Contracts for Benefit of Third PersonsIf without privity of contract, one may become indebted to another, the lack of privity is surely no reason for denying him a beneficial right.

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1-1-1918

Contracts for Benefit of Third PersonsArthur CorbinYale Law School

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Recommended CitationCorbin, Arthur, "Contracts for Benefit of Third Persons" (1918). Faculty Scholarship Series. Paper 2849.http://digitalcommons.law.yale.edu/fss_papers/2849

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CONTRACTS FOR THE BENEFIT OF THIRDPERSONS'

ARTHUR L. CORBIN

Professor of Law, Yale University

By the great weight of authority in the United States the same factsthat operate to create contractual relations between the offeror andthe acceptor may also operate to create rights in a third person. 2 Itmay be useful, therefore, to examine in detail the nature and limitsof this doctrine and to classify and discuss the cases in distinctgroups.

To many students and practitioners of the common law privity ofcontract3 became a fetish. As such, it operated to deprive many aclaimant of a remedy in cases where according to the mores of thetime the claim was just. It has made many learned men believe thata chose in action could not be assigned. Even now, it is gravelyasserted that a man cannot be made the debtor of another against hiswill. But the common law was gradually influenced by equity andby the law merchant, so that by assignment a debtor could becomebound to pay a perfect stranger to himself, although until the legisla-ture stepped in, the common-law courts characteristically made use ofa fiction and pretended that they were not doing that which theyreally were doing.

TRUST BENEFICIARIES

If without privity of contract, one may become indebted to another,the lack of privity is surely no reason for denying him a beneficialright. As usual, equity saw this long before the common law did.'

This article contains the substance of certain sections in an edition of Ansonon Contracts to be published by the Oxford University Press. Some use hasbeen made of the notes of Professor E. W. Huffcut in an earlier edition.

2 See 13 C. J. 7o5, sec. 815, citing more than 350 cases; 6 R. C. L 884, sec. 271;Wald's Pollock, Contracts (Williston's ed. i9o6) 237-278.

'In order that privity of contract may exist, it seems to be necessary for Ato say to B "I promise you." It requires the voluntary selection of each partyby the other. See criticism of the term privity in i5 Am. LAw Rnv. 244-5. Forrecent adherence to the fetish, see 6 R. C. L. 885, sec. 271.

'Not alone in the cases of trustee and cestui que trust was this true. Thecourt did not shrink from expanding the concept of a trust to cover the caseof a contract beneficiary. See Tomlinson v. Gill (756) Ambler, 33o, beforeHardwicke, L C.; Moore v. Darton (1851) 4 DeG. & Sm. 517. See also SchoolDistrict v. Livers (1899) 147 Mo. 58o; Forbes v. Thorpe (ig91) 2o9 Mass. 570;Grime v. Borden (1896) x66 Mass. i98; Nash v. Commonwealth (1899) 174Mass. 335.

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CONTRACTS FOR THE BENEFIT OF THIRDPERSONS 1

ARTHUR L. CORBIN


By the great weight of authority in the United States the same factsthat operate to create contractual relations between the offeror andthe acceptor may also operate to create rights in a third person.: Itmay be useful, therefore, to examine in detail the nature and limitsof this doctrine and to classify and discuss the cases in distinctgroups.

To many students and practitioners of the common law privity ofcontracfl became a fetish. As such, it operated to deprive many aclaimant of a remedy in cases where according to the mores of thetime the claim was just. It has made many learned men believe- thata chose in action could not be assigned. Even now, it is gravelyasserted that a man cannot be made the debtor of another against hiswill. But the common law was gradually influenced by equity andby the law merchant, so that by assignment a debtor could becomebound to pay a perfect stranger to himself, although until the legislature stepped in, the common-law courts characteristically made use ofa fiction and pretended that they were not doing that which theyreally were doing.

TRUST BENEFICIARIES

If without privity of contract, one may become indebted to another,the lack of privity is surely no reason for denying him a beneficialright. As usual, equity saw this long before the common law did.·

1 This article contains the substance of certain sections in an edition of Ansonon Contracts to be published by the Oxford University Press. Some use hasbeen made of the notes of Professor E. W. Huffcut in an earlier edition.

2 See 13 C. I. 705, sec. 815, citing more than 350 cases; 6 R C. L. 884. sec. 271 ;Wald's Pollock, Contracts (Williston's ed. 1906) 237-278.

• In order that privits of contract may exist, it seems to be necessary for Ato say to B "I promise sou:' It requires the voluntary selection of each partybv the other. See criticism of the term privity in IS AM.. LAW REv. 244-5- Forr~ent adherence to the fetish, see 6 R C. L. 885, sec. 271.

• Not alone in the cases of trustee and cestui que trust was this true. Thecourt did not shrink from expanding the concept of a trust to cover the caseof a contract beneficiary. See Tomlinson v. Gill (1756) Ambler, 330, beforeHardwicke, L. c.; Moore v. Darion (1851) 4- DeG. & Sm. 517. See also SchoolDistrict'lJ. Livers (1899) 147 Mo. 580; Forbes'lJ. Thorpe (I9U) 209 Mass. 570;Grime 'lJ. Borden (dlg6) 166 Mass. 19B; Nash 'lJ. Commonwealth (1899) 174Mass. 335.

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CONTRACT BENEFICIARIES

No privity is necessary to create rights in a cestui que trust, and noconsideration need move from him. If it was possible and desirablefor equity to recognize the very extensive rights, powers, privileges,and immunities of a cestui que trust, it is equally possible, and itappears to the American courts to be equally desirable, to recognizesimilar relations betwen a promisor and a contractual beneficiary. Itis no answer to say that in the one case the magic words "in trust"were used, while in the latter they were not. This would be merefetish worship once more. It may be that the rights, powers,privileges, and immunities of a cestui que trust are more numerousand valuable than are those of a contract beneficiary. The cestui quetrust, without privity and without giving value, gets so much;-should not the contract beneficiary be given at least a crumb ?5

It may be argued that in the case of trust there is a specific res,while in the case of the contract there is not. This is also a dis-tinction that proves nothing. Suppose there is a specific physicalres-its mere existence is no reason for creating rights in a benefi-ciary without privity and without value given by him. In many casesof trust, however, there is no physical res. The trust res is then saidto consist of the rights and powers of the trustee, which he "holds"in trust and must exercise for the benefit of the cestui que trust. Ifsuch an unreal res may be the basis of rights in a beneficiary, thereis no greater difficulty in the case of contract.

The reasons for recognizing rights in the contract beneficiary aresubstaritially the same as those underlying the rights of a cestui quetrust. By so doing the intention of the parties is carried out and thebeneficiary's just expectations are fulfilled. The reason is not, ashas sometimes been suggested, that the promisee was acting as theagent of the third party.' He was not in fact so acting and nobodysupposed that he was. Nor is the beneficiary's right to be explainedon some theory of subrogation.7

POSSESSION OF ASSETS BY THE PROMISOR

In nearly all of the American jurisdictions, including those thatdeny a right of action to most third party beneficiaries, there is onesort of beneficiary who is given a right of action. "Where, under a

'See Pennsylvania Steel Co. v. New York City R. Co. (1912) i98 Fed. 721,749. Lord Mansfield in Martyn v. Hind (1776) Cowp. 437, 443, said it was amatter of surprise how a doubt could have arisen in a case like Dutton v. Poole(1677) 2 Lev. 210.

'See opinion of Johnson, C. J., and Denio, J., in Lawrence v. Fox (859) 20N. Y. 268; Union Inst. v. Phoenix Ins. Co. (i9o7) 196 Mass. 23o. In accordwith the text is the opinion of Finch J., in Gifford v. Corrigan (1889) 117 N. Y.257.

' See discussion below in connection with mortgagee-beneficiaries.

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CONTRACT BENEFICIARIES 1009

No privity is necessary to create rights in a cestui que trust, and noconsideration need move from him. If it was possible and desirablefor equity to recognize the very extensive rights, powers, privileges,and immunities of a cestui que trust, it is equally possible, and itappears to the American courts to be equally desirable, to recognizesimilar relations betwen a promisor and a contractual beneficiary. Itis no answer to say that in the one case the magic words "in trust"were used, while in the latter they were not. This would be merefetish worship once more. It may be that the rights, powers,privileges, and immunities of a cestui que trust are more numerousand valuable than are those of a contract beneficiary. The cestui quetrust, without privity and without giving value, gets so much;should not the contract beneficiary be given at least a crumb?5

It may be argued that in the case of trust there is a specific res,while in the case of the contract there is not. This is also a distinction that proves nothing. Suppose there is a specific physicalres-its mere existence is no reason for creating rights in a beneficiary without privity and without value given by him. In many casesof trust, however, there is no physical res. The trust res is then saidto consist of the rights and powers of the trustee, which he "holds"in trust and must exercise for the benefit of the cestui que trust. Ifsuch an unreal res may be the basis of rights in a beneficiary, thereis no greater difficulty in the case of contract.

The reasons for recognizing rights in the contract beneficiary aresubstantially the same as those underlying the rights of a cestui quetrust. By so doing the intention of the parties is carried out and thebeneficiary's just expectations are fulfilled. The reason is not, ashas sometimes been suggested, that the promisee was acting as theagent of the third party.6 He was not in fact so acting and nobodysupposed that he was. Nor is the beneficiary's right to be explainedon some theory of subrogation.T



• See Pennsylvania Steel Co. v. New York City R. Co. (1912) 19B Fed. 721,749. Lord Mansfield in Martyn v. Hind (1776) Cowp. 437. 443. said it was amatter of surprise how a doubt could have arisen in a case like Dutton v. Poole(1677) 2 Lev. 2IO.

• See opinion of Johnson, C. J., and Denio, J., in Lawrence v. Fox (1859) 20N. Y. 268; Union Inst. v. Phoenix Ins. Co. (1907) 196 Mass. 230. In accordwith the text is the opinion of Finch J., in Gifford v. Corrigan (188g) II7 N. Y.257·

1 See discussion below in connection with mortgagee-beneficiaries.

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contract between two persons, assets have come to the promisor'shands or under his control which in equity belong to a third person,"the beneficiary can maintain an action at law in his own name.8

These cases essentially recognize that a beneficiary can acquire alegal right without privity and without giving consideration. Insome such cases a true equitable trust may exist with respect to somespecific res. In most such cases, however, this is not so. If there isa trust and a specific res, the duty of the promisor should beheld to be merely the duty to account. The fact is that the dutyenforced against the promisor is that of a debtor." Some of thesecases may properly be regarded as based upon the quasi-contractualdoctrine of unjust enrichment, in which case the defendant's duty islimited by the value received by him. By the great majority of courts,however, it is regarded as unjust for the promisor not to perform ashe promised in return for a consideration; and the beneficiary'sright is dependent upon neither a specific res nor an unjust enrich-ment, but upon the existence of a valid contract.10

PLAINTIFF A PROMISEE, BUT CONSIDERATION GIVEN BY ANOTHER

In some cases the promise is made to the plaintiff, but the consid-eration moves from.a third party. Here the plaintiff is a promiseeand there is no lack of privily. The problem is merely one as to con-

'See National Bank v. Grand Lodge (1878) 98 U. S. 123; Hall v. Marston(1822) I7 Mass. 575; Fitch v. Chandler (1849, Mass.) 4 Cush. 254; Mellen v.Whipple (1854, Mass.) I Gray, 317; Exchange Bank v. Rice (1871) IO7 Mass.37. And see cases cited in 13 C. J. 704, secs. 8og, 8io. A recent Massachusettscase says that the plaintiff's right is "in equity"; but this does not affect thecharacter of the right and the duty, for the defendant is treated as a debtor andnot as -a trustee. Forbes v. Thorpe (I9II) 209 Mass. 57o. Cf. Borden v. Board-man (1892) 157 Mass. 41o. A remedy at law was denied in Morgan v. Randolph& Clowes Co. (igoo) 73 Conn. 396.

The "assets" here referred to are assets in the hands of the promisor and donot include the promise itself, which is sometimes regarded as an asset of thepromisee.

'For example, where a devise given on condition that a certain sum be paidto a beneficiary is accepted by the devisee, the latter is a debtor of the beneficiaryirrespective of the value of the devise. Felch v. Taylor (I832, Mass.) 13 Pick.133; Adams v. Adams (1867, Mass.) 14 Allen, 65; Olmstead v. Brush (1858)27 Conn. 530; Brown v. Knapp (1879) 79 N. Y. 136; Flickinger v. Saum (1884)40 Oh. St 591; Porter v. Jackson (1884) 95 Ind. 210; LaValle v. Droit (1913)179 Ill. App. 484; Etter v. Greenawalt (1881) 98 Pa. 422. See.also Feldman v.McGuire (1899) 34 Ore. 309.

The plaintiff's action, therefore, may be assumpsit for unliquidated damagesas well as debt for a specific sum. His action lies also where the defendant hasassumed to settle a claim for unliquidated damages that the plaintiff had againstthe promisee. Likewise the beneficiary has been given an injunction for theenforcement of a negative covenant Ferris v. Amer. Brewing Co. (igoo) 155Ind. 539.

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These cases essentially recognize that a ·beneficiary can acquire alegal right without privity and without giving consideration. Insome such cases a true equitable trust may exist with respect to somespecific res. In most such cases, however, this is not so. If there isa trust and a specific res, the duty of the promisor should beheld to be merely the duty to account. The fact is that the dutyenforced against the promisor is that of a debtor.9 Some of thesecases may properly be regarded as based upon the quasi-contractualdoctrine of unjust enrichment, in which case the defendant's duty islimited by the value received by him. By the great majority of courts,however, it is regarded as unjust for the promisor not to perform ashe promised in return for a consideration; and the beneficiiry'sright is dependent upon neither a specific res nor an unjust enrichment, but upon the existence of a valid contract.10


In some cases the promise is made to the plaintiff, but the consideration moves from.a third party. Here the plaintiff is a promiseeand there is no lack of privity. The problem is merely one as to con-

• See National Ba,~k 1/. Grand Lodge (1878) 98 u.. S. 123: Hall 1/. Marston(1822) 17 Mass. 575; Fitch 1/. Chandle,.. (1849, Mass.) 4 Cush. 254: Mellen 1/.

