When do ownership and risks change hands?
Objective: Master the rules on transfer of ownership and risk, choose the right Incoterm, and structure an effective acceptance procedure.
Legal sources
- Art. 1196 C. civ. - Transfer of ownership by mere exchange of consent
- Art. 1196 al. 3 C. civ. - Transfer of ownership entails transfer of risk
- Art. 1604 C. civ. - Obligation to deliver conforming goods
- Incoterms® 2020 (ICC) - International delivery rules
Delivery obligation (Art. 1604)
The seller must deliver goods that conform to the contract. Non-conformity = right to reject, replacement or price reduction. The time limit for challenging conformity should be specified in the contract.
Incoterms® 2020 (ICC) - The 11 Incoterms
Incoterms determine who bears the costs and risks at each stage of international transport. They only cover the physical delivery of goods, not the transfer of ownership.
Group E - Departure
EXW (Ex Works): The seller makes goods available at their premises. The buyer bears all transport and risks. Not recommended: the buyer becomes the exporter in a foreign country.
Group F - Main carriage unpaid
FCA (Free Carrier): Risks transfer to the nominated carrier.
FAS / FOB: Sea transport only. FOB = risks transfer upon loading on the vessel.
Group C - Main carriage paid
CPT / CIP: The seller pays transport but risks transfer to the first carrier.
CFR / CIF: Sea transport only. CIF = insurance included.
Group D - Arrival
DAP: Delivered at place, duties unpaid.
DPU: Delivered at place unloaded.
DDP: Maximum obligations for the seller - customs duties included. The safest option for the buyer.
Acceptance procedure (Recette)
For complex goods and services: define acceptance criteria, the testing period, and the consequences of rejection. The acceptance certificate without reservations triggers the transfer of ownership and risk in well-drafted contracts.
Practical case - Choosing an Incoterm
A French buyer orders electronic components from a Chinese supplier.
- EXW Shenzhen: The buyer arranges everything (transport, Chinese export customs, French import customs). Risks from the factory. ❌ Not recommended: the buyer becomes the exporter in China.
- FCA Shenzhen Airport: The seller delivers to the air carrier. The buyer handles freight and import customs. ✅ Good compromise.
- DDP Paris: The seller delivers to Paris, customs duties paid. The buyer handles nothing. ✅ Safest but most expensive.
"By derogation from Article 1196 of the French Civil Code, the transfer of ownership and risk shall take effect on the date of signature of the acceptance certificate without reservation by the Buyer. The Buyer shall have a period of [X] business days from delivery to carry out inspections and raise any reservations as applicable."