the express or presumed intention of the parties, but rather as a policybased exceptional deviation from the ordinary compensatory principle of the assessment of damages. The exception is based upon a judicial policy of preventing loss caused by a breaching party from being unclaimable merely on account of the division of the elements of loss and title to sue between two parties, the loss being borne by a party other than that which would have borne it before such division. Transferred loss is not thus promissory based: the third party is not the recipient of any promise, nor is the contracting party enforcing a promise made in favour of such third party. Rather, the third party is simply the beneficiary of a very limited policy exception to the default rule that a party may only claim for its own losses in contract. Though the promissory idea is a useful one in relation to stipulationes alteri, it cannot explain every aspect of contractual claims to benefit third parties.

(b)  The mixed legal systems

Little needs to be said on Scots law and transferred loss, as it is a subject which has hardly been litigated upon. Despite a relative dearth of authority, the Scottish courts have nonetheless recognised and awarded damages based upon transferred loss reasoning,149 and in so doing have expressly followed the English authorities discussed above (as well as referring to the nineteenth-century Scottish case of Dunlop v. Lambert150). It should perhaps be added that there are some cases where conceivably, given the priority given to performance over damage in Scotland, an order of specific implement might be sought by A against B in preference to a damages claim, thereby obviating the need for reliance upon the transferred loss principle. Such an alternative would not, of course, be possible in the case of the complete loss of goods in transit, though it might be more feasible in some cases of defective buildings.

South Africa does not recognise transferred loss claims at common law, and insists that, under its contract with B, A is permitted only to sue in respect of its own losses. However, as with the similar statutory development in the UK, relatively recent legislation has addressed the specific problem raised on the facts of The Albazero. Section 4 of The Sea Transport Documents Act151 provides that the holder of a sea transport

149McLaren Murdoch & Hamilton Ltd v. The Abercromby Motor Group Ltd 2003 SCLR 323 (CSOH).

150 (1839) 6 Cl & F 600, (1839) Macl & R 663. 151 No. 65 of 2000.

document such as a bill of lading is entitled to the same rights against the party issuing the document (usually the owner of the ship, or its agent) as if it were a party to a contract with that person on the terms of the document, and is furthermore to be regarded as a cessionary (that is, assignee) of all rights of action for loss of or damage to the goods referred to in such a document, whether arising from the contract of carriage, ownership of the goods, or otherwise. This provision would have allowed the new owner of the goods in The Albazero to have had a direct claim against the shipowner, thus obviating the need for the exceptional transferred loss claim permitted by the House of Lords. This statutory provision is limited to the field of carriage of goods by sea, however, and would thus evidently fail to protect a third party to a construction contract (such as the new owner of the building in St Martin’s).

In Louisiana, the Civil Code enshrines the principle that damages in contract are to compensate both the creditor’s actual losses (damnum emergens) as well as his loss of expected profit (lucrum cessans).152 The provision makes no reference to a right, even exceptionally, to claim in respect of the losses of any other party. Moreover, in the particular case of carriage of goods at sea, the US Carriage of Goods by Sea Act153 (applicable in all the states of the US) contains no provision equivalent to that in the UK’s Carriage of Goods by Sea Act specifying for third party damage claims in respect of goods, though it does contain a permissive provision entitling carrier and shipper to agree ‘any terms as to the responsibility and liability of the carrier for such goods’, such terms conceivably encompassing one allowing the shipper to claim in respect of third party losses.

(c)  German law

In German law, there is no provision in the BGB for transferred loss (or Drittschadensliquidation as it is called), but a body of case law has grown up recognising the doctrine as an exception to the ordinary rule that a creditor may sue to protect its own interest alone.154 The claim has been described as being available where ‘all the damage due to the harmful conduct of the obligor is suffered by a third party rather than by the person with title to sue’, and only so in such cases where there is one injury, suffered by the third party, which would have been suffered by the promisee but which has shifted to the third party as a result of the contractual

152  CC Art. 1995.    153  28 USC §1306 concerns agreements as to particular goods. 154 See Unberath, Transferred Loss, pp. 85–91.

interest vesting in that third party.155 The similarities with the English legal idea of transferred loss is notable. As in English law, it is A who sues for damages on behalf of C, A being required to account to C for the damages recovered. The German courts have also said, however, that an alternative conception is to regard C as being entitled to require A to assign its right to sue for damages to C, something which comes close to a subrogation of A’s claim. If this were seen as a general entitlement, it would be hard to reconcile with a more limited right of assignment which might exist under a contract, such as the limited right which existed in the St Martin’s case. However, the courts have not settled on a single description of transferred loss claims to the exclusion of all others.

As in England, development of third party claims has tended to cluster around certain fact situations. Three principal groups of case have emerged, those being: (1) claims in relation to the transportation of goods, decided cases in this class having typically related to claims by cargo owners in cases of carriage of goods by land for the benefit of a third party,156 claims by the forwarder of goods against the carrier in respect of losses suffered by the consignor or consignee,157 and claims against carriers of goods by sea in respect of losses suffered by third parties ­having an interest in the goods (such as a new owner of the goods);158

(2) claims in respect of damage to goods which are the subject of a contract of bailment;159 and (3) claims arising out of so-called ‘indirect representation’ (mittelbare Stellvertretung), such as claims by an agent under a contract of commission for losses suffered by his principal160 and claims in some construction scenarios,161 sufficiently akin to the English construction cases discussed earlier to suggest that, in similar circumstances to those English cases, the German courts would also apply transferred loss analysis.162 Recovery in circumstances other than these three types of case is controversial, the courts being cautious about adding to the exceptions.163

Unlike in English law, transferred loss claims in German law are not seen as a last recourse, available only where no other claim is possible. In

155See for these statements of the nature of the claim, BGHZ 40, 91.

156In this type of case, Drittschadensliquidation has been entrenched in a provision of the HGB (§421).

157For instance, RGZ 75, 169; 115, 419; BGH NJW 1989, 3099.

158 For instance, BGHZ 25, 250. 159 BGH NJW 1985, 2411.

160The principal has a right to have the agent’s claim assigned to him: §384(2) HGB.

161BGH NJW 1972, 288; BGH VersR 1972, 274.

162 So argues Unberath, Transferred Loss, p. 222. 163 BGHZ 133, 36.