Whipple (1854, Mass.) I Gray, 317: Ezcllange Bank 1/. Rice (1871) 107 Mass.37. And see cases cited in 13 C. J. 704, secs. Bog, 810. A recent Massachusettscase says that the plaintiff's right is "in equity": but this does not affect thecharacter of the right and the duty, for the defendant is treated as a debtor andnot as a trustee. Forbes 1/. Thorpe (I9U) 209 Mass. 570. Ct. Borden 1/. Boardman (I8g2) 157 Mass. 410. A remedy at law was denied in Morgan 1/. Randolph& Clowes Co. (1900) 73 Conn. 396·


• For example, where a devise given on condition that a certain sum be paidto a beneficiary is accepted by the devisee, the latter is a debtor of the beneficiaryirrespective of the value of the devise. Felch 1/. Taylor (1832, Mass.) 13 Pick.133; Adams 1/. Adams (1867, Mass.) 14 Allen, 65; Olmstead 1/. Brush (1858)27 Conn. 530: Brown 1/. Knapp (1879) 79 N. Y. 136: Flickinger 1/. Saum (1884)400h. St. 591: Porter 1/. Jackson (1884) 95 Ind. 210: LaValle 1/. Droit (1913)179 Ill. App. 484: Etter 1/. Greenawalt (1881) 98 Pa. 422. See.also Feldman v.McGuire (1899) 34 Ore. 309·

1D The plaintiff's action, therefore, may be assumpsit for unliquidated damagesas well as debt for a specific sum. His action lies also where the defendant hasassumed to settle a claim for unliquidated damages that the plaintiff had againstthe promisee. Likewise the beneficiary has been given an injunction for theenforcement of a negative covenant. Ferris v. Amer. Brewing Co. (1900) 155Ind. 539.






















sideration. It is the English law that the consideration must movefrom the promisee. 1 Such is not the American law as. generally laiddown by our courts 1 2 and some of the cases draw a clear dis-tinction between a promise to the plaintiff upon a consideration mov-ing from another13 and a promise to X for the benefit of the plaintiffupon a consideration moving from X. In some cases the promiseseems to be made simultaneously to both the plaintiff and the onefurnishing the consideration. 4 Where a promise is made to twopersons jointly, it seems not to be questioned whether the considera-tion must move from both. No doubt a fiction is indulged and thejoint promisees are regarded as a unity. Where the beneficiary is.not himself the promisee, he can always establish a sufficient "privity"to satisfy the courts by obtaining an assignment from the promisee.He will then possess whatever rights the promisee had as well as suchrights as a beneficiary as may be recognized in the particular jurisdic-tion.u

DONEE-BENEFICIARIES AND SOLE BENEFICIARIES

In many cases the purpose of the promisee in securing a promisefor the benefit of a third party is to confer a gratuitous benefit upon

that third party. In such cases this third party will usually be the

only person who will be benefited by the promised performance; he

will be the sole beneficiary.' Performance will not benefit the

promisee; he is not to receive it, and such performance will not dis-

charge any duty of the promisee, for he owes none to the beneficiary.

If the purpose is to discharge some duty owed by the promisee to the

third party, the latter is not a donee.

-Dunlop v. Selfridge [i915] A. C. 847.1 Van Eman v. Stanchfield (1879) io Minn. 255; Rector v. Teed (i8go) 12o

N. Y. 583; Palmer Sav. Bk. v. Insurance Co. (1896) 166 Mass. i89. See also

Gardner v. Denison (1914) 217 Mass. 492.

" In First N. B. vL. Chalmers (i895) i44 N. Y. 432, 439, the court says:

"I do not deem the doctrine of Lawrence v. Fox (i859) 20 N. Y. 268 involvedin this controversy. That doctrine applies where no express promise has beenmade to the party suing, but he claims the right to rest upon a promise betweenother parties having respect to the debt due to him and as having been madefor his benefit It struggles to obviate a lack of privity upon equitable principles,but is needless and has no proper application where the privity exists, and adirect promise has been made upon which the action may rest."

See also De Cicco v. Schweizer (917, N. Y.) ii7 N. E. 807, and the dissenting

opinion of Comstock, J., in Lawrence v. Fox (I859) 2o N. Y. 268.

"Bouton v. Welch (I902) 17o N. Y. 554; Furbish v,. Goodnow (1867) 98

Mass. 296."Hyland v. .Crofut (I913) 87 Conn. 49; Reed v. Paul (188) 131 Mass. 129;

Litchfield v. Flint (1887) 1o4 N. Y. 543; Societa Italiana v. Sulzer (1893) 138

N. Y. 468.'The plaintiff may be a donee-beneficiary even though he is not the sole

beneficiary. In such case he can maintain suit Jenkins v. Chesapeake & 0. R.

Co. (19o7) 61 W. Va. 597.

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sideration. It is the English law that the consideration must movefrom the promiseeP Such is not the American law as. generally laiddown by our COUrts,12 and some of the cases draw a clear distinction between a promise to the plaintiff upon a consideration moving from another13 and a promise to X for the benefit of the plaintiffupon a consideration moving from X. In some cases the promiseseems to be made simultaneously to both the plaintiff and the onefurnishing the consideration.l4. Where a promise is made to twopersons jointly, it seems not to be questioned whether the consideration must move from both. No doubt a fictiqn is indulged and thejoint promisees are regarded as a unity. Where the beneficiary is.not himself the promisee, he can always establish a sufficient "privity"to satisfy the courts by obtaining an assignment from the promisee.He will then possess whatever rights the promisee had as well as suchrights as a beneficiary as may be recognized in the particular jurisdiction.lG


In many cases the purpose of the promisee in securing a promisefor the benefit of a third party is to confer a gratuitous benefit uponthat third party. In such cases this third party will usually be theonly person who will be benefited by the promised performance; hewill be the sole beneficiary.16 Performance will not benefit thepromisee; he is not to receive it, and such performance will not discharge any duty of the promisee, for he owes none to the beneficiary.If the purpose is to discharge some duty owed by the promisee to thethird party, the latter is not a donee.

11 Dunlop v. Selfridge [1915] A. C. 847.13 Van Eman v. Stanchfield (1879) 10 Minn. 255; Rector v. Teed (1890) 120

N. Y. 583; Palmer Sav. Bk. v. Insurance Co. (18g6) 166 Mass. ISg. See alsoGardner v. Denison (1914) 217 Mass. 492.

,. In First N. B. v. Chalmers (ISg5) 144 N. Y. 432, 439, the court says:"I do not deem the doctrine of Lawrence v. Fo~ (1859) 20 N. Y. 268 involved

in this controversy. That doctrine applies where no express promise has beenmade to the party suing, but he claims the right to rest upon a promise betweenother parties having respect to the debt due to him and as having been madefor his benefit. It struggles to obviate a lack of privity upon equitable principles,but is needless and has no proper application where the privity exists, and adirect promise has been made upon which the action may rest."See also De Cicco v. Schweizer (1917. N. Y.) II7 N. E. 807, and the dissentingopinion of Comstock, J., in Lawrence v. Fo~ (1859) 20 N. Y.268.

U Bouton v. Welch (1902) 170 N. Y. 554; Furbish v. Goodnow (1867) g8Mass. 296.

15 Hyland v•.Crofut (1913) 87 Conn. 49; Reed v. Paul (1881) 131 Mass. 129;Litchfield v. FUnt (1887) 104 N. Y. 543; Societa ItaUana v. Sulzer (ISg3) 138N.Y. .¢8.

10 The plaintiff may be a donee-beneficiary even though he is not the solebeneficiary. In such case he can maintain suit. Jenkins v. CTlesapeake & O. R.Co. (1907) 61 W. Va. 597··























YALE LAW JOURNAL

It is clear that a sole beneficiary should be allowed to enforce thecontract, and great numbers of cases have so held.1 7 It was oncesuggested by the United States Supreme Court 18 that a sole beneficiarywas the only kind who could sue, on the ground that to allow acreditor-beneficiary to sue would subject the promisor to two suitsfor breach.' 9 On the other hand, the New York courts long repeatedthe rule that no beneficiary could sue unless he was a creditor (or anobligee) of the promisee.2' Neither of these limitations, contradic-tory to each other as they are, should be sustained.

Some cases have decided in favor of a donee-beneficiary on theground of a relationship by blood or marriage between the beneficiaryand the promisee.1 Such relationship is an evidential fact showing

'In re Edmundson's Estate (19i8, Pa.) io3 AtI. 277; Rogers v. GallowayFemale College (1898) 64 Ark. 627 (beneficiary of a charitable subscription) ;St. Louis v. Von Phul (1895) i33 Mo. 56I; Todd v. Weber (1884) 95 N. Y. I81(promise to the mother of plaintiff to furnish support. See other cases of thistype in note 21 infra); Whitehead v. Burgess (1897) 61 N. J. L. 75; Boutonv. Welch (192) 170 N. Y. 554; Pond v. New Rochelle W. Co. (19o6) 183 N. Y.330 (promise to a village for the benefit of the inhabitants); Rigney v. NewYork Central R. R. Co. (1916) 217 N. Y. 31 (same); Smyth v. New York(1911) 2o3 N. Y. io6 (same); Independent Sch. Dist. v. Le Mars Water Co.(19o6) 131 Iowa, 14; Doll v. Crume (1894) 41 Neb. 655; Gorrell v. Water Co.(1899) 124 N. C. 328; Tweeddale v. Tweeddale (19o3) 116 Wis. 517; Simons v.Bedell (1898) 122 Cal. 341 (specific performance decreed). Contra, Knights ofthe Maccabees v. Sharp (igio) 163 Mich. 449. See further 22 L. R. A. (N. S.)492; 39 L. R. A. (N. S.) 151; 49 L. R. A. (N. S.) 1166.

"National Bank v. Grand Lodge (1878) 98 U. S. 123. By statute, this ruleseems to prevail in the Virginias. Newberry Land Co. v. Newberry (1897) 95Va. iig; King v. Scott (915) 76 W. Va. 58.

"The rights of the promisee will be discussed below.King v. Whitely (1843, N. Y.) io Paige, 465 [but see Thorp v. Keokuk &

Co. (x872) 48 N. Y. 253]; Vrooman v. Turner (x877) 69 N. Y. 28o; Durnherrv. Rau (1892) 135 N. Y. 219; Jefferson v. Asch (1893) 53 Minn. 446. Theirsubstantial abandonment of this doctrine will be indicated below. Neverthelessthe doctrine continues to influence the decisions in many states in certain classesof cases. See the sections below on "Mortgagee-beneficiaries" and "Liabilityof Water Companies."

'Dutton v. Poole (I677) 2 Lev. 21o; In re Edmundson's Estate (1918, Pa.)1o3 At. 277; Daily v. Minnick (902) 117 Iowa, 563; Benge v. Hiatt (1885)82 Ky. 666; Schemerhorn v. Vanderheyden (i8o6, N. Y.) i Johns, 139; Toddv. Weber, supra; Coleman v. Whitney (1889) 62 Vt 123. Contra, Linneman v.Morass (1893) 98 Mich. 178.

In the following cases, it is believed, the relationship by blood or marriagecaused the court to strain the facts and to hold, contrary to the fact, that thebeneficiary was also a promisee: DeCicco v. Schweizer (i97, N. Y.) 117 N. E.8o7; Gardner v. Denison (1914) 217 Mass. 492; Eaton v. Libbey (1896) 165Mass. 218; Freeman v. Morris (1907) 131 Wis. 216. In the following casessuch relationship caused the court to hold that the promisee owed the bene-ficiary a legal or an equitable duty when in fact there was none: Buchanan v.Tilden (1899) 158 N. Y. iog; Seaver v. Ransom (i917, App. Div.) 168 N. Y.Supp. .4. Cf. Opper v. Hirsh (i9Oi) 68 N. Y. Supp. 879. *

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It is clear that a sole beneficiary should be allowed to enforce thecontract, and great numbers of cases have so held.17 It was oncesuggested by the United States Supreme Court18 that a sole beneficiarywas the only kind who could sue, on ·the ground that to allow acreditor-beneficiary to sue would subject the promisor to two suitsfor breach.19 On the other hand, the New York courts long repeatedthe rule that no beneficiary could sue unless he was a creditor (or anobligee) of the promisee.20 Neither of these limitations, contradictory to each other as they are, should be sustained.


11 In re Edmundson's Estate (1918, Pa.) 103 Atl. 277; Rogers v. GallowayFemale College (18g8) 64 Ark. 627 (beneficiary of a charitable subscription) ;St. Louis v. Von Phul (1895) 133 Mo. 561; Todd v. Weber (1884) 95 N. Y. 181(promise to the mother of plaintiff to furnish support. See other cases of thistype in note 21 infra); Whitehead v. Burgess (1897) 61 N. J. L. 75; Boutonv. WeIch (1902) 170 N. Y. 554; Pond v. New Rochelle W. Co. (1906) 183 N. Y.330 (promise to a village for the benefit of the inhabitants); Rigney v. NewYork Central R. R. Co. (1916) 217 N. Y. 31 (same); Smyth v. New York(19U) 203 N. Y. 106 (same); Independent Sch. Dist. v. Le Mars Water Co.(1906) 131 Iowa, 14; Doll v. Crume (1894) 41 Neb. 655; Gorrell v. Water Co.(1899) 124 N. C.;;28; Tweeddale v. Tweeddale (1903) u6 Wis. 517; Simons v.Bedell (18g8) 122 Cal. 341 (specific performance decreed). Contra, Knights ofthe Maccabees v. Sharp (1910) 163 Mich. 449. See further 22 L. R A. (N. S.)492; 39 L. R A. (N. S.) 151; 49 L. R. A. (N. S.) II66.

10 National Bank v. Grand Lodge (1878) 98 U. S. 123. By statute, this ruleseems to prevail in the Virginias. Newberry Land Co. v. Newberry (1897) 95Va. II9; King v. Scott (1915) 76 W. Va. 58.

10 The rights of the promisee will be discussed below... King v. Whitely (1843, N. Y.) 10 Paige,465 [but see Thorp v. Keokuk &

Co. (1872) 48 N. Y. 253]; Vrooman v. Turner (1877) 6g"N. Y. 280; Durnherrv. Rau (1892) 135 N. Y. 219; Jefferson v. Asch (1893) 53 Mino. 446- Theirsubstantial abandonment .of this doctrine will be indicated below. Neverthe1essthe doctrine continues to influence the decisions in many states in certain classesof cases. See the sections below on "Mortgagee-beneficiaries" and "Liabilityof Water Companies."

>l Dutton v. Poole (1677) 2 Lev. 210; In re Edmundson's Estate (1918, Pa.)103 Atl 277; Daily v. Minnick (1902) II7 Iowa, 563; Benge v. Hiatt (1885)82 Ky. 666; Schemerhorn v. Vanderheyden (1806, N. Y.) I Johns, 139; Toddv. Weber, supra; Coleman v. Whitney (188g) 62 Vt. 123. Contra, Linneman v.Morass (1893) 98 Mich. 178.

In the following cases, it is believed, the relationship by blood or marriagecaused the court to strain the facts and to hold, contrary to the fact, that thebeneficiary was also a promisee: DeCicco v. Schweizer (1917, N. Y.) II7 N. E.807; Gardner v. Denison (1914) 217 Mass. 492; Eaton v. Libbey (18g6) 165Mass. 218; Freeman v. Morris (1907) 131 Wis. 216. In the following casessuch relationship caused the court to hold that the promisee owed the beneficiary a legal or an equitable duty when in fact there was none: Buchanan v.TildefS (1899) 158 N. Y. log; Seaver v. Ransom (1917, App. Div.) 168 N. Y.Supp..454- Cf. Opper v. Hirsh (1901) 68 N. Y. Supp. 879- •



















1013CONTRACT BENEFICIARIES

that the promisee truly intended that the third party should receive

a benefit, and indicates the causa-the reason or motive-for which

he paid the consideration. But the intention to benefit the third party

can be dearly shown by the express words of the contract, or by

other evidence, and relationship should not be held to be a necessary

operative fact.22

In life insurance the beneficiary is usually a sole beneficiary, and in

all jurisdictions he can maintain suit on the policy. In England and

a few of our states, this result was attained by statute.23 It would

indeed create a scandal to deny him a right of action either because

he was not the promisee or because he gave no consideration.

