Go to Database Directory || See also UNCITRAL Digest Cases + Added Cases
Search the entire CISG Database (case data + other data)

2012 UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods

Digest of Article 67 case law [reproduced with permission of UNCITRAL] [*]

[Text of article
Overview
Contracts of sale involving carriage of goods
Allocation of risk
   -   If seller is not bound to hand over goods to carrier at a particular place
   -   Where seller is bound to hand over goods to carrier at a particular place
The meaning of "hand over" to a carrier
Retention of documents by seller
Identification of goods]

Article 67

(1) 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 in accordance with the contract of sale. If the seller is bound to hand the goods over to a carrier at a particular place, the risk does not pass to the buyer until the goods are handed over to the carrier at that place. The fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passage of the risk.

(2) Nevertheless, the risk does not pass to the buyer until the goods are clearly identified to the contract, whether by markings on the goods, by shipping documents, by notice given to the buyer or otherwise.

OVERVIEW

1. Article 67 provides rules governing the time at which the risk of loss or damage passes to the buyer if the contract of sale involves carriage of the goods.[1] In general, the risk passes to the buyer when the seller hands over the goods to the first carrier. The risk passes without regard to whether the seller or the buyer has title to the goods,[2] and without regard to who is responsible for arranging transport and insurance.[3] The consequence of the passing of the risk on the buyer's obligation to pay is dealt with in article 66. The effect of seller's fundamental breach on the passing of risk is addressed in article 70.

2. Article 67 states a generally-accepted international rule. A constitutional court, hearing a challenge to a similar domestic rule on the ground that it was inconsistent with the constitutional principle of equality, cited articles 31 and 67 of the Convention as evidence of general acceptance.[4]

3. Under article 6, the parties may agree to derogate from the provisions of article 67. Under article 9, they may also be bound by usages of trade or a course of dealing that derogate from article 67. If the parties' agreement is consistent with article 67, courts frequently cite the article. This is also true when the parties agree on trade terms that address the passage of risk. Decisions have found the terms "CIF",[5] "C & F"[6] (which was replaced by "CFR" in Incoterms 1990), "FOB"[7] , "FOT"[8] (which was replaced by "FCA" in Incoterms 1990), and "list price ex works"[9] to be consistent with article 67(1). If the trade term is inconsistent with article 67(1), the parties' agreement prevails in accordance with article 6. Thus, although the goods in the particular case were handed over to a third-party carrier, a court did not apply article 67 in a case where the parties agreed that the goods would be delivered "frei Haus" ("free delivery"), which the court construed to mean that the seller undertook to deliver the goods to the buyer's place of business.[10]

Contracts of Sale Involving Carriage of Goods

4. Article 67 does not define when a contract of sale involves carriage of goods. A similar formula is used in article 31 (a), which provides that if the contract of sale involves carriage of goods the seller satisfies its obligation to deliver the goods when it hands them over to the first carrier. Given the identical language in the two provisions, they should be read to cover the same transactions.[11]

5. Article 68 sets out special rules for passage of risk when goods are sold in transit. Therefore, article 67 does not apply when goods are sold in transit.

6. A contract of sale involves the carriage of goods when it expressly or implicitly provides for subsequent carriage. The contract may expressly provide that the goods are to be transported via carrier by, e.g., including details with respect to the manner of carriage. This is often done most efficiently by incorporating trade terms, such as the International Chamber of Commerce's Incoterms (e.g. "CIF", "FOB"), which spell out which party's obligation it is to arrange for a contract of carriage. Other terms of the contract may also imply that the goods are to be carried. An arbitral tribunal found that the contract involved carriage when it provided that "the buyer shall pick up the fish eggs at the seller's address and bring the goods to his facilities in Hungary" and the price was stated to be "FOB Kladovo" (Kladovo being the seller's address).[12] Some cases apply article 67 without reciting facts which show that carriage was involved.[13] A decision held that a contract which provided for delivery "free of charge" was still a contract involving carriage where the buyer engaged the carrier and the seller was charged for the transport.[14] However, where the seller was to deliver the goods free at the buyer's address, customs duties unpaid, the court held that the risk passed at the time of unloading at the place of performance.[15]

7. For the purpose of deciding whether a contract of sale involves carriage or not, it is irrelevant whether the contract of carriage is to be arranged by the seller or the buyer.[16] There is no question that the sale involves carriage if it is the obligation of the seller to arrange the carriage. Cases in which the buyer arranged the carriage also apply article 67.[17] Some cases apply article 67 without specifying which party was to arrange the carriage.[18]

8. Carriers for the purpose of article 67 may be a courier service[19] or postal service.[20] Article 67 refers to "carriage of the goods" and does not expressly require that the goods be carried by a third-party carrier. Some decisions treat delivery to a freight forwarder as the equivalent of delivery to the "first carrier".[21]

Allocation of Risk

9. Paragraph (1) of article 67 sets out separate rules for two different situations: first, if the seller is not bound to hand the goods over to the carrier at a particular place (first sentence of article 67(1)), and second, if the seller is so bound (second sentence). In both cases, the risk passes to the buyer when the seller hands over the goods to the specified carrier.

