A contract for sale and purchase of goods without agreements of risk transfers
Question: DTD & Associates LLP please give me advice about this situation. On December 1, 2020, my company (headquartered in Ho Chi Minh City) signed with Thuan An Computer Company (headquartered in Vinh City, Nghe An) a contract for sale and purchase of computer No.03/HĐMBHH. At the time the contract was signed, the goods were being delivered from Ho Chi Minh City to Vinh City. After that, the ship had an accident and sank, which led to irreversible damage of the cargo on board. However, the signed contract has no regulation on the time of risk transfer. Therefore, please let me know whether my Company or Thuan An Company will have liabilities of the risk? I sincerely thank you!
Answer: Hello. Thank you for your trust and sending your question to the legal consulting department of DTD & Associates LLP. The content of your question has been researched and consulted by our lawyers as follows:
Legal grounds:
- Civil Code No.91/2015/QH13 promulgated by The National Assembly dated November 24, 2015 (“Civil Code 2015”)
- Commercial Law No.36/2005/QH11 promulgated by The National Assembly dated June 14, 2005 (“Commercial Law 2005”)
In contract No.03/HĐMBHH signed by your Company and Thuan An Company, there is no detailed agreement about the time of risk transfer . Therefore, the risks in this case shall be regulated by the provisions of The Civil Code 2015 and Commercial Law 2005. Accordingly, there are two circumstances that could be arisen from the given case as follows:
Case 1: The subject matter of the contract is goods in transportation
Pursuant to Article 60 of Commercial Law 2005:
“Article 60. Pass of risks in case of purchase and sale of goods in transportation
Unless otherwise agreed, if the subject matter of the contract is goods in transportation, the risk of goods loss or damage shall be passed to the purchaser as from the time the contract is entered into”.
According to the provided information, at the time your Company and Thuan An Company signed the contract No.03, the goods were being delivered by ship from Ho Chi Minh City to Vinh City. In other words, instead of being in a fixed position the subject matter of this contract was during transport at the time two parties signed the contract. Therefore, according to the provisions of Article 60 of Commercial Law 2005, since that time, the risks of goods loss or damage (the subject matter of the contract) shall be transferred to the Thuan An Company (the purchaser).
Case 2: Two parties agreed that the subject matter of the contract is not goods in transportation
In this case, the subject matter of the contract is in a fixed position, instead of goods in transportation. When the ship had an accident, the goods were possessed, preserved and under ownership of the seller. In the given case, Clause 1 Article 441 of Civil Code 2015 stipulates: “The seller shall bear all risks of the property until the property is delivered to the purchaser, the purchaser shall bear all risks of the property from the time of acceptance of the property, unless otherwise agreed or prescribed by law”.
According to this regulation, it can be seen that if two parties only bargained about the name, category, quality, characteristic... of the products, but had no agreement about whether it is goods in transportation or not, then the seller (your Company) shall take the risks.
From the above analysis, it can be seen that whether your Company and Thuan An Company agreed that the subject matter of contract is goods in transportation, the risks shall be transferred to the Thuan An Company since the time the contract was signed. Otherwise, if the subject matter of the contract is not the goods in transportation, the seller (your Company) shall bear all the risks until the purchaser receives all the goods.
