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Part IX Passing of Risk, 38 Passing of Risk

From: Global Sales and Contract Law

Ingeborg Schwenzer, Pascal Hachem, Christopher Kee

Content type:
Book content
Product:
International Commercial Law [ICML]
Published in print:
26 January 2012
ISBN:
9780199572984

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 07 June 2023

Subject(s):
Handing over goods — Delivery and damages — All risks — Bulk goods and passing of property

38  Passing of Risk

  1. A.  Notion of Risk 38.01

    1. I.  Definition 38.01

    2. II.  Cases Covered 38.03

    3. III.  Consequences 38.06

  2. B.  Contractual Allocation of Risk 38.08

    1. I.  General 38.08

    2. II.  Trade Terms 38.13

      1. 1.  General 38.14

      2. 2.  Specific INCOTERMS®38.15

  3. C.  Default Rules on Passing of Risk 38.21

    1. I.  General 38.21

      1. 1.  Historical Starting Points 38.23

      2. 2.  Merchants and Consumers 38.27

    2. II.  Systems of Allocation of Risk 38.30

      1. 1.  Periculum Est Emptoris and Res Perit Domino 38.34

      2. 2.  Delivery and Handing Over of the Goods 38.39

    3. III.  Specific Cases 38.46

      1. 1.  Unascertained Goods 38.47

        1. (a)  General 38.47

        2. (b)  Approaches 38.48

        3. (c)  Bulk Sales 38.52

      2. 2.  Goods Sold in Transit 38.57

      3. 3.  Default by One Party 38.62

        1. (a)  Default by Seller 38.63

        2. (b)  Default by Buyer 38.68

A.  Notion of Risk

I.  Definition

38.01  The word risk can be used in many general senses in a discussion of the sale of goods. For example, a buyer may take the commercial risk of being able to resell goods at a profit.1 Or, as is the case in this chapter, the risk may be what is sometimes referred to as the ‘price risk’.2 Price risk is the risk of having to bear the cost of damage to the goods,3 or loss thereof because the buyer remains obligated to pay the purchase price, where that loss or damage has happened through no fault of either party. For example, if goods are lost at sea due to an unpredictable storm, will the buyer still be obliged to pay the purchase price?

38.02  The rules on the passing of risk are only relevant where neither party can be considered responsible for the loss or for the circumstances which enabled that loss to occur. If the loss has resulted from a breach, the regime of liability for breach of contract applies. While this delimitation of the spheres of application of the rules on liability for breach of contract, and those on passing of risk, is certainly of significance, legal systems rarely expressly state that the rules on passing of risk apply only in situations where the loss of or damage to the goods occurs accidentally. A notable exception, however, is the heading of USA § 2-509 UCC which reads ‘Risk of Loss in the Absence of Breach’. At the international level, Article 66 CISG avoids any doubts when stating that after the passing of risk the buyer is not discharged from its obligation to pay (p. 480) the price, if the goods are lost or damaged ‘unless the loss or damage is due to an act or omission by the seller’.4

II.  Cases Covered

38.03  There appears to be unanimity among legal jurisdictions that discussions of the ‘passing of risk’ cover situations where something has happened to the integrity of the goods—that is, they have been damaged or destroyed—or where the goods have been stolen.5

38.04  It is somewhat less clear, however, whether situations where the goods are seized or confiscated as a result of governmental measures are also included. This risk is sometimes termed ‘legal risk’.6 In some domestic legal systems these situations are thought to be encompassed by the concept of risk.7

38.05  At the international level there are opposing views as to whether cases involving seizure or confiscation by governmental measures fall within the type of risk contemplated by Article 66 CISG. In essence, two positions exist on this issue: the first excludes cases of seizure and confiscation from the scope of Article 66; the second, on the other hand, includes them. The excluding view argues that risk should lie with the party who is best able to get insurance or has an insurance obligation.8 Protection from governmental measures is not something for which insurance is normally available and is thus not part of the contemplated risk. An exception is made for goods taken by an enemy state during times of war—for which it is possible to obtain insurance. Furthermore, this view argues that the risk contemplated by Article 66 CISG concerns the integrity of the goods themselves and not the legal rights connected to the goods. It is these legal rights, in particular ownership, which are interfered with when goods are seized or confiscated.9 The including, and seemingly majority, view is that governmental measures are encompassed in Article 66 CISG.10 This view argues that it should not matter how the goods are lost, simply that they are lost. It is suggested that this interpretation should be preferred as it reconciles the ‘enemy state’ exception recognized by the excluding view.11

III.  Consequences

38.06  The passing of risk has a number of consequences. First, it shifts the burden of a loss from the seller to the buyer. For example, if the goods are damaged, destroyed, or lost before risk has passed then the seller will suffer this loss. The seller may be obliged to supply substitute goods to the buyer, but only receive one purchase price; or the seller may be released from its obligations and receive no purchase price. In either case the seller has still suffered the loss of the original goods. However, where the goods are damaged, destroyed, or lost after risk has passed to the buyer, it is the buyer who suffers the loss. In these situations, the buyer will be required to pay the full purchase price, even though the value of the goods it receives, if it receives any, has been diminished.

(p. 481) 38.07  In the vast majority of jurisdictions both domestic and international, the passing of risk is also the time at which non-conformity of the goods is to be assessed.12 ‘Assessing’ here does not mean proven in court but rather the time at which the goods must have been non-conforming for there to be a breach.

B.  Contractual Allocation of Risk

I.  General

38.08  Consistent with the general principle of freedom of contract, first it is for the parties to make provision for the allocation of risk in their contract.13 In international trade, parties seldom neglect to include such contractual agreements on the passing of risk. In most instances, however, the allocation of risk will not be a stand-alone term of the contract but be included in the provisions made for the modalities of delivery such as transportation, costs, and insurance. Typically, parties use a domestic or international trade term. At the international level the ICC INCOTERMS® are the most important set of trade terms. Such trade terms will stipulate the point in time at which risk is to pass to the buyer.14

38.09  However, even in those instances where the parties have neither established a specific clause dealing with the passing of risk nor used a trade term, it may be possible to infer an implied agreement by interpreting other clauses dealing with the performance of the contract. For example, where the seller is obliged to insure the goods and upon shipment of the goods sends the insurance documents to the buyer, this may be interpreted to the effect that risk was intended to pass when the goods were handed over to the carrier.15

