Reproduced with permission of the author.

Introduction

We live in a globalised world. A box of Belgian chocolate that is sold in a US grocery store is produced in a chocolate factory in Brussels. In this factory, German machines will mix Ecuadorian cacao with French milk, Brazilian sugar and Turkish hazelnuts. The chocolate will be wrapped in paper produced by a Finnish company using Swedish pulp. To get the box of Belgian chocolate to the Norwegian grocery store, all the different products used for the production of the chocolate have to be transported from their country of origin to Belgium. They will be transferred from factories to warehouses and from port to port. A lot can go wrong during the production process of this box of chocolate. The vessel transporting the cacao can capsize bringing the load to the bottom of the ocean; the warehouse that stores the paper can catch fire destroying the wrapping paper intended for the chocolate, the cooling system of the container holding the chocolate can malfunction leading to the melting of the chocolate, etc.

In an international sale of goods, the risk for damage to or loss of the goods will be either on the seller or on the buyer. And the parties will want to know which party will bear the risk. This is important because it means that if the risk has passed from the seller to the buyer, the buyer will have to pay the price, even if the goods get lost or damaged.

If the parties to a contract of international sale of goods have their place of business in different contracting States or if the private international law leads to the application of the law of a contracting State, the 1980 UN Convention on Contracts for the International Sale of Goods (CISG) will be applicable. This CISG consists of default rules. They will apply if the contracting parties have not changed the given provisions or created their own terms.

One way the parties to a contract of sale can deviate from the rules of the CISG is by including three-letter Incoterms by the International Chamber of Commerce (ICC) in their contract. By referring to the ICC Incoterms, the parties include a set of rules that arrange for delivery, passing of risk, the obligation to take insurance, carriage, etc.

Chapter 1: The 1980 United Nations Convention on Contracts for the International Sale of Goods

1.1 History

On 10 April 1980, a conference with diplomats from sixty-two States approved a set of rules providing a uniform law for international sales of goods. By December 1986, the treaty was ratified by eleven States (Argentina, China, Egypt, France, Hungary, Italy, Lesotho, Syrian Arab Republic, United States of America, Yugoslavia and Zambia). Today, seventy-nine States have adopted the 1980 United Nations Convention on Contracts for the International Sale of Goods, Brazil being the latest to ratify (Effective date: April 1, 2014). Because of this success the CISG is seen as the first law of sales treaty to win acceptance on a worldwide scale. Some seventy CISG contracting States account for more than two-thirds of all world trade, so the amount of money involved is enormous.[1]

Hong Kong, India, South Africa, Taiwan and the United Kingdom are the only major trading countries that haven’t adopted CISG. There is no doubt about the influence of this treaty on international trade.

The work that resulted in the Vienna Convention started in the 1920s and early 1930s by a group of scholars that were asked by the International Institute for Unification of Private Law (Unidroit) to draft a uniform international set of rules on international sale of goods.[2] In 1935 the group presented their first draft.[3] After being suspended during the Second World War a conference of twenty-one nations encouraged the continuation of the project in 1951.[4] During this conference in The Hague a special Sales Commission was appointed that produced two drafts.[5] These drafts were internationally well received and thus adopted at a 1964 Conference in, again, The Hague. The conventions adopted in The Hague are the Convention on a Uniform Law of International Sales (ULIS) and the Convention on a Uniform Law in the Formation of Contracts for the International Sale of Goods (ULFC). In the end these conventions weren’t very successful considering that only a few countries ratified them.[6]

The conviction within the international community grew that in order to be successful worldwide a worldwide participation was needed. Thus the General Assembly of the United Nations established a worldwide representative body to promote ‘the progressive harmonization and unification of the law of international trade’[7], the United Nations Commission on International Trade Law (UNCITRAL).[8] After ten years of work UNCITRAL submitted a Draft Convention (the New York Draft) in 1978, which covered both the formation of the contract and the specific rules on sales. Two years later the United Nations held a Diplomatic Conference that took place in Vienna. During this conference sixty-two States adopted the New York Draft unanimously. Since then the contracting States have been growing steadily.

1.2 Field of application

Part I of the Convention contains the rules on the application of the CISG.[9] In order to be a contract that falls under the scope of the CISG the contract needs to be a contract for the international sale of goods. Different criteria are given here: it has to be a sale of goods and this sale of goods needs to be international. In addition, the basic rule of the Convention, expressed in article 6, provides the parties with the possibility to contract out of the application of the CISG.[10]

In order to have the Vienna Convention as the applicable law, the contract needs to be a contract for the international sale of goods. ‘Internationality’ refers to the fact that the parties need to have their main place of business in different CISG contracting States.[11] However, according to article 1(1)(b) the rules of the Vienna Convention are also applicable if the private international law of the forum country leads to the application of the law of a contracting State.[12] Countries can, however, make an article 95 reservation to this way of application and decide not to apply the CISG if one of the parties’ places of business is not in a contracting State.[13]

The CISG regulates the sale of goods. ‘Goods’ under the CISG are goods that are moveable, tangible objects.[14] ‘Goods’ under CISG need to be understood as widely as possible.[15] By virtue of article 2 of the convention six specific categories of sale of goods are excluded.[16] The exclusions are made based on the nature of the transaction and the nature of the goods.[17] Excluded are: consumer sales, sales by auction, forced sales, sales of negotiable instruments, ships, aircraft and electricity.[18]

The Vienna Convention will be the applicable law on a sale of goods contract between parties whose main places of business are in different CISG contracting States and under the condition that the parties did not contract out of the application of (a part of) the Convention. Thus, the CISG has the status of supplementary law. One way for the parties to opt out certain parts of the Convention is by including an ICC Incoterm in their contract.

Chapter 2: The ICC Incoterms 2010

2.1 History and evolution

Since times past, merchants have been using various trade terms that give appropriate answers to questions such as:19]

Shorthand expressions such as FOB (Free on Board) and CIF (Cost Insurance Freight) are used to answer these questions but unfortunately, these terms do not tell us much regarding what they mean and how they should be interpreted.[20] The oldest and most common abbreviations, mainly used for carriage by sea, are FOB and CIF. These abbreviations do not always have the same meaning in different ports around the world.[21] These differentiations lead to confusion and conflict in international trade. The International Chamber of Commerce (ICC) with its headquarters in Paris performed a study in the 1920s to determine how trade terms were understood in different countries/legal systems.[22] The result of this research was that there were many different opinions as to the interpretation of trade terms. Since the differentiation in interpretation of these terms creates uncertainty in world trade, the ICC developed rules of interpretation that were first published in the 1936 version of Incoterms.[23] Since that first publication, Incoterms has been revised multiple times: in 1953, 1967, 1976, 1980, 1990, 2000 and the latest in 2010. Developments in international trade and innovation of the means of transport were taken into account for each amendment.[24]

In total Incoterms 2010 consist of 11 trade terms frequently used in international trade. They cover a wide range from the seller’s minimum obligation to make the goods available Ex Works to the buyer at the seller’s premises, handing over the goods for carriage with or without the obligation to arrange and pay for carriage under the F- and C-terms respectively and, finally, three variants of D-terms.[25]

2.2 Field of application

The main principle of the law relating to commercial agreements is based on the freedom of the contracting parties to agree as they wish; according to this general freedom of contract rule, parties may derogate from the application of convention provisions, including the CISG provisions on passing of the risk.[26] The general freedom of contract rule is incorporated in to the Vienna Convention by article 6 providing that, ‘the parties may exclude the application of this Convention or derogate from or vary the effect of any of its provisions.’

The parties have to agree to apply Incoterms rules to their contract. By including a shorthand reference to a particular ICC Incoterms rule in their contract, the parties incorporate the set of rules of that term in that contract.[27] Court decisions and arbitral awards recognise the contractual nature of the Incoterms rules’ binding force.[28] Even if the parties don’t expressly refer to a certain Incoterms rule, the Incoterms rules may become part of the contract since they reflect generally recognised principles and practices.[29] This was expressed in the BP Oilcase[30], where the US Federal Court equated the parties’ inclusion of a CFR term with ‘incorporation’ of the Incoterms version of that term: ‘even if the usage of Incoterms is not global, the fact that they are well known in international trade means that they are incorporated through article 9(2) of the CISG.’[31] However, it is important to note that Incoterms rules are not part of international customary law and for this reason merchants cannot rely blindly on the ICC Incoterms defined usage.[32] Parties will have to make a clear reference to an ICC Incoterm if they want to apply the Incoterm to their contractual relation, unless if they established a practice between them.[33] This occurs when parties regularly contract under ICC Incoterms, thus creating a usage that binds them by virtue of article 9 of the Convention.[34] According to Hans Van Houtte, “the Incoterms aspire to reflect the common practice in various countries. However, in reality the national usages are so diverse, that it is impossible to give them a common interpretation.”[35]

Chapter 3: Passing of risk under the CISG

3.1 Overview

Chapter IV (article 66 till 70) of Part III of the Convention on the International Sale of Goods contains the rules on the passing of the risk in international sale of goods. Article 66 of the Convention formulates the basic obligation the buyer has, namely to pay the price. The obligation to pay the price is not created by article 66; that obligation is defined by article 53.[36] Article 66 stipulates the consequence of passing of risk while articles 67 till 69 determine the moment when the risk passes in different situations. Article 67 handles the international contracts for the sales of goods that involve carriage as well. Goods that are sold in transit are handled by article 68. In situations that are not within articles 67 or 68, a residual rule for passing of risk is formulated in article 69 of the Convention. The relationship between risk passing and fundamental breach is determined by article 70; this article is also the last article examining the subject of the transfer of risk in the Vienna Convention.

As a general rule, the seller who has satisfied his obligation to deliver goods or documents will cease to bear the risk of loss or damage.[37] The language used in chapter IV on the passing of risk and in articles 31 till 34 on delivery of the goods and handing over of documents, is often identical.[38]

3.2 Article 66 CISG: the basic obligation of the buyer

Article 66 summarises the effect the passing of the risk has on the buyer. The buyer will have to pay the price, even if the goods are damaged or get lost; he will not be able to invoke article 58(1) of the Convention in order to refuse payment by claiming that the seller did not place the goods at his disposal.[39] Nor will the buyer be able to claim that he, because of the loss or the severe damage to the goods, is substantially deprived of his contractual expectations based on article 25 CISG.[40] So he will not be able to invoke the consequences of avoidance stated in articles 80 and 84 of the Convention.[41] The possibility to exercise the rights to reduce the price given to the buyer by article 50 CISG will not be open for use by the buyer.[42] Risk is not mentioned in these various provisions but according to Michael Bridge, it is a characteristic feature of the doctrine of risk that it overrides normal rules on contractual performance precisely because its function is to override those rules.[43]

A Russian court held that it is an established international practice that property rights to goods are transferred at the same time as the passing of risk – and the passing of the risk consequently leads to the transfer of property – unless the contract provides otherwise.[44] Article 4 of the CISG however states that the Convention does not govern the effect the contract has on property rights, thus one has to solve problems regarding this matter by applying domestic law, which is determined according to private international law.

3.2.1 Damage or loss of the goods before payment

The simple message in article 66 is that once the risk has passed, in accordance with the contract and the Convention, the buyer must pay the price agreed, and this rule applies even if the goods were damaged or lost; the buyer has to pay even if the goods ‘go down with the ship’ and never arrive at their destination.[45] The buyer will have to pay the price, he must take delivery and he cannot use the remedies set out in article 45 of the Convention. This basic rule has been confirmed by the many decisions where it has been established that the risk passed before the goods got lost or damaged and therefore, the buyer was obliged to pay the price.[46] The buyer might have the possibility using remedies that do not arise out of the casualty; this situation is considered in article 70, infra.[47]

3.2.2 Damage or loss of the goods due to seller’s act or omission

Based on the last part of article 66 of the Convention, the seller is responsible for loss or damage that is due to his ‘act or omission’, even after risk has passed. The rules on the passing of the risk are based on accidental loss of or damage to the goods while the rules on the buyer’s remedies cover loss or damage resulting from the seller’s breach of contract.[48] This distinction is clearly expressed by, on one hand, article 36 that lays down that the seller is liable for any lack of conformity which exists at the time that the risk passes to the buyer or which occurs after that time as a consequence of his breach.[49] And on the other hand, by article 70 that states that the articles on the passing of the risk do not impair the remedies available to the buyer in case of fundamental breach of contract by the seller. With the same thought in mind, article 66 of the Convention provides that risk does not pass where ‘the loss or damage is due to an act or omission of the seller.’[50]

If it is established that the loss or damage was due to an act or omission of the seller, the buyer’s obligation to pay may be discharged. In a Chinese arbitral award the tribunal found the seller of a chemical substance liable for the loss of the goods by melting.[51] The contract between the Chinese seller and US buyer contained a trade term that made the risk pass after the goods passed the ship’s rail (CIF) at the Chinese port. The seller was found liable for failing to give the carrier the agreed instructions on the temperature at which the goods were to be stored during carriage, leading to the goods being lost after the risk passed to the buyer. In another case the court regarded the seller to be liable for damage to bottles under article 36(2) and 66 CISG, even though the risk passed to the buyer.[52] The court held that the seller failed to perform his obligation to provide proper packaging of the goods.