If the seller is not bound to hand over the goods to the carrier at a particular place

10. If the seller is not bound to hand over the goods to a carrier at a particular place, the risk of loss or damage passes when the goods are handed over to the first carrier. This rule is consistent with the seller's obligation to deliver the goods as set out in article 31 (a). In the absence of proof that the parties agreed on delivery at another location, one court found that the seller delivered and the risk passed when the seller handed over the goods to the first carrier.[22]

If the seller is bound to hand over goods to the carrier at a particular place

11. The second sentence of paragraph (1) provides that if the seller is bound to hand over goods to a carrier at a particular place, the risk passes when the goods are handed over to the carrier at that place. An agreement by a seller whose place of business is inland to send the goods from a port falls within paragraph (1). There are no reported decisions interpreting this part of the provision.

The meaning of "hand over" to a carrier

12. The handing over of the goods is complete when the goods are in the physical custody of the carrier. One court held that "handing over" requires that the carrier take custody of the goods, which implies an actual surrender of the goods to the carrier; and that it is necessary for the seller to load the goods onto or into the respective means of transport; and that the risk only passes when loading is completed.[23] In that case, the damage was caused by improper loading by the seller onto a truck arranged by the buyer. Another court found that the risk had not passed when the goods (a machine) fell on the ground from a fork lift and became unsalable before the machine was loaded on a truck that arrived to pick up the goods.[24]

13. However, one court held that the risk does not pass even when the goods are handed over to the carrier, if the seller fails to present a bill of lading to the issuing bank of the letter of credit for payment within the time limit stipulated in the sales contract (with the consequence that the bill of lading did not reach the buyer); without referring to article 67, the court held that the seller still bore the risk because of its breach of contract.[25]

Retention of Documents by Seller

14. The third sentence of paragraph (1) provides that the passage of risk under article 67 is not affected by the seller's retention of documents controlling the disposition of the goods. There are no reported decisions interpreting this part of the provision.

Identification of Goods

15. Paragraph (2) of article 67 conditions the passage of risk on clear identification of the goods to the contract of sale.[26] This rule is designed to protect against the possibility that a seller will identify to the contract goods that have already suffered casualty. Some decisions have found that the requirement that the goods be clearly identified is satisfied by the description of the goods in the shipping documents.[27] Another court noted that the parties to a CIF contract agreed that the risk of loss would pass when cocoa beans clearly identified to the contract of sale were handed over to the carrier at the port of shipment.[28]


NOTES

* This presentation of the UNCITRAL Digest is a slightly modified version of the original UNCITRAL text at <http://www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdf>. The following modifications were made by the Institute of International Commercial Law of the Pace University School of Law:

   -    To enhance access to contents by computer search engines, we present in html rather than pdf;
 
   -    To facilitate direct focus on aspects of the Digests of most immediate interest, we inserted linked tables of contents at the outset of most presentations;
 
   -    To support UNCITRAL's recommendation to read more on the cases reported in the Digests, we provide mouse-click access to (i) CLOUT abstracts published by UNCITRAL (and to UNILEX case abstracts and other case abstracts); and also (ii) to full-text English translations of cases with links to original texts of cases, where available, in [bracketed citations] that we have added to UNCITRAL's footnotes; and
 
   -    To enable researchers to themselves keep the case citations provided in the Digests constantly current, we have created a series of tandem documents, UNCITRAL Digest Cases + Added Cases. The new cases and other cases that are cited in these updates are coded in accordance with UNCITRAL's Thesaurus.

1. See CLOUT case No. 447 [UNITED STATES U.S. District Court, Southern District Court of New York, 26 March 2002] (plaintiffs' experts wrongly asserted that Convention did not include rules on passage of risk).

2. [GERMANY Oberlandesgericht Schleswig-Holstein 29 October 2002 (Stallion case)] (the passing of risk at the time of handing over is independent of the passing of ownership); [CHINA Wuhan Maritime Court, Hubei, People's Republic of China, 10 September 2002 (Nanjing Resources Group v. Tian An Insurance Co. Ltd., Nanjing Branch)] (the principle of separation of ownership and risk is adopted under the Incoterms and the CISG); CLOUT case No. 447 [UNITED STATES U.S. District Court, Southern District Court of New York, 26 March 2002] (passage of risk and transfer of title need not occur at the same time).