38.10  Problems may, however, arise where the parties both establish provisions on the modalities of delivery and, in addition, use a trade term which conflicts with the other clauses in the contract. This may be the case, for example, where the parties agree that the buyer is obliged to procure insurance for the goods but at the same time use the CIF term in INCOTERMS® 2010 which obliges the seller to procure insurance for the goods.16 It is then a matter of interpretation of the provisions on the modalities of delivery to determine which of the terms should prevail, which features of the trade term were intended to apply, and what this means for the passing of risk.17

38.11  Conversely, where a clause makes specific provision for the transfer of risk, this may well influence a contradicting trade term. For example, where the contract places the risk for the entire transport phase on the seller but at the same time contains the 2010 ICC INCOTERM® CIF, (p. 482) the question arises whether this is in fact a CIF contract and whether the obligations of the parties under the CIF term still apply.18

38.12  Even where there is no apparent conflict in the parties’ contract terms, it may be necessary to interpret the parties’ intentions. For example, in jurisdictions following the English model, the sale of goods Acts contain an older common law rule. According to this default rule, the buyer will bear the risk of deterioration in the goods caused by their transport where the seller has agreed to deliver goods (at the seller’s risk) to a place other than the place where they were sold.19 At first sight this provision appears circuitous and unworkable—the seller agrees to take on the risk, but some of that risk is placed on the buyer unless the parties agree otherwise; although in order for the seller to have the risk in the first place the parties must have already reached an agreement. Contract interpretation is necessary to give useful effect to the provision and to understand precisely what risk the seller has agreed to in the first instance.20 Has the seller agreed to take on all the risk, including unavoidable deterioration during transit, or is that not covered? Factors which would indicate that the seller has assumed the entire risk include a commitment that the goods will be of a particular quality on arrival.21 In any event, at least in the international trade context, the issue may not arise often given that the majority of trade terms transfer risk to the buyer prior to transit.

II.  Trade Terms

38.13  As indicated earlier,22 in international trade parties often make use of trade terms to further specify their obligations under the contract and to determine the passing of risk. Typical of these, the ICC INCOTERMS® tie the passing of risk to the delivery of the goods. Hence, the delivery obligation as described in the respective INCOTERM® will effectively determine the time when the risk is to pass.

1.  General

38.14  Where the parties have used a trade term, it is necessary to carefully interpret what trade term they have actually chosen, as well as its content. The precise meaning of particular short-hand trade terms may vary from jurisdiction to jurisdiction quite independently of any meaning or definition given to them by the parties. This meaning may be found in statute, such as in numerous Ibero-American jurisdictions23 and the USA,24 or in case law, such as in other common law jurisdictions.25 Where the CISG is applicable, the use of a trade term without further specifications should be understood as referring to the current version of the ICC INCOTERMS®.26

2.  Specific INCOTERMS®

38.15  As the ICC INCOTERMS® have become a standard feature in international trade since their first introduction in 1936, it appears justified to briefly address the passing of risk under the different groups of terms. It should be noted that at the time of writing the ICC INCOTERMS® (p. 483) 2010 had just entered into force and ICC INCOTERMS® 2000 were still predominant. It therefore seems necessary to not focus exclusively on the most recent terms but to point out changes as far as they pertain to the passing of risk.

38.16  With respect to the passing of risk, the ICC E term (EXW) was not changed from 2000 to 2010. As delivery occurs at the seller’s place of business,27 the buyer bears all the risk of loading and transporting the goods from that place.

38.17  The three F terms all describe the situation where the buyer is responsible for paying for the carriage. The seller must deliver the goods for carriage as instructed by the buyer. It is the A5 and B5 clause that is relevant in each instance. Under the 2000 and 2010 FCA term, risk passes to the buyer when the goods have been placed in the custody of the carrier at the named place or port. Pursuant to the 2000 and 2010 FAS term, risk passes at a slightly later stage when the goods are placed alongside the vessel on which they will be carried. The FOB term displays the parties’ intent that risk should pass at a later stage. The traditional understanding of this term in passing of risk is that risk passes when the goods pass the ship’s rail. This, however, was changed from the 2000 to the 2010 ICC INCOTERMS® in that risk under ICC INCOTERM® FOB 2010 passes when the goods are delivered on board. It is significant to note that while the abbreviation ‘FOB’ is a particularly well known one, it can be understood differently depending on the circumstances of the particular case and the law that is applicable to the contract. FOB is a trade term which also appears in domestic legislation such as the USA Uniform Commercial Code28 and a number of Ibero-American systems.29 While the trade terms contained in Ibero-American legislation are identical to their role model, the ICC INCOTERMS®, the understanding of the FOB term under the USA UCC is significantly different. Pursuant to the definition provided by the USA UCC, risk does not pass when the goods have been delivered on board but rather at the place of destination. Parties must therefore be very careful to ensure they clearly identify which definition of FOB, and other INCOTERMS® generally, they are using.

38.18  Pursuant to the C terms both in the 2000 and the 2010 version the seller is responsible for arranging and paying for the carriage. Nevertheless, delivery occurs and risk passes to the buyer before the arrival of the goods at their carriage destination. With regard to the CFR and CIF terms the same changes as to the FOB term have been made. This means that while under the 2000 ICC INCOTERMS® CFR and CIF risk passed to the buyer when the goods passed the ship’s rail, under the 2010 version of these terms risk passes when the goods have been delivered on board. Under both the 2000 and 2010 ICC INCOTERMS® CPT and CIP risk passes when the goods are delivered to the first carrier.

38.19  The D terms were almost completely restructured by the 2010 version of the ICC INCOTERMS®. Under the 2000 ICC INCOTERMS®, the D group consisted of five terms: DAF, DES, DEQ, DDU, and DDP. Under DAF, risk passes to the buyer once the goods are at the place of delivery and at the buyer’s disposal although not unloaded from the mode of transport which carried them. Under the DES term, risk passes to the buyer when the ship carrying the goods arrives at the port of destination, and the goods are at the buyer’s disposal. The goods do not need to be unloaded, nor cleared for import, for risk to pass. In contrast, the DEQ term requires that the goods must have been unloaded and the seller must have obtained the import clearance before risk transfers to the buyer. DDU is the same as DES but applies to all modes of transportation. Finally, DDP is the most favourable to a buyer. Risk passes when the goods are delivered to the buyer at a place nominated by the buyer and after all duties (export and import) have been paid.

(p. 484) 38.20  The 2010 version of the ICC INCOTERMS® only contains three D terms. The DDP term remained the same. Two new terms were introduced, namely DAT (delivered at terminal) and DAP (delivered at place). Under DAT risk passes when the goods are delivered by placing them at the disposal of the buyer at the named terminal, port, or place of destination. Under DAP, risk passes when the goods are delivered by placing them at the disposal of the buyer ready for unloading at the agreed point or named place of destination.

