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Transfer of Risk in the Contract of Sale involving Carriage of Goods: A Comparative Study in English, Greek Law and the United Nations Convention on Contracts for the International Sale of Goods

Dionysios Flambouras

Worcester College, Oxford

ABSTRACT

INTRODUCTION

INTRODUCTION

1. Subject of the Study - Introductory remarks

CHAPTER I. BASIC RULES ON THE TRANSFER OF RISK

1. Theories on the Transfer of Risk

2. Concept of Risk - Consequences of the Transfer of Risk

(1) Consequences of the transfer of risk
(2) Concept of Risk

3. Relevant Provisions

(1) Greek law
(2) Vienna Convention (CISG)
(3) English law

4. Comparative Evaluation

CHAPTER II. SALES INVOLVING CARRIAGE

1. Introduction

2. English and Greek Provisions

(1) Greek law
(2) English law

3. Vienna Convention: Comparison and Partial Evaluation

(1) Carriage of goods involving dispatch: The rule (article 67(1), first sentence)
(2) Common rule

(3) Policy considerations supporting the basic rule from a comparative perspective

(4) Contract involving carriage or contract involving dispatch of the goods?
(5) Handing over of the goods to the carrier for transmission to the buyer
(6) Scope of application of the rule
(i) Situations where one carrier is involved
(ii) Situations where there is transshipment between carriers
(iii) Situations where the seller arranges for carriage and chooses the modes of transport
(iv) Situations where the parties submit themselves to the Convention rules
(7) Independent carrier
(8) Multimodal transport operators (MTO) and freight forwarders
(9) Retention of documents controlling the disposition of the goods
(10) Carriage from an agreed place (Art. 67(1), second sentence)
(11) Unascertained goods

CHAPTER III. TRADE USAGES RELATED TO CONTRACTS INVOLVING SEA TRANSIT

1. Introduction: Trade Usages in the Compared Legal Systems

2. CIF Contracts

(1) CIG contracts in Greece and in England: Introduction
(2) Transfer of risk on loading/shipment
(3) Risk of loss in goods sold or allocated in transit
(i) Sale of goods already lost
(ii) Sale of goods already deteriorated
(4) Risk of loss before appropriation
(5) Evaluation - proposals
(6) Clauses concerning payment after the ship's arrival or payment depending on the quantity of the goods actually delivered

3. FOB contracts

(1) Basic rule - variations
(2) Suggestions

4. CIF and FOB Contracts in the Vienna Convention

(1) Interrelation of the Convention and the Incoterms 1990
(2) Suggestions

CHAPTER IV. CONCLUSIONS

1. General Rule

2. Efficiency of the Compared Rules

(1) Introduction
(2) Sale of goods involving carriage of goods without incorporation of trade usage
(3) Sale of goods involving carriage where trade usage has been incorporated
(i) Sets of trade usages in the compared legal systems
(ii) CIF contracts
(iii) FOB contracts

3. Brief Overall Assessment

BIBLIOGRAPHY

ENGLISH
Books
Articles
GREEK
Books(in Greek unless otherwise indicated)
Articles
FRENCH Books
GERMAN Books

Glossary

Endnotes

Concordance (wordlist)

Manifest (alternative outputs)

Metadata

Transfer of Risk in the Contract of Sale involving Carriage of Goods: A Comparative Study in English, Greek Law and the United Nations Convention on Contracts for the International Sale of Goods

Dionysios Flambouras

copy @ CISGw3 Database, Pace Law School

Transfer of Risk in the Contract of Sale involving Carriage of Goods: A Comparative Study in English, Greek Law and the United Nations Convention on Contracts for the International Sale of Goods

Dionysios Flambouras

CHAPTER III. TRADE USAGES RELATED TO CONTRACTS INVOLVING SEA TRANSIT

2. CIF Contracts

(1) CIG contracts in Greece and in England: Introduction
(2) Transfer of risk on loading/shipment
(3) Risk of loss in goods sold or allocated in transit
(i) Sale of goods already lost
(ii) Sale of goods already deteriorated
(4) Risk of loss before appropriation
(5) Evaluation - proposals
(6) Clauses concerning payment after the ship's arrival or payment depending on the quantity of the goods actually delivered

(1) CIG contracts in Greece and in England: Introduction

As regards CIF contracts Greek judges normally start their analysis by first stating that if the parties have incorporated a CIF clause in their contract, they are considered to have provided that the place of performance of the seller's delivery obligation is the loading port and not the seller's place of business in accordance with the presumption of article 320 CC.  176  If the parties have made reference to Incoterms 1990, these rules will be binding as contractual terms in accordance with article 200 GCC.  177  On the other hand, English courts during the last century have extensively interpreted the express or implied intentions of the parties under a CIF contract and have developed judicial rules internationally and unanimously accepted which they follow, recourse to Incoterms not being necessary.