CREDITOR-BENEFICLARES

Where the third party is a creditor of the promisee, or has a right

against him for some particular performance, the purpose with which

the promisee contracts with the promisor may be to induce the latter

to pay the debt or otherwise to discharge the third party's claim. In

such case, performance will directly benefit both the third party (the

creditor or claimant) and the promisee. The third party is not a

donee and is not a sole beneficiary. Although not the first case of the

sort, the famous case of Lawrence v. Fox2 4 is now regarded as the

leading authority to the effect that a creditor-beneficiary has an

enforceable right. Here a money debt of $300 was owed by Holly

to Lawrence, and he had that sum ready to be paid. Fox borrowed

the money over night, promising Holly to pay the debt to Lawrence

next day. It was held that Lawrence could maintain suit against

Fox to enforce this promise. For a good many years this decision was

severely criticised, the critics being obsessed with the idea that privity

was logically necessary. Fine distinctions were often drawn so as to

avoid following this decision, but in spite of some confusion thus

caused, the great weight of authority is in harmony with it and a

creditor-beneficiary can maintain suit 2 5

' It now seems to be assumed to be the settled law of England that blood

relationship will not enable a beneficiary to sue. Tweddle v. Atkinson (1861)

i B. & S. 393.' In Massachusetts the beneficiary's right has been saick to be in equity only.

Nires v. Ford (1893) i59 Mass. 575. It is not apparent on casual inspection

why the procedural statute, R. L. i9o2, C. 159, sec. 8, should not sustain an

action of "contract.""' (1859) 2o N. Y. 268.

'Bohanan v. Pope (i856) 42 Me. 93; Joslin v. New Jersey'Car Spring Co.

(1873) 36 N. J. L. i4i; Barker v'. Bucklin (1846, N. Y.) 2 Den. 45; Wood v.

Moriarty (887) i5 R. I. 5i8; ZeIrs Appeal (1886) iI1 Pa. 532, 547; Ballard v.

Home Nat'l. Bank (1913) gi Kan. 9i, L. R. A. i9r6 C, I61, and note. See 25

L. R. A. 257, note; 13 C. J. 705, sec. 815, citing hundreds of cases.

Where a new partner enters a firm and promises the old members to pay a



that the promisee truly intended that the third party should receivea benefit, and indicates the causa-the reason or motive--for whichhe paid the consideration. But the intention to benefit the third partycan be clearly shown by the express words of the contract, or byother evidence, and relationship should not be held to be a necessaryoperative fact.22

In life insurance the beneficiary is usually a sole beneficiary, and inall jurisdictions he can maintain suit on the policy. In England anda few of our states, this result was attained by statute.23 It wouldindeed create a scandal to deny him a right of action either becausehe was not the promisee or because he gave no consideration.

CREDITOR-BENEFICIARIES

Where the third party is a creditor of the promisee, or has a rightagainst him for some particular performance, the purpose with whichthe promisee contracts with the promisor may be to induce the latterto pay the debt or otherwise to discharge the third party's claim. Insuch case, performance will directly benefit both the third party (thecreditor or claimant) and the promisee. The third party is not adonee and is not a sale beneficiary. Although not the first case of thesort, the famous case of Lecwrence v. Fox2

<1 is now regarded as theleading authority to the effect that a creditor-beneficiary has anenforceable right. Here a money debt of $300 was owed by Hollyto Lawrence, and he had that sum ready to be paid. Fox borrowedthe money over night, promising Holly to pay the debt to Lawrencenext day. It was held that Lawrence could maintain suit againstFox to enforce this promise. For a good many years this decision wasseverely criticised, the critics being obsessed with the idea that privitywas logically necessary. Fine distinctions were often drawn so as toavoid following this decision, but in spite of some confusion thuscaused, the great weight of authority is in harmony with it and acreditor-beneficiary can maintain suit.25

.. It now seems to be assumed to be the settled law of England that bloodrelationship will not enable a beneficiary to sue. Tweddle v. Atkinson (1861)I B. & S. 393.

23 In Massachusetts the beneficiary's right has been said.. to be in equity only.Nims v. Ford (1893) 159 Mass. 575. It is not apparent on casual inspectionwhy the procedural statute, R. L. 1902, C. 159, sec. 8, should not sustain anaction of "contract."

"(1859) 20 N. Y. 268.::;Bohanan v. Pope (1856) 42 Me. 93; Joslil~ v. New Jersey'Car Spring Co.

(1873) 36 N. J. L. 141; Barker v. Bucklin (1846, N. Y.) 2 Den. 45; Wood v.Moriarty (1887) IS R. I. 518; Zen's Appeal (1886) III Pa. 532, 547; Ballard v.Home Nat'l. Bal~k (1913) 91 Kan. 91, L. R. A. 1916 C, 161, and note. See 25L. R. A. 257, note; 13 C. J. 705, sec. 815. citing hundreds of cases.
























YALE LAW JOURNAL

MORTGAGEE-BENEFICIARIES

One of the most frequent cases where a third party attempts toenforce a contract on the theory that he is a beneficiary is that of amortgagee. A mortgagee is nearly always to be regarded as thecreditor of somebody, but he may not be the creditor of the promisee.Where a mortgagor who is himself personally indebted sells hisinterest in the property mortgaged to a grantee who assumes paymentof the mortgage debt, the mortgagee is a creditor-beneficiary, and heis almost universally allowed to maintain suit against the grantee andto get a personal judgment against him for the amount of the debt.2 6

share of the previous debts he may properly be sued by the creditors. Arnold v.Nichols (876) 64 N. Y. 117; Lehow v. Simonton (1877) 3 Colo. 346; Dunlapv. McNeil (1871) 35 Ind. 3x6; Floyd v. Ort (1878) 20 Kan. z62; Hannigan v.Allen (18gi) 127 N. Y. 639; Claflin v. Ostrom (1874) 54 N. Y. 581; Maxfieldv. Schwartz (189o) 43 Minn. 21; f3 C. J. 709. It was once held that a promiseto pay one-half or some other fraction of all the previous debts cannot beenforced by any creditor because no single creditor can well show that it is forhis benefit. Wheat v. Rice (1884) 97 N. Y. 296; Serviss v. McDonnell (1887)107 N. Y. 26o; distinguished in Hannigan.v. Allen, supra. Contra: Johnsonv. McClung (1885) 26 W. Va. 659.

Where a mortgagor insures premises and the policy is made payable to themortgagee as his interest may appear, the mortgagee can sue the insurer.Union Inst. v. Phoenix Ins. Co. (19o7) 196 Mass. 230 (on theory of agency);Palmer Savings Bank v. Ins. Co. (I896) 166 Mass. I89. Contra: Minnock v.Eureka F. & M. L Co. (1892) go Mich. 236.

Where a municipality owes a duty to travellers to keep a street in repairand makes a contract with the defendant for the latter to do this, a travellerwho is injured can sue the defendant by virtue of this contract, Jenree v.Metrop. St. Ry. Co. (1912) 86 Kan. 479; McMahon v. Second Ave. R. Co.(1878) 75 N. Y. 231. See many other cases of this sort cited in 49 L. R. A.(N. S.) x166, note.

See further, mortgagee-beneficiary cases, infra.A very few states still hold that a creditor-beneficiary cannot sue in a com-

mon law action. Morgan v. Randolph & Clowes Co. (igoo) 73 Conn. 396;Mellen v. Whipple (1854, Mass.) i Gray 317; Exchange Bank v. Rice (287i)1o7 Mass. 37; Borden v. Boardman (1892) 157 Mass. 41o; Minnock v. EurekaF. & M. L Co. (1892) go Mich. 236; Edwards v. Thoman (1915) 187 Mich.361; National Bank v. Grand Lodge (1878) 98 U. S. 123.

-W Gifford v. Corrigan (x889) 117 N. Y. 257; Thorp v. Keokuk Coal.Co. (1872)48 N. Y. 253, 257; Burr v. Beers (i86i4 24 N. Y. 178; Gay v. Blanchard (x88o)32 La. Ann. 497;'Pope v. Porter (1887) 33 Fed. 7; Urquhart v. Brayton (1878)12 R. I. i6g; Carver v. Eads (288o) 65 Ala. 29o; Allen v. Bucknam (1883) 75Me 352; Figart v. Halderman (188i) 75 Ind. 567; Huyler v. Atwood (1875)26 N. J. Eq. 504; George v. Andrews (1882) 6o Md. 26; Cooper v. Foss (1884)15 Neb. 515. Contra in the Virginias, where by statute only a sole beneficiarycan sue: Newberry Land Co. v. Newberry (1897) 95 Va. iig; King v. Scott(1915) 76 W. Va. 58.

See, further, cases cited in 13 C. J. 707, sec. 816. In Michigan and Connecticuta mortgagee-beneficiary can sue by virtue of a special statute. Mich. Comp.Laws I897, sec. 5i9; Corning v. Burton (1894) 2O2 Mich. 86; Conn. G. S. 2902,

sec. 587.

1ox4


1 014 YALE LAW JOURNAL


One of the most frequent cases where a third party attempts toenforce a contract on the theory that he is a beneficiary is that of amortgagee. A mortgagee is nearly always to be regarded as thecreditor of somebody, but he may not be the creditor of the promisee.Where a mortgagor who is himself personally indebted sells hisinterest in the property mortgaged to a grantee who assumes paymentof the mortgage debt, the mortgagee is a creditor-beneficiary, and heis almost universally allowed to maintain suit against the grantee andto get a personal judgment against him for the amount of the debt.26

share of the previous debts he may properly be sued by the creditors. Arnold v.Nichols (1876) 64 N. Y. 117; Lehow v. Simonton (1877) 3 Colo. 346; Dunlapv. McNeil (1871) 35 Inci. 316; Floyd v. Ort (1878) 20 Kan. 162; Hannigan v.Allen (1891) 127 N. Y. 639; Claflin v. Ostrom (1874) 54 N. Y. 581; Maxfieldv. Schwartz (ISgo) 43 Minn. 221; i3 c. J. 7og. It was once held that a promiseto pay one--half or some other fraction of all the previous debts cannot beenforced by any creditor because no single creditor can well show that it is forhis benefit Wheat v. Rice (1884) 97 N. Y. 296; Serviss v. McDonnell (1887)107 N. Y. 260; distinguished in Hannigan.v. Allen, supra. Contra: Johnsonv. McClung (1885) 26 W. Va. 659.

Where a mortgagor insures premises and the policy is made payable to themortgagee as his interest may appear, the mortgagee can sue the insurer.Union Inst. v. Phoenix Ins. Co. (1907) 196 Mass. 230 (on theory of agency) ;Palmer Savings Bank v. Ins. Co. (18g6) 166 Mass. 189. Contra: Minnock v.Eureka F. & M. 1. Co. (18g2) 90 Mic11-. 236.

Where a municipality owes a duty to travellers to keep a street in repairand makes a contract with the defendant for the latter to do this, a traveIlerwho is injured can sue the defendant by virtue of this contract Jenree v.Metrop. St. Ry. Co. (1912) 86 Kan. 479; McMahon v. Second Ave. R. Co.(1878) 75 N. Y. 231. See many other cases of this sort cited in 49 L. R. A.(N. S.) 1166, note.

See further, mortgagee-beneficiary cases, infra.A very few states stiIl hold that a creditor-beneficiary cannot sue in a com

mon law action. Morgan v. Randolph & Clowes Co. (1900) 73 Conn. 396;Mellen v. Whipple (1854, Mass.) I Gray 317; Exchange Bank v. Rice (1871)107 Mass. 37; Borden v. Boardman' (1892) 157 Mass. 410; Minnock v. EurekaF. & M. 1. Co. (18g2) 90 Mich. 236; Edwards v. Thoman (1915) 187 Mich.361; National Bank v. Grand Lodge (1878) 98 U. S. 123._"" Gifford v. Corrigan (1889) 117 N. Y.257; Thorp v. Keokuk Coal,Co. (1872)

48 N. Y. 253. 257; Burr v. Beers (186~ 24 N. Y. 178; Gay v. Blanchard (1880)32 La. Ann. 497; . Pope v. Porter (1887) 33 Fed. 7; Urquhart v. Brayton (1878)12 R. I. 169; Carver v. EOOs (1880) 65 Ala. 190; Allen v. Bucknam (1883) 75Me. 352; Figart v. Halderman (1881) 75 Inci. 567; Huyler v. Atwood (1875)26 N. J. Eq. 504; George v. Andrews (1882) 60 Md. 26; Cooper v. Foss (1884)IS Neb. SIS. Contra in the Virginias, where by statute only a sole beneficiarycan sue: Newberry Land Co. v. Newberry (1897) 95 Va. 119; King v. Scott(1915) 76 W. Va. 58.

See, further, cases cited in 13 C. J. 707, sec. 816. In Michigan and Connecticuta mortgagee-beneficiary can sue by virtue of a special statute. Mich. CompoLaws 1897, sec. 519; Corning v. Burton (1894) 102 Mich. 86; Conn. G. S. 1902.sec. 587.






















Suppose, however, that the mortgagor sells his interest to a granteewho buys subject to the mortgage but who makes no promise what-

ever to pay the mortgage debt. He does not "assume the mortgage

debt." In such a case, the grantee's rights in rem are limited by the

mortgage,27 but he undertakes no duty to pay the debt. The

mortgagee, therefore, can maintain no action against him, and neither

can the grantor. Such a grantee, however, has in numerous cases

sold his interest to a second grantee and has caused the latter to

assume payment of the mortgage debt. There is here an express

promise the performance of which requires a payment directly to the

mortgagee. The first grantee is the promisee, and he will not be

benefited at all by the payment. So far as the promisee is con-

cerned, therefore, the mortgagee seems to be a mere donee-beneficiary

and the sole beneficiary. At this point the decisions are found to be

hopelessly at variance. 28 Those holding that the mortgagee can sue

the promisor in these cases seem to be more nearly consistent with the

weight of authority in other beneficiary cases. Those holding

the contrary generally do so on the ground that a third party can-

not enforce a contract unless the performance will operate not only

as a benefit to him, but also as the fulfillment of a legal or an equitableduty owing by the promisee to him. This rule was laid down during

the period when many of the courts desired to limit the application

of the rule of Lawrence v. Fox.29 It denies all donee-beneficiariesa remedy, and is being abandoned. 30

Some of the cases denying the mortgagee a remedy under these

circumstances rest upon the theory that a beneficiary's right is basedupon the equitable doctrine of subrogation. It is generally held in

equity that a creditor is not only entitled to sue his principal debtorand all collateral sureties and to realize on such securities as may

have been charged with the debt, but also to make use of all securities

'The grantee lacks many rights and immunities because of the mortgage;he has certain "no-rights" because the mortgagee has privileges, and he hasliabilities because the mortgagee has powers.

