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.
Consideration is as essential in contracts of this type as in others,1 and. as in others, it may be either a benefit to the promisor or a detriment to the promisee. Carrying this principle further and applying it to contracts of this type, C is, in many jurisdictions, allowed isee,2 is under either a legal or equitable obligation, or possibly a moral obligation to such third person, for the purpose of discharging which obligation the promise is made. Thus where a lessee was making improvements and the contractor gave bond to the lessee for the use of the owner and all persons who may do work on such improvements, conditioned to be void if all just claims were paid, it was held that as the lessee could not be affected by mechanics2 liens he had no legal interest in the payment of the claims of materialmen, and hence materialmen could not sue on such bond.3 If a grantee assumes and agrees to pay a lien on the realty conveyed as part of the purchase price, the courts in which this doctrine obtains hold that such grantee is not liable on this covenant to the mortgagee unless the grantor was personally liable for the debts secured by the lien. If the debt is one for which the grantor is not personally liable, the grantee is not personally liable on such covenant.4 So where A had, in consideration of a conveyance from X, assumed and agreed to pay B's note to 0, given for love and affection, he was held not liable to C.5 A promise by one, who has bought a going business with its stock and fixtures, to pay an existing mortgage debt, can not be enforced against the purchaser if the seller was not liable personally on such debt.6 A promise by A, as part of a contract by which he buys B's patent, to pay a certain sum of money to C, to whom B is not indebted, can not be enforced by C.7 Under the Georgia statute, if the consideration moves from B to "A, and A's promise is to B for the benefit of X, X can not sue, but if the promise is directly to X, he can sue.8 Under this statute, C can not recover against a railway company, A, because A fails to perform a contract entered into between A and B, who is O's father, by which A agrees to issue a railway ticket and to deliver it to C, who lives at a considerable distance from the place at which such contract is made.9
8Tweeddsle v. Tweeddale. l16 Wis. 517, 96 Am. St. Rep. 1003, 61 L. R. A. 809. 93 N. W. 440.
9 People's Savings Bank v. Philpott. 178 Ia. 481, 159 N. W. 981.
10Micek v. Wamka, 166 Wis. 97, 161 N. W. 367.
11 Giftord v. Corrigan, 117 N. Y. 257,
15 An. St. Rep. 506, 6 L. R. A. 610, 29 N. E. 756.
12Wetutzke v. Wetutzke, 158 Wis. 305, 148 N. W. 1088.
1McArthur v. Dryden, 6 N. D. 438, 71 N. W. 125; Eastman Land A Investment Co. v. Lumber Co., 30 Okla. 555, 120 Pac. 276.
in which one of the parties promises to do something for the benefit of such stranger, there being nothing but the promise - no consideration from the stranger, and no duty or obligation to him on the part of the promisee - cannot recover thereon. The same prin-ciple was applied in Brown v. Stillman, 43 Minn. 126, 45 N. W. 2; Nelson v. Rogers, 47 Minn. 103, 49 N. W. 526, and again in Union R. Storage Co. v. McDermott, 53 Minn. 407, 55 N. W. 606. There is an obvious distinction between two classes of cases, as a moment's reflection will show. In adopting it this court followed New York and Massachusetts, in Lawrence v. Fox, 20 N. Y. 268, and Mellen v. Whipple, 1 Gray, 317. The courts of those states, adhering to well-settled principles of the common law, have declined to extend the doctrine to cases not present-ing facts showing a privity of some sort between the third person and the promisee. Lorillard v. Clyde, 122 N. Y. 498, 10 L. R. A. 113, 25 N. E. 917; Aetna National Bank v. Fourth National Bank, 46 N. Y. 82, 7 Am. Rep. 314; Dow v. Clark, 73 Mass. (7 Gray) 198; Flint v. Pierce, 99 Mass. 68, 96 Am. Dec. 691; Cottage Street M. E. Church v. Kendall, 121 Mass. 528, 23 Am. Rep. 286.
"A careful consideration of the question suggests no reason why we should depart from the rule already laid down by us, or extend it to a case like that at bar; and we adhere to our former decisions. The general subject will be found discussed with learning and ability in 15 Harvard Law Rev. 767, by Prof. Williston, where all the cases are collected and referred to. So it may be said to be definitely settled law in this state that a third person for whose benefit a contract is made does not in all cases have a right of action thereon. To entitle him to enforce the promise there must appear to have been some privity, by contract or otherwise, between the promisee and the beneficiary, some obligation or duty owing from the former to the third person, giving the latter a legal or equitable claim to the benefit of the promise. No such privity or obligation existed in this case. Johnson, to whom the plaintiff agreed to pay the Lyman-Eliel Drug Company mortgage, sustained with reference to that debt no relation whatever to the drug company, and was under no legal or moral obligation to pay it. They were total strangers so far as concerns this particular transaction. And plaintiff and Johnson did not, in entering into the contract, have the interests of the drug company in mind; and there was no purpose to impose upon plaintiff a personal obligation to discharge a debt he did not owe, and for the payment of which his promisee was* not liable, any further than was necessary to protect the lien of the mortgage then executed. The sole purpose was indemnity to Johnson, and to protect his mortgage, which was a second lien upon the property. It was said in Nelson v. Rogers, supra, in speaking of the promise by the grantee in a conveyance of land to pay an outstanding mortgage, for which the Grantor was not personally liable, that such a stipulation is presumed to be inserted primarily for the protection of the grantor. And it is only where payment of the debt as a personal obligation is necessary to his protection that the clause is to be construed as intended for the benefit of the mortgagee beyond his right of recourse to the land.' That case states the gist of the rule, and seems to harmonize fully with logic and sound principle." Kramer v. Gardner, 104 Minn. 370, 22 L. R. A (N.S.) 492. 116 N. W. 925.