Go to Database Directory || Go to CISG Table of Contents

GUIDE TO CISG ARTICLE 69

Secretariat Commentary (closest counterpart to an Official Commentary)


Guide to the use of this commentary

The Secretariat Commentary is on the 1978 Draft of the CISG, not the Official Text, which re-numbered most of the articles of the 1978 Draft. The Secretariat Commentary on article 81 of the 1978 Draft is quoted below with the article references contained in this commentary conformed to the numerical sequence of the Official Text, e.g., article 81 [draft counterpart of CISG article 69].

To the extent it is relevant to the Official Text, the Secretariat Commentary on the 1978 Draft is perhaps the most authoritative source one can cite. It is the closest counterpart to an Official Commentary on the CISG. A match-up of this article of the 1978 Draft with the version adopted for the Official Text is necessary to document the relevancy of the Secretariat Commentary on this article. See the match-up for this article for a validation of citations to this Secretariat Commentary. This match-up indicates that article 81 of the 1978 Draft and CISG article 69 are substantively identical.


Text of Secretariat Commentary on article 81 of the 1978 Draft
[draft counterpart of CISG article 69]   [Passing of risk in other cases]

PRIOR UNIFORM LAW

ULIS, articles 97 and 98.

COMMENTARY

1. Article 81 [draft counterpart of CISG article 69] gives the general rule for passage of the risk of loss in those cases which do not fall within articles 79 and 80 [draft counterpart of CISG articles 67 and 68]. In the cases governed by article 81 [draft counterpart of CISG article 69] it is anticipated that the buyer will take possession of the goods and arrange for any necessary transport himself, either in his own vehicles or in public carriers.

[Lookofsky points out "Because most international sales contacts involve carriage of the goods, the field of application of Article 69 will be limited in practice." Joseph Lookofsky, "The 1980 United Nations Convention on Contracts for the International Sale of Goods", International Encyclopaedia of Laws, Blanpain, gen. ed, (Kluwer (1993), p. 116.]

Buyer Takes Over the Goods, Paragraph (1)

2. Where the buyer takes over the goods at a place of business of the seller, the risk passes when he takes over the goods.

Buyer Fails to Take Over the Goods, Paragraph (1)

3. If the buyer was obligated to take over the goods at a place of business of the seller and the seller placed the goods at the buyer's disposal but the buyer failed to take them over in due time, the risk passes when the buyer commits a breach of contract by failing to take them over.

Example 81A: Buyer was to take delivery of 100 cartons of transistors at Seller's warehouse during the month of July. On 1 July Seller marked 100 cartons with Buyer's name and placed them in the portion of the warehouse reserved for goods ready for pick-up or shipment. On 20 July Buyer took delivery of the 100 cartons. Therefore, the risk of loss passed to buyer on 20 July at the moment that the goods were taken over by him.

[Suppose the goods were destroyed by fire on 19 July. In Example 81A, Seller bears the risk. Under Incoterms EX WORKS, on the other hand, if the goods were placed at Buyer's disposal on 1 July, Buyer would bear the risk from that time on, even though he had not yet picked up the goods.]

Example 81B: In the contract described in Example 81A Buyer did not take over the 100 cartons until 10 August. The risk of loss passed to him at the close of business on 31 July, the moment at which the Buyer was in breach of contract for failing to take delivery.

Example 81C: Although Seller in the contract described in Example 81A should have had the 100 cartons ready for Buyer to take delivery at any time during the month of July, no cartons were marked with Buyer's name or otherwise identified to the contract until 15 September. Buyer took delivery on 20 September, which was within a reasonable time after he was notified of the availability of the goods. The risk of loss passed to buyer on 20 September, the time when buyer took delivery of the goods. This result occurs, rather than the result given in Example 81B, because Buyer was not in breach of the contract for not taking delivery before 20 September.

[Schlechtriem states: "Article 69(1) expressly concerns only cases in which the buyer has delayed taking delivery. It should also be interpreted to include those situations in which the goods could not be delivered because of other breaches of required import license in a timely fashion. ..." Peter Schlechtriem, "Uniform Sales Law", Manz: Vienna (1986), p. 91]

Goods Not at a Place of Business of Seller, Paragraph (2)

4. The considerations which go into determining the appropriate time for the passage of the risk are different when the goods are at a place other than any place of business of the seller. So long as the goods are in the physical possession of the seller and the last day of the period during which the buyer was obligated to take over the goods has nor as yet passed, it is appropriate that the seller should bear the risk of loss. It is the seller who is in the best position to protect the goods from loss or damage and, if loss or damage occurs, to present claims against those who might have caused the loss or against the insurance carrier.

5. These considerations are no longer present when the goods are in the hands of a third party, such as a public warehouse. The seller is in no better position than the buyer to guard the goods against loss. Nor is the seller in any better position than the buyer to present claims against the third party, a person responsible for causing the loss or an insurance carrier, as the case may be.

6. The Convention chooses the rule that the risk passes to the buyer at the time the buyer is in a position to withdraw the goods from the control of the third party. That time is when delivery of the goods is due, the goods have been placed at the disposal of the buyer and he is aware that they have been placed at this disposal.

