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.
Principles of the law of ordinary contracts often find a special and peculiar application in contracts of this type. There must be an agreement of some sort between A and B, whereby A is to do some act for the benefit of C. B leased realty from A, a railway under a contract whereby B released A from all liability for damage by fire. C, not knowing of such provision stored cotton on B's platform, on such realty, where it was destroyed by fire caused by A's negligence. The provision in B's lease was held to be no defense to A in an action brought by C.1 iels v. Gibson (Ky.), 47 S. W. 621; Benge v. Hiatt, 82 Ky. 666; 56 Am. Rep. 912; Sargeant v. Daunoy, 14 La. 43; 33 Am. Dec. 573; Coffin v. Bradbury, 89 Me. 476; 36 Atl. 988; Dearborn v. Parks, 5 Greenl. (Me.) 81; 17 Am. Dec. 206; Dickinson County v. Fitterling, 72 Minn. 483; 75 N. W. 731; Maxcy v. Ins. Co.,
54 Minn. 272; 40 Am. St. Rep. 325;
55 N. W. 1130; Howsmon v. Water Co., 119 Mo. 304; 41 Am. St. Rep. 654; 23 L. R. A. 146; 24 S. W. 784;' Ellis v. Harrison, 104 Mo. 270; 16 S. W. 198; State v. Gas Co., 102 Mo. 472; 22 Am. St. Rep. 789; 14 S. W. 974; 15 S. W. 383; Rohman v. Gaiser, 53 Neb. 474; 73 N. W. 923; Kaufman v. Bank, 31 Neb. 661; 48 N. W. 738; Painter v. Kaiser, - New - ; 76 Pac. 747; Whitehead v. Burgess, 61 N. J. L. 75; 38 Atl. 802; Buchanan v. Til-den, 158 N. Y. 109; 70 Am. St. Rep. 454; 44 L. R. A. 170; 52 N. E. 724; Embler v. Ins. Co.. 158 N. Y. 431; 44 L. R. A. 512; 53 N. E.
212; Societa Italiana v. Sulzer, 138 N. Y. 468; 34 N. E. 193; Barker v. Bradley, 42 N. Y. 316; 1 Am. Rep. 521; Burr v. Beers, 24 N. Y. 178; 80 Am. Dec. 327; Lawrence v. Fox, 20 N. Y. 268; Poe v. Dixon, 60 O. S. 124; 71 Am. St. Rep. 713; 54 N. E. 86; Society of Friends v. Haines, 47 O. S. 423; 25 N. E. 119; Thompson v. Thompson, 4 O. S. 333; Merriman v. Moore, 90 Pa. St. 78; McCarty v. Blevins, 5 Yerg. (Tenn.) 195; 26 Am. Dec. 262; Brown v. Markland, 16 Utah 360; 67 Am. St. Rep. 629; 52 Pac. 597; Thompson v. Cheesman, 15 Utah 43; 48 Pac. 477; Tweeddale v. Tweed-dale, 116 Wis. 517; 96 Am. St. Rep 1003; 61 L. R. A. 509; 93 N. W 440; Stites v. Thompson. 98 Wis. 329; 73 N. W. 774; Larson v. Cook, 85 Wis. 564; 55 N. W. 703.
3 Montgomery v. Rief, 15 Utah 495; 50 Pac. 623.
1Texas, etc.. Ry. v. Watson, 190 U. S. 287; affirming, 112 Fed. 402. 50 C. C. A. 230.
The fact that B expects that A will do some act for the beuefit of C does not impose any liability on A unless he has in some manner agreed to assume such liability.2 Thus B transferred his property to a corporation A, and took stock therein, intending that his debts should be paid out of such property; but there was no agreement to that effect between A and B. B's creditors were not allowed to enforce payment of their debts from A.3 In jurisdictions in which the right of a third person to enforce a contract made for his benefit is not regarded with favor, it is held that a third person cannot enforce a contract for his benefit unless he is specifically named.4 In other jurisdictions which regard this right with greater favor, it is held that one who is indicated in a sufficiently definite way may enforce a contract intended for his benefit though he is not specifically named.5 Since an offer may ordinarily be made to a person to be ascertained in the future,6 a promise by A to B for the benefit of a third person is not invalid because such third person is not ascertained when the promise is made.7 Thus where A, the owner of a stallion, agreed with B, the owner of a mare, that A would pay to any person who should own "he first of the foals of such mare by such stallion, which should trot a mile in two minutes and thirty seconds or less, the sum of seven hundred fifty dollars, and C bought one of the foals, knowing of such promise, it was held that if the foal owned by C trotted a mile in the prescribed time, C would recover from A.8
As in the cases of all other contracts it is necessary that the third person should accept the offer made for his benefit to enable him to enforce it. His bringing an action on the contract is a sufficient acceptance thereof.9 No formal assent before the bringing of the action is necessary.10 The third person may accept even though he is then an infant.11 A agreed with B to convey certain realty to C, B's child, on consideration that A might name C. It was held that C's bearing such name down to the time of the suit is such an acceptance that C may sue A on such promise.12 The characteristic feature of contracts of this class is that the third person benefited by the contract is not a party to it. Accordingly if the contract is in writing, the fact that it is not delivered to C does not prevent him from enforcing it.13 If C accepts the benefits of such promise he must assume all the conditions and liabilities that the parties have attached thereto.14
