The delivery of goods: the Incoterms® ICC

Marcello Mantelli
Lawyer in Milan and Turin


According to the Vienna Convention of 1980, the seller is obliged to deliver the goods, hand the relevant documents and transfer ownership to the buyer under the terms of the contract and the Convention, while the buyer must pay the price and take delivery.

For the seller, there are several critical issues arising from this delivery obligation, among which delivery time and passing of risk are relevant.

The issue of delivery time does not pose problems when the date or time period within which it is to take place is stated in the contract (e.g. in the order confirmation accepted by the buyer) or is otherwise determinable from it.

The situation is different when nothing on the point has been agreed upon: according to Article 33 of the Convention, performance must be made within a reasonable time from the conclusion of the contract, a reasonableness that is established, according to international jurisprudence, in line with the type of goods, industry usages, and the behavior of the parties at previous sales between them.

For example, a delivery of fresh shellfish made in 10 days will not be considered to have been made within a reasonable time, since their storage time is so much shorter.

The risk for the seller is that the buyer will suspend payment or delay it, claiming for damages greater than the value of the goods up to and including termination of the contract and compensation for all damages suffered for the delayed or non-delivery of the goods in the vent hat an essential breach under Article 25 of the Convention is incorporated.

Another critical profile related to delivery is that of the passing of the risk of perishing or damage to the goods, which in national laws depend on the moment when ownership of the goods passes: in this case, the practical effect is that from the moment when such passing of risks takes place, the buyer is not released from the obligation to pay the price of the goods even if they have been destroyed or damaged after that moment.

The Convention governs the passing risk, without regard to the passing of ownership, as follows: when the contract of sale involves the carriage of the goods, the risk passes to the buyer at the time the goods are remitted to the first carrier (carrier who first takes charge of the goods on the buyer’s behalf).

If, on the other hand, the seller is required to remit the goods to a carrier at a specified place (for example, at the carrier’s warehouse), the risk passes from the seller to the buyer only when the goods have been remitted to the carrier at that place (Article 67).

In other cases, the risk passes to the buyer when the buyer takes delivery of the goods or at the time they are placed at the buyer’s disposal and fails to collect them (Article 69).

The operational solution for talking professionally with one’s partners abroad, operating with confidence and preventing disputes regarding the passing of risk, is to derogate from the Vienna Convention by referring to the International Chamber of Commerce’s Incoterms® 2020 delivery terms.

In fact, exporting using domestic source (free at destination, free on arrival) or ostensibly international source (for example, free your factory) terms of delivery can pose risks of understanding the extent of commitments and responsibilities assumed by the seller and buyer in connection with the delivery operations of the goods.

The International Chamber of Commerce’s Incoterms® 2020 rules on the terms of return of goods reflect business practice and constitute a global standard available to businesses that resolves the issues seen above, subject to their proper application in the contract of sale.

The function of Incoterms® 2020 is to allocate between seller and buyer: obligations (who does what in connection with the delivery of goods); risks (when the goods are delivered and when the risk of travel of the goods passes); and expenses (who is responsible for what costs with reference to delivery).

The 2020 edition of Incoterms®, which follows the 2010 edition, distinguishes between delivery terms for each mode of transport and delivery terms for each mode of transport and delivery terms for sea and inland waterway transport, while a further classification divides delivery terms into 4 homogeneous groups, based on the initial letter of each acronym, with increasing obligations, risks and expenses borne by the seller: Group E: EXW; Group F: FCA, FAS, FOB; Group C: CPT, CIP, CFR,CIF; Group D: DAP, DPU, DDP.

From a practical point of view, the seller and buyer must negotiate and agree on a surrender acronym among the 11 seen above; the agreed option must be reflected in the sales contract and in all documents of execution of the sale (invoice, transport, documents, and so on).

This should then be coordinated with the other contracts that revolve around the sale e.g. the letter of instruction to the carrier, the contract of carriage, and the insurance contract.

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