This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Some of the little authority there is for the proposition that a stranger to the consideration can not sue is found in cases where A makes a promise to B, who furnishes the consideration, which promise may result in a benefit to X if performed, but which is not intended primarily for the benefit of X.26
Payment by a third person not already bound is a valuable consideration.27 A check of a third person is a consideration for a promise to stay execution.28 Payment of part of a debt by a third person is a consideration for a release of the entire debt.29 Payment out of a relief fund is consideration for release of a right of action against a railroad.30
The attempt has been made to define the promisee as the person from whom the consideration moves. If this definition is correct, it is safe, but not helpful to say that the consideration must move from the promisee. If this is to be applied so as to prevent B from suing if A makes a promise to B, the consideration for which moves from X to A, it is not true according to the great weight of authority. The only effect of such a definition will be to force us to find a name other than promisee for B, to whom the promise has been made and who may sue upon it, according to the weight of authority. The cases seem to regard the promisee as the person to whom the promise is made, which seems a most plausible definition. Thus where A, a partner, sells his interest in the partnership to his co-partner, B, who agrees to pay all the debts of the firm, and X is surety for B's performance, C, a creditor of the partnership, can not maintain an action against X on such contract;31 while in the same jurisdiction a promise by A, made directly to B to pay to B a debt owing from X to B, in consideration of property belonging to X, which X has placed in B's hands, is supported by a sufficient consideration.32 B is here a stranger to the consideration, but not to the promise.
25 See Sec. 550.
26 "Where the contract is for the benefit of the contracting party and the third person is a stranger to the contract and consideration, the action must be by the promisee." Campbell v. Lacock, 40 Pa. St. (4 Wright) 448.
27 Farmer v. Sellers, 137 Ala. 112, 33 So. 829.
28 Standard Oil Co. v. Drug Co., 1 Neb. Rep. (unofficial) 443, 95 N. W. 667.
29 Marshall v. Bullard, 114 Ia. 462,
54 L. R. A. 862, 87 N. W. 427; Jackson v. Pennsylvania R. R. Co., 66 N. J. L. 319, 55 L. R. A. 87, 49 Atl. 730; Ebert v. Johns, 206 Pa. St. 395, 55 Atl. 1064; Ex parte Zelgler, 83 S. Car. 78, 21 L. R. A. (N.S.) 1005, 64 S. E. 513, 916. This question was raised but not decided in Saunders v. Whitcomb, 177 Mass. 457, 59 N. E. 192.
30Eckman v. R. R., 169 III. 312, 38 L. R. A. 750, 48 N. E. 496.
31 Campbell v. Lacock, 40 Pa. St. (4 Wright) 448.
In some of the cases in. which this question has been discussed, the promise may have been made to the person from whom the consideration moved, for the benefit of a third person who is now attempting to enforce it.
The courts do not always distinguish cases in which A makes a promise to B, and X furnishes the consideration from contracts between A and B, for which X furnishes the consideration, when they hold both classes of contracts to be equally enforceable. If X can enforce a promise by A to B when the consideration moves from B, much more should X enforce a promise which is made directly by A to him, and the consideration of which moves from B to A. A special reason for disregarding this distinction is found in the cases in which a contract, which at the outset is made between A and B for X's benefit, is regarded in legal effect upon acceptance by X as one between A and X, under which B has no rights whatever33 In such jurisdictions the promise is in legal effect one which is made to X by A, and for which B merely furnishes the consideration. In such cases it has occasionally been thought necessary to explain that both promise and consideration inures to the benefit of the beneficiary.34 If A has a valid claim against the X company, a corporation, and B. one of the stockholders, agrees with C, the other stockholder, for value moving from C, to assume all the debts of the corporation and to protect C against liability, A may enforce such contract against B,35 on the theory that "the consideration moving between the parties named, like the obligation, inures to the benefit of the claimant and will sustain a recovery on the contract."36
If we are to reject cases in which A makes a promise to B for the benefit of X, practically all the English authority to the effect that the consideration must move from the promisee, will have to be rejected, leaving very little in England and less in the United States to support it.
32 Vincent v. Watson, 18 Pa. St. (6 Harris) 96. (A's promise was made first to X and then repeated to B.)
33 Gardner v. Denison, 217 Mass. 492, 51 L. R. A. (N.S.) 1108, 105 N. E. 369; Poe v. Dixon, 60 O. S. 124, 71 Am. St. Rep. 713, 54 N. E. 86.
34 Withers v. Poe, 167 N. Car. 372, 83 S. E. 614.
35Withers v. Poe, 167 N. Car. 372, 83 S. E. 614.
36Withers v. Poe, 167 N. Car. 372, 83 S. E. 614.