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2008 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
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 specified 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 on the passing of risk in cases where the seller commits a fundamental breach 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, or they may be bound by usages of trade or a course of dealing that derogate (article 9). 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] and "list price ex works" [7] 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.[8]

[See also the overview comments UNCITRAL has prepared to introduce the provisions of the CISG dealing with Passing of Risk (articles 66 through 70). They discuss Nature of Risk, Parties' Agreement on Passing of Risk, Other Binding Rules on Passing of Risk, Burden of Establishing the Passing of Risk, and Risk of Loss or Damage Following Termination or Avoidance.]

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.[9]

5. Article 68 sets out special rules for passage of risk when goods are sold in transit. Therefore, a sale of goods in transit is not a contract involving the carriage of goods within the meaning of article 67.

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 carried 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"), which spell out the obligation of the seller to deliver the goods by a carrier. Other terms of the contract may, however, 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".[10]

7. Article 67 refers to carriage of the goods and does not expressly require that the goods be carried by a third-party carrier. One decision assumes that delivery to a freight forwarder is the equivalent of delivery to the first carrier.[11]

Allocation of risk

8. 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

9. 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.[12] Another court found that the risk had passed when a seller handed over the goods to a carrier in a timely fashion and therefore the seller was not responsible for any subsequent delay in delivery.[13]

10. Where the parties agreed that the goods would be delivered "frei Haus" ("free delivery"), a court construed the term to mean that the seller undertook to deliver the goods to the buyer's place of business even though actual delivery of the goods in the case involved carriage. The court therefore did not apply article 67(1).[14]

- Where seller is bound to hand over goods to carrier at 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 provision.

Retention of documents by seller

12. 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 provision.

Identification of goods

13. Paragraph (2) of article 67 conditions the passage of risk on clear identification of the goods to the contract of sale.[15] This rule is designed to protect against the possibility that a seller will identify to the contract goods that have already suffered casualty. One court found that the requirement that the goods be clearly identified was satisfied by the description of the goods in the shipping documents.[16] 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.[17]


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_second_edition.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.

In addition, this presentation introduces each section of the UNCITRAL Digest with a Google search button. This is to help you access doctrine (relevant material from the over 1,200 commentaries, monographs and books on the CISG and related subjects that we present on this database) as well as the texts of the cases that UNCITRAL cites in its Digests and that we present in our updates to UNCITRAL's Digests.

1. [UNITED STATES Federal District Court, Southern District of New York, 26 March 2002 (St. Paul Insurance v. Neuromed Medical Systems)] (plaintiffs experts wrongly asserted that Convention did not include rules on passage of risk).

2. [UNITED STATES Federal District Court, Southern District of New York 26 March 2002 (St. Paul Insurance v. Neuromed Medical Systems)] (passage of risk and transfer of title need not occur at the same time).

3. [SPAIN Audiencia Provincial de Córdoba 31 October 1997 (Steel profiles case)] (risk passes without regard to who must arrange for transport or insurance).

4. [ITALY Corte Costituzionale 19 November 1992].

5. [SWITZERLAND Cantone del Ticino Tribunale d'appello 15 January 1998 (Cocoa beans case)] (see full text of the decision).

6. [ARGENTINA Cámara Nacional de Apelaciones en lo Comercial 31 October 1995 (Dehydrated mushrooms case)].

7. [GERMANY Oberlandesgericht Köln 9 July 1997 (Video camera case)].

8. [GERMANY Oberlandesgericht Karlsruhe 20 November 1992 (Frozen chicken case)].

9. See, e.g., [GERMANY Amtsgericht Duisberg 13 April 2000 (Pizza cartons case)] (the word "carrier" means the same in both art. 31 and art. 67).

10. [HUNGARY Arbitration Court attached to the Hungarian Chamber of Commerce and Industry 10 December 1996 (Caviar case)].

11. [GERMANY Oberlandesgericht Köln 9 July 1997 (Video camera case)].

12. [GERMANY Amtsgericht Duisburg 13 April 2000 (Pizza cartons case)].

13. [SWITZERLAND Tribunal Cantonal du Valais 28 October 1997 (Second hand bulldozer case)].

14. [GERMANY Oberlandesgericht Karlsruhe 20 November 1992 (Frozen chicken case)].

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

16. [GERMANY Amtsgericht Duisburg 13 April 2000 (Pizza cartons case)].

17. [SWITZERLAND Cantone del Ticino Tribunale d'appello 15 January 1998 (Cocoa beans case)].


©Pace Law School Institute of International Commercial Law - Last updated June 17, 2009
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