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 right of the beneficiary to maintain an action upon the contract to which he is not a party is sometimes referred to the statute which provides that an action may be maintained in the name of the real party in interest.1 This explanation does not seem to be justified by the development of the law on the subject of the rights of the beneficiary in most jurisdictions. His position has generally been regarded as very different from that of the assignee at common law in its later development. In the latter the assignee was regarded as the real party in interest who was obliged for procedural reasons to maintain an action in the name of his assignor.2 The beneficiary has been regarded in some jurisdictions as having no interest in the contract. The entire interest in such jurisdictions has been regarded as belonging to the promisee. Where this view has been entertained, the beneficiary had no right of action either in his own name or in the name of the promisee.3 In jurisdictions in which the beneficiary has been held to have a right in the contract, it has generally been held that he could enforce such right by an action in his own name.4 In some jurisdictions the beneficiary may, at his election, sue in his own name or in the name of the promisee for the use of the beneficiary.5 A statute which provides that the trustee of an express trust may maintain an action in his own name, and that one in whose name a contract is made for the benefit of another is to be regarded as the trustee of an express trust, does not prevent the beneficiary from bringing an action upon the contract in his own name,6 especially if the real consideration belongs to the beneficiary and is furnished on his behalf by the promisee.7
1 Guthrie v. Atlantic Coast Line R. R. Co., 119 Ga. 663, 46 S. £. 824; Ogles v. Nashville, Chattanooga & St. Louis Ry., 130 Ga. 430, 124 Am. St. Rep. 175, 60 S. E. 1048; Allen & Curry Mfg. Co. v. Shreveport Waterworks Co., 113 La. 1091, 68 L. R. A. 660, 37 So. 980; McIlvane v. Big Stony Lumber Co., 105 Va. 613, 54 S. E. 473; Armour v. Western Const. Co., 36 Wash. 529, 78 Pac. 1106.
See also Guss v. Federal Trust Co., 19 Okla. 138, 91 Pac. 1045.
2Ruohs v. Traders' Fire Ins. Co., Ill Tenn. 405, 102 Am. St. Rep. 790, 78 S. W. 85.
3Ruohs v. Traders' Fire Ins. Co., 1ll Tenn. 405, 102 Am. St. Rep. 790. 78 S. W. 85.
4 Washburn v. Interstate Investment Co., 26 Or. 436, 36 Pac. 533, 38 Pac. 620; Tweeddale v. Tweeddale, 116 Wis. 517, 93 N. W. 440; Fanning v. Murphy, 126 Wis. 538, 110 Am. St. Rep. 946, 4 L. R. A. (N.S.) 666, 105 N. W. 1056. "The law invests him with a privity." Washburn v. Interstate Investment Co., 26 Or. 436, 36 Pac. 533, 38 Pac. 620 [quoted in John Horstmann Co. v. Waterman, 18 Wash. 103, 1 A. L. R. 856, 173 Pac. 7331.
5 Washer v. Independent Mining & Development Co., 142 Cal. 702, 76 Pac. 654.
6 Chandler v. Jones, 173 N. Car. 427, 92 S. E. 145; Crumpler v. Hines, 174 N. Car. 283. 93 S. E. 780.
The denial of C's right to enforce a contract between A and B, for C's benefit, is not merely a matter of procedure.6 C can not maintain an action because he has no interest in the contract, and not because, under the rules of procedure, he must bring an action in B 's name.9 Accordingly, a statute which provides that the action is to be brought in the name of the real party in interest, can not confer upon C a right to sue upon a contract for his benefit, which was made before such statute was enacted.10 It seems to be assumed that under such statute C has a right in contracts which are entered into after such statute is enacted.11 Why such a statute should have such an effect as to future contracts is not made clear. If it deals merely with a question of the party in whose name the action is to be brought, it would seem that it ought not to be regarded as affecting any substantive right.
1 American Soda Fountain Co. v. Hogue, 17 N. D. 375, 17 L. R. A. (N.S.) 1113, 116 N. W. 339.
2 See Sec. 2240.
3 See Sec. 2380 et seq.
4 See Sec. 2387.
5 Holt v. United Security L. Ins. & T. Co., 76 N. J. L. 585, 21 L. R. A. (N.S.) 691, 72 Atl. 301.
6 Best v. Rocky Mountain National Bank, 37 Colo. 149, 7 L. R. A. (N.S.) 1035, 85 Pac. 1124.
7 Best v. Rocky Mountain National Bank, 37 Colo. 149, 7 L. R. A. (N.S.) 1035, 85 Pac. 1124.
8 Signs v. Bush's Estate, 199 Mich. 192, 165 N. W. 820. "It is suggested that by virtue of section 2, ch. 12, of the Judicature Act (Act No. 314, Pub. Acts 1915), this action could now be prosecuted by the claimant, as she is the real party in interest. This section provides: 'Every action shall be prosecuted in the name of the real party in interest,' etc.