4. CLOUT case No. 91 [ITALY Corte Costituzionale 19 November 1992].

5. CLOUT case No. 253 [SWITZERLAND Cantone del Ticino Tribunale d'appello 15 January 1998] (see full text of the decision).

6. CLOUT case No. 864 [CHINA International Economic and Trade Arbitration Commission, People's Republic of China, 25 June 1997]; CLOUT case No. 191 [ARGENTINA Cámara Nacional de Apelaciones en lo Comercial, 31 October 1995], upholding [ARGENTINA Juzgado Nacional de Primera Instancia en lo Comercial No. 11 (Buenos Aires) 18 March 1994].

7. [CHINA Shanghai No. 2 Intermediate People's Court, People's Republic of China, 25 December 2006 (Cabinets and accessories case)]; [CHINA High People's Court, Ningxia Hui Autonomous Region, People's Republic of China, 27 November 2002, (Xinsheng Trade Company v. Shougang Nihong Metallurgic Products)] (explicit cumulative application of article 67(1) CISG and Incoterms 2000); [CHINA International Economic & Trade Arbitration Commission, People's Republic of China, 6 September 1996 (Engines case)].

8. [ICC Arbitration Court of the International Chamber of Commerce, 2000, (Arbitral award No. 8790) (Processed food product case)].

9. CLOUT case No. 283 [GERMANY Oberlandesgericht Köln 9 July 1997].

10. CLOUT case No. 317 [GERMANY Oberlandesgericht Karlsruhe 20 November 1992], overturning [GERMANY Landgericht Baden-Baden 13 January 1992].

11. See, e.g., CLOUT case No. 360 [GERMANY Amtsgericht Duisburg 13 April 2000] (the word "carrier" means the same in both articles 31 and 67).

12. CLOUT case No. 163 [HUNGARY Választottbíróság csatolták a Magyar Kereskedelmi és Iparkamara 10 December 1996] .

13. [GERMANY Landgericht Köln 25 March 2003] (Racing carts case).

14. [GERMANY Landgericht Bamberg 23 October 2006].

15. [SWITZERLAND Appelationshof Bern 11 February 2004 (Wire and cable case)], (perhaps applying article 69(2) though without explicit citation).

16. CLOUT case No. 247 [SPAIN Audiencia Provincial de Córdoba 31 October 1997] (risk passes without regard to who must arrange for transport or insurance).

17. [UNITED STATES U.S. Court of Appeals for the Seventh Circuit 23 May 2005 (Chicago Prime Packers, Inc. v. Northam Food Trading Co.)]; CLOUT case No. 774 [GERMANY Bundesgerichtshof 2 March 2005] (contaminated pork), reversing on different grounds CLOUT case No. 820 [GERMANY Oberlandesgericht Frankfurt 29 January 2004 (contaminated frozen pork)] and amending [GERMANY Landgericht Gießen 18 March 2003].

18. [GERMANY Oberlandesgericht Schleswig 22 August 2002 (Live sheep case)].

19. [GERMANY Landgericht Saarbrücken 26 October 2004 (Fuses and fuse brackets case)].

20. [SWITZERLAND Tribunal cantonal du Valais 19 August 2003] (Clothing, household linen case).

21. [GERMANY Landgericht Saarbrücken 26 October 2004 (Fuses and fuse brackets case)]; CLOUT case No. 283 [GERMANY Oberlandesgericht Köln 9 July 1997].

22. CLOUT case No. 360 [GERMANY Amtsgericht Duisburg 13 April 2000].

23. [GERMANY Landgericht Bamberg 23 October 2006] (Plants case).

24. [SWITZERLAND Bundesgericht 16 December 2008] (the disputing parties are the seller and the employer of the operator of the fork lift).

25. [CHINA Wuhan Maritime Court, Hubei, People's Republic of China, 10 September 2002 (Nanjing Resources Group v. Tian An Insurance Co. Ltd., Nanjing Branch)].

26. Article 32(1) requires the seller to notify the buyer of the consignment of the goods if they are not otherwise clearly identified.

27. CLOUT case No. 360 [GERMANY Amtsgericht Duisburg 13 April 2000]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 30 December 1998 (Arbitral award No. 62/1998)].

28. CLOUT case No. 253 [SWITZERLAND Cantone del Ticino Tribunale d'appello 15 January 1998].


©Pace Law School Institute of International Commercial Law - Last updated July 30, 2012
Go to Database Directory || Go to Information on other available case data
Comments/Contributions