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ISSN 2455-4782 1 | Page JOURNAL ON CONTEMPORARY ISSUES OF LAW [JCIL] VOLUME 5 ISSUE 4 PASSING OF RISK” UNDER THE CISG VIS-A-VIS INDIAN SALE OF GOODS ACT, 1930: A COMPARATIVE ANALYSIS Authored by: Vibhuti Keny* * 5th Year BA LLB Student, Jindal Global Law School ______________________________________________________________________________ INTRODUCTION The complexity of International commercial transaction is such that even a minor error may lead to loss or damage of good. Such risk of loss falls either on the buyer or the seller. Understandably either party would want to know who is to pay the brunt for the loss. If the risk has passed from the seller to the buyer (whether they were in the buyer’s control or not), the buyer will have to pay the price, irrespective of the goods have been lost or damaged. Fortunately, in practice these transactions are covered by insurance and therefore, claims can be made for the loss suffered. Nevertheless, the question arises as to which party has the power or right to make the claim, or sue the third party for his liability in the loss or damage. Therefore, in commercial transaction, the primary point of inquiry determining where the liability of the seller stops and any subsequent deterioration in the quality of goods have thereby passed on to the buyer. This concept of “Passing of Risk” is vitally important for the determination of proprietary rights of either party which includes right to sue and resale, rights against third parties including insurance claims and lastly in case either party becomes insolvent the determination of ownership becomes important. Apart from these, concept of passing of risk is significant for predictability in trade, avoiding confusion as to the rights and obligations of buyers and sellers and thereby avoiding unnecessary litigation. This paper firstly attempts to examine the concept of ‘risk’ and the different methods of passing. Secondly, the author has perused the provisions on passing of risk under United Nations Convention on the International Sale of Goods, 1980 (hereinafter referred to as ‘CISGfor brevity) and Indian Sale of Goods Act, 1930 (hereinafter referred to as the ‘Act’). India has expressed its reservation for the adoption of CISG on accounts of its domestic law being comprehensive enough to

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PASSING OF RISK” UNDER THE CISG VIS-A-VIS INDIAN SALE OF

GOODS ACT, 1930: A COMPARATIVE ANALYSIS

Authored by: Vibhuti Keny*

* 5th Year BA LLB Student, Jindal Global Law School

______________________________________________________________________________

INTRODUCTION

The complexity of International commercial transaction is such that even a minor error may lead to

loss or damage of good. Such risk of loss falls either on the buyer or the seller. Understandably

either party would want to know who is to pay the brunt for the loss. If the risk has passed from the

seller to the buyer (whether they were in the buyer’s control or not), the buyer will have to pay the

price, irrespective of the goods have been lost or damaged. Fortunately, in practice these

transactions are covered by insurance and therefore, claims can be made for the loss suffered.

Nevertheless, the question arises as to which party has the power or right to make the claim, or sue

the third party for his liability in the loss or damage. Therefore, in commercial transaction, the

primary point of inquiry determining where the liability of the seller stops and any subsequent

deterioration in the quality of goods have thereby passed on to the buyer. This concept of “Passing

of Risk” is vitally important for the determination of proprietary rights of either party which

includes right to sue and resale, rights against third parties including insurance claims and lastly in

case either party becomes insolvent the determination of ownership becomes important. Apart from

these, concept of passing of risk is significant for predictability in trade, avoiding confusion as to

the rights and obligations of buyers and sellers and thereby avoiding unnecessary litigation.

This paper firstly attempts to examine the concept of ‘risk’ and the different methods of passing.

Secondly, the author has perused the provisions on passing of risk under United Nations Convention

on the International Sale of Goods, 1980 (hereinafter referred to as ‘CISG’ for brevity) and Indian

Sale of Goods Act, 1930 (hereinafter referred to as the ‘Act’). India has expressed its reservation

for the adoption of CISG on accounts of its domestic law being comprehensive enough to

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encompass the complexity of international transactions1. And lastly, the author also attempts to

analyze the similarities or dissimilarities between the provisions of the Act and CISG on the laws

are relating to ‘passing of risks’ and thereafter draws a conclusion on the feasibility to change laws

to conform to the International law.