C.  Default Rules on Passing of Risk

I.  General

38.21  Failing any agreement by the parties on the transfer of risk, the applicable default rules come into play. Irrespective of their particular phrasing, three approaches to transfer of risk have been developed by legal systems. Their historical developments are outlined below.30

38.22  The respective choice between the three general approaches made by legal systems was and still is always heavily influenced by the decisions made in other areas of the law; the transfer of title is the most important example in this context.

1.  Historical Starting Points

38.23  In Roman law, risk of loss passed to the buyer upon the conclusion of the sales contract.31 The Latin phrasing of this principle is periculum est emptoris—the buyer assumes the risk. It should be noted that under Roman law the transfer of title was not an obligation of the seller under the sales contract.32 In addition, the conclusion of the contract itself did not cause title to pass. Roman law required traditio—the handing over of the goods. Hence, risk passed to the buyer independent of whether it became the owner at the same time or not. Naturally, in Roman times, sales contracts would be concluded and performed in the forum and typically there was thus no significant time gap between the conclusion of the contract, the passing of risk so triggered, and the transfer of title through handing over of the goods. Nevertheless, it would be wrong to assume that Roman law tied risk of loss or damage to ownership.

38.24  During the seventeenth century, when scholars increasingly focused on natural law, the Roman approach was challenged.33 A particularly prominent critic was Hugo Grotius who opined that the passing of risk should be tied to title rather than to the conclusion of the contract.34 The notion that risk of loss lies with the owner is commonly referred to as res perit domino—the thing is lost by the owner. However, Grotius also advocated that title should pass at the time of the conclusion of the contract.35 Hence, the practical results following from the propositions made by Grotius and those under the Roman periculum est emptoris typically do not differ.36

38.25  The third approach, which was also developed during the Age of Reason, focuses on the handing over of the goods. Initially, legal systems following this approach as a starting point used the notion that risk should not lie with the buyer per se but should lie with the owner of the goods (res perit domino). However, the Roman system of transfer of title by traditio (handing over of the goods) was preserved. Hence, risk was only to pass upon traditio which requires that the (p. 485) handing over of the goods actually causes title to pass.37 It is evident that this early understanding of the handing-over approach is also based on the assumption that the goods would be handed over directly from the seller to the buyer thus effecting transfer of title. Hence, the passing of risk was perceived to typically coincide with the seller giving up control over the goods and the buyer simultaneously acquiring both title and risk.

38.26  It took considerable time before the dominant role of res perit domino under the handing-over approach subsided. The focus then shifted to the idea of the seller (merely) giving up control over the goods by handing over the goods to a carrier but without title passing. The legal consequence of this change of perspective is that the handing over of the goods is the decisive issue even though it may not have caused title to pass.

2.  Merchants and Consumers

38.27  The earlier approaches to passing of risk—periculum est emptoris and res perit domino—were developed in a way that envisaged sales contracts to be concluded and performed in the market place. For the principle of res perit domino this is admittedly only an indirect consequence in those legal systems where title passes upon the conclusion of the contract. In any event, under both approaches in conjunction with the rules on transfer of title, risk and control of the goods simultaneously pass to the buyer only when the parties are in the same place. As indicated earlier, this is also true for the early understanding of the handing-over approach.38

38.28  In some legal systems, especially Ibero-American systems, the practical outcomes of the passing of risk and passing of title regimes are considered acceptable for civil transactions but not for commercial transactions, where distance-selling is the rule. Consequently, these legal systems have established different rules for the passing of risk for commercial transactions.39 In most instances, risk passes once the seller is no longer in control of the goods.40 This typically coincides with the modern understanding of the handing-over approach in that the handing over to the first carrier causes risk to pass and traditio effecting title to pass to the buyer is not necessary.41 Other legal systems such as Austria and Germany have established separate rules for distance-selling contracts without distinguishing C2C and B2B sales, which provide for the passing of risk to the buyer upon the handing over of the goods from the seller to the carrier.42

38.29  However, it is not only with regard to distance-selling in commercial transactions that modifications of the rules on passing of risk can be found; modifications can also be found with regard to distance-selling in B2C transactions. In this context, some legal systems feel that it is not sufficient to have risk pass when the seller gives up control over the goods as the consumer would still have to bear the risk of loss or damage during transport. While this is perceived as an appropriate default allocation of risk in civil transactions, it is thought inappropriate for B2C transactions. Therefore, these legal systems have modified their rules on passing of risk to (p. 486) the effect that risk passes to a consumer only when the consumer actually takes over the goods.43

II.  Systems of Allocation of Risk

38.30  In the context of passing of risk, legal systems cannot be grouped along traditional lines of categorizations such as the common law–civil law distinction. Indeed the dividing lines created by the different historical developments do not correspond to such distinctions. For example, even otherwise fairly homogeneous groups of legal systems such as the Ibero-American systems44 or the Middle Eastern and Arab legal systems45 differ in their approaches to the passing of risk. Naturally this is even more so in heterogeneous groups of jurisdictions such as the East Asian legal systems.

38.31  It should further be noted that the default rules on the passing of risk and the transfer of title were often developed with regard to the sale of specific goods. This may be seen as a relic from Roman sales law which exclusively envisaged the sale of specific goods.46 As a starting point, the presentation of the individual systems of the default allocation of risk will therefore focus on the starting points taken by legal systems. The approach to unascertained goods will be dealt with as a separate, specific issue below.47

38.32  The historical starting points for legal systems have been briefly laid out earlier.48 From a comparative perspective, the significance of the principle periculum est emptoris has largely decreased. The reason for this development is that since the works of Grotius the transfer of title has been given more significance than was the case in Roman times. Thus, Grotius’ combination of res perit domino and the transfer of title upon the conclusion of the contract came to play the predominant role. Today the handing-over approach appears to be on the rise,49 especially in commercial trade,50 but at the domestic level has not yet gathered the same following as the model developed by Grotius.

38.33  However, despite the differences in approach, it must not be forgotten that especially in international trade parties seldom neglect to make provision for the passing of risk or, as explained earlier, the insurance terms of the contract may lead to an implicit allocation of the risk of loss. Thus, the practical relevance of legislation on passing of risk in many instances is limited51 and the differences between the approaches outlined do not actually play out.

