Business Contracts

In the case of contracts involving the transfer of ownership, the question of the transfer of the risks is inseparable from that of the transfer of ownership. Who bears the costs and risks in the event of the disappearance or accidental destruction of the item, the seller or the buyer? The immediate transfer of ownership to the buyer entails, in principle, the simultaneous obligation to bear the r …

Transfer of risk

In the case of contracts involving the transfer of ownership, the question of the transfer of the risks is inseparable from that of the transfer of ownership. Who bears the costs and risks in the event of the disappearance or accidental destruction of the item, the seller or the buyer? The immediate transfer of ownership to the buyer entails, in principle, the simultaneous obligation to bear the risks of loss or deterioration of the item sold . The principle res perit domino (the thing is lost to the owner), results from the combination of Articles 1624 and 1196, paragraph 3, of the Civil Code. According to the first of these provisions, the question of which party, the seller or the buyer, should bear the risk of loss or deterioration of the thing sold before delivery, is governed by the rules laid down for “contracts or contractual obligations in general” . The second text specifies that the transfer of ownership entails the transfer of the risks of the thing, except in the case of a formal notice to deliver the thing, which places the risks on the debtor .

As the immediate transfer of ownership entails the transfer of the risks , the buyer remains liable to pay the price even if the item has been lost, unless the loss is attributable to a fault on the part of the seller . Even if the parties have made the seller responsible for completing the formalities for the transfer of ownership, the risks remain with the buyer if they have not made this transfer conditional on the delivery of administrative documents . The risks must also be borne by the buyer, the recipient of the goods, if the seller, who can prove that the goods have been dispatched by producing a dispatch note, provides proof of performance of the contract . In the specific case of distance selling, particularly over the internet, Article L. 216-4 of the Consumer Code stipulates that the risk of loss or damage to the goods is transferred to the buyer as soon as he or she takes physical possession of them. As a result, the loss of a parcel must be attributed to the seller . On the other hand, if the buyer chooses a carrier other than the one chosen by the seller, the transfer takes place as soon as the goods are handed over to the carrier (Art. L. 216-3 Consumer Code).

The transfer of risk implies the transfer of the right to be compensated for the loss of the thing. For example, the owner of a catamaran may claim compensation for its loss following a collision after the sale . On the other hand, if the parties agree to postpone the transfer of ownership of a boat until after delivery, the risks remain with the seller, who continues to benefit from his insurer's coverage for the wreck that occurred prior to delivery .

Like the transfer of ownership, the transfer of risks may be deferred by the will of the parties, the nature of the goods or the effect of the law (Art. 1196 Civil Code). For example, in the case of the sale of samples of things that it is customary to taste, if the sale is perfected by the buyer's approval of the sample, under the terms of article 1587 of the Civil Code, until the buyer has tasted or approved them, there is no transfer of ownership and therefore of risk . As Article 1587 of the Civil Code supplements the will of the parties, waiver of its provisions cannot result from their silence alone . On the other hand, in the case of a block sale, the goods sold are at the buyer's risk  , since the sale transfers ownership of the thing sold to the buyer as soon as the contract is formed, so that, as he is immediately vested with the right of ownership over the thing, he can resell it in whole or in part even before any measurement operation has taken place .

The parties may agree to apply a fixed term to the transfer of ownership. In this case, the same applies to risks, unless otherwise agreed . The transfer of ownership and risks can thus be delayed until the occurrence of a future and certain event, such as the signing of the notarial deed of sale in real estate matters, with a cut-off date most often provided for, which constitutes the expiry of the term . The transfer of ownership and risks may also be suspended by the occurrence of a future, uncertain event, known as a suspensive condition . While the condition is pending, the seller remains the owner and bears the risks, so that if the thing perishes by chance, the contract is null and void . When the condition is fulfilled, because of its retroactive nature, the purchaser is deemed to be the owner from the day the contract was concluded, unless the parties agree otherwise . In this case, there is a dissociation between the transfer of ownership, which is retroactive to the date of conclusion of the contract, and the transfer of risk, which only occurs once the condition has been satisfied . Thus, in the event of partial loss of the property sold as a result of fire occurring before the condition is fulfilled, the seller retains the benefit of the insurance settlement .