Placed at the Disposal of the Buyer

7. Goods are placed at the disposal of the buyer when the seller has done that which is necessary for the buyer to be able to take possession. Normally, this would include the identification of the goods to be delivered, the completion of any pre-delivery preparation, such as packing, to be done by the seller, and the giving of such notification to the buyer as would be necessary to enable him to take possession.

[Incoterms (1990) refer to having the goods 'clearly set aside or otherwise identified as the contract goods" (Sections B.5) and also refer to packaging. The Introduction to Incoterms (1990) states: "In most cases, the parties would know beforehand which packaging is required for the safe carriage of the goods to the destination. However, since the seller's obligation to pack the goods may well vary according to the type and duration of the transport envisaged, it has been felt necessary to stipulate that the seller is obliged to pack the goods in such a manner as is required for the transport, but only to the extent that the circumstances relating to the transport are made known to him before the contract of sale is concluded (cf. articles 35(1) and 32(2). of the [CISG] where the goods, including packaging, must be 'fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement'.)" ICC Publication No. 460 (1990), pp. 9-10.]

[Paragraph 7 of the Secretariat Commentary concludes with a reference to "the giving of such notification to the buyer as would be necessary to enable him to take possession." De Vries states that the article 69(2) referent is "and the buyer is aware of the fact that the goods are placed at this disposal ..." Hence, this should not be regarded as an article 27 situation in which constructive notice may suffice. Buyer's awareness is the article 69(2) standard. H. de Vries,"The Passing of Risk in International Sales under the Vienna Sales Convention 1980 as compared with Traditional Trade Terms", 17 European Transport Law 510-512 (1982); see also Fritz Enderlein & Dietrich Maskow, "International Sales Law", Oceana (1992), p. 277.]

[What is sufficient identification where unascertained goods are of such a kind that the seller cannot set aside a part of them until the buyer takes delivery (e.g., delivery from bulk in a tank a X's warehouse)? Paragraphs (2) and (3) of article 69 do not expressly resolve this issue, nor do Incoterms, Nicholas states: "The difficulty is perhaps best met along the lines of article 93(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." Barry Nicholas, Bianca-Bonell Commentary, Giuffrè: Milan (1987), p. 505. In the typical case, practices which the parties have established between themselves (article 9(1) or "usages widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade" (article 9(2)) would likely lead to this result.]

[Honnold states: "[T]he Convention applies to ... contracts for the sale of fungible goods (e.g., grade #2 heating oil) in terms of quantities or shares of the contents of an identified 'bulk' - e.g., the tanker North Star sailing June 1, oil tank #17. Can these contracts satisfy the 'identification' requirement of article 67(2)? Cf. art. 69(3) ... When the 'bulk' is not identified the answer is No. The first step in solving risk problems requires one to answer the question: Risk in what? This question, however, can be answered when the parties agree on a sale of Buyer A of one-half of the No. 2 heating oil loaded on the tanker North Star and the sale of the other half to Party B. (Such a contract would normally state the price per unit (e.g., barrel) and the approximate total quantity). If the contract provides that risk in transit falls equally on Buyer A and Buyer B, nothing in the Convention invalidates the agreement. ... Because of the complications inherent in such arrangements the requirement of [both articles 67 and 69] that the goods be 'clearly identified' indicates that the buyers should not be held to have agreed to loss sharing in an identified bulk unless this result is clearly indicated by the contract." John O. Honnold, "Uniform Law for International Sales under the 1980 United Nations Convention", 2d ed., Kluwer Law International (1991), pp. 465-466.]

8. If the goods are in the possession of a bailee, such as a warehouseman or a carrier, they might be placed at the disposal of the buyer by such means as the seller's instructions to the bailee to hold the goods for the buyer or by the seller handing over to the buyer in appropriate form the documents which control the goods (OFFICIAL RECORDS, p. 65).

[Maurer states: "Article 69(1) provides that if the goods are to be picked up by the buyer at the seller's place of business, the risk is allocated to the buyer when the goods are placed at his disposal. This language requires factual evidence of buyer's and seller's knowledge. In contrast, UCC 2-509(3) addresses this fact situation by passing the risk of loss to the buyer 'on his receipt of the goods if the seller is a merchant ...' This language appears to provide a more easily ascertainable moment in time for risk-shifting. It also provides an opportunity for the buyer to inspect the goods before taking receipt, and that opportunity provides greater certainty as to who bore the risk of loss or damage if loss or damage has occurred.

"Article 69(2), which appears to be an exception to article 69(3), provides for the risk of loss where the buyer takes over the goods at a place other than the place of business of the seller, such as a bailee or warehouse. The risk of loss passes when delivery is due and the buyer is aware that the goods are placed at his disposal. Thus it turns on factual knowledge of the buyer. In contrast, UCC 2-509(2) provides a far more easily ascertainable standard for identifying the risk of loss. ... The CISG language appears to provide an unnecessarily subjective approach to determining risk of loss, particularly in comparison with the UCC language. It seems prudent for traders to specify an allocation of risk provision in their sales contract so as to avoid the possible complications of the CISG approach." Virginia G .Maurer, "The United Nations Convention on Contracts for the International Sale of Goods", 15 Syr. J. Int'l L & Com. 377-378 (1989).]


Pace Law School Institute of International Commercial Law - Last updated August 30, 2006
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents