Same - Conferring Rights On Third Persons

191. As a rule, a contract cannot confer rights on a person who is not a part ' to it.

192. EXCEPTIONS - (a) The rule is subject to apparent exceptions as follows:

(1) If the contract is such as to constitute the promisor trustee for the benefit of the third person, the latter may sue in equity.

(2) Where money or other property has come into the promisor's hands by virtue of the contract, for the use of the third person, the law creates a so-called contract between him and such third person, on which the latter may sue. (b) In many of the states an exception is made in case of a promise made for the benefit of a third person, and the latter is allowed to sue thereon. It seems, however, that there must be such a relation between the promisee and the person for whose benefit the promise is made as makes the performance of the promise a satisfaction of some legal or equitable duty owing by the former to the latter.10

8 Chambers v. Baldwin, 91 Ky. 121, 15 S. W. 57, 11 L. R. A. 545, 34 Am. St Rep. 163; Ashley v. Dixon, 48 N. Y. 430, 8 Am. Rep. 559; Heywood v. Tillson, 75 Me. 225, 46 Am. Rep. 373; Bourlier v. Macauley, 91 Ky. 135, 15 S. W. 60, 11 L. R. A. 550, 34 Am. St Rep. 171; Boyson v. Thorn, 98 Cal. 578, 33 Pac. 492, 21 L. R. A. 233; Glencoe Land & Gravel Co. v. Commission Co., 138 Mo. 439, 40 S. W. 93, 36 L. R. A. 804, 60 Am. St. Rep. 500. All the courts probably agree, however, that an action will lie by a party to a contract against a third person for fraudulent representations by the latter, inducing the other party to the contract to break it. Rice v. Manley, 66 N. Y. 82, 23 Am. Rep. 30; Benton v. Pratt, 2 Wend. (N. Y.) 385, 20 Am. Dec. 623; Ashley v. Dixon, 48 N. Y. 430, 8 Am. Rep. 559. See "Master and Servant;' Dec. Dig. (Key-No.) § 339; Cent. Dig. § 12S3.

9 Bixby v. Dunlap, 56 N. H. 456, 22 Am. Rep. 475; Noice v. Brown, 39 N. J. Law, 569; Heywood v. Tillson, 75 Me. 225, 46 Am. Rep. 373; Woodward v. Washburn, 3 Denio (N. Y.) 369; Walker v. Cronin, 107 Mass. 555; Ames v. Railway Co., 117 Mass. 541, 19 Am. Rep. 426; Haskins v. Royster, 70 N. C. 601, 16 Am. Rep. 780; Jones v. Blocker, 43 Ga. 331; Daniel v. Swearengen, 6 S. C. 297, 2$ Am. Rep. 471; Huff v. Watkins, 15 S. C. 82, 40 Am. Rep. 680. See "Master and Servant," Dec. Dig. (Key-No.) § 339; Cent. Dig. § 1283.

10 See article by Professor Samuel Williston on "Contracts for the Benefit of a Third Person," 15 Harv. L. R. 767.

This rule, in its general application, is recognized by all courts. It is settled, for instance, that where a bilateral contract is made, a third person cannot perform for one of the parties, and himself claim performance by the other. He cannot thus acquire rights under the contract, even by agreement with the party whose promise he performs, unless the contract, as will be presently explained, is assignable, and is assigned. This is, in effect, another way of looking at the rule which we have already considered - that a contract cannot impose liabilities on a person not a party to it.

In a leading English case, shippers had employed a firm of brokers to transport a quantity of cocoa for them, and the brokers got a third person to do it. It was held that the latter could not sue the shippers for his expenses and commission, inasmuch as there was no privity of contract between him and them. It was said that the brokers were employed by the shippers to do the whole work for them; that the shippers looked to the brokers for the performance of the work, and the brokers had a right to look to them for payment, and that no one else had that right.11 This case illustrates both of the rules which we are considering. The contract between the brokers and the third person could not impose a liability on the shippers, as they were not parties to it; nor could the contract between the shippers and the brokers confer any rights upon the third person, since he was not a party to it.

Thus far the rule is clear not controverted.12 A difficulty, and considerable difference of opinion, arises, however, where the contract consists of a promise expressly made by one of the parties for the benefit of a third person; as, where one of the parties, for a consideration moving from the other, promises him to pay money to, or perform services for, a stranger to the contract. There may be said to be three different doctrines on this point; and probably there are more. For convenience we will call them the English,13

11 Schnialing v. Thomlinson, 6 Taunt 147. See "Contracts," Dec. Dig. (Key-No.) § 187; Cent. Dig. §§ 79S-807.

12 Standard Oil Co. v. Murray, 119 Fed. 572, 57 C. C. A. 1. To the effect that a company which has contracted with a city to supply it with water for extinguishing fires is not liable for breach of the contract to a citizen whose property is destroyed because of such breach, see Becker v. Waterworks, 79 Iowa, 419, 44 N. W. G94, 18 Am. St. Rep. 377; Fitch v. Water Co., 139 Ind. 214, 37 N. E. 9S2, 47 Am. St. Rep. 258; House v. Waterworks Co., 88 Tex. 23, 31 S. W. 179, 28 L. R. A. 532; Boston Safe-Deposit & Trust Co. v. Salem Water Co. (C. C.) 94 Fed. 238. Contra, Paducah Lumber Co. v. Paducah Water Supply Co., 89 Ky. 340, 12 S. W. 554, 7 L. R. A. 77, 25 Am. St Rep. 530; Gorrell v. Water Supply Co., 124 N. C. 328, 32 S. E. 720, 46 L. R. A. 513, 70 Am. St Rep. 598. See "Contracts," Deo. Dig. (Key-No.) » 187; Cent. Dig. §§ 7.98-807.

13nson, ConL (1th Ed.) 212 et seq.

the Massachusetts, and the New York doctrines, and will treat them separately.