1.  Periculum Est Emptoris and Res Perit Domino

38.34  Although the principles of periculum est emptoris and res perit domino are different from a conceptual perspective, as indicated earlier52 the practical results achieved are by and large the same. From a comparative perspective, a pure application of periculum est emptoris nowadays is only to be found in a very few legal systems. The most prominent examples in this regard are (p. 487) Switzerland53—where a different rule exists, however, for the sale of generic goods54—and South Africa;55 but also in the Philippines traces of periculum est emptoris can still be found.56

38.35  In Switzerland the provision establishing periculum est emptoris has been strongly criticized on various grounds for decades both by the Swiss Supreme Court57 as well as Swiss legal scholars.58 The relevant provision (Article 185 CO), however, restricts the application of periculum est emptoris to situations where the parties have not agreed otherwise. To avoid the default rule on passing of risk, Swiss courts and scholars interpret this exception very broadly.59 In particular, they readily assume a derogating agreement in numerous situations, especially where the seller does not give up control over the goods at the time of the conclusion of the contract.60 This circumvention of the periculum est emptoris principle is of particular importance in situations of distance-selling.

38.36  Res perit domino is still the predominant approach to the passing of risk at the domestic level. It is used in the traditional Romanistic systems61 and has travelled from there to the Ibero-American systems62 as well as the Middle Eastern and Arab countries.63 In these systems, title typically passes with the conclusion of the contract.64 This confirms the earlier assertion that, for these systems, the practical outcome under this default system does not differ from periculum est emptoris.65

38.37  The situation is more complicated in traditionally structured East Asian civil law legal systems such as Japan, South Korea, or Thailand but also Cambodia.66 In these jurisdictions no specific attention is devoted to the passing of risk; rather, the risk is assumed to lie with the obligor.67 It is undisputed in these systems that the seller owes transfer of title as well as the delivery of the goods.68 In traditionally structured East Asian civil law jurisdictions title passes by default upon the conclusion of the contract.69 However, in Japan, this originally French approach today is interpreted to contain the German approach of transfer of title by a separate agreement.70 To make this interpretation compatible with the default rule of title passing upon the conclusion of the contract it would have to be assumed that the separate agreement on the transfer of title is concluded at the same point in time and not subsequently. Thus, as a practical result, the principle of res perit domino would apply also in these systems.

(p. 488) 38.38  The prevalence of res perit domino as a starting point is not exclusive to civil law legal systems. Rather, save for the USA,71 a similar observation can be made for common law jurisdictions in all regions of the world.72 With regard to the sale of specific goods, the default rules in the sale of goods Acts assume risk and title to pass upon the conclusion of the contract.73 This is followed also by the East Asian common law jurisdictions.74

2.  Delivery and Handing Over of the Goods

38.39  As outlined earlier, both periculum est emptoris and res perit domino typically envisaged parties to be in the same place.75 The obvious weakness of legal systems envisaging the parties to be in the same place is that the buyer in situations of distance-selling is never in control of the goods when risk passes, as after the conclusion of the contract the seller still holds the goods in possession. Thus, if the goods are lost or damaged, that risk lies with the buyer, although it did not have any opportunity to take protective measures. The only way to escape the necessity of ordering the goods a second time, and the obligation to pay for both orders, is to prove that the loss of or damage to the goods was not accidental but that the seller was responsible, for example because of inadequate storage. Hence, in case of loss of or damage to the goods when in possession of the seller, buyers have an incentive to always allege the responsibility of the seller for the loss or damage.76 This increases the likelihood of controversy and thus costly legal proceedings.

38.40  To better fit the needs of distance-selling, domestic legal systems as well as international sets of rules now increasingly favour an approach to the passing of risk that focuses on the delivery or the handing over of the goods. While these focal points may appear to be identical, there is a conceptual difference that has created debate especially at the international level.77 Where delivery is decisive, this typically refers to the legal concept ‘delivery’, while the handing over of the goods is a purely fact-based notion of the seller giving up physical control over the goods.

38.41  As stated earlier, the general approach of devoting greater attention to the handing over of the goods is not particularly new.78 Early representatives are especially the Nordic systems79 but also Prussian law80 and the Austrian Civil Code. The Austrian Civil Code uses res perit domino as a starting point but title is only transferred with the handing over of the goods to the buyer.81 However, in distance-selling scenarios this would have meant that the transportation risk would always be on the seller. Yet, this would have been contradictory to commercial practice. To preserve res perit domino but avoid the undesired consequence of the seller bearing the transportation risk, the Austrian Civil Code provides that where the goods are being sent to the buyer with the latter’s consent, the handing over to the carrier is to be regarded as handing over to the buyer, thus effecting transfer of title.82 This understanding of the handing-over approach (p. 489) today can still be found in some Ibero-American systems, most importantly Brazil but also El Salvador.83

38.42  The German Civil Code of 1900 separated the passing of risk from the transfer of title and introduced the handing-over approach requiring (merely) the seller to give up control over the goods by either giving factual control to the buyer or the carrier.84 Furthermore, the handing over of the goods does not have to effect transfer of title at the same time.85 Hence, the handing-over approach was also emancipated from res perit domino. This emancipation also took place in the USA where Llewellyn argued against intertwining the passing of risk and the transfer of title.86 Today the USA UCC ties the passing of risk to the seller giving up control over the goods.87 Amongst earlier civil law codifications some Ibero-American (commercial) codes follow this approach for commercial transactions; however, it is the exception in that region with regard to civil sales.88

38.43  Throughout the twentieth century, and especially in recent times, the handing-over approach has become increasingly popular. At the domestic level, modern codifications especially in civil law jurisdictions in Eastern Europe, Central Asia, and East Asia have adopted this concept.89 In Japan and Cambodia the respective drafts for a new civil code likewise follow this approach.90

38.44  As mentioned earlier,91 at the international level the conceptual difference between focusing on the legal concept of delivery and the fact-based notion of handing over created considerable debate. During the preparations for the subsequent deliberations on ULIS the Nordic approach of linking the passing of risk to delivery was broadly accepted.92 However, during the deliberations the understanding of ‘delivery’ presented significant problems.93 Nevertheless, the basic decision of linking the passing of risk to the legal concept of delivery was upheld.94 It should be noted that the ICC INCOTERMS® also follow this approach.

38.45  In contrast, the CISG separates the passing of risk from the legal concept of delivery.95 As the Convention does not contain any rules on the transfer of title,96 risk is also not tied to the transfer of title. Rather, the Convention deals with the passing of risk as a separate concept97—an approach that is also followed by the DCFR. Failing any agreement to the contrary, the relevant point in time at which risk passes is no longer that where delivery in a technical sense (p. 490) occurs but where the seller gives up control over the goods.98 It is of course commonly agreed that the rules of ULIS and the CISG despite their conceptual differences in substance are almost identical.99 In the most important scenario of distance-selling both sets of rules provide for risk to pass once the goods are handed over to the first carrier.

