Reasons

I. The Court of Appeal held that the firm D had no contractual claim. This is correct in law.

1. The firm D bought the machine from the firm R, not from the defendant. The Court of Appeal was correct in holding that there were two separate sale contracts - one between the defendant, who manufactured the machine, and its Swiss general agent, R, and the other between R and the purchaser, D (compare RGZ 87, 1, 2). The appellant's contention that R was the commercial agent of the defendant and had sold the machine to D in the defendant's name is in conflict with the admitted facts on which the Court of Appeal based its judgment. It is agreed that R regularly bought the defendant's machines on its own account and sold them on its own account to Swiss customers. Consistently with this, it was R and not the defendant that on 19 December 1961 offered D the machine which was later bought, a purchase which D confirmed on 12 February 1962 to R, not to the defendant. Then on 21 February R ordered the machine from the defendant, an order which the defendant confirmed on 22 March 1962 to R, and not to D. On 30 September 1963 the defendant sent its invoice to R, which then, on its own account, invoiced D.

On these facts the Court of Appeal was right to conclude that even if R called itself 'general agent', it was a merchant acting as a principal rather than as a commercial agent. The fact that R. constantly acted for the defendant and, so far as possible, for no one else, does not mean that it sold in the name of the defendant any more than the fact that it referred to the defendant in its accounts as 'our house'. What was said in the negotiations by R's manager and what was written by Dr. L, the firm's administrative adviser, is immaterial here. In support of the Court of Appeal's conclusion it may be noted that in its confirmation of order of 22 March 1962 the defendant allowed R '10% rebate for onward sale'.

2. If R was the buyer of the machine, then D can only claim on the contract of sale if it can sue on the contract between R and the defendant. The Court of Appeal committed no error of law in saying that this was not possible.

(a) According to the Court of Appeal, the plaintiff did not claim to be assignee of any claims for damages which R might have had against the defendant on the contract between them. There was therefore no occasion to check whether R had any claim against the defendant in respect of harm suffered by it, or, pursuant to the transfer of risk of carriage, by D (compare para. 447 BGB; BGHZ 40, 99, 101). The appellant now says that the fact that R had received the purchase price from D entailed a silent transfer of any claim for damages it might have. The Court of appeal did not investigate this question. Nor did it need to do so, since the plaintiff made no mention of an express or implicit assignment in either head of claim. It consistently founded on D's own claims and not on any assigned claims of R, doubtless because R, as the defendant's general representative, was unlikely to transfer any claims it might have against 'our house'.

(b) The Court of Appeal also denied that D had any personal claim for damages on the footing that the sale to R by the defendant was arranged as a genuine contract for the benefit of third parties. That is quite correct in law.

The Court of Appeal recognised that a sale by manufacturer to his 'contract dealer' (Vertragshändler) whereby the manufacturer is to deliver the goods directly to the sub-vendee (Streckengeschäft) can be interpreted so that the sub-vendee obtains a direct right to have the goods delivered or rather, in this case, properly loaded. It nevertheless found no good reason to treat the contract of sale between R and the defendant in this manner. Contrary to the view of the appellant, there is no legal error in such a construction, especially as the Court of Appeal highlighted the fact that the machine was not collected from the defendant by D, the supposed beneficiary, but by a carrier arranged by R.

(c) The only remaining question is whether D is included within the protective ambit of the sale contract between R and the defendant. This depends on the meaning and purpose of the contract. The Court of Appeal held not and, despite the appellant's objections, this is the right result.

(aa) The defendant delivered the machine to R 'ex works', the place of performance, according to the confirmation of order, being the defendant's place of business at G. The parties are agreed that the defendant's liability is to be determined by German law. Now it is to be noted that the provision of para. 447 BGB (which is rendered applicable in certain cases by paras 651, 644 para. 2 BGB) does not apply as between the defendant and R: it was not the defendant who, at R's request, had the machine carried by a forwarding agent or carrier for whom it had itself arranged: it was R who had the machine fetched from the defendant.