The mortgagee can sue: McDonald v. Finseth (i915) 32 N. D. 40o; Cassel-man v. Gordon (I916) ii8 Va. 553; Llewellyn v. Butler (i915) 186 Mo. 525;Thorp v. Keokuk Coal Co., supra. Dean v. Walker (1883) io7 IlL 54o; MarbleSav. Bank v. Mesarvey (897) ioi Iowa, 285; Crone v. Stinde (igoo) 156 Mo.262; Hare v. Murphy (1895) 45 Neb. 8og; McKay v. Ward (1899) 20 Utah,149; also many other cases in accord, cited, in Fry v. Ausman, infra.

Contra: Fry v. Ausman (2922) 29 S. D. 30; 39 L. R. A. (N. S.) 15o, citingmany other cases; Vrooman v. Turner (1877) 69 N. Y. 28o; Ward v. DeOca(I8g8) 120 Cal. i02. See note in 22 .1. A. (N. S.) 492

'Jefferson v. Asch (1893) 53 Minn. 446; Viooman v. Turner (1877) 69 N. Y.28o; Durnherr v. Rau (1892),135 N. Y. 229.

' See discussion of donee-beneficiaries, ante; also post, "New York Law."Modern decisions are: Buchanan v. Tilden (i899) 258 N. Y. io9; Pond v.New Rochelle Water Co. (i9o6) 183 N. Y. 330; De Cicco v. Schweizer (29i7,

N. Y.) 117 N. E. 8o7; Gardner v. Denison (i914) 217 Mass. 492.

.1o15



Suppose, however, that the mortgagor sells his interest to a granteewho buys subject to the mortgage but who makes no promise whatever to pay the mortgage debt. He does not "assume the mortgagedebt." In such a case, the grantee's rights in rem are limited by themortgage,27 but he undertakes no duty to pay the debt. Themortgagee, therefore, can maintain no action against him, and neithercan the grantor. Such a grantee, however, has in numerous casessold his interest to a second grantee and has caused the latter toassume payment of the mortgage debt. There is here an expresspromise the performance of which requires a payment directly to themortgagee. The first grantee is the promisee, and he will not bebenefited at all by the payment. So far as the promisee is concerned, therefore, the mortgag~e seems to be a mere donee-beneficiaryand the sole beneficiary. At this point the decisions are found to behopelessly at variance.28 Those holding that the mortgagee can suethe promisor in these cases seem to be more nearly consistent with theweight of authority in other beneficiary cases. Those holdingthe contrary generally do so on the ground that a third party cannot enforce a contract unless the performance will operate not onlyas a benefit to him, but also as the fulfillment of a legal or an equitableduty owing by the promisee to him. This rule was laid down duringthe period when many of the courts desired to limit the applicationof the rule of Lawrence 'lI. Fox. 29 It denies all donee-beneficiariesa remedy, and is being abandoned.30

Some of the cases denying the mortgagee a remedy under thesecircumstances rest upon the theory that a beneficiary's right is basedupon the equitable doctrine of subrogation. It is generally held inequity that a creditor is not only entitled to sue his principal debtorand ail collateral sureties and to realize on such securities as mayhave been charged with the debt, but also to make use of ail securities

or The grantee lacks many rights and immunities because of the mortgage:he has certain "no-rights" because the mortgagee has privileges, and he hasliabilities because the mortgagee has powers.

:a The mortgagee can sue: McDonald 11. Finseth (1915) 32 N. D. 400: Casselman v. Gordon (1916) 118 Va. 553: Llewellyn 11. Butler (1915) 186 Mo. 525:Thorp v. Keokuk Coal Co., supra. Dean 11. Walker (1883) 107 IlL 540: MarbleSave Bank v. Mesaroey (1897) 101 Iowa, 285; Crone 11. Stinde (1900) 156 Mo.262: Hare 11. Murphy (1895) 45 Neb. Bog: McKay 11. Ward (1899) 20 Utah,149: also many other cases in accord, cited,in Fry 11. Ausman, infra.

Contra: Fry 11. Ausman (1912) 29 S. D. 30; 39 L. R. A. (N. S.) ISO, citingmany other cases: Vrooman v. Tumer (1877) 6g N. Y.280: Ward v. DeOca(18gB) 120 Cal. 102. See note in 22 1.. R. A. (N. S.) 492-

.. Jefferson 11. Asch (1893) 53 Mino. 446; Vrooman 11. Turner (1877) 6g N. Y.280; Durnherr 11. Rau (18g2).135 N. Y. 219.

... See discussion of donee-beneficiaries, ante; also post, "New York Law."Modern decisions are: Buchanan 11. Tilden (1899) 158 N. Y. 109: Pond 11.

New Rochelle Water Co. (1906) 183 N. Y. 330: De Cicco 11. Schweizer (1917,N. Y.) 117 N. R 807: Gardner 11. Denison (1914) 217 Mass. 492-



















YALE LAW JOURNAL

that the principal debtor may have given to the surety for theindemnity of the latter.31 It is also held that where one assumes thedebt of another, although the latter is not thereby discharged, heoccupies thereafter the position of a surety and the new promisoroccupies the position of a principal debtor. Thus where the promiseeis himself indebted to the mortgagee, but has become, under the abovetheory, a mere surety by reason of his contract with the new promisor,the courts may resort to the doctrine of subrogation and sustain anaction by the mortgagee against the promisor because the promiseecould have maintained such an action. On the other hand, if thepromisee is not himself bound to pay the debt, he is not a surety andthe doctrine of subrogation is not applicable.

It appears, however, that this is a very doubtful ground upon whichto sustain the action of the mortgagee (or other beneficiary) againstthe promisor. The doctrine of subrogation has no doubt been verybeneficial in spite of fiction and artificiality; but in this instance ithas been used to confer new security and new rights upon a creditor,as a gift out of a clear sky. In suretyship it is used only as againstone who is already legally indebted in order to secure the fulfillmentof that legal duty. A doctrine whose purpose was the enforcement ofa previously recognized duty cannot properly be given as the solereason for creating an entirely new duty.32

To rest the beneficiary's right to recover on such a theory as thiswould shut out all donee (or non-creditor) beneficiaries altogether,yet they are the very persons once thought by the Supreme Court ofthe United States to be the only beneficiaries who should be permittedto sue on a promise made to another person.33 Included among suchbeneficiaries are most of the persons for whose benefit life insurancepolicies are issued.

The mortgagee's right against the promisor should rest on the sameground as the right of other beneficiaries. The promisor has under-

"Brandt, Suretyship (3d ed.) sec. 357; Sheldon, Subrogation, (2d ed.) sec.154; Spencer, Suretyship, sec. i8i; Ames, Cases on Suretyship, 62o and note;Keller v. Ashford (i89o) 133 U. S. 6io; Hopkins v. Warner (i8g5) iog Cal.133.

'The extension of the subrogation theory to cover this case, where thepromisor was not indebted to the third party by reason of any operative factother than his promise to the promisee, is merely a cumbrous intellectual expedi-ent for holding that a contract between two parties can create an enforceableright in a third. E. g. see Keller v. Ashford (i889) 133 U. S. 6io, 623.

See Nat'l Bank v. Grand Lodge (1878) 98 U. S. 123.The Virginia court regards the fact that the promisee was not bound to pay

the debt as showing that the mortgagee was necessarily the "sole beneficiary"within the meaning of the Va. Code, sec. 2415, giving such a beneficiary aremedy. Casselman v. Gordon (igi6) II8 Va. 553. See also Merriman v.Moore (1879) 9o Pa. 78; Davis v. Davis (1912) ig Cal. App. 797. Under sucha statute it was held that the mortgagee could not sue the grantee of one whowas himself personally indebted. King v. Scott (I915) 76 W. Va. 58.

zo16



that the principal debtor may have given to the surety for theindemnity of the latter.31 It is also held that where one assumes thedebt of another, although the latter is not thereby discharged, heoccupies thereafter the position of a surety and the new promisoroccupies the position of a principal debtor. Thus where the promiseeis himself indebted to the mortgagee, but has become, under the abovetheory, a mere surety by reason of his contract with the new promisor,the courts may resort to the doctrine of subrogation and sustain anaction by the mortgagee against the promisor because the promiseecould have maintained such an action. On the other hand, if thepromisee is not hims~lf bound to pay the debt, he is not a surety andthe doctrine of subrogation is not applicable.




31 Brandt, Suret)'ship (3d ed.) sec. 357; Sheldon, Subrogatio7~ (2d ed.) sec.154; Spencer, Suret)'ship, sec. 181; Ames, Cases on Suretyship, 620 and note;Keller v. Ashford (1890) 133 U. S. 610; Hopkins v. Wamer (1895) log Cal133·

z:: The extension of the subrogation theory to cover this case, where thepromisor was not indebted to the third party by reason of any operative factother than his promise to the promisee, is merely a cumbrous intellectual expedient for holding that a contract between two parties can create an enforceableright in a third. E. g. see Keller v. Ashford (188g) 133 U. S. 610, 623.

.. See Nat'l Bank v. Grand Lodge (1878) 98 U. S. 123.The Virginia court regards the fact that the promisee was not bound to pay

the debt as showing that the mortgagee was necessarily the "sole beneficiary"within the meaning of the Va. Code, sec. 2415, giving such a beneficiary aremedy. Casselmal~ v. Gordon (1916) 118 Va. 553. See also J1ferri17lan v.Moore (1879) 90 Pa. 78; Davis v. Davis (1912) 19 Cal. App. 797. Under sucha statute it was held that the mortgagee could not sue the grantee of one whowas himself personally indebted. King v. Scott (1915) 76 W. Va. 58.




















taken for a sufficient consideration to perform an act that will be

beneficial to the third party. If such benefit was the contemplated

result, and if judgment and execution in favor of the third party

will give effect to the intention of the promisor and of the party

giving the consideration, there is ample justification for sustainingaction by the beneficiary.

Some of the cases denying the mortgagee a remedy may perhaps

be justified for the reason that the contracting parties had no inten-

tion of benefiting the mortgagee or of conferring a right of actionupon him. Indeed, some of them are placed squarely on this ground.3

But it is believed that where the promisor has received consideration

for a promise the fulfillment of which necessarily requires him to pay

money directly to a mortgagee or other third person, it would seemnot unreasonable to draw an invariable inference that such thirdperson was contemplated as a beneficiary and as the holder of a newand additional right of action.

INCIDENTAL AND UNINTENDED BENEFICIARIES

These are persons not intended by the contracting parties to havenew rights, and not named as beneficiaries or even as the personsto whom payment is to be made or other performance given. Inorder that a third party may sue upon a contract made by others hemust show that he was intended by them to have an enforceableright or at least that the performance of the contract must necessarilybe of benefit to him and such benefit must have been within the con-templation and purpose of the contracting parties.3 5 He has no rightof action where he incidentally finds a provision in some contractwhich makes to his advantage. On this ground a remedy has, in some

instances, been refused to a material man suing on a builder's bondconditioned on paying all claims for material,38 and likewise to a

See Fry v. Ausman (92) 29 S. D. 30; King v. Scott (x15) 76 W. Va. 58.

'Durnherr v. Rau (1892) 135 N. Y. 219; Wheat v. Rice (1884) 97 N. Y. 296;

Campbell v. Lacock (1861) 40 Pa. 448; Adams v. Kuehn (I888) iig Pa. 76;

Miller v. Winchell (I877) 7o N. Y. 437; Case v. Case (19I1) 2o3 N. Y. 263;

Lockwood v. Smith (913) 143 N. Y. Supp. 48o; Thomas Mfg. Co. v. Prather

(1898) 65 Ark. 27; Buckley v. Gray (895) ii0 Cal. 339. In New Orleans St.

J. Assn. v. Magnier (1861) 16 La. Ann. 338, the plaintiff was denied a remedy

because performance of the defendant's primary contractual duty would not

have benefited the plaintiff, although the plaintiff was expressly named as bene-

ficiary of a penalty clause. This decision should not be followed. See further

13 C. J. 709.' Standard Gas Power Corp. v. New England Casualty Co. (1917, N. J.) 1oi

At. 281, 27 YALE LAW JOURNAL, 274. Cf. School District v. Livers (i8gg) 147Mo. 580. See infra as to statutory provisions. Many cases contra are cited in

49 L R. A. (N. S.) ii66, note.

101 7



taken for a sufficient consideration to perform an act that will bebeneficial to the third party. If such benefit was the contemplatedresult, and if judgment and execution in favor of the third partywill give effect to the intention of the promisor and of the partygiving the consideration, there is ample justification for sustainingaction by the beneficiary.

Some of the cases denying the mortgagee a remedy may perhapsbe justified for the reason that the contracting parties had no intention of benefiting the mortgagee or of conferring a right of actionupon him. Indeed, some of them are placed squarely on this ground.3•

But it is believed that where the prom~sor has received considerationfor a promise the fulfillment of which necessarily requires him to paymoney directly to a mortgagee or other third person, it would seemnot unreasonable to draw an invariable inference that such thirdperson was contemplated as a beneficiary and as the holder of a newand additional right of action.


These are persons not intended by the contracting parties to havenew rights, and not named as beneficiaries or even as the personsto whom payment is to be made or other performance given. Inorder that a third party may sue upon a contract made by others hemust show that he was intended by them to have an enforceableright or at least that the performance of the contract must necessarilybe of benefit to him and such benefit must have been within the contemplation and purpose of the contracting parties.3 :! He has no rightof action where he incidentally finds a provision in some contractwhich makes to his advantage. On this ground a remedy has, in someinstances, been refused to a material man suing on a builder's bondconditioned on paying all claims for material,36 and likewise to a

.. See Fry v. Ausman (1912) 29 S. D. 30; King v. Scott (1915) 76 W. Va. 58.'" Durnherr v. Rau (1892) 135 N. Y. 219; Wheat v. RiC6- (1884) 97 N. Y. 2g6;

Campbell v. Lacock (1861) 40 Pa. 448; Adams v. Kuehn (1888) II9 Pa. 76;,iI,filler v. Winchell (1877) 70 N. Y. 437; Case v. Case (19II) 203 N. Y. 263;Lockwood v. Smith (1913) 143 N. Y. Supp. 480; Thomas Mfg. Co. 1/. Prather(18gB) 65 Ark 27; Buckley v. Gray (1895) IIO Cat 339. In New Orleans St.J. Ass,~. v. jI,[agnier (1861) 16 La. Ann. 338, the plaintiff was denied a remedybecause performance of the defendant's primary contractual duty would nothave benefited the plaintiff, although the plaintiff was expressly named as beneficiary of a penalty clause. This decision should not be followed. See further13 C. J. 709·

05 Standard Gas Power Corp. 1/. New England Cas14alty Co. (1917, N. J.) 101At!. 281,27 YALE LAW JOUR~AL, 274- Cf. School District v. Livers (1899) J47Mo. 580. See i'~fra as to statutory provisions. Many cases contra are cited in49 L R. A. (N. S.) u66, note.



