III.  Specific Cases

38.46  The previous sections have outlined the different systems of allocation of risk. However, these general approaches by legal systems require further remarks in regard to specific situations that may be encountered in the context of a sales transaction.

1.  Unascertained Goods

(a)  General

38.47  The different default allocations of risk which have been outlined earlier in this chapter all envisage that the goods are specific at the point in time risk passes. The rules on the passing of risk would otherwise not be workable obviously. For example, the seller sells 20 out of the 100 metric tons of grain that it has in stock. After the conclusion of the contract, 50 metric tons are destroyed by fire. It cannot be determined whether the 20 tons sold were amongst the 50 that were destroyed or whether they were amongst the 50 that survived. In these instances, the seller would naturally assert that the 20 tons sold were destroyed and were at the risk of the buyer. That way the seller would retain its claim for the purchase price but would not have to deliver the grain. Hence, all legal systems, independent of their general approach to the default allocation of risk, require some degree of specificity of the goods to allow risk to pass.

(b)  Approaches

38.48  The point in time at which the required degree of specificity must be met and the way in which this is determined is directly connected to the general system of allocation of risk.

38.49  The Roman law principle of periculum est emptoris presupposes that the goods be ascertained and thus specific at the time of the conclusion of the contract. As Roman sales law was developed in respect of the sale of specific goods, no particular problems arose at the time with regard to the interplay of specificity of the goods and passing of risk. However, in those few legal systems that employ periculum est emptoris today and which indeed are familiar with the sale of generic goods, this matter needed clarification. It is therefore not surprising that Switzerland explicitly addressed the passing of risk in sales of generic goods. Article 185(2) Swiss CO requires that the goods be singled out from the stock or, if the contract involves carriage that they are handed over to the carrier.

38.50  In legal systems adhering to the principle of res perit domino with title and risk passing at the time of the conclusion of the contract, it is impossible to strictly apply this approach as at the time of the conclusion of the contract there is/are no ascertained good(s) for which title could pass to the buyer.100 In the Ibero-American as well as Middle Eastern and Arabic systems using res perit domino and transfer of title, at the time of the conclusion of the contract risk does not pass before the goods have been measured, weighed, counted, or in any other way identified as the goods for which the parties contracted.101 In France, as well as in common law systems following the English model, the appropriation of the goods to the contract with the assent of the other party is decisive.102

(p. 491) 38.51  In those legal systems operating with the handing-over or delivery approach the necessary degree of specificity rarely presents problems as the goods are clearly identified when handed over to the buyer or to the carrier, which in both instances is the time at which risk passes.

(c)  Bulk Sales

38.52  As a general proposition the parties must know exactly which goods are being sold before they can agree to transfer risk ahead of transferring property. Thus the goods must be specific or ascertained. It is, however, possible and not necessarily uncommon for risk in unascertained parts of bulk goods to pass to the buyer before property has passed—for example, where CIF or (albeit rarely103) FOB terms are used. It seems clear though that the bulk must itself be identified.

38.53  In this context it is necessary to note the relatively recent amendments in the UK and Singapore. Although these amendments were intended to address insolvency issues associated with the transfer of title in an identified bulk,104 they also have not yet settled the consequences of the passing of risk.

38.54  In these jurisdictions property can now pass where payment has been made by the buyer for a specified quantity from an identified bulk.105 These new provisions do not specifically address the implications for the passing of risk and have been criticized for leaving the matter unclear.106 Commentary suggests that any undivided share of an identified bulk which falls under the definition of a specific good should be subject to the usual default rule that risk passes with property.107

38.55  Issues arising from the situation where only part of the bulk is lost or destroyed have not been entirely settled. Where the entire bulk has been sold to multiple buyers who now hold the property as owners in common, the risk is on the buyers collectively and loss would be borne on a pro rata basis as a result of a statutory provision.108 A more difficult situation is where the seller still owns part of the bulk. It is unclear whether the buyer effectively bears the risk on a pro rata basis with the seller or whether the buyer only bears the risk if the loss exceeds the part owned by the seller.109

38.56  In sales involving carriage (such as international transactions) the passing of risk associated with an undivided share of bulk is often dependent on contractual choices such as the type of carriage contract and what documents the seller is required to deliver to the buyer. It appears that there are generally four factors which may need to be considered.110 First, the seller must have done all that it has undertaken to do—that is, hand over the contracted-for documents etc. Secondly, the buyer must have accepted the documents and thus deprived the seller of control of the goods. Thirdly, consideration must be given to whether the documents in question grant the buyer a cause of action against the carrier (or warehouser etc). Where a cause of action exists it is likely that risk will have been considered to have passed. Fourthly, it may be necessary for the carrier or warehouser to acknowledge the buyer as the one with a right to possession and control.

(p. 492) 2.  Goods Sold in Transit

38.57  Frequently, and in the field of commodity trade in particular, goods are sold while already in transit. In many of these instances the goods will travel by sea. Traditional civil law legal systems do not establish specific provisions dealing with these situations.111 Apparently, to this very day the provisions on the passing of risk envisage that the goods are being shipped after the conclusion of the contract. Also in common law jurisdictions neither the respective sale of goods Acts nor the USA UCC contain rules on the passing of risk where goods in transit are sold. In common law jurisdictions the issue is discussed mainly in the context of CIF contracts.112

38.58  At the international level it was clear already during the preparations for the deliberations on ULIS that an international convention dealing with worldwide trade would have to take account of this issue and expressly deal with it. Hence, both ULIS as well as the CISG address the passing of risk with regard to goods sold in transit.113 Following the international lead, an increasing number of domestic legal systems has established specific rules in that regard. Prominent examples are China,114 most of the Nordic systems,115 and also most codifications in Eastern Europe and Central Asia.116

38.59  When evaluating the development of the rules on passing of risk regarding goods sold in transit, it appears that the divergence of domestic legal systems is a product of divergence at the international level. In the context of CIF contracts traditional practice and scholarly view in various legal systems had it that risk passed—retroactively—to the buyer upon the initial shipment of the goods.117 The underlying rationale was that the buyer could recover losses from the insurer.118 This rule was adopted in a generalized form by Article 99(1) ULIS. This provision broadened the scope of the traditional approach considerably in that it did not presuppose a CIF contract where the buyer would be protected by the insurance contract but instead generally provided for risk to pass to the buyer retroactively upon the handing over of the goods to the carrier.