Article 66 goes further than article 36(2), since it only requires an act or omission of the seller while article 36(2) states that the seller is liable for any lack of conformity which occurs after the time the risk passed and which is due to a breach of any of his obligations, clearly narrowing its scope to a mere contractual breach.[53]

The question that rises after reading this paragraph might be whether ‘act or omission’, as in article 66, must be understood as covering only those acts governed by article 36(2), being acts or omissions that constitute a breach of contract, or whether the article addresses any conduct by the seller.[54] According to the Secretariat’s Commentary on the 1978 Draft [55] on article 78 of the Draft (article 66 of the Convention):

This shows that the final phrase of article 66, ‘unless the loss or damage is due to an act or omission of the seller’, is not confined to acts or omissions of the seller that constitute a breach of his obligations under the contract. The commission rejected a proposal that would have had this effect when the draft was discussed.[57] The practical significance of this ‘dispute’ is not particularly great since the act or omission in question will most likely be a breach of contract.[58] But in some situations, as the example above shows, the act of the seller that causes the loss of the goods will not constitute a breach of contract. During preparatory work on the CISG the rule concerning liability for non-conforming goods was reformulated from ‘the seller shall be liable for the consequence of any lack of conformity (…) if it was due to an act of the seller or of a person for whose conduct he is responsible’[59], into its present form, ‘(…) lack of conformity (…) which is due to a breach of any of his obligations (…).’ This has the result that the seller’s liability for subsequent lack of conformity of the goods presupposes the breach of a contractual obligation.[60] The reason for this restriction was that the adoption of the more extensive rule in ULIS might lead to ‘contractual’ liability for the seller caused by a breach of a non-contractual obligation.[61]

On the other hand, a proposal to delete the second part of article 66 of CISG out of fear that a simplification could be misinterpreted and lead to the fact that the buyer does not need to pay if there is a fault or defect in the goods was withdrawn.[62] In opposition to the proposal, it was argued that the second part of article 66 is of great importance since, even after the risk has passed, the seller can still interfere with the goods in such a manner as to cause damage and the second part of article 66 makes it clear that the buyer would not have to pay the price when the loss or damage is caused by an act of the seller.[63] Even a proposal to change the wording of the second part of article 66 CISG with the effect that it would be limited to an act or omission of the seller that amount to a contractual breach was not retained.[64] In opposition to this proposal it was pointed out that the seller might act in a way that was not a contractual breach but still caused damage.[65] The purpose of the wording of the last sentence of article 66 of the Vienna Convention is, therefore, clear. It covers the situations, in addition to cases of breach of contract, where the seller doesn’t breach his contractual obligations but conducts a breach of a legal duty, which may be unlawful under the law of tort, but not under the law of contract.[66]

3.2.3 Risk and the action for the price

When the risk has passed from seller to buyer the buyer must pay the price agreed. This presupposes that the seller can go to court to bring an action for the price.[67] Article 62 of the Convention states that ‘the seller may require the buyer to pay the price, take delivery or perform his other obligations.’This is the seller’s equivalent for article 46 that states that ‘the buyer may require performance by the seller of his obligations.’[68] In cases where the buyer has accepted the goods, the seller can recover the price by bringing an action similar to an action to collect a ‘debt’ implemented by execution on the debtor’s property.[69] In some legal systems, other than common law, the breach by the buyer to pay the price may give a right of recovery of the goods to the seller.[70] This article differs from the law of common law countries in which the seller’s remedies in respect of the price are more restricted.[71] In order to compromise between legal systems where courts are authorised to order specific performance of an obligation and legal systems where courts are not authorised to do so, article 28 was introduced.[72] The remedy to require performance, stated in article 46 (buyer’s remedy) and article 62 (seller’s remedy), are subject to article 28, which states that ‘a court is not bound to enter a judgement for specific performance unless the court would do so under its own law.’[73] This means that irrespective of the loss of the goods after the risk has passed, the buyer does not need to pay the price if under the law of the forum the court would not order him to do so in a similar situation.[74]

The courts of the contracting States can only order performance if they would do so in similar sales contracts according to domestic law.[75] Article 28, which was introduced as a concession to the common law States, stands in opposition to the principle of harmonisation of laws; the principle that was the goal of the Vienna Conference.[76] Through article 28, national limitations on specific performance are admitted to the CISG.[77] In my opinion the drafters of the Convention should have tried to make a compromise leading to one rule being applicable in all cases falling under the Convention instead of referring to the law of the forum State. Consequently, article 28 should have been left out of the Convention.

In practice, however, article 28 of the CISG has only limited importance since the cases where a party might think of using article 28 of the CISG are cases where common law grants specific performance.’[78] In a case before a Swiss court, where a Swiss seller sought payment of the price by the buyer, the court stated that ‘the seller’s right to require performance is restricted by article 28 CISG but that article 148 of the Swiss Law of Obligations provides for the independent right of the seller to require the contract price. In contrast to the Common Law, the seller can claim payment independently from claims for damages. Thus, the restriction under article 28 CISG can be disregarded in the case at hand.’[79]Hager offers us an example in which American law would take effect under the CISG by virtue of article 28: if the buyer of fungible goods breaches the contract by failing to take delivery of them and the seller preserves the goods for him for an unreasonably long period in which the goods are accidentally destroyed.[80] Despite the fact that the risk did pass from seller to buyer, the UCC prevents the seller from bringing an action for the price based on the idea that the period during which the buyer in breach must bear the risk should be limited.[81]

3.2.4 Conclusion

Article 66 formulates the main obligation the buyer has after the risk passed, namely his duty to pay the price. There might be some difficulties in case the goods are damaged or lost due to an act or omission of the seller that is not a contractual breach. Article 36(2) of the Convention makes the seller liable for contractual breach, even after the risk has passed, while article 66 besides imposing contractual liability also protects the buyer from damage or loss caused by a breach of a legal duty, which is unlawful under the law of tort, but not under the law of contract.

By using article 28 of the Convention the buyer can escape from being forced to pay the price if the law of the forum would not force him to do so in comparable cases under its own law. Although this article only has limited importance, it stands in opposition to the principle of harmonisation of laws, which is, in my opinion, a situation that should have been avoided in the CISG.

3.3 Article 67 CISG: risk when the contract involves carriage

We have seen that article 66 of the Vienna Convention formulates the basic obligation of the buyer after the risk passed. The next articles concerning passing of risk under the CISG that will be discussed, are those determining the exact moment the risk passes from seller to buyer. The most important risk-rules are those applying to contracts of sale of goods involving carriage of the goods since this accounts for almost all international sales.[82] Different types of transport reflect different geographical settings, various types of goods and special needs of the parties.[83] Since the 1970s, transport contracts have mainly been influenced by the so called ‘container revolution’ which has made the multimodal transport - where the load is stowed in a container that is sealed at an inland point and carried by a series of different modes of transport to the buyer - as one of the main ways of transport of this time.[84]­

3.3.1 Article 67 in detail

     A. The basics

Article 67 of the Convention governs the passage of the risk of loss where the contract involves carriage of the goods and the parties have not, by the use of trade terms or otherwise, provided for a different rule in respect to the risk of loss.[85] According to article 67(1), if the seller is not bound to hand the goods over at a particular place, risk passes from seller to buyer when the goods are handed over to the first carrier.[86] The article does not distinguish between transport by air, sea or road nor does it treat specifically refer to the situation of multimodal transport.[87]

By virtue of article 67(1), third sentence, the mere fact that the seller retains transportation documents, or that he has already passed them over, doesn’t affect the passing of the risk.[88] Retention of the documents, and the corresponding rights over the goods, for reasons of securing payment does not hinder the passage of the risk to the buyer.[89] This third sentence of article 67 makes it clear that the passing of risk is independent of the transfer of title.[90] This was clearly expressed in a case before a German court concerning a dispute between a seller and buyer of a stallion.[91] The court decided that the passing of risk is independent of the passing of ownership. A Chinese court confirmed this in a dispute over insurance claims where it said that ‘CISG stipulates the transfer of risk, but does not stipulate the transfer of ownership.’[92]

The risk also passes without regard as to who is responsible for arranging transport and insurance. In a dispute between an Italian seller and a Spanish buyer, the Spanish court held that risks relating to the goods passed to the buyer when the goods were loaded on the vessel, irrespective of whether the buyer had arranged the insurance of the goods.[93]

     B. Handing over to the first carrier

Transferring the risk from seller to buyer after the goods have been handed over to the first carrier is in accordance with a widely recognised international rule.[94] Placing the transit-risk on the buyer is justified by the fact that the buyer is in a better position to assess the damage and to make a claim against the carrier or the insurer.[95] According to Honnold, followed in his opinion by Hager, it might be better, in case of a sale of ‘high-tech’ goods, to place the transit risk on the seller, since he is capable of repairing or adjusting the highly technological goods.[96]

          i) The first carrier

The Convention does not define the concept of the first carrier but scholars and case law did. Only handing over to an independent carrier causes the risk to pass.[97] This independent carrier can be e.g. a courier service [98] or a postal service.[99] If the seller delivers the goods using his own trucks or other means of transport, the goods are not ‘handed over’ to a carrier in the way stipulated by article 67(1) of the Convention.[100] When using his own means of transport, the goods remain physically in the hands of the seller and, therefore, he is closer to the goods and he can more easily take preventive measures to protect the goods from deteriorating.[101] The handing over of the goods in the article 67(1) sense signifies a transfer of power of control over the goods and, thus, presupposes a different legal entity.[102]

Another reason for the seller holding the risk when he is also the carrier of the goods is that damage during transportation is likely to generate a claim against the seller for his lack of care and when the seller engages to deliver the goods with its own means of transportation, the price will reflect this service provided by the seller; including cost of insurance of vehicles and load.[103] In cases where the seller provides for the transportation, the risk will pass according to article 69, second paragraph, if the goods are handed over to the buyer at a place different than the seller’s place of business (in detail see 4.6.2 D, infra) or according to article 67, first paragraph, the risk passes when the goods are handed over to an independent carrier at a particular place.

According to Von Hoffman it is not a good policy to leave the risk with the seller because it ‘penalises the seller who provides transportation services that are quicker or cheaper than those of established transport organisations.’[104]He suggests that this policy operates in favour of the buyer only, since he is the one profiting from the specific measures of the seller to compete in transport with other established institutions.[105]

The placement of the risk on the seller when he carries the goods himself can, however, lead to practical problems. When the seller transports a container with his own truck to a port where it is handed over to an independent carrier, the risk of transit is ‘split’ in two, which can encourage disputes over the exact moment when the damage occurred and who at that time carried the risk.[106] Parties are advised, and follow this advice most of the time, to allocate the risk inter partes by using trade terms in their contract.

          ii) Handing over of the goods

Hager defines ‘handing over’ as transferring the goods into the carrier’s custody.[107] The handing over of the goods is complete when the goods are in the physical custody of the carrier. In a case between an Italian seller and a German buyer of plants, the court stated that handing over requires that there is an actual surrender of the goods to the carrier. [108] Further, the court said that the risk only passes when loading is completed. This was confirmed by a decision of the Swiss Supreme Court in 2008 where a machine got damaged by falling off a forklift just before loading on the truck.[109]

In the case of sea transport it is sufficient to place the goods alongside the ship under the condition that the carrier has taken the goods into his custody.[110] This is important since this means that the risk during loading on the ship is on the buyer. When the load is accepted prior to loading, it is often difficult to determine whether damage to the goods occurred before, during or after loading.[111] In situations described above, the parties should use trade terms to avoid disputes regarding the moment the damage occurred.

     C. Carriage from an agreed place

If the contract requires the seller to hand the goods over to a carrier at a particular place, the risk passes from seller to buyer upon handing over of the goods at that place. This was included for situations where the seller has his business somewhere inland and agrees to deliver the goods at a seaport.[112] If the seller agrees to hand over the goods to a carrier at a particular place, it doesn’t matter whether the goods get at the place by the seller’s own trucks or if they get there by a transport company engaged by the seller.[113]

In cases where the particular place is defined in general terms, e.g. shipped French Mediterranean Sea coast, the place that is chosen by the seller to ship the goods will be the particular place where risk passes from seller to buyer.[114]

The second sentence of article 67(1) is not applicable in situations where the contract provides that the seller needs to hand the goods over to the buyer at a particular destination.[115] Situations like that fall under article 69(2) of the Convention, see 4.6.2 D, infra.

