The transfer of risk in international sales of goods under Incoterms 2020 and CISG

Managing a cross border sale is complex because of the distance, the uncertainties, and the customs formalities. Above all, the risk of damage to and loss of the goods is inherent as they are moved from one country to another. The present study underscores the crucial role that CISG and Incoterms play in the international sales contract. They are widely recognized in business frameworks due to their effectiveness in regulating multinational trade. As for Incoterms, they provide standardized rules about the delivery of the goods by determining the costs, rights, and obligations of the seller and the buyer. While the CISG governs in the formation of the contract and the performance of the parties by offering uniform laws. In other words, the CISG covers diverse aspects related to international sales, whereas the Incoterms rules focus only on the delivery of the goods. Understanding the doctrinal aspects of them help parties to make appropriate decisions regarding their needs in cross border transactions. The allocation of risk is the common area that they regulate in the contract of sale. Each of them has different methods to transfer the risk, but they are complementary to resolve the potential issues in international trade. The Convention provides general default rules concerning the passing of risk, yet the Incoterms offer eleven trade terms that define the exact point of delivery. This latter is specialized in delivery and risk management because of the clear descriptions in each rule of where and when the risk is transferred to the buyer. Thus, in commerce practices, contractors are used to incorporating Incoterms rules into their sales contract which avoids confusion and misunderstanding, because the default rules by the Convention are not sufficient to govern the risk matters. The goal of this thesis is to understand how they manage the risk of loss and deterioration of the goods in the modern business practices and their interplaying in the cross border transactions. The first chapter outlines the theoretical framework where the background and the evolution of the Incoterms will be discussed, and also the history and scope of the CISG. The second chapter underlines the notion of risk in cross border trade according to the CISG and Incoterms. And the last chapter examines the transfer of risk under these legal instruments and their interaction. This dissertation shows the strengths and limitations of these legal instruments when dealing with the risk. However, the coexistence of them in a contract supplements each other because there are cases where the Incoterms cannot govern but only CISG can do so, and vice versa.