CONSEQUENCES OF PASSING THE RISK OF LOSS

International sales governed by the CISG are likely to involve transport of goods over substantial geographical distances, and frequently involve transportation through multiple carriers and types of carriage, or multimodal transport. Shipping goods from a landlocked seller across water to a distant buyer is likely to comprise on-loading and off-loading from trucks, ships, and railways, each operated by a different entity. The consequences include both increased likelihood of damage or loss for the goods and increased difficulties in identifying the point at which any damage occurred. As a result, the default rules allocating the financial responsibility for loss or damage to the goods take on additional importance in these transactions. They inform buyers and sellers of the effects of damage or loss on their underlying obligations to pay or to deliver conforming goods and determine which of them is entitled to pursue remedies against the carriers involved in the transaction.

Legal systems differ in their default rules allocating risk of loss. They tend to allocate risk in three different ways. Some national law based on Roman law passes risk from the seller to the buyer at the conclusion of the contract. A second group of legal systems passes risk with respect to the goods sold when title (property) to them passes. The third group of national laws passes risk of loss on delivery of the goods to the buyer. The CISG's risk of loss rules are closest to the third group. They do not and cannot pass risk based on passage of title, because the CISG does not determine title in the goods, and with a single exception do not pass risk to the buyer at the conclusion of the contract. Instead, under the CISG's basic risk of loss rule risk generally passes when the buyer takes over the goods or is in a position to do so. The details of the CISG's risks of loss rules are described and evaluated in the sections that follow.

The CISG's treatment of risk of loss begins with a statement of the consequences of the passage of that risk. The primary consequence results from a negative implication.