UNDERSTANDING THE MEANING OF ‘RISK’ AND DIFFERENT METHODS OF

PASSING

The United Nations Convention on Contracts for the International Sale of Goods is an International

law governing sale of goods, a move towards uniform commercial code. Eighty-nine countries2 are

parties to the Convention which provides for default rules in contracts for sale of goods.

Particularly, Chapter IV of Part III of the Convention from Article 66 to 70 deals with passing of

risk. Before exploring them, it is pertinent to understand the meaning and scope of “risk” and the

various ways of passing them.

CISG does not define what risk as a legal concept encompasses. According to Roth, risk refers to

“accidental injury to the goods. It therefore covers theft, seizure, destruction, damage and

deterioration.”3 Risk can take the form of legal risk4, economic risk5 and contractual risk, the first

two being beyond the scope of CISG. Contractual risk is undertaken at the time of executing a

contact. Seller is obligated to make conforming delivery while buyer, in exchange, will have to pay

the price. This concurrent obligation6 and the risk of its breach are covered by the Chapter IV of

Part III of the Convention.

1 Shishir Dholakia ‘ Ratifying the CISG - India's Options’ (CISG – September 2005)

<https://www.cisg.law.pace.edu/cisg/biblio/dholakia.html> accessed on 22th April 2018 2 ibid 3 P. M. Roth, “The passing of risk”, The American Journal of Comparative Law 1979, 291 4 Legal Risk is the chance that an authority will confiscate, intervene or forbid possession, use or further commercial

exploitation of certain goods thereby depriving the buyer to make valuable use of the goods. However, CISG only

focuses on actual impairment. Nevertheless, such risks can be covered by certain insurance or contested by concerned

party. See at Michiel Buydaert “The Passing of Risk in the International Sale of Goods” 2013, 15. 5 Economic risk of fluctuation in the price or currency exchange rate of the goods sold is in substance not a loss but

an advantage to either the buyer or seller, hence not covered by CISG. Ibid, 16 6 Article 30 provides for Obligation of the buyer whereas Article 53 provides for obligation of the Seller.

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Perusing different legal systems there could be three points/moment at which passing of risk may

occur:

1) Conclusion of the contract: the principle of Periculum est emptoris, where the risk passes from

buyer to seller at the conclusion of the contact even if the buyer is not yet in possession of the

goods.7

2) Transfer of ownership from seller to the buyer: Also known as Res perit domino which

literally means “the thing is lost for the seller”. A rule followed by India, where the risk is passed

by the transfer of ownership irrespective of the question of delivery.

3) Transfer of physical possession from the seller to the buyer: Linking the passing of risk with

the physical passing of possession of the good, seems to be the fairest rule as the party who controls

the goods is in the best position to guard them against loss or damage8. However, the inherent

loophole is when the goods are in transit or delivered by carriage, which party is deemed to have

possession when it is actually in possession of a third-party carrier or bailee.

PASSING OF RISK UNDER ARTICLE 66-70 OF CISG

Article 66 stipulates the consequence of passing of risk while Article 67 to 69 determine the moment

when the risk passes in different situations. Article 67 covers sale of goods involving carriage while

Article 68 deals with goods in transit. There is a residual rule in Article 69. Lastly Article 70

enunciates the relationship between risk passing and fundamental breach.9

Article 66 is to be read in two parts. The first part summaries the effects of passing of risk on the

buyer i.e. pay the price even if the goods are damaged or lost. Although it is merely a reiteration of

Article 53 but certain provisions viz. refusal of payment by buyer by claiming goods were not

placed at his disposal10; buyer is substantially deprived of his contractual expectation because of

the loss or damage11; avoidance stated under Article 80 and 84; right to reduction in price12, they

7 Michiel Buydaert “The Passing of Risk in the International Sale of Goods” 2013, 18 8 Ibid. 9 Ibid, 20 10 Article 58(1) CISG 11 Article 25 of CISG 12 Article 50 of CISG