     D. Retention of documents

It is a normal practice in international trade to let the unpaid seller retain the shipping documents of the goods as a form of security until the payment is made.[116] Some legal systems link the ‘title’ or ‘property’ of the goods with the handing over of the documents.[117] This might lead to insecurity on the issue of the passing of risk and whether this passage is influenced by retention of documents. Article 67(1) third sentence states that the passing of the risk is not prevented by the seller’s retention of documents controlling the disposition of the goods.[118] This rule is important and useful to avoid the basic rule on risk losing its effect.[119]

     E. Identification of the goods

A buyer under the Convention should only bear the risk of damage or loss if it is clear that the goods damaged or lost in transit are his.[120] For this reason article 67(2) lists the identification of the goods as an additional requirement for the passage of risk; the risk does not pass to the buyer unless and until the goods are clearly identified to the contract.[121] Goods can be identified by markings on the goods, by shipping documents, by notice given to the buyer or otherwise.[122] A Russian arbitral tribunal found that a seller could clearly identify the goods for the purposes of the contract by means of shipping documents.[123] If the goods cannot be identified, the risk stays with the seller until the moment the goods are identified.

3.3.2 Splitting the risk

Following the application of article 67 the risk can split in three cases, firstly if the seller uses his own trucks or other means of transportation for a part of the way, secondly the case in which he is obliged to hand over the goods to a carrier at a particular place and thirdly where the goods are identified to a particular contract only after the goods were shipped.[124] Situations like this, where the risk is split during the voyage between seller and buyer, might create disputes over the exact moment the damage occurred. In quite a lot of these situations it cannot be established when the goods got damaged or lost and, therefore, the party that bears the risk of loss will ultimately be the party that bears the burden of proving the existence of conforming or non-conforming goods.[125]

3.3.3 Conclusion

Nearly all international sale of goods will include carriage. Therefore, article 67 of the Vienna Convention is the article on passing of risk that pertains to most international sales. We need, of course, to keep in mind that in practice most international sale contracts will include trade terms (like the ICC Incoterms), in which the parties will allocate the risk themselves.[126] However, unless the buyer and seller have included such a provision in their contract the risk in cases that also involve carriage must be borne by the buyer from the moment the goods are handed over to the first carrier for transport to the buyer. Although the drafters of the CISG chose very clearly to place the transit risk on the buyer, they should have given a clear definition of the concept of the ‘first carrier’ and ‘handing over’.

3.4 Article 68 CISG: goods sold in transit

Article 68 of CISG is the provision that deals with the situation in which goods are already in transit at the time of the contract of sale.[127] At the Conference in Vienna this provision on allocation of risk in sale of goods in transit unexpectedly gave rise to some problems.[128] The draft version of article 68 CISG (article 80 of the Draft) provided that the buyer assumes the risk of damage or loss from the time the goods were handed over to the carrier who issued the documents controlling their disposition.[129] It is more convenient for the buyer to pursue a claim for such loss or damage against the carrier and the insurance company than it is for the seller; therefore, the risk of loss is deemed to have passed retroactively at the time the goods were handed over to the carrier who issued the documents controlling their disposition.[130]

A number of developing countries, that mostly import goods, rejected the retroactive assumption of risk by the buyer.[131] They based their criticism on the grounds that it was irrational and unjust to put the risk on the buyer before the contract was made, especially in situations in which the goods had not been insured prior to that date.[132] They also argued that the buyer could have no insurable interest until the time the contract was made.[133] Supporters in favour of the rule that creates retroactive passing of risk argued on the other hand that it represented usual practice in international trade and that the rule was there to avoid controversy over the time when transit damage occurred.[134] The result of this discussion is reflected in the present version of article 68 of the Convention under which risk basically passes to the buyer only upon conclusion of the contract, but retroactive assumption of risk applies if the circumstances so indicate.[135]

3.4.1 Article 68 in detail

     A. The basics

Article 68 CISG allocates the risk where goods are sold while they are already in transit and they are found damaged upon arrival or they are lost during transit.[136] The basic rule of article 68 is expressed in the first sentence and makes the risk pass from seller to buyer when the contract of sale for the goods in transit is concluded. According to this major rule, the risk will be split; a situation that should be avoided since it has the feature of being dispute creating.[137]

Parties can avoid this dispute-inducing situation by an express agreement on allocation of risk.[138] One way of doing this is by including an Incoterm in the contract. In addition, article 68 refers, in its second sentence, to circumstances that indicate that the risk is assumed from the time the goods are handed over to the carrier.[139]

     B. The second sentence: retroactive assumption

According to the second sentence of article 68 the risk passes retroactively from seller to buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage.[140] This rule, however, is only applicable if the circumstances so indicate.[141]

          i) The circumstances

The applicability of the retroactive assumption of risk depends upon the satisfaction of a vague precondition.[142] Hager states that there is a general agreement that the existence of transportation insurance for the whole transit period, including the period of carriage already completed, is a particularly relevant circumstance.[143] To understand this thoroughly, we will assume the next situation. A load of cacao that is in transit from Ecuador to Belgium is the object of a contract of sale concluded between an Ecuadorian exporter and a Belgian chocolate producer. Upon arrival in the port of Antwerp, inspection of the cacao shows that the load of cacao had been seriously damaged by seawater during the period of transit.

According to article 68, first sentence, the risk has passed upon conclusion of the contract, somewhere during the period of shipping from Ecuador to Belgium. Since the damage is caused by water seepage it is difficult to determine whether this damage was caused before or after conclusion of the contract. Suppose that in the sale the standard package of documents covering the shipment, including a policy of insurance payable ‘to the order of the assured’, is transferred to the buyer.[144] Because of this, the buyer would be the only person who could claim under the policy of insurance therefore providing evidence for an intention to transfer the risk to the buyer when first handed over to the carrier.[145] Since article 68 refers to circumstances the conclusion that risk passes at the start of the voyage is made easy.[146] Contracts of sale of goods that are concluded while the goods are already in transit typically require the seller to transfer an insurance policy to the buyer and, therefore, this makes the second sentence of article 68 widely applicable.[147]

It is clear that this second sentence, ‘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’, is too vague. Therefore, parties should specify in their contract a clear and practical rule placing the risk on the buyer, provided that the buyer can look to an insurer in the event of loss.[148]

          ii) The carrier who issued the documents embodying the contract of carriage

According to article 68, in order to apply the retroactive assumption of risk by the buyer, the goods must have been ‘handed over to a carrier who issued the documents embodying the contract of carriage.’[149] There is no reference to the category used in article 67(1), namely ‘documents controlling the disposition of the goods’.[150] In an earlier version of article 68, the expression ‘documents controlling the disposition of goods’ was used.[151] An amendment proposed by the United States delegation changed this into the present wording, ‘the documents embodying the contract of carriage.’[152] The reason behind this was that the old wording was likely to be understood as being limited to negotiable bills of lading,[153] whereas the rule in article 68 should be applicable whether the document was negotiable or not and whether the buyer was covered by insurance or not.[154] This means that unlike article 58 CISG and article 67(1) CISG, the application of retroactive assumption of risk does therefore not depend upon whether the documents control the disposition of the goods but instead whether they can prove the existence of the contract of carriage; this gives article 68 a wider field of application.[155]

     C. The third sentence: non-disclosure by the seller

The last sentence of article 68 states that ‘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.’ The wording of this last sentence presents us with a problem of interpretation; there are namely two difficulties relating to the interpretation.[156]

Firstly, there is a problem with the application of this sentence to damages occurred before and after the conclusion of the contract.[157] The second difficulty that might arise is the relationship of this third sentence with the two first sentences of article 68 CISG.[158]

          i) Loss or damage under the third sentence

The first situation is best explained with an illustration; so lets go back to the cacao example. The seller ships the cargo of cacao on April 3 and sells the entire load of cacao on April 8. On the date of the conclusion of the contract (April 8), the seller has reason to believe that one-fifth of the load is damaged by seawater but he does not disclose this to the buyer. In fact two-fifth of the cacao had been damaged. During the rest of the voyage the seawater also damages the rest of the load.

The question here is whether or not the seller is liable for the damages which had already occurred at the moment of conclusion of the contract and of which he knew or ought to have known (one-fifth of the cacao), or whether he is also liable for the damages occurred after the conclusion (the whole load of cacao) or which already existed at the conclusion but of which the seller neither knew nor ought to have known (two-fifth of the cacao).[159]

Article 80 of the Draft refers to ‘such loss or damage is at the risk of the seller.’ This wording seems to restrict the loss or damage borne by the seller to the actual damage that was present at the time the risk passed.[160] The formulation was, however, changed to the present ‘loss or damage’; this seems to place the loss of the whole cargo on the seller, including the subsequent damage, which is causally connected with the original damage.[161] Nicholas states that when the seller fails to disclose loss or damage that had occurred before the conclusion of the contract the seller would be liable not only for the loss or damage that the seller knew or should have known but also for all the damage that had occurred when the contract was made and for all the subsequent damage ‘which is causally connected with the original damage.’[162] If we apply this to the example given above, the seller will be liable for the whole load of cacao. Both Honnold and Nicholas support this interpretation as it has the advantage of avoiding the splitting of the transit risk.[163] Honnold, nevertheless, supports this approach in so far as it supports holding transit loss on the seller but he doubts Nicholas’ limitation based on ‘causal connection.’[164]

Hager, however, follows the opinion that the seller is only liable for loss or damage that has already occurred at the time of the conclusion of the contract and of which he knew or ought to have known.[165] He underpins this opinion by referring to the change of wording from the Geneva Draft to the Vienna Draft. The Geneva Draft stated: ‘where the seller is not acting in good faith, the risk or loss of goods sold in transit does not pass to the buyer’, which was changed in the Vienna Draft into ‘… such loss or damage is at the risk of the seller.’[166] Which again was amended in the final version of the Convention back to: ‘the loss or damage’, since there was a discrepancy between the French and English version.[167] According to Hager, the change from the wording in the Geneva Draft to the one in the Vienna Draft indicates the intention to make the seller liable only for loss, which had already occurred at the time of conclusion of the contract of sale and of which he knew or ought to have known.[168] This was only changed to the more general ‘loss or damage’ to end the discrepancy. He does, however, point out that this has the adverse effect of splitting the risk leading to practical disadvantages.[169] If we apply this view to the above example the seller will be liable for the loss of the cacao that already occurred upon conclusion, namely two-fifth of the load of sugar. The majority opinion at this time leans toward the opinion expressed by Hager.[170]

I support the opinion expressed by Nicholas and partly supported by Honnold since this opinion has the advantage of avoiding disputes and costly litigation. I do see the reasoning behind the opinion of Hager and that one must follow the intention of the drafting parties for the sake of it, nonetheless, I think the view of Nicholas and Honnold is a better way of dealing with this ambiguous sentence.

          ii) The relationship with the first two sentences

The second difficulty surrounding the third sentence of article 68 is its relationship with the two first sentences of article 68 of the Convention. In the original formulation, the (now) third sentence was a part of the second sentence.[171] At the 9^th Plenary Meeting, the delegations had a discussion about the wordings of this second phrase and what it means.[172] It was intended that the exception should apply only to the second sentence. Mr. Krispis of the Greek delegation correctly pointed out that the second sentence stated an exception, followed by an exception to the exception, which meant a return to the rule in the first sentence.[173] Only the seller who acts in good faith gets the advantage of the retroactive effect of the transfer of risk.[174]

This interpretation is consistent with the relationship between risk and liability for non-conformity.[175] Article 36 of the Vienna Convention expresses the basic rule that the seller is liable for non-conformity of the goods till the risk passes. Article 68 CISG lets the risk pass upon conclusion of the contract (unless circumstances indicate differently…) If damage to the goods occurs before the time of conclusion, it falls under the rule of non-conformity; if the damage occurs after the conclusion of the contract, the question that is raised is one concerning risk.[176] If the third sentence would also be an exception to the first sentence of article 68, this fundamental distinction contained in the Vienna Convention would be lost.[177]

3.4.2 Conclusion

Article 68 was subject to a lot of discussion during the conference to find a compromise that was acceptable for all parties. The delegations chose a general rule of risk passing that splits up the risk between buyer and seller during the period of transit. The choice for this dispute-creating regime is understandable taking into consideration the difficult negotiations to find a compromise. However, from a legal point of view it is a situation that should have better been avoided in the treaty. The vague second sentence of article 68, which provides an exception that lets the risk pass when handed over to the carrier, tries to remedy this. In international sales of goods, most contracts will require the seller to transfer an insurance policy to the buyer and thus making the second sentence of article 68 widely applicable, creating a clear allocation of risk between seller and buyer.

I believe that the second sentence to a certain degree saves us from a lot of legal uncertainty, due to the fact that transfer of insurance papers will often make this sentence come into play. However, a better situation would have been created if this were the sole rule (under the condition expressed in the third sentence of article 68.)

3.5 Article 69 CISG: the residual rule

All contracts that are not concerned with the issue of carriage of the goods by a carrier fall under the application of article 69.[178] In cases governed by article 69, the buyer will take possession of the goods and arrange for any necessary transport himself.[179] Since the risk is linked to the person having the custody over the goods, the risk will pass from seller to buyer when the buyer takes over the goods from the seller.[180]

3.5.1 Article 69 in detail

     A. Overview

Article 69 is called the ‘residual rule’ on passing of the risk in the CISG. Contracts of international sale of goods that do not fall within the scope of article 67, involving carriage, and article 68, sale of goods in transit, will be governed by article 69.