38.60  During the drafting process of the CISG the developing countries in particular opposed this seemingly generally accepted rule as being too harsh on the buyer.119 The dispute led to the compromise now established in Article 68 CISG. Sentence 1 of that provision deviates from the original approach in that risk is stated to pass at the time of the conclusion of the contract. Sentence 2 establishes the traditional approach where ‘circumstances so indicate’. It appears that it depends on the legal background of the respective commentator whether sentence 1 of Article 68 CISG or sentence 2 is interpreted to state the prevalent rule.120 Some commentators have even gone so far to state that the circumstances always indicate that risk was to pass at the (p. 493) time of handing over the goods to the carrier, if it cannot be determined whether the loss or deterioration occurred before or after conclusion of the contract.121

38.61  A number of the newly drafted rules on the passing of risk regarding goods sold in transit follow the model of Article 68, sentence 1 CISG without adopting sentence 2 at the same time.122 Hence, in these legal systems risk passes upon the conclusion of the contract. On the other hand Estonia has established sentence 2 as the general rule without adopting sentence 1 of Article 68 CISG.123 Thus, risk passes with the handing over to the carrier. In yet another approach, some Nordic systems have copied Article 68 CISG in its entirety.124

3.  Default by One Party

38.62  It was noted earlier125 that the spheres of application of the rules on passing of risk and those on liability for breach of contract must be clearly delimited. While the generally decisive issue in this regard is whether the loss of or damage to the goods was accidental, this criterion does not work where one party is in default of its obligations at the time the goods are accidentally lost or damaged. In these scenarios the effects of a prior breach on the accidental loss of or damage to the goods must be determined.

(a)  Default by Seller

38.63  In sales transactions the typical default on the part of the seller is the delivery of non-conforming goods.

38.64  It is clear that where the non-conformity of the goods leads to their deterioration or even entire destruction after risk has passed, the seller cannot claim the purchase price. The situation is less clear where non-conforming goods are accidentally lost or damaged while at the risk of the buyer. However, it should be noted that this constellation has rarely been at issue in published court decisions and arbitral awards. The reason for this may be that in case of loss of the goods the prior non-conformity is difficult to establish and in any event the goods will typically have been insured. It is therefore not surprising that in many legal systems this constellation has not received attention. However, some domestic systems either expressly make provision for such cases or have at least witnessed considerable debate. At the international level both ULIS and the CISG explicitly address this matter.

38.65  From a comparative perspective as far as the issue is discussed, legal systems typically do not generally exclude the liability of the seller. An exception in this regard is France.126 However, those legal systems generally affirming liability of the seller differ with regard to the extent of the seller’s liability. In Germany it is disputed whether risk does not pass if the goods are non-conforming.127

38.66  Common law jurisdictions conceptually are more restrictive as they uphold the seller’s liability (only) where the non-conformity of the goods triggers a right to reject on the part of the buyer.128 The underlying rationale is that where the goods are lost or damaged, the primary interest of the buyer will be to recover the purchase price from the seller and thus to avoid the contract. (p. 494) In the USA this means that on account of § 2-601(a) UCC every non-conformity of the goods preserves liability of the seller which moves this position close to the German solution. Under English law a similar rule applies. Fitness of the goods for purpose and merchantable or satisfactory quality amount to conditions.

38.67  At the international level the CISG preserves the buyer’s remedies in case the seller has committed a fundamental breach of contract.129 This coincides with the common law position that the buyer must have the right to reject because, for the avoidance of the contract, the Convention requires a fundamental breach to have been committed by the seller. It is likely that the drafters of the CISG primarily considered the existence of the buyer’s right to avoid the contract and to require the delivery of substitute goods.130

(b)  Default by Buyer

38.68  The typical scenario relevant to the passing of risk and involving a default on the part of the buyer is the delay of the buyer in taking delivery of the goods. The general rule in all legal systems is that where the seller has done everything necessary to complete the transaction and the buyer is late in taking delivery, risk passes to the buyer even in those systems that require handing over or delivery. For those systems operating with periculum est emptoris and res perit domino 131 this issue is usually already decided at the time of the conclusion of the contract.

Footnotes:

(p. 495) 1  This is sometimes referred to as the ‘economic risk’, see Erauw, 25 J L & Com (2005–6), 203. For a description of other types of risk see Dalhusien, p 370.

2  Art 66 CISG; Aut Koziol et al/Apathy, § 1051, para 3; Chl Supreme Court, RDJ, vol 24, sec 1, p 484 cited in Díez Duarte, p 206, n 566 (defining risk as an uncertain event that can harm or even destroy a thing); Chn Huang Maorong, Sales Law, p 439; Deu Bamberger/Roth/Faust, § 446, para 12.

3  Common Law (UK) Benjamin’s Sale of Goods, para 6-001; but see para 38.12.

4  Art 96 ULIS had contained an almost identical wording.

7  See for Eastern Europe/Central Asia Lapiashvili, p 241; Ibero-America Muñoz, p 351; Che BGer, 11 October 1918, BGE 44 II 416, BaslerKommOR/Koller, Art 185, para 4; Deu Staudinger/Beckmann, § 446, para 24, but see RG, 23 November 1922, RGZ 106, 16; Tur Aral, p 56.

10  Schlechtriem/Schwenzer/Hager/Schmidt-Kessel, Art 66, para 5.

11  Ibid.

12  See eg Arabic/Middle East Hafez, pp 241ff; Common Law (UK) Benjamin’s Sale of Goods, para 11-049; Che BaslerKommOR/Honsell, Art 197, para 11; Cze Art 499 CC, Art 425 Com C; Deu § 434 CC (with regard to third party rights under § 435 CC, however the time of transfer of title is decisive, Bamberger/Roth/Faust, § 435, para 5); Est § 218 CO; Hrv Art 400 CO; Hun Arts 279, 305 CC; Khm Art 540(1) CC; Pol Art 559 CC; Svk Art 499 CC; Art 425 Com C; Svn Art 458 CC; Twn Art 354 CC; Vnm Art 40 Com C.

13  OHADA Arts 276, 277 AUDCG; Arm Art 475 CC; Aus (Vic) s 25 SGA; Aze Art 571 CC; Blr Art 429 CC; Can (BC) s 25(1) SGA; Che Art 185(1) CO; see also BaslerKommOR/Koller, Art 185, paras 41 et seq; Chn Art 142 CLPRC; Deu Staudinger/Beckmann, § 446, para 30, Bamberger/Roth/Faust, § 446, para 24; Eng s 20(1) SGA; Gha s 27 SGA; Hkg s 22 SGO; Ind s 26 SGA; Irl s 20 SGA; Kaz Art 411 CC; Ken s 22 SGA; Kgz Art 422 CC; Khm Art 416(2) CC; Ltu Art 6.320 CC; Mac Art 785 CC; Mng Art 247 CC; Mwi s 20 SGA; Mys s 26 SGA; Nga s 20 SGA; Nzl s 22(1) SGA; Rus Art 459 CC; Sco s 20(1) SGA; Sgp s 20 SGA; Tjk Art 495 CC; Tur Art 208(1) CO; Tza s 20 SGA; Uga s 21 SGA; Ukr Art 668 CC; Uzb Art 392 CC; Vnm Art 440 CC, Arts 57–61 Com C; Wal s 20(1) SGA; Zmb s 20 SGA; Zwe s 20 SGA.