YALE LAW JOURNAL

citizen who sues on a contract between a water company and themunicipality. 37 It is not always easy to determine in fact whether ornot the plaintiff was contemplated by the parties as a beneficiary, andmuch of the apparent conflict in decisions can be explained on thisground. Where the beneficiary is a sole beneficiary, the difficultydoes not exist; but in the case of creditor-beneficiaries the questionmay always be regarded as an open one. If the intention to createa right in a third party is indicated with reasonable certainty, an actionby him should be maintainable even though the intention to benefithim was only secondary and conditional, 8 and irrespective of whetherhe is a donee or a creditor. Where the agreed performance involvesa payment direct to the third party, the enforcement of the contractby him will carry out the intention of the parties.

LIABILITY OF WATER COMPANIES

Where a water company has contracted with a municipality to main-tain a certain supply of water for the putting out of fires and hasfailed to do so, with the result that the property of an individualcitizen has been destroyed, it is very generally held that the citizenhas no claim against the water company for breach of contracts'Various reasons are given for these decisions. Sometimes they aremade to rest solely upon the lack of privity, without observing thatthis is inconsistent with other cases in the same jurisdiction allowingbeneficiaries to maintain suit. In other cases it is asserted that thecontract was not made for the benefit of the citizens, an assertion thatwould seem to be generally untrue in fact; and in others it is saidthat the municipality had no legal power to make such a contractfor the benefit of its citizens, a statement that we may be permittedto doubt as a matter of law. Most of the cases denying any rightto the citizen have done so for the reason formerly given by the NewYork courts in all beneficiary cases, to the effect that no beneficiary

'Davis v. Clinton Water Co. (i88o) 54 Iowa, 59; Boston Safe D. & T. Co. v.Salem W. Co. (1899) 94 Fed. 238. Contra: Gorrell v. Greensboro W. Co.(1899) i24 N. C. 328. See further Post, "Liability of Water Companies toThird Persons."

" For this reason the decision in New Orleans St. J. Assn. v. Magnier, supra,should be disapproved.

"'Ancrum v. Camden W. Co. (igog) 82 S. C. 284, 21 L. R. A. (N. S.) io29,64 S. E. 151; Hone v. Presque-Isle W. Co. (i9o8) io4 Me. 217. Contra, Wood-bury v. Tampa Waterworks (igog) 57 Fla. 243, 21 L. R A. (N. S.) i034. Thecases are very numerous. See Arthur L. Corbin, Liability of Water Companies(191o) 19 YALE LAW JoURNAL, 425, where the cases are collected and the possibleliability in tort is also considered. Individual citizens are very generally allowedto sue transportation companies and other public service companies on contractsmade with the municipality. See note in 49 L. R. A. (N. S.) 1166.

1018



citizen who sues on a contract between a water company and themunicipality.57 It is not always easy to determine in fact whether ornot the plaintiff was contemplated by the parties as a beneficiary, andmuch of the apparent conflict in decisions can be explained on thisground. Where the beneficiary is a sole beneficiary, the difficultydoes not exist; but in the case of creditor-beneficiaries the questionmay always be regarded as an open one. If the intention to createa right in a third party is indicated with reasonable certainty, an actionby him should be maintainable even though the intention to benefithim was only secondary and conditional,3s and irrespective of whetherhe is a donee or a creditor. Where the agreed performance involvesa payment direct to the third party, the enforcement of the contractby him will carry out the intention of the parties.


'¥here a water company has contracted with a municipality to maintain a certain supply of water for the putting out of :fires and hasfailed to do so, with the result that the property of an individualcitizen has been destroyed, it is very generally held that the citizenhas no claim against the water company for breach of contract.ItVarious reasons are given for these decisions. Sometimes they aremade to rest solely upon the lack of privity, without observing thatthis is inconsistent with other cases in the same jurisdiction allowingbeneficiaries to maintain suit. In other cases it is asserted that thecontract was not made for the benefit of the citizens, an assertion thatwould seem to be generally untrue in fact; and in others it is saidthat the municipality had no legal power to make such a contractfor the benefit of its c~tizens, a statement that we may be permittedto doubt as a matter of law. Most of the cases denying any rightto the citizen have done so for the reason formerly given by the NewYork courts in all beneficiary cases, to the effect that no beneficiary

aT Davis v. Clinton Water Co. (1880) 54 Iowa, 59; Boston Safe D. & T. Co. v.Salem W. Co. (1899) 94 Fed. 238. Contra: Gorrell v. Greensboro' W. Co.(1899) 124 N. C. 328· See further post, "Liability of Water Companies toThird Persons."

"For this reason the decision in New Orleans St. J. Assn. v. Magnier, supra,should be disapproved.

80 Ancrum v. Camden W. Co. (1909) 82 s. C. 284, 21 L R A. (N. S.) 1029,64 S. E. 151; Hone v. Presque-Isle W. Co. (1908) 104 Me. 217. Contra, Woodbury v. Tampa Waterworks (1909) 57 Fla. 243, 21 L. R A. (N. S.) 1034- Thecases are very numerous. See Arthur L. Corbin, Liability of Water Companies(1910) 19 YALE LAW JOUIL'<AL, 425, where the cases are collected and the possibleliability in tort is also considered. Individual citizens are very generally allowedto sue transportation companies and other public service companies on contractsmade with the municipality. See note in 49 L. R A. (N. S.) u66.















1o9CONTRACT BENEFICIARIES

can sue unless the performance by the promisor will discharge some

legal or equitable duty of the promisee to the beneficiary. This reason

has already been shown to be unsound, as denying rights to all donee-

beneficiaries. Also it has been practically abandoned by the courts

of New York where it was invented. In all cases of this class the

rights of the citizen will vary with the words used by the parties in

the express contract; but if a water company contract is in fact for the

benefit of third persons they should have the same right of action that

other beneficiaries have.

CONTRACTS UNDER SEAL

The fact that the parties to a contract have executed a formal

instrument under seal should not affect the rule as to a third party

beneficiary's right to sue. If the right of a beneficiary is recognized

at all, it should be recognized in the case of contracts under seal, and

there is much authority to this effect.40 Many of the courts, however,

make the presence of a seal a reason for refusing to recognize a right

in the beneficiary.4 1

THE BENEFICIARY'S RIGHT IS NOT BASED ON NOVATION

It has been held in a few cases that the third party beneficiary must

elect between his former debtor and the new promisor, and that a suit

against either one, even though it does not result in. collection, will

bar any action against the other.4 2

The theory underlying these cases, though not expressed clearly,

seems to be that the agreement between the promisor and promisee

operates as an offer of a novation to the beneficiary. The chief objec-

tion to this theory is that in fact the parties contemplate no such offer

and the beneficiary has no reason to believe that in taking advantage

of the new contract he is extinguishing his previous rights. If such

an offer is in fact made and accepted, the case no longer falls under

the present heading. Where a novation is effected, there is a new

contract between the promisor and the new promisee, and the latter

'Bassett v. Hughes (1877) 53 Wis. 3x9; Hughes v. Oregon R. & Nay. Co.(1884) 11 Ore. 437; Coster v. Albany (1871) 43 N. Y. 399; Pond v. New

Rochelle W. Co. (x9o6) 183 N. Y. 330; King v. Scott (i9g5) 76 W. Va. 58,

84 S. E. 954 (Code 1913, sec. 374o); Newberry Land Co. v. Newberry (1897)

95 Va. iig (Code i9o4, sec. 2415). See further 13 C. J. 711, sec. 818.

'Harms v. McCormick (i889) 132 Ill. io4; Hendrick v. Lindsey (1876) 93

U. S. 143; Willard v. Wood (I89) 135 U. S. 309; Crowell v. Hospital (1876)

27 N. J. Eq. 650.

1Bohanan v. Pope (i856) 42 Me. 93; Wood v. Moriarty (1887) 15 R. 1. 518;

Warren v. Batchelder (1845) i6 N. H. 58o. See also Aldrick v. Carpenter

(i893)-i6o Mass. i66.



can sue unless the performance by the promisor will discharge somelegal or equitable duty of the promisee to the beneficiary. This reasonhas already been shown to be unsound, as denying rights to all doneebeneficiaries. Also it has been practically abandoned by the courtsof New York where it was invented. In all cases of this class therights of the citizen will vary with the words used by the parties inthe express contract; but if a water company contract is in fact for thebenefit of third persons they should have the same right of action thatother beneficiaries have.


The fact that the parties to a contract have executed a formalinstrument under seal should not affect the rule as to a third partybeneficiary's right to sue. If the right of a beneficiary is recognizedat all, it should be recognized in the case of contracts under seal, andthere is much authority to this effect.40 Many of the courts, however,make the presence of a seal a reason for refusing to recognize a rightin the beneficiary.u


It has been held in a few cases that the third party beneficiary mustelect between his former debtor and the new promisor, and that a suitagainst either one, even though it does not result in. collection, willbar any action against the other."2

The theory underlying these cases, though not expressed clearly,seems to be that the agreement between the promisor and promiseeoperates as an offer of a novation to the beneficiary. The chief objection to this theory is that in fact the parties contemplate no such offerand the beneficiary has no reason to believe that in taking advantageof the ne\v contract he is extinguishing his previous rights. If suchan offer is in fact made and accepted, the case no longer falls underthe present heading. Where a novation is effected, there is a newcontract between the promisor and the new promisee, and the latter

«> Bassett 'lI. Hughes (1877) 53 Wis. 319; Hughes 'lI. Oregon R. & Na'lI. Co.(1884) II Ore. 437; Coster 'lI. Albany (1871) 43 N. Y. 399; Pond 'lI. NewRochelle W. Co. (1906) 183 N. Y. 330; King 'lI. Scott (1915) 76 W. Va. 58,84 S. E. 954 (Code 1913. sec. 3740); Newberry Land Co. 'lJ. Newberry (1897)95 Va. II9 (Code 1904, sec. 2415). See further 13 C. J. 7II, sec. 818.

<1 Harms 'lJ. McCormick (1889) 132 Ill. 104; Hendrick 'lI. Lindsey (1876) 93U. S. 143; Willard'lJ. Wood (IBgo) 135 U. S.309; Crowell 'lI. Hospital (1876)27 N. J. Eq. 650.

.. Bohanan 'lJ. Pope (1856) 42 Me. 93; Wood 'lJ. Moriarty (1887) IS R. 1. 518;Warren 'lI. Batchelder (1845) 16 N. H. 580. See also Aldrick 'U. Carpenter(1893)-160 Mass. 166.





















X020 YALE LAW JOURNAL

is not a beneficiary of a contract between other persons. Instead, heis a prowmisee and he has given valuable consideration by discharginghis previous debtor.

In the absence of a novation, there seems to be no sufficient reasonfor holding that the beneficiary's attempt to enforce the duty createdby the new contract amounts to a discharge of his previous rightsagainst the promisee. The history of the law of discharge at commonlaw justifies no such holding, and no sufficient reason appears forinducing equity to intervene and to discharge the promisee. In likemanner, a suit by the beneficiary against his formef debtor should notaffect his rights against the new promisor.

Where the beneficiary is not a creditor of the promisee he has norights to discharge, and the novation theory is wholly inapplicable.Clearly also, the better authority appears to be that the creditor-beneficiary's right against the new promisor is an additionalsecurity. This carries out the real intention of the parties.

CHARACTER OF THE THIRD PARTY'S RIGHT

The right of a third party beneficiary should be described as a legalright and as a contractual right. It is contractual because the opera-tive facts creating it are acts of offer and acceptance; the party whoassumes the duty does so by consenting thereto, and the necessaryconsideration is the same as that required for any contract. Uponbreach of the primary duty by the promisor, the secondary right ofthe beneficiary may be a right to damages collectible in expressassumpsit; the beneficiary is not restricted to an action of debt orindebitatus assumpsit for the amount of the defendant's unjustenrichment. Indeed, in most cases it is held that the promisor neednot have received anything at all; it is merely necessary that thepromisee shall have given consideration for the promise. There isno particular reason therefore for describing the right and the dutyas quasi-contractual. We cannot properly say that the promisor andthe third party have made a contract, even though the third party hasassented; the contract was made by the promisor and the promisee.The assent of the third party is certainly not the acceptance of anoffer, and the third party gives no consideration. Nevertheless, the

'Fischer v. Hope Mat. Life Ins. Co (1877) 69 N. Y. 161; Rodenbarger v.Bramflett (x88I) 78 Ind. 213; Davis v. Hardy (I88I) 76 Ind. 272; Gay v.Blanchard (I88o) 32 La. Ann. 497, 5o5 ("True, there was no novation of thedebt There was simply an additional obligor bound for it."); Feldman v.McGuire (i89g) 34 Ore. 3o9; Smith v. Pfluger (19o5) 126 Wis. 253, 1O5 N. W.476. See also Poe v. Dixon (1899) 6o Oh. St i24.

This is necessarily true in mortgagee-beneficiary cases where the court basesthe mortgagees right against the grantee who has assumed the debt upon thedoctrine 6f subrogation. See Hopkins v. Warner (1895) io9 Cal. 133.



is not a beneficiary of a contract between other persons. Instead, heis a promisee and he has given valuable consideration by discharginghis previous debtor.

In the absence of a novation, there seems to be no sufficient reasonfor holding that the beneficiary's attempt to enforce the duty createdby the new contract amounts to a discharge of his previous rightsagainst the promisee. The history of the law of discharge at commonlaw justifies no such holding, and no sufficient reason appears forinducing equity to intervene and to discharge the promisee. In likemanner, a suit by the beneficiary against his former debtor should notaffect his rights against the new promisor.

Where the beneficiary is not a creditor of the promisee he has norights to discharge, and the novation theory is wholly inapplicable.Oearly also, the better authority appears to be that the credit<;>rbeneficiary's right against the new promisor is an additionalsecurity.4a This carries out the real intention of the parties.