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stand restricted. Article 66, thereby, having an overriding effect13. The second part of the Article

provides that the seller is liable for any loss or damage on account of his “act or omission” even

after the risk has passed covering accidental loss or damage. This part is along the lines of two other

provisions: Article 36 provides for seller’s liability for any lack of conformity and Article 70

relating to seller’s liability for fundamental breach of contract. However, “any act or omission” is

wider as certain loss or damage which although does not strictly constitute a breach or inconsistency

with the contract, nevertheless would fall within this provision and make the seller liable for the

risk. Thus, a loss or damage caused by the seller which is in the nature of a tort, buyer would be

unable to exercise his remedies under the Article 41 to 47 whereas such tort would be cover by

Article 66.

Moving forward to determining the exact moment when the risk is passed comprised in Article 67

to 69. Article 67 provides the most important risk-rule which applies to contract of sale of goods

involving carriage. With this article, a departure from the view of the predecessor Uniform Law of

International Sales, 1964 can be seen where the link of passing of risk and delivery was dropped

and the rules were based on commercial practice. In practice, however, the new rules have the same

effect where the risk will still pass upon delivery, but it is expressed differently. The significance

of Article 67 is actually limited in the sense that usually in international trade contracts include

trade terms determining the time of passage of risk (such as Incoterms) which will take priority

over Article 67, but in absence of such terms article 67 provides a gap-filling rule.14

The third sentence of the article suggests that the passing of risk is independent of the transfer of

title. Later it was clearly expressed by a Chinese court while adjudicating upon a dispute over

insurance claims where it said that ‘the transfer of risk and the ownership of the goods should

determine the insurable interest; however, the risk and ownership could be separated. CISG

stipulates the transfer of risk, but does not stipulate the transfer of ownership.’15

The provision absolves the seller from any loss or damage caused to the goods after the goods are

handed over to the first carrier. From the moment of handling over till the time of actual physical

13 Michiel Buydaert “The Passing of Risk in the International Sale of Goods” 2013, 22 14 Michiel Buydaert “The Passing of Risk in the International Sale of Goods” 2013, 30-32 15 Wuhan Maritime Court Hubei (People’s Republic of China) 10 September 2002, Nanjing Resources Group/Tian an

Insurance Co. Ltd., Nanjing Branch, http://cisgw3.law.edu/cases/020910c1.html.

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possession with the buyer, the risk falls on the buyer. The justification of the same being, from that

moment the buyer is in better position to assess the damage and make claim against the carrier or

the insurer.16 Article 67 does not distinguish between different modes of transportation by air, sea

or road neither does it refer to situations of multimodal transport. Further complications arise while

determining the moment of passing according to the nature of carrier. Although the Convention

does not delve into it, scholars17 and case laws have commented on how the situation changes when

goods are handed over to an ‘independent carrier’18 on one hand, and seller using his own means

of transport on the other. Handing over the goods in the article signifies a transfer of power of

control over the goods, in the latter case there is no such shift in the controlling power. Hence the

goods would have not been said to be ‘handed over’ to a carrier as stipulated by the article19.

Furthermore, buyer should only bear the risk of loss or damage of the goods which are clearly

identified. This sub-clause contemplates a possibility of confusion regarding the identification of

goods belonging to one buyer over the other, where there is a common seller. Article 26(2) clearly

makes identification of the goods as an additional requirement for the passing of risk. Goods can

be identified by shipping documents, markings on the goods, by notice issued to buyer or

otherwise20.

Article 67 envisages a conclusion of contract followed by initiation of delivery by carriage of goods.

