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.
The American courts have divided on this question. A minority of them have adopted the final result reached by the English courts, and they have held that a contract between two persons for the benefit of a third confers no right of action upon such third person as against the promisor.1 In states which enforce this principle, a contract by an applicant for a loan to pay the lender's counsel "his charges for the examination of the title,"2or a contract on consideration whereby A promises B not to sue C on a note,3 can not be enforced by such third person. A promise by A, who owes B money on a contract of employment,4 or as income due him from an estate,5to pay to C the amount thus owing by A to B, or a promise by A, a husband, to B, his wife, to pay C, her son, money loaned by B to A,6can none of them be enforced by C. A promise by A, to whom B has paid funds under a contract with him to pay to C out of such funds a debt due him from B, can not be enforced by. C.7 A contract by which an executor, A, agrees with the beneficiary, B, that A will collect a policy upon the life of the decedent, which was payable to B, and that he will pay a certain portion of such policy to C, a creditor of the estate, can not be enforced by C.8 A promise by a prospective devisee to testator, in consideration of the devise, to pay a certain sum of money monthly to one to whom such devise had been given by a previous will, can not be enforced by such third person.9Where property is transferred by a partnership to a corporation, in consideration of a promise by the corporation to pay the partnership debts, creditors of the partnership can not enforce such contract;l0 and where B transferred a note to A under A's promise to pay B's debt to C,11 C can not enforce such contract against A. So it has been held that a grantee who promises to pay grantor's debts is liable to the grantor's creditors only in case of express agreement among the three parties.12
15 McGrather v. Pitcher , 2 Ch. 306.
16 McGruther v. Pitcher , 2 Ch. 306.
Connecticut. Treat v. Stanton, 14 Conn. 445; Clapp v. Lawton, 31 Conn. 95; Meech v. Ensign, 49 Conn. 191, 44 Am. Rep. 225; Baxter v. Camp. 71 Conn. 245, 71 Am. St. Rep. 169, 42 L. R. A. 514, 41 Atl. 803; Lamkin v. Mfg. Co., 72 Conn. 57, 44 L. R. A. 786, 43 Atl. 593, 1042; Morgan v. Randolph & Clowes Co., 73 Conn. 396, 51 L. R. A. 653, 47 Atl. 658; Atwood v. Burpee, 77 Conn. 42, 58 Atl. 237; [following, Treat v. Stanton, 14 Conn. 445, 36 Am. St. Rep. 492; Baxter v. Camp, 71 Conn. 245, 42 L. R. A. 514, 4l Atl. 803; Morgan v. Randolph & Clowes Co., 73 Conn. 396, 51 L. R. A. 653, 47 Atl. 558].
Georgia. Gunter v. Moonoy, 72 Ga. 205; Harris v. Johnson, 98 Ga. 434, 25 S. E. 525; Austell v. Humphries, 99
Ga. 408, 27 S. E. 736; Guthrie v. Atlantic Coast Line R. R. Co., 119 Ga. 663, 46 S. E. 824; Cooper v. Claxton, 122 Ga. 596, 50 S. E. 399.
Massachusetts. Rogers v. €tone Co., 130 Mass. 581, 39 Am. Rep. 478; Mars-ten v. Bigelow, 150 Mass. 45, 5 L. R. A. 43, 22 N. E. 71; Saunders v. Saunders, 154 Mass. 337, 28 N. E. 270; Borden v. Boardman, 157 Mass. 410, 32 N. E. 469; Be La Vergne Refrigerating Machine Co. v. Brewing Co., 175 Mass. 419, 56 N. E. 584; Williamson v. Mc-Grath, 180 Mass. 55, 61 N. E. 636.
Michigan. Edwards v. Clement, 81 Mich. 513, 45 N. W. 1107; Wheeler v. Stewart, 94 Mich. 445, 54 N. W. 172; Linnemann v. Moross, 98 Mich. 178, 39 Am. St. Rep. 528, 57 N. W. 103; Knights v. Sharp, 163 Mich. 449, 33 L R. A. (N.S.) 780, 128 N. W. 786; Clay Lumber Co. v. Hart's Branch Coal Co., 174 Mich. 613, 140 N. W. 912; Edwards v. Thoman, 187 Mich. 361, 153 N. W. 806; Signs v. Bush's Estate, 199 Mich. 192, 165 N. W. 820.
New Hampshire. Butterfield v. Hartshorn, 7 N. H. 345, 26 Am. Dec. 741; Chamberlain v. New Hampshire Fire Ins. Co., 55 N. H. 249.
Pennsylvania. Sweeney v. Houston, 243 Pa. St. 542, L. R. A. 1915A, 779, 90 Atl. 347.
"It must now be regarded as the settled general rule in this state that where A simply agrees with B upon a valid consideration to assume and pay B's debts and save B harmless therefrom, C, a creditor of B, cannot maintain an action at law against A for his refusal to pay the debt due from B to C." Morgan v. Clowes Co., 73 Conn. 396, 397, 51 L. R. A. 653, 47 Atl. 658.
"The mere fact that one would receive a direct benefit from the performance of a contract to which he is not a party, does not enable him to maintain an action at law upon it; and that that this is a rule which should not be departed from except for good reasons' has been stated in our courts in several cases." Atwood v. Burpee, 77 Conn. 42, 58 Atl. 237.
In the earlier Connecticut cases, it seems to have been felt that C uld bring an action upon a contract for his benefit. Crocker v. Higgins, 7 Conn. 342.
In Coffey v. Shuler, 112 N. Car. 622, 16 S. E. 911, it was said that a promise for the benefit of a third person cannot be enforced by such third person [citing, Morehead v. Wriston, 73 N. Car. 398, 21 Am. Rep. 4701. But Coffey v. Shuler is a case in which there was no consideration for the promise. The principle that a third person may enforce the contract is recognized in Gorrell v. Water Supply Co., 124 N. Car. 328, 70 Am. St. Rep. 598, 46 L. R. A. 513, 32 S. E. 720; Haun v. Bur-rell, 119 N. Car. 544, 26 S. E. 1ll; Sams v. Price, 119 N. Car. 572, 26 S. E. 170.
2 Williamson v. McGrath, 180 Mass. 55, 61 N. E. 636.
3Marsten v. Bigelow, 150 Mass. 45, 5 L. R. A. 43, 22 N. E. 71 [citing, Exchange Bank v. Rice, 107 Mass. 37, 9 Am. Rep. 11.
4Wheeler v. Stewart, 94 Mich. 445, 54 N. W. 172.
5 Saunders v. Saunders, 154 Mass. 337, 28 N. E. 270. The promise was made to the husband and the wife. Substantially the same conclusion has been reached in states which usually allow a third person to enforce a contract for his benefit. Sullivan v. Sullivan, 161 N 554, 56 N. E. 79.
6 Baxter Camp, 71 Conn. 245, 71 Am. St Rep. 169, 42 L. R. A. 514, 41 Atl. 803.
7 Borden v. Boardman, 157 Mass. 410, 32 N. E. 469.
8 Atwood v. Burpee, 77 Conn. 42, 58 Atl. 237.
From the qualifications and exceptions to this rule discussed, in this and the following sections, it will be seen that no hard and fast line can be drawn between the jurisdictions which lay down the general rule that the beneficiary can not sue, but limit this rule by qualifications and honeycomb it with exceptions, and the jurisdictions which lay down the general rule that the beneficiary can sue, but limit and qualify this rule to an even greater extent.