The right of a third party beneficiary should be described as a legalright and as a contractual right. It is contractual because the operative facts creating it are acts of offer and acceptance; the party whoassumes the duty does so by consenting thereto, and the necessaryconsideration is the same as that required for any contract. Uponbreach of the primary duty by the promisor, the secondary right ofthe beneficiary may be a right to damages collectible in expressassumpsit; the beneficiary is not restricted to an action of debt orindebitatus assumpsit for the amount of the defendant's unjustenrichment. Indeed, in most cases it is held that the promisor neednot have received anything at all; it is merely necessary that thepromisee shall have given consideration for the promise. There isno particular reason therefore for describing the right and the dutyas quasi-contractual. We cannot properly say that the promisor andthe third party have made a contract, even though the third party hasassented; the contract was made by the promisor and the promisee.The assent of the third party is certainly not the acceptance of anoffer, and the third party gives no consideration. Nevertheless, the

Q Fischer v. Hope Mut. Life Ins. Co, (1877) 69 N. Y. 161; Rodenbarger v.Bramjlett (1881) 78 Ind. 213; Davis v. Hardy (1881) 76 Ind. 272; Gay v.Blanchard (1880) 32 La. Ann. 497, 50S ("True, there was no novation of thedebt. There was simply an additional obligor bound for it."); Feldman v.McGuire (1899) 34 Ore. 309; Smith v. Pfluger (1905) 126 Wis. 253, 105 N. W.476. See also Poe v. Dizon (1899) 60 Oh. St. 124-

This is necessarily true in mortgagee-beneficiary cases where the court basesthe mortgagee's right against the grantee who has assumed the debt upon thedoctrine cif subrogation. See Hopkins v. Warner (1895) 109 Cal. 133.


















right of this party and the duty of the promisor are properly described

as contractual.There is no sufficient reason for describing the third party's right

as an equitable right instead of a legal one. The recognition of the

third party's right has very largely come about in jurisdictions where

there have never been separate courts of common law and of equity;

and even in other jurisdictions the right has been enforced in the

courts of law as well as in equity. Moreover, in fundamental

character, there is no difference between an equitable right and a legal

right. Any right, legal or equitable, implies a duty of performance

by another, the non-performance being penalized by society. Its

existence does not depend upon the number of officials or courts to

whom application must be made or upon the complexity of the

machinery of enforcement, although these may determine what the

secondary and other subsequent rights will be. The term equitable

has often meant in the past that application must be made to a

chancellor in a particular form called a "bill" and that the societal

penalty for nonperformance will be of a particular kind. It no longer

has that definite meaning; and if it has such a meaning it is inappli-

cable in this instance.In the past, certain rights have been described as equitable because

there was a liability to their extinguishment for the benefit of some

innocent purchaser. Certain admittedly legal rights were likewise

subject to such a liability by the rules of market overt, and hence the

existence of such a liability is not the basis of a clear distinction.The right of the third party beneficiary, however, is accompanied by

no liabilities that do not accompany all contract rights. The fact that

the promisee may have the power of extinguishment is not materialon this point. There is no chance here for the application of specialbona fide purchaser doctrines."4

The accuracy of the foregoing seems not to be doubted in the caseof a sole beneficiary. In the case of a creditor-beneficiary, however,the contrary has been maintained, especially in cases where the courtoverlooked altogether the rights of a sole beneficiary. Thus it has

been held that a mortgagee or other creditor cdn sue the promisoronly according to the procedure of a court of equity, and on thetheory that the promise is an "asset" of the promisee." Not only

"The relation between a beneficiary and the promisor is not a fiduciary one.Attorney General v. American Legion of Honor (igio) 2o6 Mass. s58.

*Keller v. Ashford (1889) i33 U. S. 61o; Green v. Turner (i898) 8o Fed.41, 86 Fed. 837; Hopkins v. Warner (1895) io9 Cal. 133; Forbes v. Thorpe(191) 209 Mass. 570. Observe that this asset theory is different from the onediscussed previously. Here the promissory duty is the asset, and is to bereached as an asset of the promisee. The other doctrine supposes the existenceof assets in the hands of the promisor. Forbes v. Thorpe, supra, might restupon both doctrines at once.



right of this party and the duty of the promisor are properly describedas contractual.

There is no sufficient reason for describing the third party's rightas an equitable right instead of a legal one. The recognition of thethird party's right has very largely come about in jurisdictions wheretJ1ere have never been separate courts of common law and of equity;and even in other jurisdictions the right has been enforced in thecourts of law as well as in equity. Moreover, in fundamentalcharacter, there is no difference between an equitable right and a legalright. Any right, legal or equitable, implies a duty of performanceby another, the non-performance being penalized by society. Itsexistence does not depend upon the number of officials or courts towhom application must be made or upon the complexity of themachinery of enforcement, although these may determine what thesecondary and other subsequent rights will be. The term equitablehas often meant in the past that application must be made to achancellor in a particular form called a "bill" and that the societalpenalty for nonperformance will be of a particular kind. It no longerhas that definite meaning; and if it has such a meaning it is inapplicable in this instance.

In the past, certain rights have been described as equitable becausethere was a liability to their extinguishment for the benefit of someinnocent purchaser. Certain admittedly legal rights were likewisesubject to such a liability by the rules of market overt, and hence theexistence of such a liability is not the basis of a clear distinction.The right of the third party beneficiary, however, is accompanied byno liabilities that do not accompany all contract rights. The fact thatthe promisee may have the power of extinguishment is not materialon this point. There is no chance here for the application of specialbona fide purchaser doctrines.H

The accuracy of the foregoing seems not to be doubted in the caseof a sale beneficiary. In the case of a creditor-beneficiary, however,the contrary has been maintained, especially in cases where the courtoverlooked altogether the rights of a sole beneficiary. Thus it hasbeen held that a mortgagee or other creditor can sue the promisoronly according to the procedure of a court of equity, and on thetheory that the promise is an "asset" of the promisee.ill Not only

.. The relation between a beneficiary and the promisor is not a fiduciary one.Attorney General 1/. American Legion of Honor (1910) 206 Mass. 158.

• Keller 1/. Ashford (1889) 133 U. S. 610; Green 1/. Turner (1898) 80 Fed.41, 86 Fed. 837; HOPkins 1/. Warner (1895) 109 CaL 133; Forbes 1/. Thorpe(19U) 209 Mass. 570. Observe that this asset theory is different from the onediscussed previously. Here the promissory duty is the asset, and is to bereached as an asset of the promisee. The other doctrine supposes the existenceof assets in the hands of the promisor. Forbes 1/. Thorpe, suprrs, might restupon both doctrines at once.
















is such a theory wholly inapplicable to sole beneficiaries, but it isnot the theory on which the rights of creditor-beneficiaries havegenerally been based and it has not been consistently adhered to inany state."' If the promisee has an "asset" in this case it should beavailable like other assets to his other creditors as well as to theparticular creditor who is named as the payee. The present writerhas seen no creditor's bill for realizing on this asset brought by anycreditor other than the named payee; but if other creditors couldmaintain such a bill, it would result in the payee's getting the wholeof this asset and still sharing other assets pro rata with the othercreditors as to any balance that might be due him. By differentiatingthis particular creditor from other creditors and this particular "asset"from other assets we are merely recognizing that he has obtained aspecial right in personam as against the promisor, a right that iscreated by a contract to which he was not a party. He gains thisspecial right because the contracting parties intended that he shouldhave it, or at least that the performance should go direct to him. Toapply the "equitable asset" theory is merely to recognize the thirdparty beneficiary's right under another and mis-descriptive name.

There is no doubt that the chancery procedure had many advantagesover that of the common law. This was especially true with respectto its flexibility in the matter of parties to the suit, where more thantwo parties were involved. In all beneficiary cases there are threeinterested parties, although the interest of the promisee is not quitethe same in sole beneficiary cases as it is in creditor-beneficiary cases.The rights and duties of the three can no doubt be better determinedand enforced in one suit to which all are parties than in two or moresuits in each of which only two are parties. If the promisor is suedby either the promisee or the third party he should have the powerto make the other one a party to the suit No doubt the procedure ofnearly all of our courts is now such as to permit this. Even if not,the case should be regarded merely as one where the promisor hasundertaken duties to two persons severally.

THE RIGHTS OF THE PROMISEE

It was once held in England that where a third party was solebeneficiary, the promisee having no pecuniary interest in the per-formance, the promisee could maintain no action at law.47 The same

," (i) Sole beneficiaries. Every state recognizes the right of a sole bene-ficiary in some cases. (2) Statute of limitations. The mortgagee can sue themortgagor's grantee who assumes the debt, even though the statute of limita-tions has barred the remedy against the mortgagor. Davis v. Davis (1912) 19Cal. App. 797; Daniels v. Johnson (i9oo) 129 CaL 415. (3) Other defenses.It is no defense to the promisor that the promisee may have had a good defenseagainst the plaintiff. Wsher v. Independent M. & D. Co. (i9o4) x42 Cal. 7o8

rLevet v. Hawes (1599) Cro. Erz 61g, 652.



is such a theory wholly inapplicable to sole beneficiaries, but it isnot the theory on which the rights of creditor-beneficiaries havegenerally been based a.."1d it has not been consistently adhered to inany state.~e If the promisee has an "asset" in this case it should beavailable like other assets to his other creditors as well as to theparticular creditor who is named as the payee. The present writerhas seen no creditor's bill for realizing on this asset brought by anycreditor other than the named payee; but if other creditors couldmaintain such a bill, it would result in the payee's getting the who.leof this asset and still sharing other assets pro rata with the othercreditors as to any balance that might be due him. By differentiatingthis particular creditor from other creditors and this particular "asset"from other assets we are merely recognizing that he has obtained aspecial right in personam as against the promisor, a right that iscreated by a contract to which he was not a party. He gains thisspecial right because the contracting parties intended that he shouldhave it, or at least that the- performance should go direct to him. Toapply the "equitable asset" theory is merely to recognize the thirdparty beneficiary's right under another and mis-descriptive name.

There is no doubt that the chancery procedure had many advantagesover that of the common law. This was especially true with respectto its flexibility in the matter of parties to the suit, where more thantwo parties were involved. In all beneficiary cases there are threeinterested parties, although the interest of the promisee isnot quitethe same in sole beneficiary cases as it is in creditor-beneficiary cases.The rights and duties of the three can no doubt be better determinedand enforced in one suit to which all are parties than in two or moresuits in each of which only two are parties. If the promisor is suedby either the promisee or the third party he should have the powerto make the other one a party to the suit No doubt the procedure ofnearly all of our courts is now such as to permit this. Even if not,the case should be regarded merely as one where the promisor hasundertaken duties to two persons severally.


It was once held in England that where a third party was solebeneficiary, the promisee having no pecuniary interest in the performance, the promisee could maintain no action at law.41 The same

.. (1) Sale beneficiaries. Every state recognizes the right of a sote beneficiary in some cases. (2) Statute of limitations. The mortgagee can sue themortgagor's grantee who assumes the debt, even though the statute of limitations has barred the remedy against the mortgagor. Davis 'lJ. Davis (1912) 19Cat. App. 797; Daniels 'lJ. Johnson (1900) 129 CaL 415. (3) Other defenses.It is no defense to the promisor that the promisee may have had a good defenseagainst the plaintiff. Washer'lJ. Independent M: & D. Co. (1904) 142 Cat. 708.

Cf Le'lIet fl. Hawes (1599) ere. Etiz. 619, 652-
















has been held in some cases in the United States.'8 There seems to

be no sufficient reason for this. The promisee has paid the consid-

eration and the law should vindicate his right that performance shall

take place, even though the damage to the plaintiff is nominal. Where

the promisee has a pecuniary interest in performance, as where it

is to discharge a debt owed to the third party beneficiary, the promisee

certainly can sue the promisor in case of breach.'9 Thus the latter

may be sued by two persons on the same contract; but this is not

unjust, because his breach causes an injurious disappointment to

two separate persons. By availing himself of modem code procedure

or that of equity the promisor can avoid the expense of two actions

and the danger of a double recovery.In states where the beneficiary cannot sue, of course the promisee

can, and he can recover the full amount promised1 The promisee's

right is assignable,51 and if the assignment is to the beneficiary the

latter can sue as assignee.5 2

POWER OF THE PROMISEE TO RELEASE THE PROMISOR

It is now clear that after the beneficiary has become aware of the

contract made for his benefit, and has either acted in reliance on it or

has in some manner expressed an assent and approval, the promisee

no longer has power to release the promisor from his duty to the

beneficiary.53 This is true whether the relation of the beneficiary to

the promisee is that of donee or that of creditor. No notice of his

'Ayers v. Dixon (879) 78 N. Y. 338; Adams v. Union Ry. (1899) 21 R I.

134; Reeves v. Bluff City Bank (i9oi) 63 Kan. 789; New Haven v. New Haven

& D. R. Co. (1892) 62 Conn. 252.

'Meyer v. Hartman (1874) 72 Ill. 442; Tinkler v. Swaynie (1880) 71 Ind.

562; Baldwin v. Emery (1897) 89 Me. 496; Merriam v. Lumber Co. (i877)23 Minn. 314, 322; O'Neill v. American Legion of Honor (19o4) 70 N. J. L.

410; Langan v. American Legion of Honor (19o3) 174 N. Y. 266 (semble) ;

Kelly v. Security Co. (i9o6) i86 N. Y. 16. The last two cases suggest that the

propiisee is entitled to a decree for. specific performance. See further U. S.

Fidelity & G. Co. v. U. S. (1917) 246 Fed. 433."Furnas v. Durgin (1876) ii9 Mass. 5oo; Boardman v. Larrabee (1883) 51

Conn. 39.The promisor can compel the promisee to pay over the sum collected to the

third party beneficiary if the latter holds a mortgage on the promisor's land.

Williams v. Fowle (1882) 132 Mass. 385 (semble); Furnas v. Durgin, supra,

(semble).I Hyland v. Crofut (1913) 87 Conn. 49.

"Reed v. Paul (188i) 131 Mass. I29.

"Gifford v. Corrigan (889) II7 N. Y. 257; New York Ins. Co. v. Aitken

(i89i) 125 N. Y. 66o; Hill v. Hoeldtke (I1Q2) io4 Tex. 594, 142 S. W. 871;

4o L. R. A. (N. S.) 672, with note; Bassett v. Hughes (1877) 43 Wis. 319.

"The person who has made the stipulation cannot revoke it if the third party

has declared that he wished to take advantage of it." French Civil Code, sec.

I121. See also Civ. Code Cal. sec. 1559; Civ. Code S. Dak. sec. 1193; Rev. L.

Okla. 191o, sec. 895.

102 3



has been held in some cases in the United States.'s There seems tobe no sufficient reason for this. The promisee has paid the consideration and the law should vindicate his right that performance shalltake place, even though the damage to the plaintiff is nominal. 'Wherethe promisee has a pecuniary interest in performance, as where itis to discharge a debt owed to the third party beneficiary, the promiseecertainly can sue the promisor in case of breach.'l1 Thus the lattermay be sued by two persons on the same contract; but this is notunjust, because his breach causes an injurious disappointment totwo separate persons. By availing himself of modem code procedureor that of equity the promisor can avoid the expense of two actionsand the danger of a double recovery.

