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

Under the CISG, Delta Ltd sold 500 tonnes of grain in transit, afloat on a ship, to Omar Co. Neither party knew at the time of contracting that the grain had been damaged by seawater earlier in the voyage, after the carrier received it. The contract has no contrary term or circumstances indicating otherwise. Who bears the loss?

Omar Co bears the loss. For goods sold in transit, the CISG treats risk as passing to the buyer from when the goods were handed to the carrier, unless circumstances indicate otherwise. Neither party knew of the damage, so the seller's non-disclosure exception does not apply.

  1. ADelta Ltd, because risk never passes until the buyer inspects the grain
  2. BOmar Co, because risk is treated as passing from the time the goods were handed to the carrier, unless circumstances indicate otherwiseCorrect
  3. COmar Co, but only if Delta Ltd knew of the damage when contracting

Explanation

For goods sold in transit, risk passes to the buyer from the time the goods were handed to the carrier who issued the transport documents, unless circumstances indicate otherwise. Inspection is not the trigger. Delta's knowledge matters only in the sense that if it knew of the loss and did not disclose it, the loss stays with the seller; here neither party knew.

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