14  For the passing of risk under the respective ICC INCOTERMS® 2010 see paras 38.15 et seq.

15  See for the USA with regard to insurance terms White/Summers, para 6.1, p 246.

16  See ICC INCOTERMS® 2010, clause A3.

17  On the particular relevance of an insurance stipulation for contract interpretation see USA White/Summers, para 6.1.

19  Aus (Vic) s 40 SGA; Can (BC) s 37 SGA; Eng s 33 SGA; Hkg s 35 SGO; Ind s 40 SGA; Irl s 33 SGA; Mys s 40 SGA; Nzl s 35 SGA; Sco s 33 SGA; Sgp s 33 SGA; Wal s 33 SGA.

20  Common Law (UK) Benjamin’s Sale of Goods, para 18-293 for discussion of the issues raised here generally.

21  In this context it is also necessary to consider a term usually implied into sale of goods contracts that the goods are capable of enduring normal transit—see para 31.134.

22  See para 38.08.

23  Bol Arts 852 (EX), 853 (FOB), 854 (FAS), 855, 856 (C y F & CIF with the delivery of documents) Com C; Cri Arts 473, 474 (CIF & C y F), 475 (FOB) Com C; Gtm Arts 697 (FOB), 698 (FAS), 702 (CIF), 704 (C y F) Com C; Slv Arts 1033 (CIF), 1034 (C y F), 1035 (FOB) Com C.

24  USA §§2-319–324 UCC.

25  See eg the discussion in Eng Benjamin’s Sale of Goods, paras 20-010, 20-011.

27  The ICC INCOTERMS® strictly tie passing of risk to delivery.

28  USA § 2-319 UCC.

29  See Muñoz, p 354.

30  See paras 38.23 et seq.

31  See Honsell, Römisches Recht, pp 128ff; Hager, Gefahrtragung, p 38 with a brief overview of the dispute as to the correct understanding of the Roman approach.

32  See para 2.07 and Chs 28, Ch 39.

33  Overview provided by Hager, Gefahrtragung, pp 39ff also with a brief summary of the debate in the drafting process of Prussian law (p 41).

35  See ibid.

36  See ibid.

37  See for those Ibero-American systems following this understanding Muñoz, p 358. See for Aut Hager, Gefahrtragung, p 42.

38  See para 38.23.

40  See ibid.

41  See ibid, p 360.

42  See Arm Art 475 CC; Aze Art 571 CC; Blr Art 429 CC; Deu § 447 CC; Geo Art 482 CC; Kaz Art 411 CC; Kgz Art 422 CC; Ltu Art 6.320 CC; Mda Art 759 CC; Pol Art 544 CC; Rus Art 459 CC; Tjk Art 495 CC; Ukr Art 668 CC; Uzb Art 392 CC. In Aut the principle of res perit domino applies. The passing of title requires traditio, § 1051 CC. To fit the needs of distance selling, Aut § 429 CC deems handing over of the goods to the carrier to qualify as handing over to the buyer, Koziol et al/Eccher, § 429, para 2. Therefore, the risk passes with handing over to the carrier, Koziol et al/Apathy, § 1051, para 3. See on the passing of risk in distance-selling contracts also Hager, Gefahrtragung, pp 80ff.

43  See for Deu § 474(2) CC; Eng s 20(4) SGA; Est § 214(5) CO; Fin Chapter 5, ss 6, 4 Consumer Protection Act; Hun Art 278(2) CC; Ndl Art 7.11 CC; Sco s 20(4) SGA; Svk Art 614(3) CC; Swe §§ 6, 8 Consumer Sales Act.

44  See Muñoz, pp 357ff: ‘vary from one system to another’.

45  See Hafez, pp 273ff.

46  See Ch 2. In Deu it has been said that only the modernization of the law of obligations in 2002 liberated the Civil Code from its Roman confinements to the sale of specific goods, see Altmeppen/Reichard, FS Ulrich Huber, pp 73, 97.

47  See paras 38.47 et seq.

48  See paras 38.23 et seq.

49  See para 38.43.

50  The ICC INCOTERMS®, also in the 2010 version, strictly tie the passing of risk to the delivery of the goods.

51  See for the CISG, Schlechtriem/Schwenzer/Hager/Schmidt-Kessel, Art 67, para 2.

52  See para 38.24.

53  See Che Art 185(1) CO; criticism from Honsell, Römisches Recht, p 129.

54  See Che Art 185(2) CO.

56  See SJ Yang, pp 264ff outlining also the problems created by the additional adoption of res perit domino and the delivery approach.

57  See BGer, 18 April 1958, BGE 84 II 158 with extensive remarks on the problems created by this provision.

60  BGer, 18 April 1958, BGE 84 II 158, 161 et seq; BaslerKommOR/Koller, Art 185, para 38; Cavin, SPR VII/1, 34.

61  OHADA Art 277 AUDCG; Fra Art 1138 CC; Esp Arts 1.182, 1.452 CC.

63  See Hafez, pp 263ff.

64  OHADA Art 275 AUDCG; Arab and Middle East Hafez, pp 284ff; Ibero-America Muñoz, p 366; Fra Art 1583 CC.

65  See para 38.24.

66  See SJ Yang, p 266.

67  See SJ Yang, p 266 who, however, also points out changes to this approach in the respective drafts for new Civil Codes in Jpn and Khm.

69  See ibid, p 271.

70  See ibid.

71  See for the USA para 38.42.

72  For a summary of the development in Eng see Hager, Gefahrtragung, pp 58ff.

73  See East Asia SJ Yang, pp 263ff; Aus (Vic) s 23 (Rule 1) SGA; Can (BC) s 23(2) SGA; Eng s 18 (Rule 1) SGA; Gha s 27 SGA; Hkg s 20 (Rule 1) SGO; Ind s 20 SGA; Irl s 18 (Rule 1) SGA; Ken s 22 SGA; Mwi s 20 SGA; Mys s 20 SGA; Nga s 20 SGA; Nzl s 20 (Rule 1) SGA; Sco s 18 Rule 1) SGA; Sgp s 18 (Rule 1) SGA; Tza s 20 SGA; Uga s 21 SGA; Wal s 18 (Rule 1) SGA; Zmb s 20 SGA; Zwe s 20 SGA.

