Corporate and Business Law (Global) · Obligations of the seller and buyer, and provisions common to both

Passing of Risk and Preservation of Goods under the CISG

Updated 11 October 2026 · Fact-checked

Under the CISG, risk of loss passes from seller to buyer at a point set by Articles 66-70: usually when goods go to the first carrier, when the buyer takes them over, or at contract date for goods in transit. After that the buyer must still pay. Each party holding the goods must preserve them.

Understand Passing of Risk and Preservation of Goods

Risk means who bears the loss if goods are lost or damaged without anyone's fault, for example in a shipping accident. Under the CISG, the party who has the risk bears that loss. It is not the same as ownership. The CISG does not deal with when ownership passes.

Once risk has passed to the buyer, the buyer must still pay the price (Article 66). The exception is where the loss was caused by the seller's act or omission. So the key question is always: when did risk pass, and was the loss before or after that moment?

The CISG gives rules for three situations. Contracts involving carriage (Article 67): if the seller does not have to hand the goods over at a particular place, risk passes when the goods are handed to the first carrier for transmission to the buyer. If the seller must hand over at a particular place, risk passes when the goods are handed to the carrier at that place. Risk does not pass until the goods are clearly identified to the contract, for example by markings, shipping documents or notice to the buyer. Keeping documents that control disposal of the goods does not stop risk passing. Goods sold in transit (Article 68): by default, risk passes at the time the contract is made. If the circumstances indicate it, risk can instead be treated as passing from handover to the carrier who issued the documents embodying the contract of carriage. This carrier-handover alternative has a limit: if, at the time of the contract, the seller knew or ought to have known that the goods had been lost or damaged and did not tell the buyer, the seller bears that loss. All other cases (Article 69): risk passes when the buyer takes over the goods. If the buyer does not take them over in time, risk passes when the goods are placed at the buyer's disposal and the buyer breaches by not taking delivery. Goods must be clearly identified to the contract first.

Article 70 adds that these rules do not limit the buyer's remedies if the seller has committed a fundamental breach. A buyer can still avoid the contract even though risk has passed.

Preservation is the second half of the topic. If one party has the goods and the other is not performing, the holder must protect the goods. The seller preserves if the buyer delays taking delivery or fails to pay when payment and delivery are concurrent, and the seller is in possession of the goods or otherwise able to control their disposal (Article 85). The buyer preserves if the goods have been received and the buyer intends to reject them (Article 86). The party preserving may keep the goods until reasonable expenses are repaid. Article 87 allows storage in a third party's warehouse at the other party's expense if the cost is not unreasonable. Article 88 allows resale, with reasonable notice, if the other party unreasonably delays, and requires resale where goods deteriorate quickly or preservation would be unreasonably expensive.

Key formulas to remember

Effect of risk passing (Article 66): Risk passed → buyer must still pay, unless loss caused by seller's act or omission; Loss after risk passes does not release the buyer from paying the price.
Carriage, no named place (Article 67(1)): Risk passes on handover to the first carrier; Applies where the contract involves carriage and the seller need not hand over at a particular place.
Carriage, named place (Article 67(1)): Risk passes on handover to the carrier at that place; Handing over to an earlier carrier elsewhere does not pass risk.
Identification (Articles 67(2) and 69(3)): No risk passes until goods are clearly identified to the contract; Identification can be by markings, shipping documents, notice to the buyer or otherwise.
Goods in transit (Article 68): Risk passes at contract date by default (or from handover to the carrier if circumstances indicate); Where risk is treated as passing from handover to the carrier, the seller still bears loss or damage it knew or ought to have known of at the time of the contract and did not disclose.
Other cases (Article 69): Risk passes when buyer takes over, or when goods are at buyer's disposal and buyer breaches by not taking delivery; If delivery is at a place other than the seller's, risk passes when delivery is due and the buyer knows the goods are at its disposal.
Seller's preservation (Article 85): Buyer delays or fails to pay (concurrent) + seller holds goods or can otherwise control their disposal → seller must take reasonable steps to preserve; Seller may retain goods until reimbursed its reasonable expenses.
Buyer's preservation (Article 86): Buyer received goods + intends to reject → take reasonable steps to preserve; Buyer may retain until reimbursed. At destination, buyer must take possession for the seller if no price payment and no unreasonable inconvenience or expense, unless the seller or its representative is there.
Warehousing and sale (Articles 87-88): Deposit in third-party warehouse at other party's expense (if reasonable); sell on reasonable notice after unreasonable delay; Must take reasonable steps to sell if goods deteriorate rapidly or storage is unreasonably costly, giving notice where possible. The selling party keeps proceeds equal to its reasonable costs and pays over the balance.

How to solve Passing of Risk and Preservation of Goods questions

Use this order for any risk or preservation question. It stops you mixing up the three risk rules.

1Identify the facts: where were the goods when the loss happened, and who had them?
2Classify the sale: does it involve carriage, is it goods sold in transit, or is it neither?
3Apply the matching Article: 67 for carriage, 68 for transit, 69 for all other cases.
4Check identification: were the goods clearly identified to the contract before the loss? If not, risk has not passed.
5Compare timing: was the loss before or after risk passed? If after, the buyer must still pay (Article 66) unless the seller caused it.
6Check for seller fault or fundamental breach: a seller's act or omission, or a fundamental breach (Article 70), keeps the buyer's remedies alive.
7For preservation, identify who holds the goods and why, then apply Article 85 or 86, and consider warehousing (87) or resale (88).
8Write the conclusion plainly: who bears the loss, who must preserve, and what costs can be recovered.

Quickest way: Three-question risk check

When to use it: Use for objective test questions where you have about two minutes.