(2) Transfer of risk on loading/shipment

In a recent Greek case it was clearly stated that as a matter of international custom risk is transferred when goods pass the ship's rail.  178  Under English law the seller's duty to ship may be performed by actually shipping goods, by allocating goods which he has already shipped  179  , or by buying and allocating such goods afloat.  180  English authorities state that risk is transferred on shipment (if the goods are sold and then shipped) or as from shipment (if the goods are afloat at the time of sale or allocation)  181  , without further specifying the exact point of the passing of risk.  182 

It is submitted that the ship's rail criterion as it is an arbitrary point for the transfer of risk, which does not correspond to the needs of modern trade.  183  The new clauses incorporated in Incoterms 1990 (CIP, CPT, FCA) and the Vienna Convention rules refer to entry into the carrier's custody as the critical point for delivery, the seller's obligation being complete as soon as the carrier obtains physical delivery of the goods for the purposes of carriage.  184  It is suggested in the present study that the criterion of 'delivery to the carrier's custody' would be more efficient in CIF contracts as (1) if a derrick or a crane are used for the loading and the boom or the hook breaks during the loading process, any dispute as to the exact point where the loss or damage occurred would be avoided as the risk would have passed at the commencement of the loading process; and (2) if the goods, have been taken before shipment to an operator of a transport terminal (e.g. container, cement, coffee, gas or fruit and vegetable terminal) it will be easier if risk passes on handing over of the goods to this operator: this last argument is also supported by the facts that (a) the buyer will be often covered by insurance at this pre-shipment port stage  185  , (b) the operator will normally operate as the carrier's agent, thus getting control on the buyer's behalf  186  ; and (c) under an expansive interpretation, the modern concept of shipment involves the pre-shipment stages where different operators at the port of shipment undertake the obligation to store, pack and in general prepare the goods for loading or shipment. Nevertheless, the notion of shipment should only be extended to involve delivery of physical control to terminals and premises of operators situated at the port of shipment, and not to delivery of the goods to the premises of an inland operator.  187 

A third possibility is (as many Greek court decisions accept  188  ) that risk should pass on completion of the loading process. It is suggested that this is not a satisfactory solution, since it will rarely be appropriate and if the parties want risk to pass at this time they can make it clear in their contract by inserting clauses such as 'stowed', 'trimmed' or 'loaded'.  189  Postponement of the transfer of risk point until completion of the loading process would constitute an unjustified intervention in the parties' contractual intention. This will be the case especially if the loading process is a long, risky and expensive one.

(3) Risk of loss in goods sold or allocated in transit

One of the main advantages of the CIF contract is that it allows the seller to ship a large quantity of a commodity and then allocate the whole or parts of it to a buyer or buyers when the goods are afloat.  190  As regards Greek law, it seems that the courts have not dealt with the question of goods sold or allocated afloat. Greek commentators consider the matter as dubious and simply state that risk is transferred from the time the contract of sale was concluded or retrospectively as from shipment, without making any further analysis.  191 

As a result, we realize that in order to propose a convenient solution for Greek law it is important to refer to the solutions adopted by English law and the Convention, where it seems that there is considerable disagreement, at least amongst academics. The starting point in English law is the rule that, in CIF contracts, at least when the goods are specific or have been appropriated at the time, the seller may validly tender documents (bill of lading, invoice, policy of insurance) in respect of goods shipped on a vessel which at the time of tender the seller knows to have been totally lost. In this situation the buyer will not be entitled to reject the documents (assuming that the goods were in conformity with the sale contract at the time of shipment).  192  But the result may be otherwise if the goods have been lost before the contract of sale was concluded or after sale but before allocation.

The Convention does not provide specific rules for CIF contracts. Nevertheless, since article 68 governs goods sold in transit it could apply to such contracts. More specifically, it provides that risk passes on conclusion of the contract. Retrospective transfer (as from shipment) will be possible only if the circumstances so indicate (e.g. if the insurance policy is to the order of the assured or has been endorsed to the buyer)  193  , and the seller did not know that the goods had been lost or damaged after shipment.

For clarity we may divide the situation as follows:

(i) Sale of goods already lost

As regards the situation where the goods have been shipped, lost and then sold, first of all it should be noted that in accordance with the Greek general contract law provisions, a contract is valid, even if a person promises that he will do something impossible (initial impossibility, articles 362 et seq. CC).  194  The rules concerning impossibility of performance in synallagmatic contracts are provided for by articles 380 et seq. and apply to CIF contracts by reason of the absence of any special provisions. More specifically, it is essential to distinguish between two different categories: (1) If impossibility of performance of the delivery obligation is not due to fault of the creditor (i.e. the seller did not and could not know that the goods had been lost), both the contracting parties are released from their obligations: the seller to deliver the goods and the buyer to pay the price (article 380 CC). (2) If on the other hand the impossibility of performance of the delivery obligation is due to the fault of the creditor (i.e. the seller knew or was negligently unaware of the loss of the goods sold), the debtor (buyer) has three rights, which can be exercised alternatively: (a) to invoke the rights of article 380 CC and thus be released from his duty to pay the price; (b) to seek compensation (positive interest) for the damnum emergens and the lucrum cessans which he has suffered as a result of the impossibility of the performance. In this situation he will still owe to pay the price; or (c) rescind the contract. The consequences of rescission are the release of both contracting parties from their obligations. However, the buyer at the same time may seek reasonable (reduced) compensation from the court (article 387 CC).

In English law such a situation occurred in Couturier v Hastie  195  where it was held that the buyer was not bound to pay the price on tender of shipping documents where at the time of the contract there was nothing to be purchased. It is obvious that in English law the seller's fault or fraud is of importance only as regards tortious liablity.  196  If specific goods (or part of them  197  ) have perished at the time the contract of sale is concluded, the contract is void for mistake.  198  Although this rule is now provided by statute (section 6 SGA 1977), it is not free of doubt (for example the meaning of the phrase 'perished' and its relation to partial loss, or the application of this rule to CIF contracts  199  or by analogy to the sale of unascertained or generic goods).

