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Reproduced with permission from 23 International Lawyer (1989) 443-483

excerpt from

Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods

Alejandro M. Garro [*]

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Passing of Risk of Goods Sold in Transit

A . . . sensitive issue between developing and industrialized countries concerned the passing of the risk of loss under a contract of sale concluded while the goods are in transit. Article 80 of the Draft Convention stated that the time of passing of the risk is the time of handing the goods over to the carrier. The delegate of Pakistan insisted that relating the passing of risk retroactively to the dispatch of the goods might disadvantage developing countries, which generally dispatch bulk commodities to be sold in transit. With the support from the delegate from Ghana, Pakistan proposed an amendment to make risk pass at the time of contracting.[137] This proposal was opposed by the delegate from Sweden, who argued that concerns for the eventual damage suffered by the seller was unwarranted, since goods sold in transit are generally insured. The Finnish, Japanese, and Norwegian delegates also opposed the amendment suggested by Pakistan, contending that it would be extremely difficult to establish whether the damage occurred before or after the sale. After several discussions, a compromise came into being. The first sentence of article 68 contains the Pakistani proposal, establishing as a general principle that the risk passes at the time of conclusion of the contract. But this is followed by an exception, the applicability of which is not easy to ascertain: the risk passes retroactively from the moment the goods are handed over to the carrier "if the circumstances so indicate."[138]

As in all compromises, each party gave concessions to the others. But this type of compromise fails to provide guidelines for a national court to choose between the main rule embodied in the first sentence of article 68 or the exception to the rule embodied in the second sentence. Neither is the applicability of the exception limited to those cases in which the time when the goods were damaged cannot be proved.[139] Perhaps the issue is merely academic, because no thoughtful buyer who purchases goods in transit will fail to require the inclusion of a contractual clause dealing with the passage of risk.[140] Nevertheless, by masking an irreconcilable position behind an illusory compromise, article 68 of the Convention fails to provide a workable rule to fill the gap left by the parties.

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* Alejandro M. Garro, Lecturer in Law, Columbia University. This paper was submitted to the 81st Annual Meeting of the American Association of Law Libraries, June 26-29, 1988.

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137. Eörsi, supra note 4, at 352.

138. Article 68 of the Convention, supra note 3, reads:

"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. 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."

139. Eörsi, supra note 4, at 352. While placing on the buyer the consequences of any inadequacy in the insurance, the passing of risk at the time the goods are handed over to the carrier obviates any difficulties of proof and has the advantage that only the buyer must pursue claims arising from damage occurring while the goods are in transit. See Nicholas, Article 68, in Commentary, supra note 13, at 498, (noting that the principal difficulty with art. 68 lies in the meaning of "if the circumstances so indicate").

140. See Honnold, Risk of Loss, in International Sales, supra note 12, at 8-1, 8-14 (1984) (observing that the risk provisions of the U.C.C. fail to address the sale of goods in transit).

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Pace Law School Institute of International Commercial Law - Last updated August 16, 1999

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