It was not the defendant's obligation to arrange for the delivery of the machine. It was certainly bound to hand it over to the carrier or agent sent by the purchaser in such a condition that the carrier could deliver it to the purchaser unharmed (RGZ 115, 162, 164; further references omitted). The duty to load the thing in a professional manner is part of the vendor's duty to deliver the purchased object to the purchaser (para. 433 par. 1 BGB), and the Court of Appeal was right to describe this duty as a subsidiary one. If the vendor is in breach of it he cannot rely on any transfer of risk under paras 446, 447 BGB, which unburden him only of risks incidental to the carriage of the goods. If he fails to pack them properly or load them in a professional manner on to the vehicle of the carrier or agent, he is responsible for the consequent destruction or deterioration of the goods (see RG, JW 1901, 725 no. 19; other references omitted). It is wholly immaterial that harm attributable to such a breach of contract arises only after the vendor has handed the goods over to the carrier (reference omitted).

The defendant has not denied that although it sold the machine 'free ex works' it undertook to load the machine on to the truck. If its workmen committed a fault in this, then it would be answerable under para. 278 BGB; the damage to the goods would not be 'accidental', so the defendant could not rely as against R on the provisions of paras 446, 447 BGB. The rules of paras 323 ff. BGB would remain applicable, and the defendant would be liable in damages and would in particular forfeit its right to claim the price.

(bb) But this helps the plaintiff only if the defendant's duty to load the machine properly was owed to D as well as to its purchaser, R. The Court of Appeal did not regard this as established.

The appellant, as against this, relies on the decisions of this court to the effect that third parties are to be drawn within the protection of a contract if the debtor's duty of care should be respected not only as towards his contractor but also as against others (NJW 1959, 1676; VersR 1959, 1009; also BGHZ 33, 247, 249). In addition to personal injury cases, this court has allowed the third party a personal claim for damages for property damage and even for merely economic loss (NJW 1965, 1955; BGHZ 49, 350). We need not here ask whether this expansion of liability results from an extensive construction of the contract based on the principle of good faith (reference omitted) or from some other source (reference omitted). This line of decisions has been criticised in some quarters, but the Bundesgerichtshof has adhered to it (BGHZ 49, 278; BGHZ 49, 350).

Still, this court has frequently emphasised that it is only within narrow limits that contractual duties of care are to be extended outside the circle of the actual parties to the contract (VersR 1962, 86; other reference omitted). The distinction between direct and indirect victims should be maintained. The general rule is that contractual liability is annexed to the tie that binds the creditor to his contractual partner. If these principles are forgotten, a contractor will be unable to tell, and so calculate, what risk he is undertaking, and it will be difficult to justify holding him liable. Thus it is by no means enough that third parties 'come into contact' with the performance of the debtor through the creditor. In modern commercial transactions involving long chains of dealers this is almost always the case. The concept of 'contract with protective effect for third parties' must be restricted not only as regards the subjects, i.e. those third parties who are drawn into the protected area, but also as regards its objects, i.e. the terms of the contract from which it is sought to draw such protective duties. The meaning and purpose of a contract, once it is construed in accordance with the principle of good faith (para. 157 BGB), will only justify the extension of the duties of care and protection to third parties if the principal creditor himself owes them protection and care and is in some sense responsible for their weal and woe (see BGHZ NJW 1964, 33). This will normally be so only in rather personal situations, such as exist in the family or in employment or in tenancy. An especially strict test must be applied if the protective effect is to apply to property damage and economic loss.

This is not the place to decide in detail what people deserve and need to be included. The Court of Appeal essentially relied on the above principles of law and asked whether the contract between the defendant and R could be construed in such a way as to give D a place in the protective purpose of the contract, at any rate so far as the duty to load the gods with care was concerned. The court did not misapprehend the fact that the machine was clearly produced in accordance with D's wishes, and was to be delivered directly to D, but it saw in this fact no sufficient reason for giving D a personal right to claim damages. From the legal point of view this is perfectly right. It is essentially just a question of the construction of the contract, a matter over which a court of review has only limited control. Doubtless tradesmen do think it important to take care of their customers' interests, but not in the sense of owing them 'protection and care' (reference omitted). In a Streckengeschäft like the present, the goods are packed and loaded so as to reach the ultimate purchaser, but this just helps to decide how they are to be packed and loaded: it is not a sufficient reason for bringing the sub-purchaser within the protection of the contractual subsidiary duty.

(cc) The appellant says that good faith demands his inclusion in the protection of the contract, for otherwise the result would be inequitable. The considerations it adduces are only partially correct.