However, Article 68 contemplates a situation where the goods are already in carriage i.e. ‘transit’

and the contract are concluded at a later point. The first sentence of Article 68 gives the basic rule

that the risk passes in a contract of sale for goods in transit when such contract is concluded. The

problem with this rule is that it is difficult to locate the exact moment or event when the loss or

damage occurred. If it is an identifiable event for instance, a storm or collision, then the difficulty

16 Michiel Buydaert “The Passing of Risk in the International Sale of Goods” 2013, 33 17 J. LOOKOFSKY, Understanding the CISG, 102; J. O. HONNOLD and H. M. FLECHTNER, Uniform Law for

International Sales, 521; G. HAGER and M. SCHMIDT-KESSEL in P. SCHLECHTRIEM and I. SCHWENZER,

Commentary, 929. 18 Landgericht Saarbrücken (Germany) 26 October 2004, http://cisgw3.law.pace.edu/cases/041026g1.html.

192 Tribunal Cantonal Valais (Switzerland) 19 august 2003, http://cisgw3.law.pace.edu/cases/030819s1.html; X,

UNCITRAL Digest of case law on the United Nations Convention on Contracts for the International Sale of Goods,

New York, United Nations, 2012, 322. 19 Michiel Buydaert “The Passing of Risk in the International Sale of Goods” 2013, 34 20 J. LOOKOFSKY, Understanding the CISG, 103. (page 38)

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is mitigated but if it is not, then the risk is split and then party who has the burden of proving the

conformity of the goods will be the one bearing the risk of loss of the goods21.

The second sentence is an exception to the general rule which can be invoked when the exact

moment of loss or damage is not known. The exception allows a retroactive assumption of the

buyer’s risk from the time the goods were handed over to the carrier who issued the document

embodying the contract of carriage. The rationale behind it being a usual practice in international

trade where the entire voyage is insured by the buyer and it is much more practice and convenient

to claim from the insurance company than the seller22. This rule is a dispute- avoiding rule, however

with a vague pre-condition of “if the circumstances so indicate”.

The third sentence raises issues regarding its interpretation. It is not clear whether it acts like an

exception to the previous two sentences or only for the general rule. Moreover, it also unclear which

loss or damages does the sentence refer to, damages occurred after the conclusion of the contract

or both before and after the conclusion of contract. After the perusal of the Drafting Committee’s

reports and opinions of scholars23, the last sentence starting from the wording “Nevertheless”

indicates its relation to the exception in second sentence, restricting its application and only giving

the retroactive advantage to sellers who acts in good faith. However, on the second issue of

interpretation, the opinion is divided among scholars24.

Article 69 is a residual rule for all the contracts where the buyer will take possession of the goods

and arrange for the transportation by himself. The first sentence provides that in cases where buyer

needs to take over the goods that have been placed at his disposal at the seller’s place of business,

the risk passes when the goods are placed at his disposal. There is no obligation on the seller to

notify the buyer of such disposal, a mere awareness is sufficient25. The second sentence is a “catch

all” provision of the residual risk rule where all the situations which are not governed by the first

sentence are governed by the second. Here the concept of agent or bailee can be envisaged where a

21 Michiel Buydaert “The Passing of Risk in the International Sale of Goods” 2013, 30-34 22 ibid 23 B. NICHOLAS in C. M. BIANCA and M. J. BONELL, Commentary, 500; J. O. HONNOLD, Documentary

History, 216 and also P. SCHLECHTRIEM, Uniform Sales Law, 90. 24 The article discusses how the last sentence is open to varied interpretation. See Michiel Buydaert “The Passing of

Risk in the International Sale of Goods” 2013, 47. 25 There is difference of opinion. But this view was has advocated by A. RAYMOND in S. KRÖLL, L. MISTELIS

and M. DEL PILAR PERALES VISCACILLAS, Commentary, 906

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third party needs to take over the goods and thereby the risk would pass when the third party

becomes responsible for the goods.26 The third sentence provides that the goods covered by these

provisions must be identified goods as discussed before.

Article 69 contemplates a situation where the buyer is in breach of the contract if he fails to take

over the goods, Article 70 covers situations where the seller delivers non-conforming goods thereby

is in breach of contract. Therefore, article 70 governs the relationship between the passing of risk

and remedies for breach of contract vis a vis the seller. By virtue of this provision the risk which

had already passed to the buyer will have no consequence on the buyer’s right to avoid the contract

or to require delivery of substitute goods on account of the seller’s fundamental breach of contract.