This situation would under the Convention be governed by article 68.  200  Therefore, risk would pass on conclusion of the sale. However, if the circumstances indicated otherwise then the buyer would bear the risk of loss from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage. The word 'circumstances' should be construed as referring to the intention of the parties, whether it is expressed or is to be inferred. The circumstances would be indicative and risk would pass from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage in a situation where the contract of carriage requires the seller to transfer (endorse) an insurance policy to the buyer  201  (which is the case in CIF contracts) or the buyer takes out a retroactive insurance cover, which is possible if he is not aware of the loss. Only if the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer, would the risk of loss before sale be on the seller. Since article 68 allows the retrospective transfer of risk even if the goods have been lost before the conclusion of the contract of sale, all the relevant domestic provisions which provide for the invalidity of the contract where the goods had ceased to exist at the time of the making of the contract, will not apply.  202 

(ii) Sale of goods already deteriorated

If on the other hand goods ar e shipped, deteriorate and then sold CIF, under English law, risk is on the buyer as from shipment. Therefore, he has to pay even if the goods were already deteriorated at the time the contract of sale was made.  203  A different view is however put forward for both situations (i) and (ii) by Professor Goode, who argues that the buyer is in both cases entitled to reject a tender of documents, regardless of whether the goods are lost wholly or in part or are merely damaged or have deteriorated, as the seller may not sell goods already lost or damaged.  204  This point is equally dubious under Greek law as academic writing is not definite whether in such a case risk passes as from shipment or on sale. Finally, the Convention in article 68 does not distinguish between total loss and deterioration. Thus the solution would be the same as in the case of goods totally lost before sale (see (ii) above).

(4) Risk of loss before appropriation

The situation where there is a generic sale, the goods are lost or deteriorate (or are damaged) and are then allocated to a sale, or 'appropriated', is a very problematic one. One of the meanings of 'appropriation' in international sales relates to the seller's obligation to send to the buyer a notice (notice of appropriation/consignment, declaration of shipment) where there are details of the goods' shipment, including the identity of the ship and the approximate quantity of the goods loaded, thus making those goods what he is obliged to deliver under the contract, or at least obliging him to deliver from that source. A typical situation would be a cargo of 50,000 tonnes of soya bean or grain on board a named ship, where the seller sends a notice of appropriation to the buyer, indicating the source of the 10,000 tonnes of soya which he is obliged to deliver to the buyer under a contract of sale.  205 

In English jurisprudence and academic writing it is accepted that in a CIF sale of specific or appropriated goods the seller may validly tender documents in respect of goods shipped on a vessel which at the time of tender the seller knows to have been totally lost (see (3) above). Nevertheless, in the case of goods not yet appropriated, it seems that the result changes, in accordance with whether the goods have simply deteriorated (or been damaged) or been totally lost. More specifically:

If the goods are shipped, a contract is concluded for the sale of goods, the shipped goods deteriorate or are damaged and then appropriated to the contrac t , the seller, under English law, will be entitled to appropriate the goods and the buyer will bear the risk of deterioration as from shipment, that is the risk of deterioration which occurred after shipment (even before appropriation), and therefore he has not the right to reject the documents subsequently sent by the seller.  206 

However, it is not equally clear whether, under English law, the seller may equally appropriate, by tendering the sale documents, goods already lost. Case law suggests that the seller may tender the shipping documents in such a case, and even if he knows that the goods have been lost. Thus, in Groom v Barber it was held that the seller was entitled to be paid against a tender of the usual shipping documents on lost goods even if the goods, apparently even if the goods had not been appropriated before the time of tender.  207 

This conclusion is not, however, without doubt as it has been suggested that Atkin J was merely basing himself on the proprietary sense of 'appropriation' and not that relating to identification of the goods, so called 'contractual appropriation'.  208  Other cases which dealt with similar circumstances either did not discuss the question of post-loss appropriation as such  209  , or were not related to CIF contracts  210  or included special terms.  211  In accordance with this opinion a CIF seller of unascertained generic goods cannot tender documents and claim the price if the goods have been lost, unless at the time of loss he had already appropriated them to the contract in the sense of binding himself contractually to deliver, or tender documents relating to, the particular goods which have been lost, or to a quantity out of the particular bulk of which they form a part.  212 

Another opinion argues that the seller may appropriate the goods after loss, but only if at the time of contracting he did not know of the loss nor intended to appropriate lost goods. The basic policy for this opinion, that the buyer may cover loss because he gets rights under the ancillary contracts of insurance and carriage  213  carries some disadvantages. The buyer will have nothing in his hands except documents, which makes his condition more insecure as, he still has to deal with the insurer and the carrier and he may not be able to recover from them, i.e. by reason of an exclusion clause (the carrier may limit his liability in accordance with the Hague-Visby Rules) or if the carrier becomes insolvent. Furthermore, he may not be able to recover against the insurer if the specific risk was not covered by the insurance policy. On the other hand if the goods have merely deteriorated or are damaged it seems more just to permit on a subsequent appropriation since the buyer will still have in his hands the goods, which may still be of some commercial value. Although these disadvantages may create difficulties, it is suggested that the main problem with this approach, at least as regards English law, is the absence of an appropriate legal technique for making the seller's knowledge relevant. If Greek law were applicable, it could be argued that, if the seller tenders documents in relation to goods that are known to have been lost, such behaviour would be contrary to good faith (article 288 CC) or would constitute an abuse of right (article 281 CC).  214  English law, however, has no general notion of 'good faith'.  215  Therefore, it seems that, unless English courts adopt something like a concept of 'good faith', such an interpretation would not have much chance of success in England.

