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.
Payment by -one not a party to the contract, if accepted in satisfaction of the obligation of the contract operates as a discharge,1 even if there is no privity between the party making the payment and the debtor, and the debtor is therefore under no obligation to reimburse such third party.2 Thus A who had a judgment against B, attached certain bonds of a railroad company. The railroad company wished to retire such bonds and so made an arrangement by which A had the bonds sold, bought them in himself and transferred to X, who acting on behalf of the railroad company, paid part of the judgment in cash and gave notes for the balance. Whatever might be the nature of the transaction between B and X, A was paid and could not recover again from B.3 So A gave a note which was subsequently indorsed by the holder thereof to a bank "for collection." The bank paid the note without consulting A, and then sought to recover from A. As the agreement between the bank and the holder of the note was for payment and not for assignment, the bank could not be treated as the holder of the note.4 Xeither could the bank recover from A for money expended on his behalf.5 If, however, the contract provides for assignment the transaction cannot be treated as payment. Thus where the holder A indorsed " for collection ': to B, and B sold to C after cancelling such indorsement, but leaving it still legible, C took with notico and acquired no greater right than B had; but the transaction was not payment.6 If payment is a condition precedent, payment by a third person if accepted in satisfaction is sufficient.7 So if the premium on an insurance policy must be paid before the policy takes effect, this condition is performed if the agent advances the premium out of his own funds.8 But where A agreed severally with X and Y to construct a building for each, adjoining that of the other, and X agreed to pay A half the cost of the party-wall, while Y agreed to pay A the entire cost of such wall, X's payment of his proportion does not discharge Y from paying the entire amount.9
1 People v. Syracuse, 144 N. Y. 63; 38 N. E. 1006; Swift v. New York. 83 N. Y. 528.
2 Vandegrift v. Engineering Co., 161 N. Y. 435; 48 L. R. A. 685; 55 N. E. 941.
3 Drake v. Harrison, 69 Wis. 99;
2 Am. St. Rep. 717; 33 N. W. 81.
4 Crumlish v. Improvement Co., 38 W. Va. 390; 45 Am. St. Rep. 872; 23 L. R. A. 120; 18 S. E. 456; Gray v. Herman, 75 Wis. 453; 6 L. R. A. 691 ; 44 X. W. 248.
1 Cnimlish v. Improvement Co.,
38 W. Va. 390; 45 Am. St. Rep. 872; 23 L. R. A. 120; 18 S. E. 456; Gray v. Herman, 75 Wis. 453; 6 L. R. A. 691; 44 N. W. 248.
2 Gray v. Herman, 75 Wis. 453; 6 L. R. A. 691; 44 N. W. 248.
3 Crumlish v. Improvement Co., 38 W. Va. 390; 45 Am. St. Rep. 372; 23 L. R. A. 120; 18 S. E. 456.
4 People's, etc., Bank v. Craig, 63
O. S. 374; 81 Am. St. Rep. 639; 52 L. R. A. 872: 59 N. E. 102.
5 See Sec. 832.
6 Cussen v. Brandt, 97 Va. 1; 75 Am. St. Rep. 762; 32 S. E. 791.
7 Lehman v. Gunn, 124 Ala. 213; 82 Am. St. Rep. 159; 5 L. R. A. 112; 27 So. 475.
8 Lehman v. Gnnn, 124 Ala. 213; 82 Am. St. Rep. 159; 51 L. R. A. 112; 27 So. 475.