: 1986. Reproduced with their permission.

excerpt from

Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods

Univ. Prof. Dr. Peter Schlechtriem [*]

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D. The Passing of Risk

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2. The Sale of Goods During Transit (Article 68)

The rules for the passages of risk with regard to goods sold in transit proved to be unexpectedly difficult. According to both Article 80 of the 1978 Draft Convention and ULIS Article 99,[360] the risk passes at the time the goods are handed over to the carrier.[361] In contracts such as CIF transactions, the risk that the buyer would have to pay for goods that were already damaged or lost at the time the sales contract was completed is normally covered by insurance. The proponents of this solution repeatedly pointed out that, in this kind of transaction, the parties are more concerned with the sale of the documents than with the sale of the goods themselves.[362] The Pakistani proposal [363] for the risk to pass when the contract is concluded produced a vehement discussion in the First Committee. A number of developing countries noted that the 1978 Draft Convention's solution violated the legitimate interests of the sellers [364] of bulk goods from developing countries.[365] The rejection of the original proposal was also motivated by the [page 89] argument that the parties may have been unable to obtain any insurance at all for the goods before the conclusion of the contract.[366] After the Pakistani proposal was also rejected by the Plenary,[367] the countries that had favored it blocked the adoption of the original proposal which had already been approved in the First Committee.

It was then agreed to reopen the debate, and, finally, the compromise embodied in Article 68 was reached, whereby the risk generally passes when the contract is concluded (Article 68 sentence 1), but an agreement that the buyer will assume the risk from the moment the goods are handed over to the carrier can be implied from the circumstances. According to the consensus of the delegates, the existence of transportation insurance may point to such an agreement.[368] Of course, the retroactive effect of the transfer of risk to the date of shipment operates only to the advantage of the good faith seller (Article 68 sentence 3).

The risk passes to the buyer from the moment the goods are delivered to a carrier who issues "the documents embodying the contract of carriage". This definition was changed in Vienna; it is irrelevant whether the documents are negotiable instruments.[369] The Conference did not succeed, though, in providing for the possibility that, in the future, no documents may be issued at all and that, instead, shipping contracts may be electronically recorded and transmitted.[370]

As in Article 67(2), the identification of the lost or damaged goods to the sales contract in question is a prerequisite for the passing of risk.[371] [page 90]

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FOOTNOTES

* The author of this book participated at the Conference as a member of the delegation from the Federal Republic of Germany. The views expressed here are personal to the author and do not necessarily represent the position of the F.R.G. or its delegation.

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360. ULIS Article 99 only regulates sales involving carriage by sea while CISG covers every mode of carriage.

361. There were practical reasons behind the solution in Article 80 of the 1978 Draft Convention. The condition of the goods is most likely to be recognizable and provable when they are handed over to the carrier, whereas it will often be difficult to establish the precise moment when the goods were damaged or destroyed during transport. Furthermore, in the cases where the goods are damaged, the buyer is usually in a better position to determine the extent of the damage and to assert claims against the carriers or insurance companies. See Secretariat's Commentary at 202-03 § 1; Roth at 298.

362. See A/Conf. 97/C.1/SR.32 at 2-3 (= O.R. 403 et seq.).

363. A/Conf. 97/C.1/L.237 (= O.R. 127).

364. Re-sellers, i.e., middlemen who were originally affected as buyers, were probably intented here.

365. See A/Conf. 97/C.1/SR.32 at 7 §§ 43-44 (= O.R. 406) (final word of the Pakistani delegate); see also A/Conf. 97/8/Add. 5 at 5 (rejection by the Asian-African Legal Consultative Committee).

366. cf. A/Conf. 97/C.1/SR.32 at 3 § 10 (= O.R. 404).

367. A/Conf. 97/L.15 (= O.R. 173). The motion was made by Argentina, Egypt, Pakistan, South Korea and Turkey.

368. See Honnold, Commentary § 372. In the end, the solution already recommended by Neumayer for ULIS was accepted. See Dölle (Neumayer) Article 99 §§ 11, 13. The change in the risk of loss in the sale of goods in transit does not mean that domestic laws are to be taken into consideration so that the sale of a non-existent or no-longer-existent good is void. Under Article 68 sentence 2, it remains possible for the sale to be valid even though the goods had already been destroyed at the time the contract was concluded. Article 68 sentence 3 expressly supposes that a valid contract may be formed in this situation. An Indian proposal to consider invalidity under a domestic law did not receive support. See A/Conf. 97/SR.32 at 6-7 § 38-41 (= O.R. 404).

369. See A/Conf. 97/C.1/SR.32 at 3 § 13 (= O.R. 404) (reasoning of the U.S. delegate).

370. See A/Conf. 97/C.1/SR.32 at 4-5 (= O.R. 404 et seq.) (discussion).

371. See A/Conf. 97/C.1/SR.32 et seq. §§ 21, 32 (= O.R. 404) (arguments of the Norwegian delegate).

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