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

Fenmark Ltd agreed to sell 200 crates of components to Gale Corp for delivery by carrier. Fenmark handed the goods to the carrier but did not mark them or send any shipping document identifying them to the contract. The goods, together with other consignments, were lost in transit. Under the CISG, what is the position on risk?

Risk stayed with Fenmark. Under the CISG, risk does not pass to the buyer until the goods are clearly identified to the contract by markings, shipping documents or notice. Without identification, handing goods to the carrier is not enough to transfer risk.

  1. ARisk passed to Gale on handing over to the carrier, because identification is irrelevant
  2. BRisk remained with Fenmark because risk does not pass until the goods are clearly identified to the contractCorrect
  3. CRisk passed to Gale when the contract was concluded
  4. DRisk is shared equally because the goods were lost with others

Explanation

Even where risk would otherwise pass on handover to the carrier, it does not pass until the goods are clearly identified to the contract, for example by markings, shipping documents or notice to the buyer. Fenmark did none of these, so the loss falls on Fenmark. Sharing the loss is not a CISG rule.

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