As regards Greek law it seems that the Greek jurisprudence (with one exception  216  ) has not dealt with the possibility of appropriating the goods after loss or deterioration. Greek commentators mention, however, that there is doubt whether risk is transferred on appropriation or retrospectively (as from shipment). They conclude that risk in the sale of generic goods passes retrospectively, only if the seller was in good faith, that is, if, without negligence, he was unaware of the goods' loss or deterioration at the time of the tender of the documents.  217  The reasoning is that if the seller knows of the occurrence he can too easily appropriate the deteriorated (or damaged) goods to the buyer keep for himself the undamaged ones.  218 

Finally, under the Convention, if goods have been sold in transit article 68 applies. Nevertheless, in accordance with article 67(2), which equally applies to situations governed by article 68, risk passes to the buyer only if the goods have been clearly identified to the contract.  219  This will be the case when the seller ships the goods without designating the buyer as consignee and then sells them. It may be, though this is not clear, that article 68 applies also to goods which are not sold, but merely 'allocated' or 'appropriated' in transit. If so, it will apply where the seller ships an undivided bulk of goods sold with a view to performing several contracts, where risk passes only if he dispatches a notice of appropriation to the buyer.  220  Nevertheless, it is accepted that in situations governed by article 68 (goods shipped, sold and then appropriated), if the contract or a trade usage entitles the seller to deliver an undivided bulk to several buyers (a collective consignment), risk passes to the buyers at the time laid down in article 68 and they bear any loss or deterioration pro rata 221  This practically means that risk will pass on conclusion of the contract or if the circumstances so indicate (e.g. insurance policy endorsed to the buyer) and the seller did not know of the loss or deterioration, as from shipment.

If, finally, goods deteriorate/are damaged or lost after appropriation, risk will be on the buyer without the need for reliance on the notion of retrospective effect.  222 

(5) Evaluation - proposals

As regards the basic rule, the rule that risk is transferred on shipment, seems to be common in the compared legal systems. More specifically, as to the concept of shipment, it is suggested that an efficient and fair solution would be the Vienna Convention approach, which requires the seller to hand the goods over at the carrier's control. This seems more compatible with the situations where a freight operator in a CIF sale takes over the goods at his control at the seller's premises or at his own loading and packaging terminals at the port of shipment.  223  Furthermore, it renders litigation less time consuming and expensive, as it avoids uncertainties as to whether the goods had crossed or had just about or had just not crossed the ship's rail (for some additional arguments supporting this opinion see Ch. III (2)(2)). The approach adopted by some Greek cases, which requires loading to be completed  224  , although efficient as it minimizes problems which could possibly arise if the goods are damaged during the loading process, is not in accordance with the general understanding of the traders, and it is suggested that it would result in uncertainty and expensive negotiations. It is for the parties to decide if they want risk to pass so late, and if this is the case they must make it clear in their contract (e.g. by inserting clauses such as, 'loading completed' or 'stowed and/or trimmed).

  • As regard the situation where the goods have been shipped, lost and then sold, it seems that the basic consequence, the avoidance of the contract, is a common place in the compared legal systems. Nevertheless, it is suggested that the knowledge criterion followed by the Greek Civil Code, the Convention and German writers  225  (although for reasons already mentioned hard to apply in English law) is more appropriate as it puts pressure on the seller to act in good faith, thus not selling cargoes lost at sea. Furthermore, by reason of the operation of advanced telecommunications systems, it is almost impossible for a total loss of cargo to be unknown for long; therefore knowledge of the seller after a reasonable time (some hours) may sometimes be presumed, or at least the knowledge of his agents or employees may be attributed to him..
  • Finally, as concerns the problem of retrospective transfer of risk after appropriation, English jurisprudence and academic writing seems to be more developed than the Greek one. Furthermore, it is more efficient than the rule followed by the Convention which in article 68 inserts the vague and uncertain criterion of 'indicative circumstances' in order for risk to pass retrospectively in collective consignments. The basic rule that risk is transferred retrospectively as from shipment upon appropriation (where appropriation is necessary) is common. What seems, however, to be a difference is that, whereas Greek academics (in accordance with the Convention's article 68 in the case of collective consignments sold in transit) use the criterion of knowledge of loss or deterioration, in order to decide whether the seller may appropriate goods already damaged, English (with one exception  226  ) do not.
  • It is suggested however that in the case of deterioration or damage, the criterion of knowledge is not an appropriate one because the seller's knowledge will usually be difficult to prove, especially if goods are situated in sealed containers or more generally if the cause of the damage or deterioration was not identifiable.  227  Such a rule would create uncertainty and time consuming and expensive litigation. Therefore, Greek courts (and the Convention drafters) should adopt the English approach which allows appropriation after deterioration or damage without involving the question of knowledge. On the other hand, since in the case of a cargo totally lost knowledge is easy to prove (thus can often be presumed), use of the knowledge criterion in the case of total loss of is appropriate.  228  Therefore the English courts, provided they find an appropriate legal technique, should adopt the approach which would allow the seller to appropriate unascertained goods already lost, but only if he did not know or was not negligently unaware of their loss.