74  See SJ Yang, p 272.

75  See para 38.23.

76  See Muñoz, p 358.

77  See para 38.44.

78  See para 38.23.

79  See Rabel, 9 RabelsZ (1935) 1, 358 = Gesammelte Aufsätze, vol III, p 522, 607.

81  See Aut § 428 CC; Hager, Gefahrtragung, p 42.

82  See Aut § 429 CC.

83  See Muñoz, p 358.

84  See Deu §§ 446, 447 CC.

87  See USA § 2-509 UCC. The provision uses the term delivery, however, it is understood to mean that the seller gives up physical control over the goods, see Hager, Gefahrtragung, p 62.

88  See Muñoz, p 359.

89  For East Asia Civil Law jurisdictions, see SJ Yang, pp 266ff; Eastern Europe/Central Asia Lapiashvili, p 245; Arm Art 475 CC; Aze Art 571 CC; Blr Art 429 CC; Cze Art 455 Com C; Est § 214 CO; Hun Arts 117, 279 CC; Kaz Art 411 CC; Kgz Art 422 CC; Ltu Art 6.320 CC; Mda Art 759 CC; Pol Art 548 CC; Rus Art 459 CC; Svn Art 436 CO; Tjk Art 495 CC; Ukr Art 668 CC; Uzb Art 392 CC.

90  See SJ Yang, p 266.

91  See para 38.40.

92  See Hager, Gefahrtragung, p 64. For the Nordic systems see Rabel, 9 RabelsZ (1935) 1, 358 = Gesammelte Aufsätze, vol III, pp 522, 607.

93  See for a summary of the positions Hager, Gefahrtragung, pp 63ff.

94  See Art 97(1) ULIS: ‘The risk shall pass to the buyer when delivery of the goods is effected in accordance with the provisions of the contract and the present law’ (emphasis added).

95  See Schlechtriem/Schwenzer/Hager/Schmidt-Kessel, Art 67, para 1; Hager, Gefahrtragung, p 65.

96  According to Art 4, sentence 2(b) CISG questions of property lie outside the scope of the Convention.

98  See Art 69(1) CISG; Hager, Gefahrtragung, p 66.

101  Arab/Middle East Hafez, p 276; Ibero-America Muñoz, p 357.

102  Aus (Vic) s 23 (Rule 5(1)) SGA; Can (BC) s 23(7), (8) SGA; Eng s 18 (Rule 5(1)) SGA; Fra Bell et al, p 347; Hkg s 20 (Rule 5(1)) SGO; Ind s 23(1) SGA; Irl s 18 (Rule 5(1)) SGA; Mys s 23(1) SGA; Nzl s 20 (Rule 5(1)) SGA; Sco s 18 (Rule 5(1)) SGA; Sgp s 18 (Rule 5(1)) SGA; Wal s 18 (Rule 5(1)) SGA.

104  The purpose of this provision was to protect a buyer from a seller’s insolvency after payment but before property had passed simply because the goods were not yet ascertained.

105  Eng s 20A SGA; Sco s 20A SGA; Sgp s 20A SGA; Wal s 20A SGA.

106  Common Law (UK) Benjamin’s Sale of Goods, para 6-006; Bradgate/White, LMCLQ [1995] 315, at 322.

108  Eng s 20A(3) SGA; Sco s 20A(3) SGA; Sgp s 20A(3) SGA; Wal s 20A(3) SGA.

110  Common Law (UK) Benjamin’s Sale of Goods, para 18-343 citing Sterns Ltd v Vickers Ltd [1923] 1 KB 78; Aus The Laws of Australia/Sutton, para 8.4.28.

111  But see for Ita Art 1529 CC.

113  See Art 99 ULIS; Art 68 CISG; see also OHADA Art 279 AUDCG.

114  See Chn Art 144 PRC CL. See also Vnm Art 60 Com C.

115  Fin s 15 SGA; Nor Art 67 SGA; Swe s 15 SGA.

116  Arm Art 475 CC; Aze Art 571 CC; Blr Art 429 CC; Est § 214 CO; Kaz Art 411 CC; Kgz Art 422 CC; Ltu Art 6.320 CC; Mda Art 759 CC; Rus Art 459 CC; Tjk Art 495 CC; Ukr Art 668 CC.

117  See for Common Law (Eng) Bridge, International Sale of Goods, para 8.53; Fra Hager, Gefahrtragung, pp 142ff; Ita Art 1529 CC.

118  See for Common Law (Eng) Bridge, International Sale of Goods, para 8.53.

119  See Schlechtriem/Schwenzer/Hager/Schmidt-Kessel, Art 68, para 1: ‘unexpectedly gave rise to a number of problems’.

120  See eg Hager, Gefahrtragung, p 144 who states that the traditional rule of risk passing with shipment was also adopted by the CISG albeit with the additional requirement that the circumstances so indicate. Bridge, International Sale of Goods, para 8.54 perceives sentence 1 to be the main rule but criticizes it as ‘inconsistent with settled CIF practice and the realities of marine insurance’. In his view sentence 2 is ‘less unsuitable than the main rule’.

121  Honsell/Schönle/Koller, Art 68, para 14. Against this view Schlechtriem/Schwenzer/Hager/Schmidt-Kessel, Art 68, para 4: not reconcilable with legislative history of Art 68 CISG.

122  See Arm Art 475 CC; Aze Art 571 CC; Blr Art 429 CC; Chn Art 144 PRC CL; Kaz Art 411 CC; Kgz Art 422 CC; Ltu Art 6.320 CC; Mda Art 759 CC; Rus Art 459 CC; Tjk Art 495 CC; Ukr Art 668 CC; Vnm Art 60 Com C.

123  See Est § 214 CO.

124  See for Fin § 15 SGA; Swe § 15 SGA, but see Nor Art 67 SGA which only has copied the second sentence.

125  See para 38.02.

126  See Fra Art 1647(2) CC.

127  Against passing of risk Jauernig/Berger, § 446, para 3. Affirming passing of risk, Staudinger/Beckmann, § 446, para 28.

128  See USA § 2-510 UCC.

129  See Art 70 CISG.

130  See Schlechtriem/Schwenzer/Hager/Schmidt-Kessel, Art 70, para 4.

131  See for these approaches paras 38.34 et seq.