In states where the beneficiary cannot sue, of course the promiseecan, and he can recover the full amount promised.50 The promisee'sright is assignable,51 and if the assignment is to the beneficiary thelatter can sue as assignee.5

:


It is now clear that after the beneficiary has become aware of thecontract made for his benefit, and has either acted in reliance on it orhas in some manner expressed an assent and approval, the promiseeno longer has power to release the promisor from his duty to thebeneficiary.53 This is true whether the relation of the beneficiary tothe promisee is that of donee or that of creditor. No notice of his

.. Ayers v. Dixon (1879) 78 N. Y. 318; Adams v. Union Ry. (1899) 21 R. I.134; Reeves v. Bluff City Bank (1901) 63 Kan. 789; New Haven v. New Haven& D. R. Co. (ISgz) 62 Conn. 252.

.. Meyer v. Hartman (1874) 72 IlL 442; Tinkler v. Swaynie (1880) 71 Ind.562; Baldwin v. Emery (1897) 89 Me. 496; Merriam v. Lumber Co. (1877)23 Minn. 314, 322 ; O'Neill v. American Legion of Honor (1904) 70 N. J. L.410; Langan v. America,~ Legion of Honor (1903) 174 N. Y. 266 (semble);Kelly v. Security Co. (1906) 186 N. Y. 16. The last two cases suggest that thepromisee is entitled to a decree for. specific performance. See further U. S.Fidelity & G. Co. v. U. S. (1917) 246 Fed. 433.

.. Furnas v. Durgin (1876) 119 Mass. 500; Boardman v. Larrabee (1883) 51Conn. 39.

The promisor can compel the promisee to pay over the sum collected to thethird party beneficiary if the latter holds a mortgage on the promisor's land.Williams v. Fowle (1882) 132 Mass. 385 (semble); Furnas v. Durgin, supra,(semble).

11 Hyland v. Crofut (1913) 87 Conn. 49... Reed v. Paul (1881) 131 Mass. 129-"Gifford v. Corrigan (1889) 117 N. Y. 257; New York Ins. Co. v. Aitke71

(1891) 125 N. Y. 660; Hill v. Hoeldtke (1912) 104 Tex:. 594. 142 S. W. 871;-40 L. R. A. (N. S.) 672, with note; Bassett v. Hughes (1877) 43 Wis. 319.

"The person who has made the stipulation cannot revoke it if the third partyhas declared that he wished to take advantage of it." French Civil Code, sec.1121. See also Civ. Code CaL sec. 1559; Civ. Code S. Dak. sec. II93; Rev. LOIda. 1910, sec. 895-




:













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YALE LAW JOURNAL

assent by the beneficiary to the promisor is necessary."4 Prior toassent by the beneficiary the promisee may perhaps have the powerto release."5 Where the third party is the sole beneficiary of the con-tract the promisee is generally held to have no power whatever torelease the promisor, even before the third party is aware of thecontract5 8

DEFENSES OF THE PROMISOR AS AGAINST THE BENEFICIAMY

The beneficiary's rights against the promisor spring from the con-tract as it was made, and if that contract was in the beginning voidfor lack of any essential element the third party has no rights. Solikewise if the contract was voidable for infancy or insanity or fraud,it is voidable as against the beneficiary.57 If the duty of the promisoris subject to some condition precedent, the correlative right of thebeneficiary is likewise conditional.58

On the other hand, just as- soon as the right of the beneficiary is inexistence and beyond the power of the promisee to destroy by arelease or rescission, it is also beyond his power to destroy by wrong-ful acts that would discharge the promisor's duty to himself. Thus abeneficiary can still hold a surety on his bond even though thepromisee has discharged such surety's duty to himself by surrenderingcollateral securities5" or by making an alteration of the contract withthe principal and without the surety's consent8 0°

"Hill v. Hoeldtke, supra.ITrimble v. Strother (874) 25 Oh. -St 378; Berkshire Life Ins. Co. v.

Hutchings (1884) oo Ind. 496; Commercial N. B. v. Kirkwood (1898) 172 Ill.563; Gilbert v. Sanderson (I88) 56 Iowa, 349.

" Tweeddale v. Tweeddale (19o3) 116 Wis. 517; Wetutzke v. Wetutzke(1914) [58 Wis. 3o5, 148 N. W. io88. The right of the beneficiary of a lifeinsurance policy is generally held to be irrevocable by the insured, even priorto any knowledge or assent by the beneficiary, unless the power of revocationis reserved in the policy. Such a power may of course be reserved.

"Arnold v. Nichols (1876) 64 N. Y. 117 (the usual rules as to rescission forfraud concerning the return of the consideration, etc., apply) ; Jenness v. Simp-son (i91o) 84 Vt. 127, 139; Cohrt v. Koch (i88i) 56 Iowa, 658; Crowe v.Lewin (1884) 95 N. Y. 423; Dunning v. Leavitt (i88i) 85 N. Y. 30; Green v.Turner (1898) 8o Fed. 41, 86 Fed. 837.

'Jenness v. Simpson (i91o) 84 Vt .127, 143; Osborne v. Cabell (1883) 77Va. 462 (nonperformance or failure of consideration). The case of O'Rourkev. John Hancock M. L. L Co. (19o2) 23 R. I. 457, is in effect contra, and cannotbe supported.

The power of rescission or alteration may be reserved in express terms."Doll v. Crume (1894) 41 Neb. 655; School District v. Livers (i899) 147 Mo.

58o."Equitable Sur. Co. v. McMillan (1913) 234 U. S. 448; United States v.

National Sur. Co. (i899) 92 Fed. 549; Victoria Lumber Co. v. Wells (1916)139 La. Soo; Cowles v. U. S. Fidelity, etc. Co. (i9o3) 32 Wash. i2o; Conn. v.State (189o) 125 Ind. 514; Steffes v. Lemke (i889) 40 Minn. 27.

102 4



assent by the beneficiary to the promisor is necessary.G~ Prior toassent by the beneficiary the promisee may perhaps have the powerto release.G5 Where the third party is the sole beneficiary of the contract the promisee is generally held to have no power whatever torelease the promisor, even before the third party is aware of thecontract.G6

DEFENSES OF THE PROMISOR AS AGAINST THE BENEFICIARY

The beneficiary's rights against the promisor spring from the contract as it was made, and if that contract was in the beginning voidfor lack of any essential element the third party has no rights. Solikewise if the contract was voidable for infancy or insanity or fraud,it is voidable as against the beneficiary.51 If the duty of the promisoris subject to some condition precedent, the correlative right of thebeneficiary is likewise conditional.58

On the other hand, just as· soon as the right of the beneficiary is inexistence and beyond the power of the promisee to destroy by arelease or rescission, it is also beyond his power to destroy by wrongful acts that would discharge the promisor's duty to himself. Thus abeneficiary can still hold a surety on his bond even though thepromisee has discharged such surety's duty to himself by surrenderingcollateral securitiesG9 or by making an alteration of the contract withthe principal and without the surety's consent.60

... Hill v. Hoeldtke, supra."Trimble 'lJ. Strother (1874) 25 Oh. .St. 378; Berkshire Life Ins. Co. 'lJ.

Hutchings (1884) 100 Ind. 496; Commercial N. B. 'lJ. Kirkwood (18gB) 172 Ill.563; Gilbert 'lJ. Sanderson (1881) 56 Iowa, 349.

.. Tweeddale 'lJ. Tweeddale (1903) u6 Wis. 517; Wetutzke 'lJ. Wetutzke(1914) 158 Wis. 305, 148 N. W. 1088. The right of the beneficiary of a lifeinsurance policy is generally held to be irrevocable by the insured, even priorto any knowledge or assent by the beneficiary, unless the power of revocationis reserved in the policy. Such a power may of course be reserved.

.. Arnold 'lJ. Nichols (1876) 64 N. Y. U7 (the usual rules as to rescission forfraud concerning the return of the consideration, etc., apply); Jenness'lJ. Simpson (1910) 84 Vt 12';, 139; Cohrt 'lJ. Koch (1881) 56 Iowa, 658; Crowe 'lJ.Lewin (1884) 95 N. Y. 423; Dunning'lJ. Leavitt (1881) 85 N. Y. 30; Green'lJ.Turner (18gB) So Fed. 41,86 Fed. 837•

.. Jenness 'lJ. Simpson (1910) 84 Vt. .12';, 143; Osborne 'lJ. Cabell (1883) 77Va. 462 (nonperformance or failure of consideration). The case of O'Rourke'lJ. John Hancock M. L. 1. Co. (1902) 23 R 1. 457, is in effect contra, and cannotbe supported.

The power of rescission or alteration may be reserved in express terms... Doll 'lJ. Crume (1894) 41 Neb. 655; School District 'lJ. Livers (IBgg) 147 Mo.

SSo.to Equitable Sur. Co. 'lJ. McMillan (1913) 234 U. S. 448; United States 'lJ.

National Sur. Co. (lBgg) 92 Fe<L 549; Victoria Lumber Co. 'lJ. Wells (1916)139 La. 500; Cowles'lJ. U. S. Fidelity, etc. Co. (1903) 32 Wash. 120; Conn. 'lJ.State (ISgo) 125 Ind. 514; Steffes 'D. Lemke (188g) 40 MinD. 27·






... Hill v. Hoeldtke, supra... Trimble 'lJ. Strother (1874) 25 Oh.. St. 378; Berkshire Life Ins. Co. 'lJ.



.. Arnold 'lJ. Nichols (1876) 64 N. Y. U7 (the usual rules as to rescission forfraud concerning the return of the consideration, etc., apply); Jenness'lJ. Simpson (1910) 84 Vt 12';, 139; Cohrt 'lJ. Koch (1881) 56 Iowa, 658; Crowe 'lJ.Lewin (1884) 95 N. Y. 423; Dunning'lJ. Leavitt (1881) 85 N. Y. 30; Green'lJ.Turner (18gB) So Fed. 41,86 Fed. 837.










... Hill v. Hoeldtke, supra... Trimble 'lJ. Strother (1874) 25 Oh.. St. 378; Berkshire Life Ins. Co. 'lJ.



.. Arnold 'lJ. Nichols (1876) 64 N. Y. U7 (the usual rules as to rescission forfraud concerning the return of the consideration, etc., apply); Jenness'lJ. Simpson (1910) 84 Vt 12';, 139; Cohrt 'lJ. Koch (1881) 56 Iowa, 658; Crowe 'lJ.Lewin (1884) 95 N. Y. 423; Dunning'lJ. Leavitt (1881) 85 N. Y. 30; Green'lJ.Turner (18gB) So Fed. 41,86 Fed. 837.






The duty of the promisor to the beneficiary is quite independent ofprevious or subsequent relations between the promisee and the benefi-ciary.8 '

MASSACHUSETTS LAW

Prior to 1850 the Supreme Court of Massachusetts held in anumber of cases that a beneficiary could sue on a contract made byothers. 2 It was largely upon these cases that the decision in

Lawrence v. Fox' was based, and they have had an importantinfluence upon the law in the United States to-day. In Mellen v.Whipple" it was held that a mortgagee could not sue the grantee ofthe mortgagor although he had assumed the debt, and Judge Metcalfput all the earlier cases into three classes which he declared to beexceptions to the general rule that no action lies by one not a promisee.Two of these classes were, first, cases where the defendant hadreceived assets which he ought to pay over and, second, cases wherethe beneficiary was related by blood to the promisee. In Putnam v.Field"5 a liberal application was made of the assets exception. InExchange Bank v. Rice"8 a creditor-beneficiary was not allowed to

sue, Judge Gray referring to the three classes of exceptions with novery marked approval. Somewhat later all of Judge Metcalf's classesof exceptions seem to have been disapproved, and the cases on whichthey were based have been declared to be overruled. In Marston v.Bigelow 67 it was held that a sole beneficiary who was the son of thepromisee could not enforce the contract in either law or equity; and

in Borden v. Boardman8 the assets exception was disregarded and it

was held that the beneficiary could not sue unless the parties had

' The fraud of the plaintiff as against the promisee is not available as adefense to the promisor. Hurst v. Knight (1914, Tex.) 164 S. W. Io7z. Thegrantee of the mortgagor who has assumed the mortgage debt can set up nodefenses against the mortgagee except a satisfaction. Washer v. Independent M.& D. Co. (i9o4) z42 Cal. 702, 7o8; Davis v. Davis (1922) ig Cal. App. 797(statute of limitations) ; Daniels v. Johnson (igoo) 129 Cal. 415 (same).

"Felton v. Dickinson (813) io Mass. 287 (sole beneficiary and blood rela-tion) ; Arnold v. Lyman (282I) 17 Mass. 400; Hall v. Marston (1822) 17 Mass.575; Fitch v. Chandler (1849) 4 Cush. 254; Brewer v. Dyer (i85i) 7 Gush.337 ("the law, operating on the act of the parties, creates the duty, establishesthe privity, and implies the promise and obligation").

(1859) 20 N. Y. 268.(854) I Gray, 317. See also Dow v. Clark (1856, Mass.) 7 Gray, 198.

(1870) 1O3 Mass. 556.(1871) 107 Mass. 37. But see Nash" v. Commonwealth (899) 174 Mass. 335,

where the exceptions laid down in Mellen v. Whipple seem to be approved.

' (i889) 1SO Mass. 45. But see Dean v. American Legion of Honor (892)

i56 Mass. 435, 438; Attorney Gen. v. American Legion of Honor (igio) 2o6

Mass. 158, i66." (1892) 157 Mass. 410. A right in the plaintiff in this sort of case has since

been recognized as enforceable by a bill in equity. Forbes v. Thorpe (i911)

69

ro25



The duty of the promisor to the beneficiary is quite independent ofprevious or subsequent relations between the promisee and the beneficiary.61

MASSACHUSETTS LAW

Prior to 1850 the Supreme Court of Massachusetts held in anumber of cases that a beneficiary could sue on a contract made byothers.62 It was largely upon these cases that the decision inLawrence v. Fox63 was based, and they have had an importantinfluence upon the law in the United States to-day. In Mellen v.Whipple 6 /> it was held that a mortgagee could not sue the grantee ofthe mortgagor although he had assumed the debt, and Judge Metcalfput all the earlier cases into three classes which he declared to beexceptions to the general rule that no action lies by one not a promisee.Two of these classes were, first, cases where the defendant hadreceived assets which he ought to pay over and, second, cases wherethe beneficiary was related by blood to the promisee. In Putnam v.Fieldf.5 a liberal application was made of the assets exception. InExchange Bank v. Rice66 a creditor-beneficiary was not allowed tosue, Judge Gray referring to the three classes of exceptions with novery marked approval. Somewhat later all of Judge Metcalf's classesof exceptions seem to have been disapproved, and the cases on whichthey were based have been declared to be overruled. In Marston v.Bigelow6T it was held that a sole beneficiary who was the son of thepromisee could not enforce the contract in either law or equity; andin Borden v. Boardman68 the assets exception was disregarded and itwas held that the beneficiary could not sue unless the parties had

... The fraud of the plaintiff as against the promisee is not available as adefense to the promisor. Hurst 1/. Knight (1914, Tex.) 164 S. W. 1072. Thegrantee of the mortgagor who has assumed the mortgage debt can set up nodefenses against the mortgagee except a satisfaction. Washer 1/. Independent M.& D. Co. (1904) 142 Cal. 702, 708; Davis 1/. Davis (1912) 19 Cal. App. 797(statute of limitations); Daniels 1/. Johnson (1900) 129 Cal. 415 (same) .