The first paragraph of article 69 is concerned with contracts in which the buyer needs to take over the goods at the seller’s place of business.[181] In the German pizza carton case, the court clearly stated that article 69(1) applies to cases in which the goods are placed at the disposal of the buyer at the seller’s place of business.[182] In situations in which the contract is silent on the issue of the carriage of the goods but the buyer arranges for transportation of the goods by a third party, the passing of risk will be governed by article 69 CISG rather than by article 67.[183] The decision on which article parties will apply on the passage of risk depends upon the interpretation of their contract.

All the other situations not governed by this first paragraph will be governed by article 69(2), makings this second paragraph the ‘catch-all’ provision of the residual risk rule.[184] In a case before a court in the State of Colorado, a Mexican buyer claimed relief for delivery of non-conforming goods (coal mining equipment) by the United States seller.[185] In referring to article 36(1) of the CISG, which provides that the seller is liable for any lack of conformity which exists at the time when the risk passes to the buyer, the court stated that ‘article 69(2) CISG governs passing of risk if the buyer is bound to take over the goods at a place other than a place of business of the seller. It provides that the risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place.’

     B. The basics: taking over at the seller’s place of business

The first paragraph of article 69 is concerned with contracts in which the buyer needs to take over the goods that have been placed at his disposal at the seller’s place of business.[186] In cases that are governed by article 69 CISG, the seller will have to place the goods at the disposal of the buyer.[187] The buyer will take possession of the goods and arrange for any necessary transport himself, either in his own vehicles or in public carriers.[188] Article 69 does not express requirements the buyer needs to fulfil in order to place the goods at the seller’s disposal; the mere fact that the buyer is aware that the goods are placed at his disposal is sufficient.[189] If the buyer needs to take over the goods at the seller’s place of business, the risk will pass at the moment when the buyer takes over the goods, this being the moment when he takes over the control of the goods.[190] The fact that the buyer uses a carrier to take over the goods, does not prevent the risk from passing in cases where it was agreed that the buyer himself would take over the goods.[191] This was clearly stated in the Stallion case.[192]

If the contract permits the buyer to collect the goods within a given period, the risk will only pass after the buyer has taken over the goods, or if the buyer failed to take delivery before the period expired, leading to a breach of contract.[193]

     C. Breach of contract by the buyer

          i) Failure to take delivery

Failure of the buyer to take over the goods that are placed at his disposal will be considered to be a breach of contract if the agreed time for taking delivery has passed or, if no time was agreed upon by the parties, after a reasonable period has expired after the buyer received the seller’s notice that the goods are placed at his disposal in accordance with article 31(c).[194] The term ‘reasonable time’ is not necessarily the same for both parties; the interpretation of it will depend upon the nature of the goods and the circumstances of the case.[195] In a German case, the court found that the seller did not place the goods at the disposal of the buyer when he stored the goods in a manufacturer’s warehouse, instead of storing them at the seller’s warehouse where the delivery to the buyer was to be made.[196]

          ii) Other breaches by the buyer

Article 69(1) does not expressly cover situations in which the buyer commits a breach other than refusing to take delivery of the goods; situations such as failure to pay the price when this is due before delivery.[197] Hager is of the opinion that the situation in which the seller retains the goods after the buyer’s refusal to pay the price is also seen as the buyer ‘committing a breach of contract by failing to take delivery’ as in article 69(1) of the Convention.[198] Similarly, according to Schlechtriem, article 69(1) should also be interpreted to include situations in which the goods could not be delivered because of other breaches of contract by the buyer.[199]

On the other hand we have Nicholas who clearly states that other breaches do not affect the passing of the risk. Nicholas says that article 70 of the Convention is not applicable to breaches by the buyer and, therefore, a breach which does not make it impossible for the seller to hand over the goods, but merely removes or suspends his obligation to do so, is not sufficient.[200]

In my opinion, although not clearly expressed by the wording of the Convention, the risk should pass to the buyer in situations where the buyer breaches contractual obligations and therefore fails to take delivery when it is due. Most authors follow this opinion and it is consistent with the policy consideration that the passing of risk may encourage the buyer to meet his contractual obligations. The general obligation expressed in article 85 till 88 of the Convention makes the seller preserve the goods if the buyer is in delay in taking over, so this rule of risk passing will not induce any adverse effects.

     D. Taking over at a different place

Paragraph two of article 69 adds the specific rule covering cases in which the buyer is bound to take over the goods from the seller at a place different than the seller’s place of business.[201]According to the first paragraph of article 69, the risk passes when the buyer takes over the goods at the seller’s place of business. By virtue of the second paragraph of article 69 the risk will pass at an earlier point in time, namely at the moment when delivery is due and the buyer is aware that the goods are placed at his disposal at the place designated by the contract.[202] The rule was made for situations in which the sold goods are stored in a warehouse or another place of custody, e.g. sales ‘Ex Warehouse’, ‘Ex Works’ or ‘Ex Quay.’[203] When the goods are in the physical possession of the seller, and the last day of the period during which the buyer was obliged to take over the goods has not yet passed, the seller is in the best position to protect the goods from loss or damage and hence he should bear the risk.[204] If, however, the goods are in the hands of a third party, the seller is not in a better position than the buyer to take the necessary precautions to protect the goods from deterioration or loss.[205] The CISG, therefore, chose to put the risk at the buyer from the time he is in a position to withdraw the goods from the control of that third party.

To understand this thoroughly we will apply this situation to the commerce of our earlier mentioned Belgian chocolate producer. The chocolate producer sells boxes of chocolate to a Norwegian buyer. The goods are stored in a warehouse operated by a third party; a situation known by both parties. When the Belgian seller deposited the chocolate in the warehouse, he received a warehouse receipt stating that the goods would be released to any person who held a delivery order executed by the Belgian seller. On August 5, when the contract was concluded, the Belgian seller gave the Norwegian buyer a delivery order that directs the warehouseman to deliver the goods to the buyer. On August 6, a fire hits the warehouse and all the goods got destroyed.

Following paragraph two of article 69 the risk passed the fifth of August, being the moment when delivery was due and when the buyer received notice that the goods were at his disposal at the warehouse.[206] Unlike article 69(1), the passing of risk does not depend upon the buyer’s willingness (to a certain extent) to take over the goods at the seller’s place; it is the seller’s unilateral action of placing the goods at the buyer’s disposal that makes the risk pass.[207] If we apply this to our example this means that the Norwegian buyer will have to pay the price even though the goods got destroyed in the fire.

We have seen that article 69 is used when the buyer needs to take over the goods at the seller’s place, and in situations where the buyer needs to take over the goods at a place other than seller’s place of business, namely at a warehouse where the goods are stored.

In cases where the seller has to deliver the goods to the buyer at the buyer’s place article 69(2) of the Convention will apply as well.[208] We have seen that only an independent carrier (being a third party) can be the first carrier referred to in article 67(1) CISG. When the sellers transports the goods with his own trucks or other means of transport, the goods stay in the physical possession of the seller, making him the party that should bear the risk of loss or damage.

3.5.2 Conclusion

Article 69 is the residual rule of the Convention, handling cases not falling within the scope of article 67 and 68. In cases falling under article 69(1), the risk will pass at the moment the buyer takes over the goods or if he does not do so in due time, from the time the goods were placed at his disposal and he fails to take delivery. Article 69, second paragraph, is concerned with cases in which the buyer is obliged to take over the goods at a place different than the place of business of the seller. In those situations, the risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place. Delivery to the buyer’s place of business also falls within the scope of this article. In this latter situation, risk will pass according to article 67 of the Convention, if carriage is arranged by the agreement and if the carrier is an independent party.

Since most contracts in international sale of goods will also arrange for transport from seller to buyer, the application of this article in practice is quite limited.

3.6 Article 70 CISG: fundamental breach

The last article to handle the passing of risk in the 1980 Convention on the International Sale of Goods is article 70, which governs the relationship between the CISG rules concerning the passing of risk and those concerning remedies for breach of contract. We have seen in article 69 of the Convention that a buyer, who commits a breach of contract by failing to take over the goods when this is due, most likely makes the risk pass because of his breach of contract.[209] The issue that is addressed by article 70 is whether a breach of contract by the seller, e.g. by handing over ten footballs instead of ten volleyballs, will prevent the risk from passing from the seller to the buyer.[210]

3.6.1 Article 70 in detail

     A. The basics

Article 70 of the Convention governs the cases in which the seller’s breach of contract and the loss of the goods are ‘unconnected.’[211] This means that article 70 is concerned with cases where, despite the breach of contract by the seller, the loss of goods is accidental.[212] Article 70 says that the fact that the seller has committed a fundamental breach of contract does not impair the remedies available to the buyer on account of that breach.[213] Consequently, the buyer can pursue the remedies provided by the Convention in case of seller’s breach, namely, the right to declare the contract avoided (art. 49(1)), to require substitute goods (art. 46(2)), to require repair of the goods (art. 46(3)), to reduce the price (art. 50) and to claim damages (art. 74).[214] The remedies the drafting parties of the Vienna Convention had in mind were probably mainly the right to require delivery of substitute goods and the right to avoid the contract; these remedies only apply in situations where the contract is breached in a fundamental way, infra.[215]

This means that, although the risk has passed from seller to buyer, the buyer will be able to require replacement goods or he will have the right to avoid the contract.[216] The fact that the buyer is unable to make restitution will not be a bar to avoidance in cases where the goods got lost due to an accident.[217] The rules that provide the buyer with remedies in case of breach of contract by the seller will take priority over the rules, which regulate the passing of risk.[218]

In cases in which the buyer receives goods that are non-conforming and this is a fundamental breach of the contract, the buyer may require substitute goods, even though the goods were lost.[219] Another situation addressed by article 70 is when the seller needs to dispatch goods to the buyer but is in delay in doing this.[220] If this amounts to a fundamental breach of contract, the buyer has the right to avoid the contract according to article 49(1)(a) of the Convention even though the goods got lost in transit.[221] Thus, the seller will not be able to use article 66 of the Convention and bring an action for the price for the goods that were lost.[222] If the price is already paid, the buyer will be able to recover it under article 81(2) of the Convention.[223] The effect article 70 has is therefore that it brings the risk back from buyer to seller.[224]

          i) Fundamental breach

Fundamental breach is defined by article 25 CISG that states that breach is fundamental if it ‘results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result.’[225]Fundamental breach of contract has different functions.[226] Firstly, if the party who is affected by a breach of contract wants to avoid it, the breach of contract will have to be fundamental.[227] Secondly, if a fundamental breach exists, the party effected by it can claim substitute goods in accordance with article 46(2) CISG.[228] And thirdly, a fundamental breach of contract by the seller will make the buyer be able to use all his remedies, despite the fact that the risk passed to him.[229]

     B. Article 82: conditional right to avoid or to require substitute goods

Article 82 of the Convention limits the power to avoid the contract or to require substitute goods by providing that a buyer loses his right to avoid a contract if he is unable to make restitution of the goods, with the exception of situations in which this restitution is impossible and this is not due to an act or omission of the buyer.[230] This also applies to cases where the buyer uses his right to require substitute goods. Thus, if we read article 70 in conjunction with article 82(2), the buyer will be able to shift any losses occurring after the passing of the risk and that are not due to an act or omission by that buyer back onto the seller, this of course under the condition that the seller committed a fundamental breach of the contract.[231]

     C. Avoidance in case of non-delivery within the additional period of time

The buyer will be able to avoid the contract not only when the seller commits a fundamental breach of contract (49(1)(a) CISG) but also when the seller fails to deliver within an additional period of time fixed by the buyer (49(1)(b) CISG).[232] The wording of article 70 seems to only shift the risk back to the seller in situations in which the seller committed a fundamental breach of contract but the formulation of article 49(1) makes a distinction between avoiding after fundamental breach and avoiding in case of failing to deliver in the additional period of time.[233] This means that when the seller fails to deliver in the additional period of time and the buyer uses his right given by article 49(1)(b) to avoid the contract, the risk will not shift back. Consequently, the risk will be borne by the buyer. According to Erauw, this is a correct interpretation ‘as the seller’s inability to perform within the additional period of time gives rise to the buyer being able to avoid the contract, but the text does not technically classify this as a fundamental breach.’[234] According to Hager, however, this is merely a drafting error and the risk should be shifted back on to the seller in situations falling under article 49(1)(b) of the Convention. This was clearly stated by the drafting committee: ‘the operation of article 67 [235] should be extended to all cases where the buyer has the right to avoid the contract rather than restrict it to cases where the seller committed a fundamental breach of contract.’[236]The committee adopted this but the text remained unchanged for an unknown reason.[237] Article 82(2)(a) of the Convention, which is an exception to the general rule that the buyer loses the right to declare the contract avoided if it is impossible for him to make restitution of the goods, makes it clear that avoidance of the contract on the basis of expiry of the additional period of time also causes the risk to shift back to the seller.[238]

I think it was indeed the purpose of the drafting parties to also include situations in which the seller fails to deliver the goods within the period of additional time fixed by the buyer, since, in my opinion, the fact that the drafting parties gave the buyer the right to avoid the contract in those situations ipse facto means that it is a fundamental breach. On top of that, article 82(2)(a) gives the buyer the right to avoid the contract, even in situations in which he is not capable of making restitution, thus, placing the risk of loss or damage in all cases in which the buyer has the right to avoid back on the seller.