    In the case of string contracts, however, even if the goods have been totally lost, considerations of justice may result to the need for a further refinement of the rule in relation to the presumption of knowledge. Let us consider the following hypothetical: A supplier (A) that has already shipped a bulk consignment, contracts with buyers B and C on the 15th of July. He then faxes to B and C notices of appropriation on the 17th of July at 13:00. The goods are lost in the same day at 13:30 and B faxes the original copy of appropriation at 14:00 to his buyer D without knowing anything about the loss. In this situation since the B did and could not know that the vessel was sunk, and appropriated the goods immediately to D as far as he received the original appropriation from A, it seems just and fair for B to be able to claim the price from D (since D will also be able to recover from the insurer or, in case of breach of the contract of carriage from the carrier).  229  If, however, B is late and faxes or mails the original appropriation to D on the 18th of July at 9:00, it will be hard for him to rebut some presumption or inference of knowledge, since modern technology normally enables the loss of a vessel to be known within hours.  230  Allowing B to forward the appropriation on when his knowledge is presumed or inferred would constitute behaviour not within the limits of good faith. On the other hand depriving B of his right to claim the price from D, and obliging him to pay the price to A in this situation where it was impossible for him to know of the loss would not promote the aim of justice.  231  Therefore, it is suggested that, especially in the case of string contracts, if the time between the loss of the vessel and the appropriation is limited, absence of knowledge should be presumed. Nevertheless, string contracts may perhaps constitute a general exception to the rule by reason of their special features, including the necessity of prompt forwarding of documents.  232 

    (6) Clauses concerning payment after the ship's arrival or payment depending on the quantity of the goods actually delivered

    The usual mode of payment in CIF contracts, in both the compared legal systems and the Convention, is against tender of documents (cash 'against' or 'in exchange for' or 'on presentation of' shipping documents or 'terms net cash') which means that the buyer has to pay the price if there is a valid tender of the relevant documents (invoice, bill of lading/delivery order, insurance policy).  233  If the documents conform on their face to the contract, the buyer will have to pay the price, irrespectively of the goods' condition  234  (in modern practice payment is through a bank's letter of credit).

    Many times, however, the parties enter into their contract terms which result in the alteration of this mode of payment (for example by providing that the price is to be payable on, after or within a specified time from the ship's (or the goods') arrival, i.e. 'Payment on Arrival'). In Greek jurisprudence and academic writing it seems to be unanimously accepted that these clauses do not alter the point of the transfer of risk, that is the buyer bears the sea transit risk.  235  English courts have similarly accepted that in some circumstances such clauses do not alter the normal effect of a CIF contract.  236 

    Nevertheless, it is suggested that such clauses may sometimes have the effect of leaving the risk of loss, which under a normal CIF contract passes to the buyer on or as from shipment, with the seller during transit.  237  If for example the parties' agreement is equal to a 'No arrival, no sale' term  238  the obligations of the buyer would be changed, as he may be justified in rejecting the goods if lost during the sea transit, -thus not paying the price. In this situation it is apparent that the contract would not be a CIF contract at all because it would be as it put the whole risk (of deterioration as well as of loss) on the seller until actual delivery.  239 

    A second category of problematic cases includes CIF or CandF contracts which involve 'net weight', 'net landed weights', 'full outturn weight' or (in the oil trade) 'out-turn' clauses, which oblige the buyer to pay the price for the quantity delivered and not the quantity shown in the bill of lading.  240  Greek courts and academic writers consider these clauses as not affecting the point of the transfer of risk.  241  As a starting point we can say that this view seems right. Only if a contract is 'full of reference to delivery' it should be considered as a destination contract.  242  However, a comparative review suggests that some further analysis and refinement of this rule is necessary.

    In England the court held in Soon Hua Seng Co. Ltd v Glencore Grain Ltd  243  that a clause by which the amount to be paid was to be based on 'full out turn weight at port of destination' would apply only to in respect of 'weight differences arising in... ordinary circumstances' (such as evaporation during the voyage) and not where the goods were lost through an accident during the voyage. The idea that necessary deterioration (transportation loss) and fortuitous, extraordinary deterioration or loss (marine loss) are distinguishable in such circumstances is also apparent in s. 2-321 of the Uniform Commercial Code which provides that any 'delivered weights' agreement or any warranty of quality or condition of the goods on arrival places upon the seller the risk of ordinary deterioration, shrinkage and the like in transportation but has no effect on the passing of the risk of loss.  244 

    The importance of the distinction between marine and transportation loss is of great practical importance particularly in the oil trade, where an amount of the carried oil is sometimes inevitably lost due to unavoidable or necessary causes such as evaporation, sludge accumulation, spillage or measurement error. Therefore, quite often, especially in the light of the increase in the price of crude oil that followed the Arab-Israeli war, buyers (western importers) inserted out-turn clauses in their CIF contracts with the result that the price of the cargo was triggered at or around the time it reaches final destination (and not on the basis of the quantities shown on the bill of lading). In such situation the seller effectively assumes the risks associated with deterioration or loss of cargo or downward movements in price that may occur during transit.  245 

    From the foregoing analysis we may thus conclude that the Greek courts are right in considering these clauses as price adjustment mechanisms which do not affect the transfer of risk. Nevertheless, they should make the necessary analysis based on the English jurisprudence and s. 2-321 of the UCC in order to make clear that marine and transportation losses are distinguishable.

