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 rule that the beneficiary can enforce the contract only if it is intended primarily for his benefit, is sometimes stated in the form that if the contract between A and B is intended for the sole benefit of the parties to such contract, a third person can not enforce it.1 Some courts go further and hold that C can sue only when he is the sole beneficiary.2 This principle has been otherwise expressed by saying that the third person may sue only when a release from him would discharge the promisor.3
In some jurisdictions in which the right of the beneficiary to enforce the contract is regulated by statute, this rule is carried into the statute and it is provided expressly that the beneficiary can recover if the contract is entered into for his sole benefit.4 It is said that the legislature used the word "sole" in such a
7 State Bank v. Western Union Telegraph Co., 19 N. M. 211, L. R. A. 1915A, 120. 142 Pac. 156.
8 Gearing v. Berkson, 223 Mass. 257, L. R. A. 1916D, 1006, 111 X. E. 785; Clement v. Rommwk, 140 Mich, 595, 119 Am. St. Rep. 695. 13 L. R. A. (X.S.) 382, 113 N. W. 286.
9 Clement v. Rommeck, 140 Mich. 695. 119 Am. St. Rep. 695, 13 L. R, A. (N.S.) 382, 113 N. W. 286.
10 Gearing v.' Berkson. 223 Mass. 257. L. R. A. 1916D, 1006, 111 N. E. 785.
1 Searles v. Flora. 225 11l. 167. 80 N. E. 98.
2 Davis v. Waterworks Co.. 54 Ia. 59, 37 Am. Rep. 185. 6 X. W. 126; Messenger v. Votaw, 75 Ia. 225, 39 N. W. 280. The rule allowing third persons to sue is "confined to cases where the person for whose benefit the promise is made has the sole exclusive interest in its performance." German State Bank v. Light Co., 104 la. 717. 723, 74 N. W. 685 [quoted in Chicago, etc., Ry. v. Ottumwa, 112 Ia. 300. 51 L. R. A. 763, S3 N. W. 1074].
3 Kountz v. Holthouse. 85 Pa. St. 235.
4 Newberry Land Co. v. Newberry, 95 Va. 119, 27 S. E. 899; Mcllvane v. Big Stony Lumber Co.. 105 Va. 613, 54 S. E. 473: King v. Scott, 76 W. Va. 68, 84 S. E. 954.
statute in order to prevent a double right of action against the promisor in favor of the promisee and also of the beneficiary.5 In construing such a statute, the phrase "sole benefit" is assumed to be equivalent to "primarily for the benefit" of the beneficiary who seeks to enforce the contract.6 Under such a statute a grantee, who assumes and agrees to pay a lien upon realty, is not liable personally to the holder of the debt secured by such lien, since such creditor may maintain an action against the original grantor, if the latter is the original debtor.7 Under such a statute, it has been held that a promise by A to B to assume B's debt to C, in consideration of a conveyance by B to A, is not intended for the sole benefit of C, and accordingly C can not recover from A thereon.8 However, a promise by A to assume and pay a lien upon realty which is not a personal obligation of the grantor, B, is said to be intended for the sole benefit of the creditor in whose favor such lien exists.9