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 principles which control contracts for the benefit of the promisee often find especial and peculiar application in contracts for the benefit of a third person. In order that the beneficiary may enforce the contract, there must be a valid and enforceable contract between the promisor and the promisee for the benefit of the third person.1 A statement, "I have agreed with B to take up his papers," does not of itself import a contract for the benefit of C, who is B's creditor.2 A clause in a deed which recites that the grantee assumes and agrees to pay certain obligations of the grantor, does not impose a personal obligation upon the grantee, if the grantee did not know of such provision or assent thereto.3 One who has purchased realty which is subject to a mortgage, does not become personally liable to the mortgagee in the absence of a contract whereby he agrees to pay such debt either expressly or by fair implication.4 If the grantee agrees with his grantor upon the purchase price of the realty free from incumbrances, and by mutual arrangement the grantee then retains the amount of the incumbrances out of the purchase price, such transaction is generally regarded as amounting to a promise by the grantee to the grantor to apply to the payment of the incumbrance the amount thus retained,5 and the creditor may maintain an action against the grantee upon such contract.6 One who acquires an interest in land subject to certain rent, does not thereby assume a personal obligation for the amount of such rent.7 One who has purchased a lot can not enforce building restrictions in the deeds of adjoining lot owners, unless such adjoining lot owners know of a general plan for the use of such adjoining property when he purchases his lot, or unless they know that restrictions are inserted in their deeds for the benefit of adjoining property owners.8 The fact that a bank pays a check upon a forged indorsement and stamps it paid, does not amount to such an acceptance of the check as to make the bank liable to the payee or to the true holder thereof.9 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.10 The fact that B expects that A will do some act for the benefit of C, does not impose any liability on A, unless he has in some manner agreed to assume such liability.11 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.12 Since an agent is bound to carry out the instructions of his principal, and since he owes no duty to the person who was to be benefited by the performance of his original instructions, which can justify him in refusing to obey subsequent instructions, a creditor can not bring an action against an agent in whose hands the principal has placed money with instructions to apply such money to the payment of certain specified obligations.13 C can not accept the benefits of the contract between A and B after A has become bankrupt.14 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.15
"This was not in effect at the time that the claim was filed, and the claim was pending when this law went into force. It is urged that the Judicature Act is merely a practice act and that a practice act should be held to apply ' to cases pending when such act went into effect, and the case of Little & Co. v. Hazen & Co., 185 Mich. 316, 152 N. W. 95, is referred to* to sustain this contention. We there held that where a statute affects the rights of the parties, and not the rights themselves, even though passed subsequent-to commencement of suit, it is fully applicable to all pending cases. But the situation before us is not merely a question of applying the remedy to the rights of the parties, but under the law as it existed at the time this claim was filed, the claimant had no rights arising out of the transaction against the defending estate. To hold that the statute here invoked would sustain appellant's contention would give the claimant a right which she did not possess at the time she filed her claim. If she had had a right or a claim at that time and had pursued an improper remedy, which was subsequently recognized by statute, it would present a similar situation to that referred to in the Little case, supra." Signs v. Bush's Estate, 199 Mich. 192, 165 N. W. 820.
9 Signs v. Bush's Estate, 199 Mich. 192, 165 N. W. 820.
10 Signs v. Bush's Estate, 199 Mich. 192, 165 N. W. 820.
11 Signs v. Bush's Estate, 199 Mich. 192, 165 N. W. 820.
1 Illinois. Thompson v. Dearborn, 107 111. 87.
Nebraska. Gammel Book Co. v. Paine, 75 Neb. 683, 106 N. W. 777.
New York. Schwartz v. Cahill, 220 N. Y. 174, 115 N. E. 451.
Ohio. Elyria Savings & Banking Co. v. Walker Bin Co., 92 O. S. 406, L. R. A. 1916D, 433, 111 N. E. 147.
Oklahoma. Hiner v. Washita Valley Bank, 51 Okla. 606, 152 Pac. 112.
South Carolina. Tucker v. Gaines, 86 S. Car. 500, 68 S. E. 670.
Wisconsin. Krahn v. Goodrich, 164 Wis. 600, 160 N. W. 1072.
2 Tucker v. Gaines, 86 S. Car. 600, 68 S. E. 670.
3 Thompson v. Dearborn, 107 111. 87.
4 Robinson Bank v. Miller, 153 111. 244, 46 Am. St. Rep. 883, 27 L. R. A. 449, 38 N. E. 1078; Van Eman v. Mosing, 36 Okla. 555, L. R. A. 1917C, 590. 129 Pac. 2; Hammond v. Wall, - Utah - , 171 Pac. 148.
5 Van Eman v. Mosing, 36 Okla. 555, L. R. A. 1917C, 590, 129 Pac. 2.
7 Schwartz v. Cahill, 220 N. Y. 174, 115 N. E. 451.
8 Kiley v. Hall, 96 O. S. 374, L. R. A. 1918B, 961, 117 N. E. 359.
9 Elyria Savings & Banking Co. v. Walker Bin Co., 92 O. S. 406, L. R. A 1916D, 433, 111 N. E. 147.