If we keep in mind all the above we can formulate the general regime that is expressed in article 70 of the Vienna Convention. In situations in which the buyer is entitled to avoid the contract or if he can use article 46 to require delivery of substitute goods on account of the seller’s breach of contract, the risk will shift back to the seller.

3.6.2 Conclusion

Article 70 of the Convention on International Sale of Goods handles the relationship between, on the one hand, the rules on passing of risk and, on the other hand, the rules providing the buyer with remedies for fundamental breach by the seller. The article provides that the rules concerning transfer of risk do not impair the remedies available to a buyer against a seller who committed a fundamental breach of contract. Consequently, the buyer can pursue the remedies provided by the Convention in case of seller’s breach, namely, the right to declare the contract avoided, to require substitute goods, to require repair of the goods, to reduce the price and to claim damages.[239] The wording of article 70 leads to the application in cases of fundamental breach of contract by the seller but if the breach of contract is non-fundamental, the rule should apply by analogy, not depriving the buyer of the right to claim damages or price reduction.[240]

In cases where the buyer can avoid the contract due to seller’s fundamental breach or ask substitute goods, the risk will shift back from seller to buyer.

The drafting parties decided to make an ‘easy topic’ into a vague article leading to differing opinions concerning its interpretation. Needless to say an easier formulation would have been better to create certainty. The drafters could have used a formulation that makes it clear that in cases where the buyer can avoid the contract or ask for substitute goods, the risk stays with the seller. Fortunately, the cases in which article 70 would apply are very rare and no decisions have been registered.

Chapter 4: Passing of risk under the Incoterms 2010

4.1 Overview

Article 6 of the Convention provides us with the basic rule that parties can deviate from the provisions of the convention and draft their own rules. One way the parties can deviate from the Convention on International Sale of Goods is by referring to an ICC Incoterm in their contract.

The latest version of the ICC Incoterms rules contains eleven trade terms divided in two groups, one group contains Incoterms that can be used for all modes of transport and one contains terms that are limited to transport by sea or waterway. The ICC’s Incoterms rules reflect commercial practice that is most commonly used in international trade but parties are free to change these basic trade terms and adjust them to their own needs.[241]

Every Incoterm provided in the ICC’s 2010 Incoterms Rules stipulates ten different types of obligations in mirror fashion. The a-side reflects the seller’s obligation and the b-side expresses the buyer’s obligation.[242]

The transfer of risk in Incoterms is linked to the delivery obligation of the seller. The main rule expressed in Incoterms is that the seller bears all risks of loss of or damage to the goods until they have been delivered in accordance with the Incoterm, and that the buyer bears all risks of loss of or damage to the goods from the time they have been delivered as envisaged in the Incoterm.

4.2 Division

4.2.1 Division under Incoterms 2010

In its official Rules for the Use of Domestic and International Trade Terms, the ICC divides the Incoterms 2010 rules into two groups. The ICC starts of with providing all the Incoterms that can be used for any mode or modes of transport. This is the biggest group containing seven Incoterms rules. Following this group, a smaller group of four Incoterms is provided, all having the same characteristic that they are created for sea and inland waterway transport. The ICC chose to start its Incoterms 2010 rules presenting trade terms that can be used by any mode of transport in order to promote the use of these general trade terms since merchants still too often use maritime trade terms for non-maritime transport.[243]

The first group consists of Incoterms EXW (Ex Works), FCA (Free Carrier), CPT (Carriage Paid To), CIP (Carriage and Insurance Paid To), DAT (Delivered At Terminal), DAP (Delivered At Place) and DDP (Delivered Duty Paid).[244] The group fit for transport by sea and inland waterway consists of Incoterms FAS (Free Alongside Ship), FOB (Free On Board), CFR (Cost And Freight) and CIF (Cost, Insurance and Freight).

4.2.2 Division under the older versions

In the older versions of the ICC Incoterms rules, the Incoterms were classified in four categories, namely, the C-terms, the D-terms, the F-terms and one single E-term.[245] The Incoterms were organised by delivery obligation the seller has to fulfil.[246] The first letter of the trade terms was used as an indication of the category in which they belong.[247]

Although I understand the goal of the ICC to create a world in which merchants use the right trade term for the right mode of transport, I prefer the division used in the older versions of the Incoterms since I think it is better to organise the trade terms according to obligations of the parties than to organise them according to mode of transport. For this dissertation, I have to say, it is also more convenient to treat the Incoterms by its old classification since the manner of risk passing is similar for trade terms in the same letter-group.

4.3 Incoterms’ relationship with the CISG

4.3.1 In general

A reference in the contract to a certain Incoterm (or any other trade term) or an Incoterm being applicable by established practice between the parties does not exclude the application of the Convention.[248] The Incoterms alter and supplement the Vienna Convention by expressing the obligations of the parties on issues such as transport, loading of the goods, risk of loss and related matters.[249]

The Incoterms stay silent on matters such as formation of the contract, transfer of property and consequences of breach.[250] Thus, if the contract only mentions a certain Incoterm and is silent on other matters, one will have to look at the applicable law.

4.4 E-term: EXW

There is only one term in the E-term group, namely the Incoterm Ex Works[251] (EXW). Under this Incoterm the seller makes the goods available for the buyer at the seller’s own place of business or at another named place (i.e. works, factory, warehouse, etc.)[252] Since the seller only has to place the goods at the disposal of the buyer, the Incoterm EXW expresses seller’s minimum obligation.[253] The delivery obligation of the seller consists of placing the goods at the disposal of the seller at the agreed point, not loaded on any collecting vehicle.[254] The seller must deliver at the agreed time or within the agreed period. The buyer must take delivery of the goods when the seller has placed them at the buyer’s disposal and notified the buyer of the fact the goods are placed at his disposal. The risk is transferred from seller to buyer at the moment the seller placed the goods at buyer’s disposal; provided that the goods have been clearly identified to the contract.[255]

4.4.1 EXW and the CISG

According to article 31 of the Convention the seller fulfils his obligation to deliver either by handing over to the first carrier when the contract involves carriage (article 31(a)), or by placing the goods at the buyer’s disposal at the seller’s place (article 31(c)), or at the buyer’s disposal at a particular place (article 31(b)).[256] These last two cases are situations that are also included in the Incoterm EXW.[257] In situations where the seller has to place the goods at the disposal of the buyer at his own place of business or at a place other than the place of business of the seller, the risk will pass according to article 69 of the Convention.

If we compare the rules on the passing of risk expressed in article 69 with the passing of risk rules in EXW clause A5 and B5, we see that the risk will transfer at a different stage.[258] The Incoterm EXW will let the risk pass the moment the seller places the goods at the buyer’s disposal, either at his place of business or at another named place (i.e. works, factory, warehouse, etc.) while the Vienna Convention will let the risk pass when the buyer takes over the goods at the seller’s premises (or if he commits a breach of contract by failing to take delivery) or when the buyer is aware the goods are placed at his disposal at the place other than seller’s place of business. The Incoterm EXW lets the risk pass as soon as the goods have been made available to the buyer at the delivery point (seller’s place or another named place), without any requirement such as the buyer’s awareness of the goods being placed at his disposal or the buyer’s failure to take delivery constituting a breach of contract.[259] Back to the chocolate example: let us assume that the Belgian seller and the Norwegian buyer agree on the sale of 5000 boxes of chocolate under the Incoterms 2010 rule EXW. The contract states that the goods are available for the buyer to pick up at the seller’s place of business from the 1^st of August till the 14^th of August. On the 1^st of August the buyer is informed that the load of chocolate is ready, but on the 5^th of August the chocolate melts by a malfunctioning cooling system, caused by an ‘act of god’. Under EXW, the buyer will have to bear the loss of the goods since the risk passes the moments the goods are placed at his disposal, ready to be picked up. The Convention, however, lets the risk pass to the buyer the 14^th of August, when the buyer commits a breach of contract by his failure to take delivery of the goods; consequently, the seller will bear the risk of loss under the Convention.

The EXW-seller has the obligation to notify the buyer that the goods are placed at his disposal but unlike under article 69 of the Vienna Convention, the fact that the buyer is unaware that the goods are placed at his disposal won’t affect the passing of the risk.[260] The seller might be liable for damages according to the CISG but the risk will have passed since the seller’s failure to notify the buyer does not constitute a fundamental breach. Article 70 of the CISG only allows the risk to shift back to the seller in cases where the seller committed a fundamental breach, supra.[261] If the buyer is entitled to determine the time within an agreed period or the point of taking over within the named place, he has to give the seller sufficient notice.[262] The failure of the buyer to notify the seller of the time when the goods are to be made available or of the place of delivery will result in a premature passing of risk. The risk will pass from the agreed date or the expiry date of any period fixed for taking delivery.[263]

The risk only passes when goods are clearly identified to the contract.[264] This is a basic condition present in all ICC Incoterms.

4.5 F-terms

This group consists of three trade terms namely, FCA [265] (Free Carrier), FAS [266] (Free Alongside Ship) and FOB [267] (Free On Board). Under the F-terms the seller is obliged to deliver the goods to a carrier appointed and paid by the buyer.[268] The ‘carrier’ was a much-debated concept.[269] However, it is now generally accepted that the ‘carrier’ applicable in the F trade terms is ‘any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport by rail, road, air, sea, inland waterway or by a combination of such modes.’[270] This is the same ‘carrier’ as the one referred to in the CISG.[271] Therefore, a carrier is not only the company that in practice will perform the transport but it can be any person who undertakes to perform or to procure the performance of transport, thus, also an enterprise that contracts to perform or arrange the transport of the goods.[272]

4.5.1 FCA

FCA is distinguished from the terms FAS and FOB since it does not refer to a specific mode of transport and, therefore, parties can use this trade term for any type of transport, including multimodal transport.[273] Under the Incoterm FCA, the seller has to deliver the goods to the carrier at the seller’s premises or another named place.[274] According to the general passing or risk rule of the Incoterms this means that the risk will pass upon handing over of the goods to the carrier, assigned by the buyer. The delivery will be completed when, if the place is the seller’s premises, the goods are loaded on the means of transport provided by the buyer (in contrast to EXW, where the risk passes before loading onto the means of transport.) In cases where the named place is another place, the delivery will be completed when the goods are placed at the disposal of the carrier, ready to be unloaded from the seller’s means of transport.[275]

From the time delivery is completed, the buyer will bear all risks of loss or damage to the goods.[276] If, however, the buyer fails to notify the seller of his nomination of a certain carrier or if that carrier fails to take control over the goods, then the buyer bears all risk from the agreed date.[277] If no date was agreed, from the time the seller gave notice to the buyer that the carrier failed to take over the goods.[278] If no such date has been notified, from the expiry date of any agreed period for delivery.[279] The risk will only pass if the goods have been clearly identified to the contract.[280] FCA is the most suitable term in contracts where the buyer should arrange and pay for carriage and therefore he should bear the risk in situations in which transport is unavailable.[281]

4.5.2 FAS

Free Alongside Ship is used for sea and inland waterway transport and it means that the seller will deliver the goods by placing the goods at the ship’s side or by procuring goods already so delivered for shipment.[282] This latter situation is used in so called string sales of commodity goods where goods are sold multiple times down a chain. It is up to the buyer to nominate the vessel that will be used for transport.[283] In the old versions of the Incoterms it was the ship’s rail that acted as the border between the seller and buyer’s obligations, hence also functioning as a customs border with respect to clearance for export in international trade.[284] For the Incoterm FAS, this was changed in the 2000 version of the Incoterms rules and in the 2010 version the concept of the ‘ship’s rail’ has been deleted as line for the FOB trade term, thus, the Incoterms no longer refer to ‘the ship’s rail’.[285]

The seller fulfils his obligations by placing the goods alongside the ship and it is his obligation to clear the goods for export.[286] The risk will, therefore, pass from seller to buyer when the seller placed the goods alongside the ship.[287] The buyer’s failure to nominate the ship and notify the seller of the name, loading place and delivery time may result in a premature passing of risk. Thus, the failure to notify the seller will cause the risk to pass ‘from the agreed date or expiry date of the agreed period for delivery.’[288]

If the vessel fails to arrive in time or in cases in which the vessel is unable to take over the goods, a premature passing of risk will occur and the risk will pass to the buyer.[289] The risk will only pass if the goods have been clearly identified to the contract.

