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.
If the beneficiary accepts the bene-fits of the contract, he takes subject to its validity as between the original parties thereto, and subject to the terms and conditions of the original contract. The liability of the promisor to the beneficiary is measured by the terms of the contract between the promisor and the promisee; and the liability of the promisor can not exceed the liability imposed upon him by such contract.1 If B has obtained an option from C, which imposes no liability upon B to make payments, but which provides that B may secure the property by making payments if he wishes to, and B transfers such contract to A under a contract by which A agrees to make such payments, it is held that A is not bound to make such payments to C.2 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.3 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.4 B conveyed a farm to A under a contract by which A was to support B for life, and should discharge all of B's indebtedness, and that in case he paid the indebtedness by the end of ten years he should pay a certain sum of money to each of B's children, C, Y and Z. Soon afterwards B leased to A all the personal property upon the farm for B's life on condition that A remained on the farm and performed the contract. It was held that the contract between A and B was personal and that the covenant by A to pay such money to C, Y and Z was conditioned upon his electing to perform the contract and to pay such indebtedness. Accordingly, since A subsequently elected not to perform, and by agreement with B conveyed such property to B, it was held that C, Y and Z had no cause of action against A upon such promise.5
Indiana. Carnahan v. Tousey, 93 Ind. 561; Coppage v. Gregg, 127 Ind. 359, 26 N. E. 903; McCoy v. McCoy, 32 Ind. App. 38, 102 Am. St. Rep. 223, 69 N. E. 193.
Minneosta. Stariha v. Greenwood, 28 Minn. 521, 11 N. W. 76.
New York. Campbell v. Smith, 71 N. Y. 26, 27 Am. Rep. 5.
Wisconsin. Tweeddale v. Tweeddale. 116 Wis. 517, 96 Am. St. Rep. 1003, 61 L. R. A. 509, 93 N. W. 440.
See also, Gilbert Paper Co. v. Whiting Paper Co., 123 Wis. 472, 68 L. R. A. 956, 102 N. W. 20.
6 Tweeddale v. Tweeddale, 116 Wis. 517, 96 Am. St. Rep. 1003, 61 L. R. A. 509, 93 N. W. 440; Smith v. Pfluger, 126 Wis. 253, 110 Am. St. Rep. 911, 2 L. R. A. (N.S.) 783, 105 N. W. 476; Fanning v. Murphy, 126 Wis. 538, 110 Am. St. Rep. 946, 4 L. R. A. (N.S.) 666, 105 N. W. 1056; Micek v. Wamka, 165 Wis. 97, 161 N. W. 367.
See also, Gilbert Paper Co. v. Whiting Paper Co., 123 Wis. 472, 68 L. R. A. 956, 102 N. W. 20.
7Gooden 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; Griffin v. Schlenk (Ky.), 102 S. W. 837, 31 Ky. Law Rep. 422; McCarty v. Blevens, 11 Tenn. (5 Yerg.) 195, 26 Am. Dec. 262.
8 Daily v. Minnick, 117 Ia. 563, 60 L. R. A. 840, 91 N. W. 913.
9Griffin v. Schlenk (Ky.), 102 S. W. 837, 31 Ky. Law Rep. 422.
10 Ottumwa Mill & Construction Co. v. Manchester, 139 la. 334. 115 N. W. 911.
11 Ottumwa Mill & Construction Co. v. Manchester, 139 Ia. 334. 115 N. W. 911. (This is said to be an "implied contract" between the contractor and the tenant.)
Florida. American Securities Co. v. Goldsberry, 69 Fla. 104, 1 A. L. R. 15, 67 So. 862.
Georgia. Union City Realty & Trust Co. v. Wright, 145 Ga. 730, 89 S. E. 822
New York. Schneider v. Ins. Co., 123 N. Y. 109, 20 Am. St. Rep. 727, 25 N. E. 321.
Oregon. United Artisans v. Cronise, 88 Or. 602. L. R. A. 1918D. 1131, 172 Pac. 109.
Vermont. Jenness v. Simpson, 84 Vt. 127, 78 Atl. 886.
Washington. Rockwell v. Edgcomb,
72 Wash. 694, 45 L. R. A. (N.S.) 661, 131 Pac. 191.
Wisconsin. Gimbel Brothers v. Mc-Connell. 159 Wis. 325. 150 N. W. 495.
