Passage of Risk and Incoterms

• Author: Jack Michael Graves
• Pages: 71-80

Rules for Allocating Risk of Loss or

Casualty to the Goods at Issue

The CISG employs specic rules governing the passing of risk, rather than

relying on the question of when title passes under applicable property laws.

In view of the substantial risk of casualty to goods—especially in transit—

the allocation of risk of loss at any given point in time is critically important

to the buyer and seller. A prudent party will typically insure against such

losses. However, to do so, the parties must know who bears the insurable

risk, and when. Inasmuch as domestic laws governing passage of title vary

a great deal, the CISG instead provides rules governing the passing of risk.

The CISG includes a general set of rules governing passage of risk, as well

as a specic rule applying them to circumstances involving nonconforming

goods. We begin with the general rules.

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PASSAGE OF RISK

AND INCOTERMS

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INTRNTL Graves CISG Final Press Pass.indd 71 5/6/13 9:36 AM