Here the rules of buyer’s remedies in case of breach by seller will take priority over the rules of

passing of risk27.

PASSING OF RISK UNDER INDIAN SALE OF GOODS ACT, 1930

Indian law on sale of goods is based on the English Act and it incorporates many of its provisions

either verbatim or in essence. Needless to mention, Courts in India often refer and rely on common

law principles and judgements for the interpretation of these colonial Acts. Indian Sale of Goods

Act, 1930 apply to both domestic trade transactions as well as to international commercial

transactions. Hence when an Indian party is involved and CISG is not invoked by virtue of Para 1A

of Article 1 of the Convention, the governing law for the contracts would be the Indian law. Unlike

the CISG, rules on ‘Passing of risk’ has not been devoted an entire Chapter in the Sale of Goods

Act, 1930 but it has to be construed from the interrelation of widely dispersed sections.

The rules for passing of risk fall under two provisions: Section 26 provides for a general provision

where the risk is passed when the contract is concluded i.e. transfer of property and Section 40

which recognises contracts where the seller has to deliver the good at a distant place, in such a case

risk is passed when the seller delivers the goods to the carrier.

26 Michiel Buydaert “The Passing of Risk in the International Sale of Goods” 2013, 58 27 Ibid, 64

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The provision, Section 26 headed “Risk prima facie passes with property” directly speaks about

passing of risk. The section begins with “Unless otherwise agreed” which allows the parties to

freely bypass the rule and have their own trade terms relating to passing of risk whether it is with

plain terms or by incorporation of Incoterms28. Party autonomy is a feature of all contracts

especially a contract for the sale of goods. However, in case there is no such contract to the contrary,

the prima facie rule acts like a default rule. Section 26 contemplates the legal maxim of res perit

domino. Blackburn J., in the case of Martinean v. Kitching29 made an observation that res perit

domino is a rule “when you can show that the property passed the risk of the loss prima facie is on

the person in whom the property is."

Section 26 gives a general rule that the risk passes upon the transfer of property irrespective of the

delivery of goods. It also enumerates two exceptions. The first proviso states that when the delivery

is delayed due to the fault of either buyer or seller, the goods will be at the risk of the defaulting

party. The case of Demby Hamilton & Co. Ltd. v. Barden (Endeavour Wines) Ltd30 could be an

illustration for the same, where the risk was held to be on the buyer where he failed to take the

delivery of apple juice as a result of which the juice went putrid. The seller had fulfilled his end of

the contract where he effected the transfer when he placed the goods at the disposal of the buyer

and therefore the risk solely fell on the buyer. The second proviso provides for the obligation of

seller and buyer in their relationship as bailor and bailee.

In order to understand when the risk passes, it is pertinent to understand when the transfer occurs

according to the Indian law. Section 18- 19 provide for the two essential requirements for transfer

of goods. The Act distinguishes goods into two categories ‘specific and ascertained goods’ and

‘unascertained and future goods’31. The latter category is distinct from the former where they refer

to good which are not in existence or not yet acquired by the seller. Goods to be subject to transfer

by sale must be ascertained, the rationale being before the proprietary rights or interest of the seller

ceases and transferred to a buyer, it must be determined in which property does such rights or

28 Phulchand Exports Ltd. v. OOO Patriot 2011 (11) SC ALE 475 29 (1872) LR 7 QB 436. 30 (1949) 1 All ER 435 31 Section 2 read two section 18 and 23 of Sale of Goods Act, 1930.

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interest are ceased.32 Section 18 mandates that the goods which are the subject matter of the transfer

to be ascertained.

Section 19 provides that property is passed when parties intend it to be passed. This rule resonate

the concept of party autonomy where the terms of the contract, the conduct of the parties and the

circumstances must be perused to ascertain the intent of the parties and these principles in Section

19(2) imposes a duty on the Court to apply them.33 Moreover the Court must also gather the

intention from the substance of the agreement and not merely from the words used by the parties.34

When such intention is not apparent from the agreement, it must be ascertained in accordance with

the rule contained in Section 20 to 2435.