Ask: is there carriage? If yes and no named handover place, risk passed at the first carrier. If a named place, at that place.
Ask: were the goods already at sea or in transit when the contract was made? If yes, risk passes at contract date by default. It passes from handover to the carrier only if the circumstances indicate. If the carrier-handover alternative applies, the seller still bears any loss it knew or ought to have known of at contract time and did not disclose.
Ask: were the goods identified to the contract? If not, risk has not passed, whatever else the facts say.
For preservation, the person holding the goods (or able to control their disposal) must look after them and can claim reasonable costs back.

Common mistakes in Passing of Risk and Preservation of Goods

Saying risk passes when the goods arrive at the buyer's premises in a carriage contract.
Students assume risk follows delivery to the buyer, as with some Incoterms.
Fix: Under Article 67 the default is handover to the first carrier. Arrival only matters in Article 69 cases.
Treating risk and ownership as the same thing.
Domestic sale of goods law links them closely.
Fix: The CISG governs risk, not when ownership passes. Answer only the risk question.
Ignoring identification of the goods.
Students focus on the handover date and skip the second paragraph of the Article.
Fix: Always check that the goods were clearly marked, documented or notified to the buyer. Without that, risk has not passed.
Releasing the buyer from paying because the goods were destroyed.
It feels unfair to pay for goods you never received.
Fix: If risk had passed, the buyer pays under Article 66. Only seller fault removes that duty.
Forgetting the seller's duty to disclose in goods-in-transit sales.
Students stop at 'risk passes at contract date'.
Fix: Remember the limit on the carrier-handover alternative: if, at the time of the contract, the seller knew or ought to have known of the loss or damage and did not tell the buyer, the seller bears it.
Selling rejected goods immediately without notice.
Students think a rejecting party can dispose of goods freely.
Fix: Resale under Article 88(1) needs reasonable notice of intention to sell. For perishables under Article 88(2), the party must take reasonable steps to sell, and the duty to give notice applies where possible. The selling party keeps only its reasonable preservation and sale costs and pays over the balance.

Worked examples

Example 1

A seller in Country A agrees to sell 500 machine parts to a buyer in Country B for $40,000. The contract involves carriage but names no place for handover. On 5 May the seller hands the parts, clearly marked with the buyer's name, to the first carrier. On 9 May the ship sinks and the parts are lost through no fault of the seller. Who bears the loss?

Show the solution

The contract involves carriage and no handover place is named, so Article 67(1) applies.
Risk passes when the goods are handed to the first carrier: 5 May.
The goods were clearly marked for the buyer, so they were identified to the contract (Article 67(2)).
The loss on 9 May is after risk passed, and there is no seller fault.
Under Article 66 the buyer must still pay the price.

Answer: The buyer bears the loss and must pay the $40,000, because risk passed on 5 May when the identified goods were handed to the first carrier.

Example 2

A buyer receives a consignment of goods worth $25,000 at its warehouse and validly intends to reject them because they do not conform. The seller is not present and has no representative there. The buyer wants to know what it must do and what it may claim.

Show the solution

The buyer has received the goods and intends to reject, so Article 86(1) applies.
The buyer must take reasonable steps to preserve the goods.
The buyer may retain the goods until the seller reimburses its reasonable expenses.
If storage at its own premises is unsuitable, Article 87 lets the buyer deposit the goods in a third party's warehouse at the seller's expense, provided the cost is not unreasonable.
If the seller unreasonably delays taking the goods back or paying the expenses, Article 88 allows the buyer to sell them after giving the seller reasonable notice.
If the goods deteriorate quickly, the buyer must take reasonable steps to sell them and should notify the seller if possible.
On a sale, the buyer keeps an amount equal to its reasonable preservation and sale costs and pays the balance to the seller.

Answer: The buyer must preserve the goods, may keep them until its reasonable costs are repaid, may warehouse them at the seller's expense, and may sell them after reasonable notice (or must sell if they perish quickly), paying any surplus to the seller.

Exam tips

In objective questions, find the key word: 'first carrier', 'in transit', 'took over' or 'rejected'. Each points to a different Article.
Always check for identification of the goods. Examiners use it as a trap in carriage scenarios.
Remember that risk passing does not remove the buyer's remedies for a fundamental breach by the seller.
In multi-task written answers, name the Article, state the rule in one sentence, apply it to the facts, and give a clear conclusion on who bears the loss.
For preservation, state who holds the goods, the duty to take reasonable steps, the right to reimbursement, and the option of warehousing or sale.

Practice questions from Obligations of the seller and buyer, and provisions common to both

Passing of Risk and Preservation of Goods: frequently asked questions

When does risk pass under the CISG if goods are shipped by sea?

If the contract involves carriage and no handover place is named, risk passes when the goods are handed to the first carrier, provided they are clearly identified to the contract. If a place is named, it passes when the goods are handed to the carrier there.

What does Article 67 CISG say about documents?

The seller may keep documents that control disposal of the goods, such as a bill of lading. This does not affect the passing of risk. Risk still passes on handover to the carrier.

What must a buyer do with goods it wants to reject?

The buyer must take reasonable steps to preserve them. It may keep them until the seller repays its reasonable expenses. If the goods are at their destination and the seller is not there, the buyer may have to take possession for the seller, as long as this needs no payment of the price and causes no unreasonable inconvenience or expense.

Can a party sell goods it is preserving?

Yes, if the other party has unreasonably delayed taking the goods back, taking possession or paying the costs, and reasonable notice of the intended sale has been given. If the goods deteriorate rapidly or storage costs would be unreasonable, the holder must take reasonable steps to sell them.