    Finally the parties should always keep in mind that, if they want their contract to be a CIF contract, they should draft it so as to make sure that the buyer will bear the marine (fortuitous) losses during transit. A good way would be to use the wording of s. 2-321 UCC : '... the seller will bear the risk of any ordinary deterioration, shrinkage and the like in transportation'. If on the other hand the parties want the seller to bear the whole of the risks for the sea transit, they should provide for a Delivered Ex Ship (DES) clause or an 'out-turn' (port of destination) outside customs (Delivered Duty Paid). A clear clause to this effect would be 'risk of loss passes from the seller to the buyer as the oil passes the permanent flange connection of the delivery vessel at the discharge point'.  246 

    Finally, a clause CFFO (C and F Free Out) has the meaning that the buyer bears the expenses of unloading, without affecting the transfer of risk.  247 


     176. Athens Court of Appeal 8723/1995 CLR 1995 674. Also Gazis, Article 524 para. 25

     177. Th. Liacopoulos, Commercial Law - General Part,(1998) 61 ('Liacopoulos').

     178. Piraeus Court of First Instance 1530/1996 ECL 1997 304, 305. See, however, footnote 174 for a different opinion. The ship's rail is also accepted by Incoterms (CIF, A4, B4).

     179. Smyth (Ross T.) and Co Ltd v Bailey (T. D.), Sons and Co[1940] 3 All ER 60, 68.

     180. As in Eurico SpA v Philipp Brothers (The Epaphus),[1987] 2 Lloyd's Rep 214, 222 where Croom-Johnson L.J. states that 'a sale afloat in a named ship is rare'. Normally goods are bought afloat if it is impossible for the seller to fulfill the contract by shipping appropriate goods: see Vantol Ltd v Fairclough Dodd and Jones Ltd,[1955] 1 WLR 642. Also, Shipton, Anderson and Co v John Weston and Co,(1922) 10 Ll.l.R 762, 763.

     181. The Julia [1949] AC 293, 309; Clemens Horst Co. Ltd v Biddell Bros[1911] 1 KB 934, 956, 959; Bowden Bros and Co Ltd v Little(1907) 4 CLR 1364. Nevertheless, in Golodetz and Co Inc v Charnikow Rionda Co Inc (The Galatia)[1980] 1 WLR 495, 510, it was found that risk to a C and F contract had passed before shipment (when the sugar sold was alongside the vessel).

     182. Bowes v Shand(1877) 2 App Cas 455; Johnson v Taylor Bros and Co Ltd[1920] AC 144, 156.

     183. For example, in the sale of crude oil, the ship's rail has been displaced by the Vessel's permanent hose connection at the port of loading: see Article III(i) of the 1980 Model Sales Contract for CIF Product Sales by Government of Kuwait in Barrow's Basic Oil Laws and Concession Contracts (Supplement 66 / Page 27). Also Compania Portorafti Commerciale SA v Ultramar Panama Inc (The Captain Gregos) (No 2)[1990] 2 Lloyd's Rep 395; Marimpex Mineraloel Handlesgesellschaft mbH v Luis Dreyfus et Cie Mineraloel GmbH[1995] 1 Lloyd's Rep 167; Vitol SA v Norelf Ltd (The Santa Clara) [1993] 2 Lloyd's Rep 301, 302; The Surf City [1995] 2 Lloyd's Rep 242, 245. Furthermore, in 'roll-roll-off' transport the ship's rail has been displaced by the outward rump of the vessel, see Ch. II.3(6)(ii), footnote 111.

     184. See, Ch. II.5.

     185. As for example in Wuensche Handelsgesellschaft International GmbH v Tai Ping Insurance Co Ltd[1998] 2 Lloyd's Rep. 8.

     186. In the Incoterms (FCA A4(iv)) it is mentioned that the operator of a transport terminal receives the goods on behalf of the carrier.

     187. The suggested opinion is in contrast with the old English case of Aron and Co Inc v Comptoir Wegimont[1921] 3 KB 435, where it was held that shipment does not mean delivering the goods at the docks to an agent of the ship for future shipment.

     188. Piraeus Court of First Instance 1918/1955 GLG 1955 p. 599. Piraeus Court of First Instance 912/1973 ABR 22 701. Court of Appeal of Athens 4041/1987 CLR 1988 246. Athens Court of First Instance 645/1991 Armenopoulos 1994 1056, 1057. Athens Court of First Instance 3711/1997 CLR 1997 711. Verveniotis in Commentary, Article 524 para. 41.

     189. It has been suggested that contractual incorporation of a stowed and/or trimmed clause may simply describe the extension of the seller's obligations and therefore the distribution of expenses without changing the point of delivery and consequently the risk of the seller, see Debattista, Incoterms in Practice 155.

     190. Smyth (Ross T.) and Co Ltd v Bailey (T.D.), Sons and Co[1940] All ER 60, 68.

     191. Gazis, Article 524 para. 25. Verveniotis in Commentary, Article 524 para. 41.

     192. Law and Bonar Ltd v British American Tobacco Co, Ltd[1916] 2 KB 605, 608; Karberg (Arnold) and Co v Blythe, Green, Jourdain and Co[1916] 1 KB 495; Manbre Saccharine Co. Ltd v Corn Products Co Ltd[1919] 1 KB 198; Smyth (Ross T.) and Co Ltd v Bailey (T.D.), Sons and Co[1940] 3 All ER 60, 69-70.

