188. As a rule, a contract does not impose liabilities nor confer rights on a person who is not a party to it.

EXCEPTIONS - (a) There are apparent exceptions to this rule:

(1) Where one person represents another in entering into a contract; that is, in the case of contracts through agents.

(2) Where the rights or liabilities created by a contract pass to a person or persons other than the original parties by assignment, (b) There are also real exceptions to the rule in some jurisdictions.

The rule that a person who is not a party to a contract cannot be included in the rights or liabilities which it creates, so as to entitle him to sue, or render him liable to be sued, upon it, flows from the very nature of contract as a legal conception. As we have seen, a true contract is an agreement between two or more persons, by which an obligation or legal tie is created, binding those persons together, so that one or each has the right to require some act or forbearance on the part of the other. As a rule, the legal relations of third persons are not affected, because they are not parties to the agreement. They are not bound by the legal bond which it creates, and a breach thereof cannot give them any rights. Nor, on the other hand, can any liabilities be imposed upon them.

It will be noticed that the rule stated in the black-letter text is divisible. There are in fact two rules - the first, that a contract cannot impose liabilities, and the second, that it cannot confer rights, on a person who is not a party to it.1 We can better reach a correct understanding of the law on this subject if we consider each of these rules separately, together with the exceptions, or apparent exceptions, peculiar to it; but before doing so we must notice two apparent exceptions to the rule as a whole.