2 Durlacher v. Frazer, 8 Wyom. 58; 80 Am. St. Rep. 918; 55 Pac. 306.
3 Durlacher v. Frazer, 8 Wyom. 58; 80 Am. St. Rep. 918; 55 Pac. 306.
4 Harvey v. Milk Co., 92 Me. 115; 42 Atl. 342; Carr v. Bank, 107 Mass. 45; 9 Am. Rep. 6; Dow v. Clark, 7 Gray (Mass.) 198.
5 State v. Gaslight Co., 102 Mo.
472; 22 Am. St. Rep. 789; 14 S. W. 974; 15 S. W. 383.
6 See Sec. 51.
7 Whitehead v. Burgess, 61 N. J. L. 75; 38 Atl. 802. (The court expressly treated this as analagous to contracts offering rewards to persons not then known.)
8Whitehead v. Burgess, 61 N. J L. 75; 38 Atl. 802.
The promisor and the promisee may rescind the contract without the consent of the third person at any time before he has assented to it or acted on it.15 If the promisor agrees to pay something to a third person to whom the promisee is not indebted such third person cannot enforce this promise after the promisor has settled all his liability by a payment to the promisee.16 It can be rescinded so as to bar the rights of the third person, only " before it is brought to his knowledge and he has assented to it and acted on it,"17 After the third person has accepted this offer, it seems that the promisor and promisee cannot rescind.18 Thus where A, a grantee, assumed and agreed to pay a mortgage from his grantor B, to C; and C has notified A that he holds him liable, and C has brought suit against A, but summons has not yet been served, A can not avoid liability by taking a release from B.19
9 North Alabama Development Co. v. Orman, 55 Fed. 18; 5 C. C. A. 22; Coppage v. Gregg, 127 Ind. 359; 26 N. E. 903; McCoy v. McCoy, - Ind. App. - ; 69 N. E. 193; Stariha v. Greenwood, 28 Minn. 521; UN. W. 76; Campbell v. Smith, 71 N. Y. 26; 27 Am. Rep. 5.
10 Tweeddale v. Tweeddale, 116 Wis. 517; 96 Am. St. Rep. 1003; 61 L. R. A. 509; 93 N. W. 440.
11 Gooden v. Rayl, 85 la. 592; 52 N. W. 506; Strong v. Marcy, 33 Kan. 109; 5 Pac. 366; Benge v. Hiatt, 82 Ky. 666; 56 Am. Rep. 912; McCarty v. Blevens, 5 Yerg. (Tenn.) 195; 26 Am. Dec. 262.
12Daily v. Minnick, 117 Ia. 563;
60 L. R. A. 840; 91 N. W. 913.
13 Copeland v. Sumers, 138 Ind. 219; 35 N. E. 514; 37 N. E. 971; Stevens v. Flannagan, 131 Ind. 122; 30 N. E. 898.
14 Schneider v. Ins. Co., 123 N. Y. 109; 20 Am. St. Rep. 727; 25 N. E. 321.
15 Commercial National Bank v. Kirkwood, 172 111. 563; 50 N. E. 219; Davis v. Calloway, 30 Ind. 112; 95 Am. Dec. 671; Brewer v. Maurer, 38 O. S. 543; 43 Am. Rep. 436; Trimble v. Strother, 25 O. S. 378.
16 Townsend v. Rackham, 143 N. Y. 516; 38 N. E. 731.
17Gifford v. Corrigan, 117 N. Y.
If C can maintain an action upon A's promise, any defense which A could invoke as against B can be invoked against C.20 Thus failure of consideration caused by B's default may be in voked as against C.21 A's liability to C is measured by his contract with B. If A has promised to pay B's debts up to a certain amount, and the total amount of B's debts is uncertain, C, one of B's creditors may sue A, but A may compel the action to be brought for the benefit of all the creditors so that the adjudication rendered will bind all and free A from further liability.22 If A has paid the entire amount of his contract liability to one of the creditors, he may be compelled to pay to the other creditors such sum as they would have received if they had all been made parties and had received proportionate amounts of the sum paid by A.23