4.5.3 FOB

Being one of the oldest trade terms used in international trade, it established a dominant position. In the older versions of the ICC’s Incoterms rules, this term used the ship’s rail as decisive border for obligations and allocation of costs and risk.[290] In the 2010 version the ship’s rail as risk transfer point was replaced by placing the goods on board of the ship.[291] The same rules as in Incoterm FAS and FCA apply here but, instead of placing the goods alongside the ship, the seller will deliver the goods by placing them on board the ship, at which the time the risk also passes.[292] Premature transfer of risk is possible under the same conditions as in FAS, supra.[293]

Under the FOB trade term, the risk of placing the goods on board the ship is on the seller. The term ‘placing on board’ was used instead of the term ‘loading’ since this would imply stowage and under FOB the risk for stowage on board (i.e. trimming, securing and lashing) is on the buyer.[294] The customs of the port named following the Incoterm FOB (e.g. FOB Antwerp) will have priority over the rules in the Incoterms rule FOB, thus, the actual border can still be the ship’s rail.[295]

4.5.4 F-terms and the CISG

Under the F-terms the seller is obliged to deliver the goods to a carrier appointed by the buyer and paid by that buyer.[296] When delivery has to be made FCA at the seller’s premises, delivery will be completed when the goods are loaded on the means of transport; consequently the risk will pass when loading is completed.[297] This corresponds to the rule expressed in article 67(1) of the CISG, where the Convention states that risk passes from seller to buyer when the goods are handed over to the first carrier. It was also the intention of the International Chamber of Commerce to match the Incoterm FCA with the basic rule in article 67 of the CISG.[298] Courts will frequently cite the article if the trade term agreed among the parties is consistent with article 67.[299]

In cases in which delivery is due FCA at a place different than the seller’s premises, the risk will pass when the goods are placed at the disposal of the carrier, meaning that the unloading of the goods from the seller’s means of transport will be conducted at the seller’s risk.[300] Situations envisaged by the second sentence of 67(1) correspond to the situation of incoterm FCA, where the place of delivery is a place other than the seller’s place of business, and Incoterm FOB and FAS, where the goods need to be placed on board of a ship or alongside a ship. In a case between a Yugoslavian seller and a Hungarian buyer of caviar, the term for delivery was ‘FOB Kladovo’ (the seller’s city in today’s Serbia; wrongly used Incoterm since no waterway transport was intended.)[301] The buyer couldn’t pay due to UN sanctions. The Arbitral court correctly found that the Incoterm ‘FOB Kladovo’ places the risk on the buyer from the moment the goods were delivered in Kladovo, thus the risk for possible embargoes was placed on the Hungarian buyer. The court pointed out that article 67 provides that the risk of freight had to be born by the buyer, unless the contract provided otherwise, which it did not.

A difference between 67(1) CISG and Incoterms FAS and FCA (in cases where delivery has to be made at a place different than seller’s place of business) is that under the rules of the CISG the seller will have to hand over the goods to the carrier at that place (article 67(1), second sentence), where the Incoterm FCA merely requires the seller to place the goods at the carrier’s disposal or under the Incoterms FAS the seller delivers by placing the goods alongside the ship.[302] We assume that our Belgian seller of chocolate needs to deliver FCA Antwerp at a warehouse of the carrier, contracted by the Norwegian buyer. The contract gives the Antwerp warehouse ten hours to empty the container placed at its disposal by the Belgian seller. Under the Incoterm FCA, the risk will pass when the goods are placed at the disposal of the carrier (the warehouse) thus, if, during those ten hours, the cooling system of the container stops working, the Norwegian buyer will bear the risk of the damaged chocolate. Under the CISG, however, the risk passes when the goods are taken over by the carrier, making the delivery into a bilateral act, hence keeping the risk at the seller till the chocolate is unloaded from the seller’s container.[303]

The F-terms are clear on the issue of ‘handing over’ and unmistakeably express the exact moment of risk passing since they clearly state when the delivery is completed, hence when the risk passes. It is therefore advised that the parties explicitly refer to an ICC Incoterm avoiding any complication arising out of the sometimes unclear provision of the Convention.

4.6 C-terms

In the group of C-terms we can find the Incoterms starting with the letter C, being CPT (Carriage Paid To), CIP (Carriage and Insurance Paid to), CFR (Cost and Freight) and CIF (Cost, Insurance and Freight). Under the C-terms, the seller is obliged to conclude the contract of carriage and pay for it.[304] The risk of loss of or damage to the goods after the moment of loading will, however, be borne by the buyer.[305] The letters behind the C of each C-term determine the exact allocation of cost of transport.[306] It is important to note that the place mentioned following this type of Incoterms is, unlike the mentioned place with FCA, the place of ‘destination’ and not the place of ‘delivery’. This means that, e.g. in the case between the Belgian chocolate seller and the Norwegian buyer, although the Incoterm states for example CFR Bergen, the seller will fulfil his delivery obligation the moment he places the goods on board of the ship at the port in Antwerp (CFR and CIF).[307] In the situation, e.g. between the Belgian seller and a Danish buyer, where the Incoterm used is CPT Aarhus, the seller will fulfil his obligation the moment he hands over the goods to a carrier in Belgium (CPT and CIP).[308] Premature transfer of risk is possible under the same conditions as under the F- and E-terms.

4.6.1 CPT and CIP

The CPT trade term is built around the main obligation of the seller to hand over the goods to a carrier and arrange and pay for that carriage to the agreed destination point, which will be stated after the Incoterm.[309] As with all C-terms, the transfer of risk will take place the moment the goods are handed over to the carrier.[310] The relevant point of transfer of risk under CPT will be where the goods are handed over to the first carrier.[311] This is different from the regime in the ‘maritime’ C-terms CFR and CIF where risk will pass the moment the seller delivers the goods on board of the ship.[312]

The Incoterm CIP is virtually identical to the Incoterm CPT with the only difference that under CIP the seller will be obliged to arrange and pay for insurance.[313]

4.6.2 CFR and CIF

The C-terms CFR and CIF are terms created specifically for the trade over sea and inland waterway.[314] The rules concerning these terms are similar to the rules governing CPT and CIF with the difference that the seller fulfils his delivery obligation the moment he places the goods on board of the ship.[315]

If the buyer wishes to make the seller responsible for the arrival of the goods at the destination at particular time, D-terms should be used instead of C-terms.

4.6.3 C-terms and the CISG

     A. C-terms and article 67

The C-terms are, on the issue of passing of risk, similar to the F-terms. According to the C-terms, the risk will pass either at the moment the seller hands over the goods to the carrier, or, by virtue of the maritime C-terms CFR and CIF, upon the placement of the goods on board of the vessel. As we have seen while discussing the F-terms, these C-terms also correspond to the situation governed by article 67. Like with certain F-terms, courts will frequently cite the article if the trade term agreed among the parties is consistent with article 67.[316] The F-term that can be used for any mode of transport, FCA, expressly states when delivery is completed and risk passes, namely when the good are loaded on the means of transport provided by the buyer at the seller’s premises or by placing the goods at the disposal of the carrier, ready to be unloaded, at the place other than seller’s place of business.[317] The C-terms that can be used for any mode of transport, CPT and CIP, however, use the same wording as provided in the Vienna Convention and state that the seller’s delivery obligation is fulfilled when he seller ‘hands over’ the goods to the carrier.

The reason for this different wording is probably that the Incoterm FCA was introduced for transport of containers with all means of transport; therefore, the risk passes the moment the container is loaded (and in practice sealed after collecting proof of the properly weighed, checked, measured and packed goods for delivery)[318] at the seller’s premises, where the seller has full control over the stowing of the container. In comparison we have the Incoterms CPT and CIP, which can be used for any technique of transport with all means of transport. The Incoterms CPT and CIP let the risk pass when the goods are handed over to the carrier. CPT and CIP are terms that are fit for container-use as well, nevertheless, parties will need to clearly stipulate the exact moment the risk passes, since the risk passes when the goods are handed over to the carrier and the terms are silent on the issue of loading of the container. This is also clearly expressed in the guidance note of the Incoterms rules CPT and CIP. Parties are advised to identify as precisely as possible both the place of delivery where the risk passes and the named place of destination to which the seller must contract for carriage.[319]

     B. C-terms and article 68

Article 68 of the Convention is the article concerned with the passing of risk in cases where goods are sold in transit, supra. The general rule stipulated in article 68 lets the risk pass at the time of conclusion of the contract. However, if the circumstances so indicate (i.e. where there is an insurance cover) 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.[320]

The Incoterms 2000 rules did not refer explicitly to the sale of goods in transit and it was suggested that in cases of sale of goods during transit, the CIF and CFR terms usually apply by adding the words ‘afloat’ after them.[321] By doing this, the risk will pass to the buyer when the goods pass the ship’s rail at the port of shipment.[322] The use of Incoterms CFR and CIF is seen as a circumstance reflected in the second sentence of article 68, leading to the risk to transfer the moment the goods were handed over to the first carrier.[323] In the 2010 version of the Incoterms the wording of CFR and CIF was changed and the seller now undertakes to ‘procure’ goods delivered for the destination agreed in the contract of sale.[324] This clarifies what happens when multiple sales down a chain are intended leading to the risk passing the moment the goods are placed on board of the ship.[325] The wording of the Incoterm FOB was also changed this way, thus making FOB, CIF and CFR most frequently used in contracts of sale of goods in transit; under these terms the risk passes when the goods are placed on board of the vessel.[326]

4.7 D-terms

The Incoterms 2010 rules provide us with three D-terms that should be used in situations where the seller has the obligation to carry the goods at his own cost and risk to the named destination.[327] The trade terms in the D-group are: DAT (Delivery At Terminal), DAP (Delivery At Place), and DDP (Delivery Duty Paid).[328] All D-terms require the seller to deliver the goods at the named point, to pay for them to get there and to assume all risks concerning the goods in transit.[329]

4.7.1 DAT

According to the rules of Incoterm DAT, the seller delivers the goods by placing them at the named terminal, unloaded by the seller.[330] The term ‘terminal’ refers to ‘any place, whether covered or not, such as quay, warehouse, container yard, container freight station, road, rail or air cargo terminal.’[331]In situations in which the term DAT is applicable to the contract, the seller will fulfil his duty to deliver by bringing the goods to the named place and unloading them from the used means of transport, thus risk will pass when the goods are unloaded from the means of transport at the named place.[332]

4.7.2 DAP and DDP

Under the Incoterm DAP, the seller bears the risk till the moment he makes the goods available for the buyer to unload them from the arriving means of transport.[333] The seller will have to pay for the carriage of the goods to the place mentioned following the Incoterm; the buyer will have to unload them.[334]

We can find the same rule concerning passing of risk in the Incoterm DDP. The difference between DAP and DDP is one governing the obligation to clear the goods for import and to pay taxes levied on the import of the goods.[335] Under all the D-terms except DDP, the importer (buyer) will normally be obliged to clear the goods for import and to pay the taxes on that import.[336] The trade term DDP however, places those obligations on the seller, making DDP the incoterm representing the seller’s maximum obligation.[337] If the seller fails to fulfil his obligation to clear the goods for import, he will bear the resulting risk of loss or damage to the goods.[338]

4.7.3 D-terms and the CISG

The D-terms are destination trade terms (also called arrival contracts) where the seller fulfils his obligations by delivering the goods at the destination. These D-terms can best be compared with the rules expressed in article 69(2) of the Convention.[339]

According to the wording of the Incoterms, the mere fact that the seller places the goods at the buyer’s disposal, either ready to be unloaded or unloaded (if the applicable D-term is DAT), is enough to let the risk pass from seller to buyer. Article 69(2) of the Convention requires the buyer to be aware that the goods are placed at that place. The considerations that led to determining the appropriate time of passing of risk are different when the goods are at a place other than the seller’s place of business.[340] When the goods are in the physical possession of the seller, and the last day of the period during which the buyer was obliged to take over the goods has not yet passed, the seller is in the best position to protect the goods from loss or damage, hence he should bear the risk.[341] If, however, the goods are in the hands of a third party (the warehouse), the seller is not in a better position than the buyer to take the necessary precautions to protect the goods from deterioration or loss. The risks passes when the buyer is aware of this situation thus being capable of taking full control over the goods himself. The D-terms do not require this awareness of the buyer and thus the risk passes when the goods are placed at the disposal of the buyer at the agreed terminal or place.[342]

Chapter 5: Conclusion

We have seen that the Vienna Convention on the International Sale of Goods and the ICC Incoterms are important instruments that arrange for the legal aspects of international commerce. Both regimes give the parties to a contract freedom to adjust the terms applicable. This is a good thing, since international trade is constantly evolving and the best way to avoid legal disputes is to respond quickly to problems arising out of new technology or practices in the international sale of goods.

The CISG will be applicable to the contract if the parties have their place of business in different contracting States or if the private international law leads to the application of the Convention and the parties did not use the possibility to contract out the application of the CISG. Thus, the CISG has the status of supplementary law.

