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 bulk of contract law deals with the relations between the parties to the contract. We have considered the question of the power of one party to a contract to transfer his rights to a third person by assignment so that such third person may enforce the contract against the other party thereto.1 We have also discussed the extent to which two parties may by contract confer contractual rights upon a third party so that he may enforce such contract as against the promisor.2 There remains for consideration the question of the liability, if any, which a contract imposes upon third persons and of the extent, if any, to which they are bound to refrain from interfering therewith.
Since the fundamental notion of a contract is that it is an obligation that arises out of agreement,3 and since a party can not be bound by an offer to which he did not assent,4 it necessarily follows that A and B can not, by a contract between themselves, impose obligations of a contractual nature upon X.5 If X performs services which in their nature are entire, under a contract with A and B, X is not bound by a contract between A and B, that each shall pay half of the compensation for such services.6 If X enters into a contract with B, the owner of a saw-mill, to saw certain lumber, A's rights are not affected by the fact that B had a contract with X for the use of such mill, if A did not know of such contract.7 If A and B, who are stockholders in a corporation, enter into a contract for the management and control thereof, another stockholder, X, is not bound by such contract,8 even if he knows thereof. If B enters into a contract to buy certain goods from X, which he is to resell to A, and if the contract between B and X provides that A shall give bond for payment for such goods, A and B can not waive such provision.9 If A enters into a contract with B, by which A agrees to buy certain land from B, and B agrees that certain improvements shall be constructed upon adjoining realty, and if B has made a contract with X, by which X is to construct such improvements, the contract between A and B can not confer upon A a right to enforce such contract as against X.10 If X is indebted to B, and A pays such debt to B voluntarily, so that the transaction is payment and not assignment, A can not recover such debt from X.11 If A has entered into a contract with B for the purchase of goods,12 or for the performance of services,13 and in order to perform such contract B enters into a contract with X, such contract between B and X can not confer upon X any right as against A.14 If A lends money to pay a certain specified debt which B owes to X, and B pays such money to X, to be applied upon such debt, the fact that X applies such money to another debt does not give to A a right of action against X.15 If A assumes to act on behalf of X, and enters into a contract with B, such contract imposes no liability unless A had authority to represent X in such transaction.16
1See ch. LXXI.
2 See ch. LXXIII.
3 See Sec. 41 and 70.
4 See ch. V.
5England. Durnford v. Messiter, 5 Maule & S. 446; Schmaling v. Thomiin-son, 6 Taunt. 147.
Arkansas. Rice-Brown Lumber Co. v. Fleetwood, - Ark. - , 203 S. W. 692.
California. Galusha v. Fraser, - Cal. - , 174 Pac. 311.
Iowa. Stead v. Sampson (Ia.), 156 N. W. 978; Chase v. Evans, 178 Ia. 885, 3 A. L. R. 1071, 160 N. W. 346.
Kentucky. Ewell v. Best, 177 Ky.
673, 198 S. W. 4; Haldeman v. Halde-man, 176 Ky. 635, 197 S. W. 376.
Maine. Brown v. Chesterville, 63 Me. 241.
Massachusetts. Knowlton v. Par-sons, 198 Mass. 439, 84 N. E. 798.
Oklahoma. Guss v. Federal Trust Co., 19 Okla. 138, 91 Pac. 1045.
Washington. Banks v. Eastern Railway & Lumber Co., 46 Wash. 610, 11 L. R. A. (N.S.) 485, 90 Pac. 1048.
Wisconsin. Rossman v. Townsend, 17 Wis. 95, 84 Am. Dec. 733.
6 Knowlton v. Parsons, 198 Mass. 439, 84 N. E. 798.
7 Rice-Brown Lumber Co. v. Fleet-wood, - Ark. - , 203 S. W. 692.
If B is indebted to X, and by a contract between A and B, A assumes and agrees to pay such debt, X may recover such debt from A in most of the jurisdictions in the United States,17 and it is generally held that in the absence of an express agreement to the effect that B should become a mere surety for A, B remains primarily liable to X upon the original obligation and that X may recover such debt from either A or B.18 In some jurisdictions it is said that as a result of such transaction the original debtor becomes the surety, and the person who has assumed the debt becomes the principal debtor.19 In any event, if the contract between A and B provided expressly that B should become a surety, and X, with knowledge of such contract, elected to hold A as debtor, X would probably be regarded as having accepted the entire contract, including the provision by which B was to become a surety.20
If A had known of such contract, his conduct might have been an inter ference therewith. See Sec. 2412 et seq.
8 Haldeman v. Haldeman, 176 Ky. 635, 197 S. W. 376.
9 Browning v. North Missouri Cent. Ry. Co. (Mo.), 188 S. W. 143.
10Galusha v. Fraser, - Cal. - , 174 Pac. 311.
11 Durnford v. Messiter, 5 Maule & S. 446; South Soituote v. Hanover, 75 Mass. (9 Gray) 420; Breneman's Appeal, 121 Pa. St. 641. On the question of voluntary payments for the benefit of third persons, see Sec. 1520.
The same principle applies where A voluntarily renders services for the benefit of X without any contract with X, either express or implied, and in the absence of special circumstances which might justify the rendition of services on the ground of decency, humanity and the like. See Sec. 1516.
12Rossman v. Townsend, 17 Wis. 95, 84 Am. Dec. 733.
13Schmaling v. Thomlinson, 6 Taunt. 147.
14See on this subject Sec. 1439.
15Ewell v. Best, 177 Ky. 673, 198 S. W. 4.
16Stead v. Sampson (Ia.), 155 N. W. 978. See on this question Sec. 1762.