2 Rockwell v. Edgcomb, 72 Wash. 694, 45 L. R. A. (N.S.) 661. 131 Pac. 191.
3 Bell v. Mendenhall, 71 Minn. 331,
73 N. W. 1086.
4 Curry v. Homer, 62 O. S. 233, 56 N. E. 870.
If C can maintain an action upon A's promise, any defense which A could invoke as against B can be invoked against C.6 If A is induced to enter into the contract by B's fraud, A may set up such fraud in an action by C,7 at least if A did not contemplate action by C in reliance upon such contract.8 If A's liability is made subject to the express condition of a notice to him, by the terms of the contract between A and B, C can not enforce such contract without giving such notice.9 If a bond given by a public contractor for the benefit of laborers and materialmen, is conditioned upon giving notice, the beneficiaries of such bond can enforce it only if such notice is given in substantial compliance with such provisions.10 If the mortgagor and the mortgagee have entered into a valid agreement for the extension of time upon the mortgage debt, a subsequent grantee who has assumed and agreed to pay the mortgage debt may take advantage of such extension.11 If the contract between A and B reserves to B the right to change the beneficiary, C can not enforce such contract against A in case B has exercised such option;l2 nor can he enforce such contract after A and B have rescinded it.13 By a special contract between B and C,14 which is entered into either when A and B make their contract,15 or subsequently thereto,16 B may give up the right of changing the beneficiary which he has reserved by the terms of the contract between himself and A, and in such case A is bound by B's renunciation of such right as long as B has not altered his position in reliance upon the terms of the original contract. B's right of changing the beneficiary must be exercised in accordance with the terms of the contract between A and B.17 If a beneficial certificate is made payable to one who may be named as beneficiary under statute, the subsequent attempt of the insured to change the payee to one who can not be a beneficiary,18 such as the estate of the insured,19 does not destroy the right of the former beneficiary.20
5 Krahn v. Goodrich, 164 Wis. 600. 160 N. W. 1072.
6 Union City Realty & Trust Co. v. Wright, 145 Ga. 730, 89 S. E. 822; Ellis v. Harrison, 104 Mo. 270, 16 S. W. 198; Dunning v. Leavitt, 85 N. Y. 30, 39 Am. Rep. 617; Jenness v. Simpson, &4 Vt. 127, 78 Atl. 886.
7 Union City Realty & Trust Co. v. Wright, 145 Ga. 730, 89 S. E. 822; Jenness v. Simpson, 84 Vt. 127, 78 Atl. 896.
8 Union City Realty & Trust Co. v. Wright, 145 Ga. 730, 89 S. E. 822.
9 Knight & Jillson Co. v. Castle, 172 Ind. 97, 27 L. R. A. (N.S.) 573, 87 N. E. 976. A similar provision has, however, been construed as applicable only to B's right of action against A, and as not requiring C to give such notice.
Forburger Stone Co. v. Lion Bonding & Surety Co., - Neb. - 170 N. W. 897.
10Rodgers v. Fidelity & Deposit Co., 89 Wash. 316, 154 Pac. 444; Carstens Packing Co. v. Mitchell, 96 Wash. 72, 163 Pac. 1 (obiter).
11 American Securities Co. v. Golds-berry, 69 Fla. 104, I A. L. R. 15, 67 So. 662.
12United Artisans v. Cronise, 88 Or. 602, L. R. A. 1918D, 1131, 172 Pac. 109.
13 Slocum v. Northwestern National Life Ins. Co., 135 Wis. 288, 14 L. R. A. (N.S.) 1110, 115 N. W. 796.
14Neary v. Metropolitan Life Insurance Co., 92 Conn. 488, L. R. A. 1918F, 306, 103 Atl. 661; Sipe v. Sipe, 102 Kan. 742, L. R. A. 1918E, 1029, 178 Pac. 13.
Breach which amounts to a failure of consideration and which is caused by B's default, may be invoked as against C.21 A and B entered into a contract by which B was to convey certain realty to A free from all liens, except two specified mortgages, and in consideration of such conveyance A agreed to pay X's claim against B. B was never able to free the realty from the remaining liens, and subsequently, because of his inability to perform, B released A from such contract. It was held that X could not enforce such contract against A, since A's promise to pay X was conditioned upon B's performance.22
A breach which does not amount to a total failure of consideration and which did not operate as a discharge of the contract between A and B,23 does not discharge A from liability to C,24 and apparently it does not give to A a cause of action against C, or a right to interpose a set-off or counter-claim.25 If B sells a saw-mill to A, in consideration of which, among other things, A agrees to pay B's outstanding note to X, the fact that B has not paid his workmen and that A is obliged to pay them to prevent them from filing a lien upon certain timber, is not a defense to an action by X against A upon such note, unless by the terms of the contract between A and B, A's promise to pay such note was made conditional upon B's payment of the claims of the workmen.26 In case of partial failure of consideration, it has been held, on the other hand, that A may interpose such partial failure as a partial defense.27 If A agrees to pay B's debts to C and D, in consideration of B's conveyance of certain property to A, and such consideration fails in part, the creditors must prorate their claims in proportion to the amount of such failure of consideration.28
15Neary v. Metropolitan Life Insurance Co., 92 Conn. 488, L. R. A. 1918F, 306, 103 Atl. 661.
16Sipe v. Sipe, 102 Kan. 742, L. R. A. 1918E, 1029, 173 Pac. 13.
17Sturges v. Sturges, 120 Ky. 80, 12 L. R. A. (N.S.) 1014, 102 S. W. 884.
18 Sturges v. Sturges, 126 Ky. 80, 12 L. R. A. (N.S.) 1014, 102 S. W. 884.
19 Sturges v. Sturges. 126 Ky. 80, 12 L. R. A. (N.S.) 1014, 102 S. W. 884.
20 Sturges v. Sturges, 126 Ky. 80, 12 L. R. A. (N.S.) 1014, 102. S. W. 884.
21 Clay v. Woodrum, 45 Kan. 116, 25 Pac. 619; Osborne v. Cabell, 77 Va. 462; Jenness v. Simpson, 84 Vt. 127, 78 Atl. 886.
22Gimbel Brothers v. McConnell, 159 Wis. 325, 150 N. W. 495.
23See ch. LXXXIV.
24 Fulmer v. Wightman, 87 Wis. 573, 58 N. W. 1106.
25 Fulmer v. Wightman, 87 Wis. 573, 58 N. W. 1106.