As mentioned earlier, Section 18 and 19 only provide a pre-condition. The default rule of transfer

of property is contained in Section 20-24. These sections relate with following situation-

(i) Sale of specific goods in a deliverable state (Section 20): By virtue of this provision,

the goods are passed when the contract is concluded irrespective of whether or not the payment or

delivery is made. There are three basic conditions: sale must be of specific goods; in a deliverable

state and the contract must be without any precondition.36 ‘Deliverable state’ means the goods are

complete and nothing remains to be done. Even if the goods need to dismantled and packed, that

would not be covered by this section. The following section covers such cases37.

(ii) Sale of goods to be put in a deliverable state (Section 21): Cases which fall outside

the purview of the previous section are covered by this provision38.

(iii) Sale of goods in deliverable but the seller has to weight or measure etc in order to

ascertain the price (Section 22)39

32 Badri Prasad v. State of Madhya Pradesh, (1971) 3 SCC 23 33 Agricultural Market Committee v. Shalimar Chemical Works, AIR 1997 SC 2502 34 Bhagwat Narain Tendulkar v. Goa Coop. Marketing and Supply Federation Ltd., (1998) 2 Mah LJ 703 (Bom) 35 Section 19(3) of Sale of Goods Act, 1930. 36 Section 20 of Sale of Goods Act, 1930. 37 Underwood Ltd. v. Burgh Castle & Cement Syndicate., (1922) 1 KB 343 38 For instance, the case of Rugg v. Minett, (1809) 11 East 210: 10 RR 475, where in the contract for the sale of oil

which had to be filled up in the casks from the cistern to be put in a deliverable state. 39 The case of is an illustration, where there was a contract for the sale of goat skin. However, the seller had to first

count the goatskin in each bale. It was held that the loss caused by fire in the seller’s go-down was to borne by the

seller himself as it was caused before the goods could be counted.

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(iii) Sale of unascertained goods (Section 23): According to the general rule under Section

20, the goods pass or the risk passes as soon as the contract is concluded. However, this general

rule applies when the goods are specific and ascertained. Section 23 applies to a situation where the

contract has already been concluded but the subject- matter of the contract i.e. the goods are

unascertained, hence the goods do not pass or the risk does not pass. Accordingly, these risk/ goods

can only be passed once the goods are ascertained.40 The section uses interesting terminology of

“unconditional appropriation” which in plain language means the goods have been unconditionally

identified by the parties to be subject of the contract.41

Section 23(2) gives statutory recognition to the rule of delivery to a carrier for the transmission to

a buyer. The provision presumes that carrier to be the buyer’s agent, not merely for the acceptance

of delivery but also assent the appropriation in sub-section (1)42.

The second rule of passing of risk under section 40 is attracted when the seller by his will or as a

condition of the contract is required to deliver the goods at a distant place. In such a situation, the

risk must be borne by the buyer for deterioration. Similar to Section 26, this is subject to contract

to the contrary and concept of party autonomy is equally attracted.

Section 39 may come to aid to understand when delivers under Section 40 is completed. Delivery

to carrier is deemed to be completed when such goods are delivered to a wharf Inger for safe

custody. From that point, seller is not responsible for loss or damage as the risk has passed. However

sub-section (2) creates an exception where the nature of goods requires a special contract with whar

finger and if the seller fails to do so, he could be held responsible.

COMPARATIVE ANALYSIS

As the rules on passing of risk in CISG and Indian law have been examined, the author would move

forward to analyze them in comparison with each other.43 While comparing the provisions of CISG

and the Act, the fundamental difference lies in the approach. CISG focuses on the modes of

40 Loon Karan Sohan Lal v. Firm John & Co AIR 1967 All 308 41 Laidler v. Burlinson, (1837) 2 M&W 602, 610, 46 RR 717 42 Wait v. Baker, (1848) 2 Ex 1, 7, 76 RR 469 43 The analysis presented in this article is the opinion and observations of the author.