It is true that R could claim damages from the defendant because, as we have said, the defendant is not relieved by para. 447 BGB. If so, says the appellant, it would be unjust if D were 'saddled with' the loss since the risk of carriage had passed to it (para. 447 BGB; compare art. 185, Swiss Code of Obligations (OR)). But this is wrong. There was surely a contract of sale and delivery between R and D, but it relieved R only of the true risks of carriage, whereas here we have harm due to improper loading. The seller, R, had to see to the loading, and since it had the loading done by the defendant, it must answer for the defendant's fault in this regard, as the Court of Appeal correctly said by invoking para. 278 BGB and the comparable rule in Swiss law (Art. 101 OR). D may well have good claim against R (for damages or for refund of the purchase price) wherein R could assign to D its claims for damages against the defendant (compare para. 281 BGB and the similar rule in Swiss law).

No further consideration of these factors is needed to show that the results of the decision of the Court of Appeal are not necessarily inequitable or such as to constrain us to grant D the right to claim damages directly from the defendant.

II.

The Court of appeal was right to hold that D had no claim for damages against the defendant on the basis of negotiorum gestio (Geschäftsführung ohne Auftrag). In loading the machine the defendant was neither executing a mandate from R nor yet performing a task for D for which it had no mandate: it was doing its own duty as seller to deliver the machine to the purchaser (reference omitted). The appellant's proposals on this matter are based on a misconception of the law.

III.

Nor did the firm D have any claim in tort against the defendant on the ground that the defendant caused 'its' machine, the machine of D, to be loaded in an unprofessional manner. D had already paid 30,000 DM towards the purchase price, but that did not make it 'owner by Vorbehalt', as the Court of Appeal rightly held. Nor was D in indirect possession of the machine during the carriage. The carrier was in possession of the machine during the carriage. The carrier was in possession of the machine for R, not for D.

1. As we have explained there were here two sale contracts which must be kept legally distinct. We must also distinguish the transfer of ownership from the defendant to R from the further transfer to D. When the machine was handed to the carrier sent by R, the risk passed to R and the risk of carriage passed simultaneously to D, regardless of the fact that here R was delivering directly from the factory rather than from his own place of business or place of performance (BGHZ 24 March 1965, NJW 1965, 1324). But the transfer of risk has nothing to do with the transfer of ownership (nor with the acquisition of a vested right of future ownership) (RGZ 93, 330, 331; 85, 320). In a contract for sale and delivery ownership only passes to the purchaser when the purchased property comes into his hands (RGZ 108, 25, 27-8; 102, 38, 40; 99, 56, 57; NJW 1960, 1952), although it may happen earlier in exceptional cases, for example if the vendor, in handing the goods to the carrier, untypically intends to vest them in the purchaser and the carrier is authorised by the purchaser to acquire ownership in them as his agent (see RGZ 84, 320, 322; other reference omitted).

In the present case it may be assumed that on handing the machine to the carrier the defendant was ready to transfer his ownership in it to R (probably conditionally on the outstanding price being paid). The carrier commissioned to deliver the machine to R had been chosen not by the defendant but by R. The carrier and forwarding agent were therefore in possession of the machine as intermediaries for R. It does not follow from this that R would have been ready to transfer ownership to D before the machine actually arrived at it destination, let alone immediately. So far as the relationship between R and D goes, one should maintain the principle already mentioned, that when there is a contract for the sale and delivery of goods, the property passes only on the delivery of the goods to the purchaser. In the relationship between D and R the carrier was ordered by the seller, not by D, to whom the carrier was unknown until the accident. The carrier could not acquire ownership directly for D without some special authorisation (see RGZ 103, 30, 32; 102, 41; 84, 320, 322).

2. After investigating all the circumstances, the Court of Appeal found that there was no such authorisation here. The appellant's objections to this are without merit.

The Court of Appeal did not overlook the possibility that in view of the particularly close interfusion of the two sales contracts the defendant might have transferred the property directly to D, through the intermediacy of the carrier, but it decided that this had not happened, especially since the loading chit which the defendant gave to the carrier said 'To the order of the Firm R & Co.' This is legally unassailable. Nor was the Court of Appeal wrong to ignore the fact that the invoice which the defendant sent to R on 30 September 1963 stated, under the heading 'Delivery', To be collected by truck belonging to K in Z, for delivery to D in N'. Such a delivery note is a feature of every Streckengeschäft and it did not evince any intention on the part of the defendant to transfer ownership directly to D.

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This page last updated Thursday, 01-Dec-2005 11:04:42 CST. Copyright 2007. All rights reserved.