COVID-19 and International Sale of Goods: Contractual devices for commercial risk allocation and loss prevention

Transport and Trade Facilitation Series No. 20

The impacts of the ongoing COVID-19 pandemic and related response measures have resulted in significant operational disruptions and delays across global networks, with important implications for the performance of international commercial contracts.

Much of global commodities' trade is conducted on international sale of goods on shipment terms, notably cost, insurance and freight (CIF) and free on board (FOB). Contractual devices for commercial risk allocation and loss prevention can play an important role in addressing the commercial law implications of the pandemic and reduce the need for costly litigation.

The purpose of this report is to provide contracting parties with some general guidance and advice on how contracts for the sale and purchase of goods and commodities on CIF and FOB terms could cater for the risk of COVID-related events, during the ongoing pandemic, and in respect of possible future events of this nature.

The report takes a practical approach and focuses on possible contractual solutions which, by allocating and distributing at the outset the potential risks and cost arising from a pandemic outbreak, allow the parties to a contract, may it be on a spot or long-term basis, to contain the adverse implications of an outbreak for the performance of legal contractual obligations and/or distribute related commercial risks fairly between the parties.