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transportation where the moment the risk passes changes according to how the goods are to be

delivered: by carriage, in transit or non-carriage contracts. On the other hand, Indian law

distinguishes not only upon method of deliver i.e. handed over to the buyer directly or agent or

delivery by carrier, but it also distinguishes upon the kind of goods i.e. specific, ascertained,

unascertained, deliverable state and future. CISG does provide that the goods must be identified but

it does not delve into further complicated situations as the Indian law does. Such classification

might be useful to avoid disputes due to the range of precedent on the issues.

With respect to the delivery of goods by carriage, in CISG the seller is absolved from “any loss or

damage” which is caused after the goods have been handed over to the first carrier44. However,

Section 39 of the Act only contemplates loss by “deterioration”. Thus, it can be concluded that

CISG envisages wider or maybe all the contractual risk whereas Section 39 is much narrower in

scope.

While perusing Article 67, it was observed in a case45 that CISG stipulates transfer of risk but does

not stipulate transfer of ownership which is the most significant facet while determining insurable

interest. Such observation is antithetical to the Indian law as risk is determined by ownership or

transfer rules46.

CISG was supposed to depart from its predecessor Uniform Law of International Sale, 1964 where

the passing of risk was linked to ‘delivery’. However, Article 67 contemplates, at least in substance,

‘constructive delivery’ where delivery is deemed. In effect, Indian law is similar to CISG when it

comes to delivery by carrier. However, the principle or the rationale behind the rule is different. In

CISG, the rationale behind this deeming fiction is because the buyer is in a better position to assess

damage and make a claim against the carrier or the insurer as opposed to the seller. However, Indian

law invokes a presumption that the carrier is the agent of the buyer.

Indian law does not provide a specific rule to determine at what moment the risk passes when the

goods are in transit and the contract is already concluded. However, applying the general law under

Section 20, the risk shall pass when such contract is concluded. On the other hand, the CISG under

44 Article 67 of CISG 45 Wuhan Maritime Court Hubei (People’s Republic of China) 10 September 2002, Nanjing Resources Group/Tian an

Insurance Co. Ltd., Nanjing Branch, Note 16. 46 Section 26 read with Section 20-23

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Article 68 does subscribe to the same basic rule but it also envisages complex situations for which

it provides for an exception where the risk would pass retroactively47.

The most controversial difference between the Indian law and CISG is Article 70, where in cases

of fundamental breach of contract by the seller, the risk shall not pass to the buyer. India contends48

that there will be uncertainty due to the open-textured language used by Article 70 and its related

provisions49.

CONCLUSION

In conclusion, there are similarities as well as fundamental dissimilarities in the rules for passing

of risk under CISG and India. India, on the international stage has argued that India already has

comprehensive rules on sale of goods and hence there is no dire need to conform to the international

standards. However, this argument could be regarded as a faulty on as most of the countries have

had comprehensive laws on the subject yet they have signed and ratified the Convention. This

ratification was done as the purpose behind the Convention was not lack of coherence or

comprehensiveness but to create a uniform code. The ratification of CISG ultimately is a political

issue and needn’t be commented on in detail.

India does have differences in the approach, a mixture of conclusion of contract rule and transfer

rules but it is not fundamental enough for not joining the Convention. The concern for the vagueness

in the law, lack of hierarchy and principles of stare decisis is a genuine one50. Although nothing

that cannot be mitigated by further amendments.

47 Article 68 of CISG 48 Shishir Dholakia ‘ Ratifying the CISG - India's Options’ (CISG – September 2005)

<https://www.cisg.law.pace.edu/cisg/biblio/dholakia.html> accessed on 22th April 2018 49 Article 25, Article 46 and other remedies for breach of contract under the Convention etc. 50 Shishir Dholakia ‘ Ratifying the CISG - India's Options’ (CISG – September 2005)

<https://www.cisg.law.pace.edu/cisg/biblio/dholakia.html> accessed on 22th April 2018