     193. Von Hoffmann, Transfer of Risk, 294; Honnold, Uniform Law para. 371(5).

     194. Other legal systems provide for the invalidity of the contract where the goods did not exist at the time of the conclusion of the contract (para 306 BGB), art. 1601 of the French Civil Code.

     195. (1853) 9 Ex. 102, affd. (1856) 5 HLC 673.

     196. Negligent misstatement or fraud.

     197. Barrow Lane and Ballard Ltd v Phillip Phillips and Co[1929]1 KB 574, 585.

     198. This rule was distinguished in the decision of the High Court of Australia in McRae v Commonwealth Disposals Commission (1951) 84 CLR 377.

     199. Bridge, The Sale of Goods,(1998), 123.

     200. At the Vienna Conference the drafting of this provision gave rise to much controversy. The working group's draft reproduced the substance of article 99 ULIS, according to which the risk was assumed retrospectively by the buyer from the time the goods were handed over to the carrier. Such rule has practical advantages since it prevents splitting of transit risk. Nevertheless, some representatives of developing countries objected that it was unfair to put the risk on the buyer before the time of the conclusion of the contract. It was added that the buyer could not have any insurable interest until he contracted to buy the goods. The supporters of the proposal replied that the buyer was not put in a too uncomfortable position, since the goods should be covered by insurance assigned to the buyer. The objectors further argued that such a rule would led to a big number of contracts of insurance, which would result to a further transfer of resources from the Third World to developed countries, since the insurance market was controlled by the later. Such result was also unfair to buyers in developing countries, who would often prefer not to insure the goods but rather bear the risk themselves (see D L Perrott, 'The Vienna Convention on Contracts for the International Sale of Goods' (1980) Law and Finance Review 582. As a result the compromise solution of art. 68 was adopted.

     201. Schlechtriem, Commentary 510. Bianca/Bonell/Nicholas 498. Honnold, Uniform Law n.372-2. Contra Heuze , La vente internationale n.370.

     202. Schlechtriem, Commentary 510. Bianca/Bonell/Nicholas 501.

     203. Benjamin para. 19-094 et seq.

     204. R Goode, Commercial Law 954.

     205. Tsiritanis, Contract of Sale in Maritime Commerce, 166 - 167. In Greek law it is accepted that ascertainment in the sale of generic goods is normally taking place on loading (art. 290). For the notice of appropriation in general see Ch. II.3(1).

     206. Benjaminpara. 19-094; J D Feltham, 'The Appropriation to a CIF Contract of Goods Lost or Damaged at Sea' (1975) JBL 273, 280; contra Goode (see p. 44 above).

     207. Groom Ltd v Barber[1915] 1 KB 316.

     208. R Goode, Commercial Law(2nd ed, 1995), 953.

     209. Manbre Saccharine Co. Ltd v Corn Products Co Ltd[1919] 1 KB 198.

     210. Re an Arbitration between Olympia Oil and Cake Co Ltd and Produce Brokers Co Ltd[1915] 1 KB 233; Clark v Cox, McEuen and Co[1921] 1 KB 139, 147-148; Produce Brokers Co Ltd v Olympia Oil and Cake Co Ltd[1917] 1 KB 320, 329-330. In the last two cases the court accepted that the seller could appropriate the contract after deterioration or loss. Nevertheless, these cases concerned arrival contracts.

     211. In the Olympia Oil and Cake, above, there was a clause that obliged the buyers to accept a copy of the original appropriation, i.e. the sale was part of a «string».

     212. Benjaminpara. 19-072.

     213. Feltham, [1975] JBL 273, 280.

     214. The UNCITRAL Working Group's Draft, 7th Session (Geneva 5-16 January 1976), in YB VII (1976) p 92 No 81; p 48, No 223, clearly states in art. 65(2) that where the seller is not acting in good faith: 'the risk of loss of goods sold in transit does not pass to the buyer'.

     215. With the exception of three cases related to the Unfair Contract Terms Act 1977 and some cases related to insurance law.

     216. Court of Appeal of Athens, 1808/1966, ABR 1967 582.

     217. Gazis, Commentary, Article 524 para. 26. Contra Tzouganatos, 'Transfer of Risk in the International Sale of Goods' CLR 1998 509, 517.

     218. Tsirintanis, 169.

     219. Schlechtriem, Commentary 511 para. 6. For methods of identification and a more detailed analysis of art. 67(2) see Ch. II (3) (10).

     220. Schlechtriem Commentary 507(9). In order to realize the difference between goods 'shipped and sold' and goods 'sold and shipped' the following hypothetical situation is suggested: A seller agrees to sell to the buyers a quantity of Thailand tapioca CIF Hamburg (contract for unascertained goods by description), ships the goods on a vessel on January 19 and then despatch a notice of appropriation on the form of a telex message on February 1 (Waren Import Gesellschaft Krohn and Co v Alfred C Toepfer (The Vladimir Ilich),[1975] 1 Lloyd's Rep 322). In this situation article 68 would not apply (the unascertained goods were (agreed to be) sold and then shipped), since retrospective effect under the Convention is not possible. Risk will pass when the seller sends to the buyers notice of appropriation. In this situation the problem is that if the damage is due to an unidentifiable cause, it will not be easy to pinpoint whether deterioration occurred before or after tender of notice of appropriation.