When it is the common intention of the parties to defer the transfer of ownership until the date fixed for delivery, on which, notably, the payment of the price depended, the risks of the thing sold remain the responsibility of the seller . He remains the owner of the property until the notarial deed, which alone, according to the agreement of the parties, should effect the transfer of ownership, and must bear any losses until that date . This applies to the sale of a building to be erected on a specific plot of land, where the obligation to build is paramount, and the transfer of risks to the property acquired does not take place until delivery of the completed building , or where the sale is accompanied by a retention of title clause, with the seller retaining ownership even though the property has already been delivered .

Finally, the immediate transfer of risk cannot be applied when the loss or deterioration of the goods has occurred during transport as a result of a fault on the part of the seller, in his capacity as shipper. In principle, goods can be considered delivered to the buyer as soon as they leave the seller's warehouses, but if the sole cause of the loss is the seller's fault, since he was obliged to ensure their transport, the loss is attributable to him . Similarly, although the risks of transport have been transferred to the buyer, the seller is not discharged from the obligation to provide the goods intended for the buyer, whose shipment was his responsibility, with appropriate packaging, so that the damage suffered by these goods having as its sole cause the defects in their packaging, the seller cannot claim, because of the fault he has committed, payment for the goods lost as a result of the damage suffered .

CA Nancy, 10 April 2018, LawLex202300008211JBJ.

Renamed, since the reform of contract law, “Des sources d'obligations”.

CA Reims, 8 June 2009, LawLex202300008214JBJ, which holds that a sale finalized by the purchaser's approval of the sample does not entail either transfer of ownership or transfer of risks, since the subject-matter of the sale is a type of product that has not yet been individualized, with only the weighing, counting or measuring operation making it possible to individualize the product sold.

Cass. 1re civ, 24 March 1998, LawLex202300002002JBJ.

Cass. 1re civ., 1 February 1983, LawLex202300008486JBJ, in the case of a sale of a group of animals, the price per kilogram of fixed meat was only intended to determine the price to be paid.

CA Aix-en-Provence, 7 January 2021, LawLex202300008604JBJ.

CA Douai, 13 September 2018, LawLex202300008210JBJ.

Civil Code, Art. 1304-6, para. 2: “However, the parties may provide that the fulfillment of the condition is retroactive to the date of the contract. The object of the obligation nevertheless remains at the risk of the debtor, who retains the administration of it and is entitled to the fruits until the condition is satisfied”. - See in this sense: CA Nancy, 10 April 2018, LawLex202300008211JBJ.

However, the seller is exempt from this requirement if he can prove that the thing would have perished in the hands of the creditor if it had been delivered.

Cass. 1re civ., 20 November 1990, LawLex202300003159JBJ, holding that the purchasers of a building partially destroyed in a fire at a date prior to that provided for the transfer of ownership are not beneficiaries of the guarantee and creditors of the insurance indemnity paid to the sellers.

Cass. 1re civ., 4 July 1995, LawLex202300008583JBJ.

Cass. 3e civ. 13 November 1997, LawLex202100006430JBJ, holding that an agreement which delays the transfer of ownership to the signing of a notarial deed also delays the transfer of risks to that date.

Cass. 3e civ, 11 October 2000, LawLex202200000938JBJ.

Cass. com. 20 November 1979, LawLex202200000168JBJ, for a clause stipulating that “all material remains our property until full payment by the buyer”.

Cass. com, 2 June 1975, LawLex202300008630JBJ.

Cass. com. 11 May 1981, LawLex202300008631JBJ.

Cass. com. 7 December 1993, LawLex202300008577JBJ.

Cass. 1re civ, 10 October 1995, LawLex202100006411JBJ.

Cass. 1re civ. 19 November 1991, LawLex202100006395JBJ.

Cass. 1re civ, 3 February 2021, LawLex202100006396JBJ.

Cass. com. 5 October 2010, LawLex202300008576JBJ.

Cass. 1re civ. 7 July 1993, LawLex202100006391JBJ. See also Cass. 1re civ, 4 July 1995, LawLex202300008583JBJ.

Business Contracts

149. Transfer of risk

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149. Transfer of risk

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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