The ICC Incoterms, on the other hand will be applicable if the parties explicitly refer to an ICC Incoterm or if the rules of the Incoterms are found to be a usage or a practice established between the parties. The Incoterms will then replace the rules of the CISG. However, subjects not settled by the Incoterms will still be settled by the rules of the CISG. As we have seen, the use of one regime does not exclude the use of the other. Courts and tribunals around the world use Incoterms and the CISG as complementary sources to solve disputes arising out of contracts for the sale of goods.

The Convention arranges the passing of risk in article 66-70. While applying these rules, one must at all times stay focused not to lose sight of the different articles and their modalities of application. During the drafting, the parties had some difficulties in finding appropriate compromises that both common law and civil law, developed and developing countries all felt comfortable with. These compromises are reflected in the somewhat ambiguously drafted articles that sometimes lead to discussion concerning their interpretation. An example of this is the last sentence of article 68 that refers to damage not disclosed by the seller in a sale of goods in transit. Scholars have different opinions on the interpretation of this last sentence and its connection with the sentence before it. Another example is article 70 that only refers to fundamental breach of contract and the possibility of avoiding the contract or requiring substitute goods,The Convention has also failed in defining terms that are important for the passing of risk, e.g. ‘first carrier’, ‘handing over’ and ‘circumstances’. This leads to conflicting views of scholars on the interpretation. These discussions however are mostly held at universities and conferences around the world rather than in court. This is due to the fact that in practice there is not much dispute concerning the passing of risk since the parties will in most contracts use trade terms that allocate the risk in the international sale of goods in a clear way. Incoterms reflect commercial practice and are therefore more effective in tackling problems that might arise in international trade.

The ICC Incoterms link the passing of risk to the delivery. Consequently, if the seller fulfils his obligation to deliver, the risk will pass from seller to buyer. The Incoterm stipulates the exact moment of delivery in a very clear way. The drafting parties of the CISG did not want to link the passing of the risk with the delivery of the goods and decided to use a more typological moment of passing, hence being the change of physical control. In practice however, this will often occur at the same time. In contrary to the CISG, the Incoterms (except for CIP and CPT) also allocate the risk for (un)loading, avoiding any dispute concerning goods that got damaged during this operation.

All in all we see that the passing-of-risk-rules in the Vienna Convention and the ICC Incoterms complement each other. This symbiotic relationship leads to a set of rules that is functioning fairly well and creates a good legal fundament for the international trade of goods.

FOOTNOTES

1. Joseph M. Lookofsky, Understanding the CISG 1 (3th ed. 2008).

2. John O. Honnold & Harry M. Flechtner, Uniform Law for International Sales under the 1980 United Nations Convention 5 (4th ed. 2009).

3. Id.

4. Id.

5. Id. at6.

6. Only ratified by 9 States: Belgium, Gambia, Germany, Israël, Luxembourg, the Netherlands, San Marino and the United Kingdom; Peter Huber, The CISG 2-3 (Peter Huber & Alastair Mullis, 2007).

7. G.A. Res. 2205 (XXI) U.N. GOAR, 21^st Sess., (Dec. 17, 1966).

8. Honnold & Flechtner, supra note 2, at 6.

9. Lookofsky, supra note 1, at 11.

10. Id. at 27.

11. Honnold & Flechtner, supra note 2, at 30.

12. Lookofsky, supra note 1, at 15.

13. The United States of America and China are States that made this reservation on ratification of the Convention; Lookofsky, supra note 1, at 16.

14. Honnold & Flechtner, supra note 2, at 55.

15. Ingeborg Schwenzer & Pascal Hachem, Commentary on the UN Convention on the International Sale of Goods (CISG) 34 (Peter Schlechtriem & Ingeborg Schwenzer eds., 3^rd ed. 2010).

16. Lookofsky, supra note 1, at17.

17. Honnold & Flechtner, supra note 2, at48.

18. Lookofsky, supra note 1, at17.

19. Jan Ramberg, International Commercial Transactions 56 (4^th ed. 2011); Emily Nordin, The Possible Success of Soft Law: Incoterms 2010, Maastricht Journal of European and Comparative Law 506, 508 (2010).

20. See Ramberg, International Commercial Transactionsat56.

21. Hans Van Houtte, The Law of International Trade 171 (2^nd ed.2002).

22. Ramberg, supra note 17, at 56; Koen Vanheusden, Leveringsvoorwaarden in Internationale Overeenkomsten. Van Trade Terms en Incoterms166-177 (2005).

23. Ramberg, supra note 17, at 56; Nordin, supra note 19, at 508.

24. Van Houtte, supra note 21, at 172.

25. Ramberg, supra note 17, at 56-57.

26. Lookofsky, supra note 1, at 101.

27. Id.

28. Van Houtte, supra note 21, at 175.

29. Jan Ramberg, ICC Guide to Incoterms 2010, 16 (2011); Lairi Railas, Incoterms for the New Millennium. How problems relating to Incoterms 1990 have been solved and how the experience of the earlier version could still help us?, European Transport Law [E.T.L.] 9, 22 (2000).

30. BP Oil International v. Empresa Estatal Petroleos de Ecuador, Clout Case No. 575 (USA, 5^th Cir. June 11, 2003) (Pace).

31. Lookofsky, supra note 1, at 101.

32. Nordin, supra note 19, at 507.

33. Johan Erauw, UN Convention on Contracts for the International Sale of Goods (CISG): Commentary 895 (Stefan Kröll, Loukas A. Mistelis & Maria del Pilar Perales Viscacillas eds., 2011).

34. Honnold & Flechtner, supra note 2, at 169.

35. Van Houtte, supra note 21, at 172.

36. UNCITRAL, Digest of case law on the United Nations Convention on Contracts for the International sale of goods 319 (2012) [Hereinafter UNCITRAL digest].

37. Id. at 315.

38. Id.

39. Michael C. Bridge, The Transfer of Risk under the UN Sales Convention 1980 (CISG) 80 (Camilla B. Andersen & Ulrich G. Schroeter eds., 2008).

40. Id. at 81.

41. Id.

42. Id.

43. Id.

44. Federal Arbitration Court of the Northwestern Circuit Jun. 3, 2003 (Pace) (Rus.).

45. Lookofsky, supra note 1, at 100.

46. E.g.: District Court Komarno Mar. 12, 2009, (Pace) (Slovak.); Hof van Beroep Ghent Jun. 16, 2004 (Pace) (Bel.); Audiencia Provincial de Valencia Feb. 15, 2003 (Pace) (Sp.); Amtsgericht Duisburg Apr. 13, 2000, (Pace) (Ger.); China International Economic and Trade Arbitration Commission Jun. 25, 1997 (Pace) (Ch.).

47. Barry Nicholas,Commentary on the International Sales Law: the 1980 Vienna Sales Convention 484-485 (Cesare. M. Bianca & Michael J. Bonelleds., 1989).

48. Günter Hager & Martin Schmidt-Kessel, Commentary on the UN Convention on the International Sale of Goods (CISG) 924 (Peter Schlechtriem & Ingeborg Schwenzer eds., 3^rd ed. 2010).

49. Id.

50. Id.

51. China International Economic and Trade Arbitration Commission, 1997 (Pace) (Ch.).

52. Oberlandesgericht Koblenz Dec. 14, 2006 (Pace) (Ger.).

53. Hager & Schmidt-Kessel, supra note 48, at924.

54. Id.

55. In 1978, UNCITRAL requested the Secretary-General to prepare under his own authority a commentary on the 1978 Draft and to circulate this Draft and the Commentary for comments and proposals. This Commentary builds on and integrates earlier commentaries on the 1976 Working Group ‘Sales’ Draft and the 1977 Working Group ‘Formation’ Draft. The Commentary provides helpful analysis of the 1978 UNCITRAL Draft and the later text of the Convention.

56. John O. Honnold, Documentary History of the Uniform Law for International Sales: the studies, deliberations and decisions that led to the 1980 United Nations convention with introductions and explanations 454 (1989); United Nations Conference on Contracts for the International Sale of Goods, Official Records: Commentary on the Draft Convention on Contracts for International Sale of Goods, prepared by the Secretariat, at 63, A/CONF.97/5 (1981) [hereinafter Secretariat’s Commentary]; The articles referred to are articles 41 till 47 of the 1978 Draft which correspond to articles 45 till 51 of the 1980 Vienna Convention.

57. Nicholas, supra note 47, at 485.

58. Id.; Hager & Schmidt-Kessel, supra note 48, at 924.

59. Article 35 of the Convention relating to a Uniform Law on the International Sale of Goods (The Hague 1964), on which article 36 CISG is based on.

60. Hager & Schmidt-Kessel, supra note 48, at 924; X, UNCITRAL Yearbook IV, New York, United Nations, 1973, 65, no. 50.

61. UNCITRAL, Yearbook IV, at 65, no. 50 (1973).

62. UNCITRAL, Yearbook VIII, at 62-63, no. 527-529 (1977).

63. Id.

64. Id. at 63, no. 531-532.

65. Id. at 63, no. 531.

66. Hager & Schmidt-Kessel, supra note 48, at 925; Nicholas, supra note 47, at 485.

67. See Hager & Schmidt-Kessel, at 925.

68. Honnold & Flechtner, supra note 2, at 493.

69. Id.

70. CISG art. 81(2); Honnold & Flechtner, supra note 2, at 493.

71. Secretariat’s Commentary, supra note 56, at 48-49.

72. Markus Müller-Chen, Commentary on the UN Convention on the International Sale of Goods (CISG) 460 (Peter Schlechtriem & Ingeborg Schwenzer eds., 3^rd ed. 2010); Secretariat’s Commentary, supra note 56, at 27.

73. Hager & Schmidt-Kessel, supra note 48, at 925; Honnold & Flechtner, supra note 2, at 496.

74. See Hager & Schmidt-Kessel, at 925.

75. Müller-Chen, supra note 72, at 468.

76. Id. at 46; Bruno Zeller, CISG and the Unification of International Trade Law 55 (2007).

77. See Müller-Chen, at 461.

78. See Müller-Chen, at 462.

79. Handelsgericht Bern Dec. 22, 2004 (Pace) (Swi.).

80. Hager & Schmidt-Kessel, supra note 48, at 925.

81. Id.

82. Honnold & Flechtner, supra note 2, at 516; Lookofsky, supra note 1, at 100.

83. See Honnold & Flechtner, at 516.

84. Id.

85. Secretariat’s Commentary, supra note 56, at 64.

86. Hager & Schmidt-Kessel, supra note 48, at 928.

87. Schlechtriem, supra note 190, at 87.

88. Id., at 88.

89. Id.

90. Secretariat’s Commentary, supra note 56, at 64.

91. Oberlandsgericht Schleswig-Holstein Oct. 29, 2002 (Pace) (Ger.).

92. Wuhan Maritime Court Hubei Sep. 10, 2002 (Pace) (Ger.).

93. Audiencia Provincial de Cordoba Oct. 31, 1997 (Pace) (Sp.)(Spain).

94. Hager & Schmidt-Kessel, supra note 48, at 681.

95. See Hager & Schmidt-Kessel, at 928;Honnold & Flechtner, supra note 2, at 518.

96. See Hager & Schmidt-Kessel, at 928; See Honnold & Flechtner, at 520.

97. See Hager & Schmidt-Kessel, at 929; See Honnold & Flechtner, at 521; Lookofsky, supra note 1, at 102.

98. Landgericht Saarbrücken Oct. 26, 2004 (Pace) (Ger.).

99. Tribunal Cantonal Valais Aug. 19, 2003 (Pace) (Swi); UNCITRAL digest, supra note 36, at 322.

100.Lookofsky, supra note 1, at 102; Hager & Schmidt-Kessel, supra note 48, at929.

101. Bernd Von Hoffmann, International Sale of Goods: Dubrovnik Lectures 288 (Petar Šarčevic & Paul Volken, 1986).

102. Hager & Schmidt-Kessel, supra note 48, at 929.

103. Honnold & Flechtner, supra note 2, at 521.

104. Von Hoffmann, supra note 101, at 288.

105. Id.

106. Hager & Schmidt-Kessel, supra note 48, at 929.

107. Id.

108. Landgericht Bamberg Oct. 23, 2006 (Pace) (Ger.).

109. Bundesgericht Switzerland Dec. 16, 2008 (Pace) (Swi.).

110. Hager & Schmidt-Kessel, supra note 48, at 929.

111. Honnold & Flechtner, supra note 2, at 519.

112. Hager & Schmidt-Kessel, supra note 48, at 930.

113. Secretariat’s Commentary, supra note 56, at 64.

114. Hager & Schmidt-Kessel, supra note 48, at 930.

115. Secretariat’s Commentary, supra note 56, at 64.

116. Id.

117. Id.

118. Joseph Lookofsky, International Encyclopaedia of Laws – Contracts 143 (Roger Blanpain & Jacques Herbots, 2000).

119. Honnold & Flechtner, supra note 2, at 525.

120. Lookofsky, supra note 1, at 102.

121. Schlechtriem, supra note 190, at 89.

122. Lookofsky, supra note 1, at 103.

123. Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industy Dec. 20, 1998, no. 62/1998 (Pace) (Rus.).