     221. S S Grewal, 'Risk of Loss in Goods Sold During Transit: A Comparative Study' (1991) 14 Loy L A Int'l and Comp L J 93, 102 et seq. Schlechtriem, Commentary 511(6).

     222. Benjamin para. 19-094.

     223. See II. 3(6) and (9).

     224. Athens Court of Instance 3711/1997 CLR 1997, 771. Areopagites 524/1995 MLR 24, 26.

     225. Articles 380 CC, 68 CISG. Also Staudinger / Magnus Art. 67, para. 27.

     226. J D Feltham, in [1975] JBL 273 at 280.

     227. Similarly Benjaminpara. 19-074.

     228. In Lloyd v Fleming(1872) LR 7 QB 299, 303 Blackburn J applied the knowledge criterion by holding that where neither seller nor buyer was aware of the loss of cargo at the time of the documentary transfer, assignment of the insurance policy would be effective.

     229. The result should be the same if the seller did not fax but mailed the appropriation at 14:00, as it is important at what time the appropriation leaves from the seller's control (this solution being also accepted by the Convention).

     230. A good practical example could be Clause 28 of the No. 79 GAFTA Contract for the U.K. and the Republic of Ireland which requires notice of appropriation to be send within a short period of time of date of bill of lading (i.e. «with telegram, telex or other method of rapid written communication, within two business days») It is suggested that in this situation if the seller tendered the notice of appropriation in the second day, making full use of his contractual right, and the loss happened the previous day, his knowledge would be presumed.

     231. The same result could also be achieved under the Convention. In accordance with article 68 since (a) there is a collective consignment, (b) the insurance policy is endorsed to D or to the bearer and (c), B did not or could not know of the loss, D should bear the risk retrospectively as from shipment (Sclechtriem, 511(6)).

     232. For example in Vitol SA v Phibro Energy AG (The Mathraki),[1990] 2 Lloyd's Rep 84, the plaintiffs received a nomination from a supplier at 16:58 London time (17:58 Swiss time) and then passed it to the defendants in Switzerland by telex timed at 18:30/18:32 Swiss time the same day. In this case there were 31 contracts in the actual chain and these contracts included five circles leaving a balance string between six operations. For a good example of a string contract see also The Post Chaser[1981] 2 Lloyd's Rep 695 where it is mentioned (699) that the 'declaration of a ship' (the 'notice of appropriation' in FOSFA contracts) is an essential step, since the seller can then appropriate the goods.

     233. Clemens Horst and Co v Biddell Bros.[1911] 1 KB 934; Smyth (Ross T.) and Co Ltd v Bailey (T.D.) Sons and Co[1940] 3 All ER 60, 67-68. Greek law: A Argyriadis, 'Transfer of Risk and Payment of Price in CIF contracts' CLR 1988 185 at p. 189. I Rokas, Commercial Law,(1996) 120. Th. Liakopoulos, 64.

     234. See the English case of Gill and Duffus SA v Berger and Co Inc[1984] AC 382, 391. The same solution is given in Greek law: see Argyriadis, CLR 1988 185, 189.

     235. Tsirintanis, 143-147. Argyriadis, CLR 1988 188, 190. Athens Court of First Instance 645/1991, Armenopoulos 1994, 1056.

     236. Denbigh Cowan and Co v Atcherley(1921) 90 LJKB 836 where the Court of Appeal considered that a clause stating that 'should the goods... not arrive from loss of vessel either before or after declaration... this contract for such portion to be void' did not prevent the contract from being CIF: The Gabbiano,[1940 P. 166, 174.

     237. Benjamin,para. 19-096; similarly Verveniotis in Commentary, Article 524 para. 42 considers that the buyer does not bear the risk of partial loss.

     238. Also s. 2-324 UCC.

     239. Nevertheless, in Tregelles v Sewell(1863) 7 HandN 584 a clause providing 'delivered at Hamburg, cost, freight and insurance', was found to describe the destination of the goods rather than defining the point at which risk passed.

     240. For Example GAFTA No 100 Contract for shipment of feeding stuffs in bulk provides (Term 17): 'Final settlement shall be made on the basis of gross delivered weights an the goods shall be weighed at time and place of discharge at port of destination'.

     241. Athens Court of Appeal 1292/1993, CLR 1993 578. Athens Court of Appeal 156/1996, CLR 1996 791 = MLR 1996 232. Piraeus Court of First Instance 1530/1996, CEL 1997 79.

     242. As in Produce Brokers New Co (1924) Ltd v Wray Sanderson and Co Ltd(1931) 39 Ll. L.R 257.

     243. [1996] 1 Lloyd's Rep. 398, 40 5.

     244. Also Hawkland, Uniform Commercial Code Series,(1984, Supplement 1986), Vol. 2 Art.2, p. 506

     245. CIF Term in 'Oil Terms: A Short Glossary' distributed in the graduate seminar 'Oil and gas in the Middle East and Latin America' which took place at St Antony's College in Oxford on the 24th April 1999. See also J J Lightburn and G M Nienaber, 'Out-turn Clauses in CIF Contracts in the Oil Trade', [1987] LMCLQ 177 at p. 178.

     246. J J Lightburn and G M Nienaber, above at 179-180.

     247. Areopagites Court 524/1995 MLR 1995 24. Athens Court of Appeal 156/1996, CLR 1996 791 = MLR 1996 232. Piraeus Court of First Instance 1530/1996, CEL 1997 79.

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