One who is not a party to a contract, but who benefits thereby, cannot sue upon it at all in some jurisdictions, but in the majority may sue provided he comes within rules that are variously stated in different cases.
The rights of one who is a beneficiary of a contract, but no party thereto, has occasioned considerable difficulty and different decisions. The theory of contract is that it is purely an individual matter governed by agreement between the parties. But when it benefits others, frequently an injustice would result if such beneficiaries could not enforce it.
One who is merely an incidental beneficiary cannot sue no matter how great the incidental benefit may be.
If the .benefit is merely incidental, no matter how great, the beneficiary has no right to enforce the performance of the contract. It is not uncommon for strangers to take a decided benefit from the performance of some contract made by others. But, if the parties chose to rescind the contract, or if one refuses to go ahead, and the other will not force him, one who would have benefited thereby can do nothing.157
157. Pennsylvania Steel Co. v. New York City R. Co., 198 Fed. 721.
If the contract is intended primarily for the beneficiary's benefit, he may sue.
The doctrine of the courts that a beneficiary may sue has been variously stated and variously applied. No general rule may be laid down which would be accurate and comprehensive of all the cases. But the doctrine, more or less stringently applied, is in force in most jurisdictions. It is applied where the contract is made primarily for another's benefit, and especially where a contract is made by which assets pass upon which a third person has an equitable right, as a sale of a business and a promise by the buyer to pay the existing debts. A creditor may sue (in most jurisdictions), on such a contract.
Example 72. Holly loaned defendant $300.00, which was the sum that Holly owed plaintiff. Defendant, as a part of the contract, agreed with Holly to repay the $300.00 to plaintiff. Plaintiff sued defendant and it was objected that plaintiff had no contract with defendant. But plaintiff was allowed a recovery as beneficiary.158
T58. Lawrence v. Fox, 20 N. Y. 268. 159. Snell v. Ives, 85 111. 279.