124. Hager & Schmidt-Kessel, supra note 48, at 932.

125. Id.

126. Ramberg, supra note 17, at 59.

127. Nicholas, supra note 47, at 496.

128. Hager & Schmidt-Kessel, supra note 48, at 933.

129. Jacob Ziegel, Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods65(1981).

130. Id.

131. Hager & Schmidt-Kessel, supra note 48, at 933.

132. Nicholas, supra note 47, at 496; Von Hoffmann, supra note 101, at 293.

133. See Nicholas, at 496; Hager & Schmidt-Kessel, supra note 48, at 933.

134. Honnold & Flechtner, supra note 2, at 528; Ziegel, supra note 129, at 65.

135. Hager & Schmidt-Kessel, supra note 48, at 933.

136. Id. at934; Nicholas, supra note 47, at 497.

137. Hager & Schmidt-Kessel, supra note 48, at 934.

138. Honnold & Flechtner, supra note 2, at 528.

139. See Honnold & Flechtner, at 528-529.

140. Hager & Schmidt-Kessel, supra note 48, at 934.

141. Id.

142. Id.

143. Id.

144. Honnold & Flechtner, supra note 2, at529.

145. Id.

146. Id.; Von Hoffmann, supra note 101, at 294.

147. Nicholas, supra note 47, at 498.

148. Johan Erauw, Delivery Terms and the Passing of Risk: Drafting Clauses Related to CISG Articles 66-70, in Drafting Contracts under the CISG 405 (Harry M. Flechtner, Ronald A. Brand & Mark S. Walter eds., 2008).

149. Nicholas, supra note 47, at 498; Hager & Schmidt-Kessel, supra note 48, at 935.

150. See Nicholas, at 499.

151. Honnold, supra note 56, at 625.

152. Id. at 626.

153. A negotiable bill of lading is a bill of lading that is transferable and gives the consignee of the bill of lading the opportunity to further pass on the title over the goods to a third party by transferring the bill of lading. If article 68 would only refer to documents controlling the disposition of the goods, only negotiable bills of lading might be included since they give the consignee the right to transfer the bill of lading to a third person. See David Holloway, Carole Murray & Daren Timson-Hunt, Schmitthoff’s Export Trade 310 (2007).

154. Honnold, supra note 56, at 626.

155. Hager & Schmidt-Kessel, supra note 48, at 935.

156. Id.; Nicholas, supra note 47, at 499.

157. See Hager & Schmidt-Kessel, at 935.

158. Nicholas, supra note 47, at 499.

159. Hager & Schmidt-Kessel, supra note 48, at 935.

160. Nicholas, supra note 47, at 500; Secretariat’s Commentary, supra note 56, at 65.

161. See Nicholas, at 500.

162. Id.

163. Honnold & Flechtner, supra note 2, at 529-530; Nicholas, supra note 47, at 500.

164. See Honnold & Flechtner, at 530; Anjanette Raymond, UN Convention on Contracts for the International Sale of Goods (CISG): Commentary 903 (Stefan Kröll, Loukas A. Mistelis & Maria del Pilar Perales Viscacillas eds., 2011).

165. Hager & Schmidt-Kessel, supra note 48, at 935.

166. Id.

167. Id.; Honnold, supra note 56, at 220.

168. See Hager & Schmidt-Kessel, at 936.

169. Id.

170. Raymond, supra note 164, at 903.

171. Nicholas, supra note 47, at 500.

172. Id.; Honnold, supra note 56, at 216.

173. See Honnold, at 217.

174. Schlechtriem, supra note 190, at 90.

175. Nicholas, supra note 47, at 500.

176. Id.

177. Id.

178. Honnold & Flechtner, supra note 2, at 533.

179. Secretariat’s Commentary, supra note 56, at 65.

180. Hager & Schmidt-Kessel, supra note 48, at 938.

181. Hager & Schmidt-Kessel, supra note 48, at 938.

182. Amtsgericht Duisburg April 13, 2000 (Pace)(Ger.).

183. UNCITRAL digest, supra note 36, at 325.

184. Hager & Schmidt-Kessel, supra note 48, at 939.

185. U.S. District Court July 6, 2010 (Pace) (Colorado, USA).

186. Raymond, supra note 164, at 906.

187. Id.

188. Secretariat’s Commentary, supra note 56, at 65.

189. Raymond, supra note 164, at 906.

190. Hager & Schmidt-Kessel, supra note 48, at 939; Peter Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sale Of Goods90 (1986).

191. UNCITRAL digest, supra note 36, at 325.

192. Oberlandsgericht Schleswig-Holstein Oct. 29, 2002 (Pace) (Ger.).

193. Lookofsky, supra note 118, at 146.

194. Hager & Schmidt-Kessel, supra note 48, at 939.

195. Raymond, supra note 164, at 907.

196. Landgericht Paderborn June 10, 1997 (Cisg-Online) (Ger.); UNCITRAL digest, supra note 36, at 326.

197. Von Hoffmann, supra note 101, at295.

198. Hager & Schmidt-Kessel, supra note 48, at 939.

199. Schlechtriem, supra note 190, at 91.

200. Nicholas, supra note 47, at 507.

201. Hager & Schmidt-Kessel, supra note 48, at 938.

202. Honnold & Flechtner, supra note 2, at536.

203. Hager & Schmidt-Kessel, supra note 48, at 939.

204. Secretariat’s Commentary, supra note 56, at 65.

205. Id.

206. Honnold & Flechtner, supra note 2, at 536.

207. Hager & Schmidt-Kessel, supra note 48, at 938.

208. Hager & Schmidt-Kessel, supra note 48, at 938.

209. Honnold & Flechtner, supra note 2, at 539.

210. Id.; Lookofsky, supra note 1, at 105.

211. Hager & Schmidt-Kessel, supra note 48, at 943.

212. Id.

213. Lookofsky, supra note 118, at 146.

214. Erauw, supra note 33, at 911; Hager & Schmidt-Kessel, supra note 48, at 943; Lookofsky, supra note 1, at104.

215. Hager & Schmidt-Kessel, supra note 48, at 944.

216. Lookofsky, supra note 118, at 146.

217. Id.

218. Lookofsky, supra note 1, at 105.

219. Hager & Schmidt-Kessel, supra note 48, at 944.

220. Id.

221. Id.

222. Id.

223. Bridge, supra note 39, at 103.

224. Nicholas, supra note 47, at 510.

225. Case law on fundamental breach: U.S. District Court Michigan Dec. 17, 2001 (Pace) (USA); Cour d’Appel de Paris June 4, 2004 (Pace) (Fr.); Kantonsgericht Valais Feb. 21, 2005 (Pace) (Switzerland).

226. Ulrich G. Schroeter, Commentary on the UN Convention on the International Sale of Goods (CISG) 284 (Peter Schlechtriem & Ingeborg Schwenzer eds., 3^rd ed. 2010).

227. Id. at 402.

228. Id.

229. Id.

230. Bridge, supra note 39, at 102.

231. Hager & Schmidt-Kessel, supra note 48, at 944.

232. Id.

233. Hager & Schmidt-Kessel, supra note 48, at945; Nicholas, supra note 47, at 511.

234. Erauw, supra note 33, at 910.

235. Refers to article 67 in the Geneva draft, now article 70.

236. UNCITRAL, Yearbook VIII, at 310 (1977).

237. Nicholas, supra note 47, at 511.

238. Hager & Schmidt-Kessel, supra note 48, at 945.

239. Id.

240. Lookofsky, supra note 1, at 106.

241. Ramberg, supra note 29, at 11.

242. ICC, Pub. No. 715 ED, Incoterms 2010, 12 (2010).

243. Ramberg, supra note 29, at 9.

244. ICC, supra note 242, at 2.

245. Van Houtte, supra note 21, at 173.

246. Railas, supra note 29, at 11.

247. Ramberg, supra note 29, at 49.

248. Erauw, supra note 33, at 894; Honnold & Flechtner, supra note 2, at 105.

249. Honnold & Flechtner, supra note 2, at 105.

250. Van Houtte, supra note 21, at 175.

251. ICC, supra note 242, at 17-23.

252. Van Houtte, supra note 21, at 173.

253. Ramberg, supra note 29, at 51.

254. ICC, supra note 242, at 18.

255. ICC, supra note 242, at 20-21; Ramberg, supra note 17, at 103.

256. Jan Ramberg, To what extend do Incoterms 2000 vary articles 67(2), 68 and 69?, Journal of Law and Commerce 219, 219, (2005-06).

257. Id.

258. Annemieke Romein, The Passing of Risk: A comparison between the passing of risk under the CISG and German law, Pace (1999).

259. Ramberg, supra note 256, at 221.

260. Ramberg, supra note 29, at 90.

261. Ramberg, supra note 256, at 221.

262. ICC, supra note 242, at 21.

263. Ramberg, supra note 29, at 93.

264. ICC, supra note 242, at 21.

265. See ICC, at 25-33.

266. See ICC, at 83-89.

267. See ICC, at 91-99.

268. Van Houtte, supra note 21, at 173.

269. Ramberg, supra note 17, at 105.

270. Id.

271. Van Houtte, supra note 21, at 174.

272. Ramberg, supra note 17, at 105; Van Houtte, supra note 21, at 174.

273. Ramberg, supra note 17, at 104.

274. ICC, supra note 242, at 25.

275. See ICC, at 28.

276. See ICC, at 29.

277. Id.

278. Id.

279. Id.

280. Id.

281. Ramberg, supra note 17, at 104.

282. ICC, supra note 242, at 83; See Ramberg, at 109.

283. See Ramberg, at 109.

284. Id.

285. Id.

286. Id.

287. ICC, supra note 242, at 86-87.

288. Ramberg, supra note 29, at 169.

289. ICC, supra note 242, at 87.

290. Ramberg, supra note 17, at 109.

291. Id.

292. ICC, supra note 242, at 94-95.

293. Id.

294. Erauw, supra note 33, at 897.

295. Id.; Ramberg, supra note 29, at 173.

296. Van Houtte, supra note 21, at 173.

297. Ramberg, supra note 29, at 100.

298. Erauw, supra note 33, at 896.

299. UNCITRAL digest, supra note 36, at 321; FOB-cases: Shanghai No. 2 Intermediate People’s Court Dec. 25, 2006 (Pace) (Ch.) & High People’s Court Ningxia Hui Autonomous Region Nov. 27, 2002 (Pace) (Ch.); FCA-case: Arbitration Court of the International Chamber of Commerce, 2000, Case No. 8790 (Pace) (Fr.).

300. ICC, supra note 242, at 28.

301. Arbitration Court attached to the Hungarian Chamber of Commerce and Industry Dec. 10, 1996 (Pace) (Hun.).

302. Zoi Valioti, Passing of Risk in International Sale Contracts: a comparative examination of the rules on risk under the United Nations Convention on contracts for the international sale of goods (Vienna 1980) and INCOTERMS 2000, Pace (Sep. 2003).

303. Id.

304. Van Houtte, supra note 21, at 173.

305. Id.

306. Id.

307. Ramberg, supra note 29, at 53.

308. Id.

309. ICC, supra note 242, at 38-41; Ramberg, supra note 17, at 106.

310. Ramberg, supra note 17, at 106.

311. Id.

312. Ramberg, supra note 17, at 106.

313. Id.; ICC, supra note 242, at 18.

314. Ramberg, supra note 29, at 52.

315. ICC, supra note 242, at 106-107 and 116-117.

316. UNCITRAL digest, supra note 36, at 321; cases where courts found CIF and CFR to be consistent with article 67: respectively Cantone del Ticino Tribunale d’Appello Jan. 15, 1998 (Pace) (Swi.) and China International Economic and Trade Arbitration Commission June 25, 1997 (Pace) (China).

317. ICC, supra note 242, at 28.

318. David Holloway, Carole Murray & Daren Timson-Hunt, Schmitthoff’s Export Trade 14 (2007).

319. ICC, supra note 242, at 45.

320. Raymond, supra note 164, at901.

321. Valioti, supra note 302.

322. Id.; Romein, supra note 258.

323. Ramberg, supra note 256, at 221.

324. Ramberg, supra note 29, at 31.

325. Id.

326. Raymond wrongly still refers to the ship’s rail as boundary see Raymond, supra note 164, at 903.

327. Ramberg, supra note 17, at 95; Van Houtte, supra note 21, at 173.

328. ICC, supra note 242, at 57-80.

329. Ramberg, supra note 17, at 108.

330. ICC, supra note 242, at 58-59.

331. Ramberg, supra note 17, at 107.

332. ICC, supra note 242, at 60-61.

333. Ramberg, supra note 17, at108.

334. ICC, supra note 242, at 68-69.

335. Ramberg, supra note 29, at 149.

336. See Ramberg, at 61.

337. Ramberg, supra note 17, at 108.

338. ICC, supra note 242, at 77.

339. Valioti, supra note 302.

340. Secretariat’s Commentary, supra note 56, at 65.

341. Id.

342. Ramberg, supra note 256, at 222.