.. Feltol~ 1/. Dickinson (1813) 10 Mass. 287 (sole beneficiary and blood relation); Arnold 1/. Lyman (1821) 17 Mass. 400; Hall 1/. Marston (I8zz) 17 Mass.575; Fitch 1/. Chandler (1849) 4 Cush. 254; Brewer 1/. Dyer (1851) 7 Cush.337 ("the law, operating on the act of the parties, creates the duty, establishesthe privity, and implies the promise and obligation") .

.. (1859) 20 N. Y. 268.

.. (1854) I Gray, 317. See also Dow 1/. Clark (1856, Mass.) 7 Gray, 198·

.. (1870) 103 Mass. 556.

.. (1871) 107 Mass. 37. But see NasH 1/. Commonwealth (1899) 174 Mass. 335,where the exceptions laid down in Mel/en 1/. Whipple seem to be approved.

fir (1889) ISO Mass. 45. But see Dean 1/. American Legion of Honor (1892)156 Mass. 435. 438; Attorney Gen. 1/. American Legion of Honor (1910) 206Mass. 158. 166.

eo (1892) 157 Mass. 410. A right in the plaintiff in this sort of case has sincebeen recognized as enforceable by a bill in equity. Forbes 11. Thorpe (I9II)

69



MASSACHUSETTS LAW




.. (1859) 20 N. Y. 268.


.. (1870) 103 Mass. 556.




69



MASSACHUSETTS LAW




.. (1859) 20 N. Y. 268.


.. (1870) 103 Mass. 556.




69

YALE LAW JOURNAL

created a trust. Had the magic word "trust" been used, it is clearthat the beneficiary's action in "contract" would have been sustained.

Thus the Massachusetts law is supposed to have been brought intoharmony with that of England. There is some reason to believe,however, that the Massachusetts court is not wholly satisfied, andnumerous decisions very materially limit the rule. In several casesthe court has established the existence of "privity" by the liberal useof fiction. Thus where the defendant promised an expectant fatherto pay a sum of money to the yet unborn child in return for thefather's giving the child a certain name it was held that the childcould maintain suit on the contract.6 9 In some curious fashion thecourt was able to convince itself that the child was the promisee andalso gave part of the consideration. The child was really a sole (anddonee) beneficiary. In like manner an artificial privity in favor of acreditor-beneficiary was discovered by the court in a case where thelicensee of a patent had agreed to pay a royalty and had later assignedhis license to the defendant "subject to covenants." The licensorwas given judgment against the assignee for the royalty due.7 0

Again, where an insurance policy was issued to a mortgagor but theloss was payable to the mortgagee "as its interest may appear," itwas held that the mortgagee could sue on the policy in its own name.71

In a later case,72 the question was raised whether the mortgagee heresued as a- promisee or as an assignee; but so far as appears, theplaintiff was a creditor-beneficiary. 3 Much earlier, the court hadheld that a mortgagee-beneficiary could sue the promisor if he heldan assignment from the promisee.74

2o9 Mass. 57o. And in other cases a trust was held to be created by reason ofa statute that bears no obvious indication of any such intent. See Nash v.Commonwealth (i899) 174 Mass. 335; George H. Sampson Co. v. Common-wealth (igog) 2o2 Mass. 326.

1Gardner v. Denison (1914) 217 Mass. 492; Eaton v. Libbey (1896) 165Mass. 218.

"Paper Stock D. Co. v. Boston D. Co. (i888) 147 Mass. 318. In this casethe licensee had an express power to assign; but this is not the power of anagent, much less is it the power to effect a novation.

'Palmer Say. Bank v. Insurance Co. (896) I66 Mass. 189. Even if theplaintiff was in fact the promisee, which seems unlikely, it gave no tonsidera-tion; and in the English courts this fact would deprive the plaintiff of a rightto sue. Dunlop v. Selfridge figS] A. C. 847. No doubt this Massachusettsdecision was influenced by R. L. i902, c. 1i8, sec. 58; but that statute does notpurport to confer a right of action upon a third party beneficiary. To the sameeffect is Union Inst. v. Phoenix Ins. Co. (19o7) i96 Mass. 23o, where themortgagor is declared to be the mortgagee's agent

" Attleborough Bank v. Security Ins. Co. ('897) 168 Mass. -47, 149." The Michigan courts regard the mortgagee as a mere third party beneficiary,

and deny him a remedy. Minnock v. Eureka Ins. Co. (1892) 9o Mich. 236;Hartford F. I Co. v. Davenport (i877) 37 Mich. 609.

"Reed v. Paul (i881) i31 Mass. i29.

io26



created a trust. Had the magic word "trust" been used, it is clearthat the beneficiary's action in "contract" would have been sustained..

Thus the Massachusetts law is supposed to have been brought intoharmony with that of England. There is some reason to believe,however, that the Massachusetts court is not wholly satisfied, andnumerous decisions very materially limit the rule. In several casesthe court has .established the existence of "privity" by the liberal useof fiction. Thus where the defendant promised an expectant fatherto pay a sum of money to the yet unborn child in return for thefather's giving the child a certain name it was held that the childcould maintain suit on the contract.69 In some curious fashion thecourt was able to convince itself that the child was the promisee andalso gave part of the consideration. The child was really a sole (anddonee) beneficiary. In like manner an artificial privity in favor of acreditor-beneficiary was discovered by the court in a case where thelicensee of a patent had agreed to pay a royalty and had later assignedhis license to the defendant "subject to covenants." The licensorwas given judgment against the assignee for the royalty due.'1OAgain, where an insurance policy was issued to a mortgagor but theloss was payable to the mortgagee "as its interest may appear," itwas held that the mortgagee could sue on the policy in its own name.'11

In a later case,72 the question was raised whether the mortgagee heresued as a· promisee or as an assignee; but so far as appears, theplaintiff was a creditor-beneficiary."13 Much earlier, the court hadheld that a mortgagee-beneficiary could sue the promisor if he heldan assignment from the promisee.n

209 Mass. 570. And in other cases a trust was held to be created by reason ofa statute that bears no obvious indication of any such intent See Nash v.Co~monwealth (1899) 174 Mass. 335; George H. Sampson Co. v. Commonwealth (1909) 202 Mass. 326.

.. Gardner v. Denison (1914) 217 Mass. 492; Eaton v. Libbey (18g6) 165Mass. 218.

TO Paper Stock D. Co. v. Boston D. Co. (1888) 147 Mass. 318. In this casethe licensee had an express power to assign; but this is not the power of anagent, much less is it the power to effect a novation.

1'1 Palmer Sa'll. Bank v. Insurance Co. (1896) 166 Mass. 189. Even if theplaintiff ~s in fact the promisee, which seems unlikely, it g-ave no consideration; and in the English courts this fact would deprive the plaintiff of a rightto sue. Dunlop v. Selfridge [1915] A. C. 847. No doubt this Massachusettsdecision was influenced by R. L. 1902, c. lI8, sec. 58; but that statute does notpurport to confer a right of action upon a third party beneficiary. To the sameeffect is Union Inst. v. Phoen~ Ins. Co. (1907) 196 Mass. 230, where themortgagor is declared to be the mortgagee's agent

.. Attleborough Bank v. Security Ins. Co. (1897) 168 Mass. ·147, 149·

.. The Michigan courts regard the mortgagee as a mere third party beneficiary,and deny him a remedy. Minnock v. Eureka Ins. Co. (1892) 90 Mich. 236;Hartford F. I. CO. v. Davenport (1877) 37 Mich. 609.

YO Reed v. Paul (1881) 131 Mass. 129-
























In a recent case the court has held that a creditor-beneficiary hasan equitable claim against the promisor on the theory that the dutyof the promisor to the promisee is an asset of the latter that isavailable to his creditor. 5 In another case, where A promised B"as trustee" to pay a sum of money to C, it was held that B couldrecover substantial damages and would hold them in trust for C. Itis to be observed that the promise of A was not to pay the moneyto B, in trust for C, but was to pay the money directly to C.76

Another method of creating a right in a creditor-beneficiary is todescribe the defendant's failure to perform his contract as a tort."This method would be used only in cases where the defendant's con-duct falls naturally within the tort field, and very likely the otherexisting facts would be held to create a tort liability in the absence ofany contract whatever.

The foregoing cases indicate that the Massachusetts court is quitewilling to enforce a duty in the absence of privity in favor of certainkinds of beneficiaries. It may be admitted that this tendency is asyet illustrated only in decisions that are based upon a liberal use offiction or upon specious distinctions. This is the traditional mannerin which a conservative court abandons a previously asserted generalrule.T

NEW YORK LAW

The law in New York has already been sufficiently indicated in dis-cussing the rules prevailing throughout the whole country, for theNew York courts have had a decisive influence on those prevailingrules. In one respect, however, these courts have been following acourse similar to that indicated in Massachusetts. In a number ofcases it was laid down that the doctrine of Lawrence v. Fox7' was tobe restricted to cases exactly parallel thereto, thus allowing creditor-

"Forbes v. Thorpe (1911) 2o9 Mass. 570. See also Clare v. Hatch (i9o2Yi8o Mass. x94. Observe that the existence of this "asset" makes the promisora debtor and not a trustee. The same is true where a devisee accepts a deviseon condition of payment of a legacy to a third party. Felch v. Taylor (1832)r3 Pick. 133; Adams v. Adams (1867) 14 Allen, 65. See discussion of this"asset" theory supra.

76 Grime v. Borden (1896) x66 Mass. 198.T'Phinney v. Boston El. Co. (i9o9) 2o Mass. 286.

"The contract with the city, whereby the defendant undertook to relieve thecity of the performance of its statutory duty, brought, the defendant into arelation to those travellers which was the foundation of a legal obligation toprovide for their safety."

"' By statute the beneficiary of a life insurance policy can sue thereon in his

own name. St. 1894, C. 225. See also Dean v. American Legion of Honor

(,892) 156 Mass. 435; Attorney Gen. v. American Legion of Honor (igio) 206

Mass. i58 ("on a broad construction of the statutes")."(1859) 2o N. Y. 268

102 7



In a recent case the court has held that a creditor-beneficiary hasan equitable claim against the promisor on the theory that the dutyof the promisor to the promisee is an asset of the latter that isavailable to his creditor.T5 In another case, where A promised B"as trustee" to pay a sum of money to C, it was held that B couldrecover substantial damages and would hold them in trust for C. Itis to be observed that the promise of A was not to pay the moneyto B, in trust for C, but was to pay the money directly to C.T4

Another method of creating a right in a creditor-beneficiary is todescribe the defendant's failure to perform his contract as a tort."This method would be used only in cases where the defendant's conduct falls naturally within the tort field, and very likely the otherexisting facts would be held to create a tort liability in the absence ofany contract whatever.

The foregoing cases indicate that the Massachusetts court is quitewilling to enforce a duty in the absence of privity in favor of certainkinds of beneficiaries. It may be admitted that this tendency is asyet illustrated only in decisions that are based upon a liberal use offiction or upon specious distinctions. This is the traditional mannerin which a conservative court abandons a previously asserted generalrule.T8

NEW YORK LAW

The law in New York has already been sufficiently indicated in discussing the rules prevailing throughout the whole country, for theNew York courts have had a decisive influence on those prevailingrules. In one respect, however, these courts have been following acourse similar to that indicated in Massachusetts. In a number ofcases it was lai,d down that the doctrine of Lawrence 7/. FoxTf) was tobe restricted to cases exactly parallel thereto, thus allowing creditor-

'" Forbes TJ. Thorpe (19U) 209 Mass. 570. See also Clare TJ. Hatch (1902)"ISo Mass. 194- Observe that the existence of this "asset" makes the promisora debtor and not a trustee. The same is true where a devisee accepts a deviseon condition of payment of a legacy to a third party. Felch TJ. Taylor (1832)13 Pick. 133; Adams TJ. Adams (1867) 14 Allen, 65. See discussion of this"asset" theory supra.

10 Grime TJ. Borden (18g6) 166 Mass. 19B.TI Phinney TJ. Boston EI. Co. (1909) 201 Mass. 286."The contract with the city, whereby the defendant undertook to reli~e the

city of the performance of its statutory duty, br~>ught· the defenda.nt ~nto arelation to those travellers which was the foundation of a legal oblIgation toprovide for their safety."

TO By statute the beneficiary of a life insurance policy can sue thereon in hisown name. St 1894, C. 225. See also Dean TJ. American Legio1J of Honor(18g2) 156 Mass. 435; Attorney Gen. TJ. American Legion of Honor (1910) 206Mass. 158 ("on a broad construction of the statutes").

,. (1859) 20 N. Y. 268.





NEW YORK LAW






,. (1859) 20 N. Y. 268.





NEW YORK LAW






,. (1859) 20 N. Y. 268.

YALE LAW JOURNAL

beneficiaries to sue and shutting out sole or donee-beneficiaries. Theexistence of the relation of debtor and creditor between the promiseeand the third party was required, or at least the former must owe thelatter some "legal or equitable duty" which will be discharged by thepromisor's performance.80 The New York courts are rapidly destroy-ing this very unsatisfactory limitation, but are doing it by greatlyexpanding the content of the term "legal or equitable duty." Thus,the general duty that a husband owes to his wife to care for and sup-port her is sufficient to enable her to sue on a promise (made to thehusband) to pay her $5o,ooo.81 An aunt owes a sufficient duty to herfavorite niece when the latter has lived in the aunt's house free ofcharge and has loved her aunt. 2 A resident of a municipality cansue on a contract made between it and the defendant for the benefitof the inhabitants even though the resident could not have sued themunicipality in this particular case, inasmuch as the municipalityowes some sort of duty to conserve the interests of the inhabitants.3On the same principle, the duty that a labor union owes to its mem-bers who pay dues is sufficient to sustain an action by a member asbeneficiary."

STATUTORY PROVISIONS

Some states provide by statute that one for whose benefit a promiseis made may maintain an action upon the promise." Third parties

'Durnherr v. Ras (1892) 135 N. Y. 219; Vrooman v. Turner (877) 69N. Y. 28o; Lorrillard v. Clyde (xi8o) i= N. Y. 498. Todd v. Weber (1884) 95N. Y. i81 is directly contra.

'Buchanan v. Tilden (x899) x58 N. Y. iog; Bouton v. Welch (i9o2) 27oN. Y. 554. See also DeCicco v. SchweLser (1g17, N. Y.) 117 N. E. 8o7. It maybe observed that the payment by the promisor will not discharge the duty ofthe husband to support his wife.

:Seaver v. Ransom (1917, App. Div.) i68 N. Y. Supp. 454.Little v. Banks (-.88x) 85 N. Y. 258; Pond v. New Rochelle W. Co. (x9o6)

183 N. Y. 33o; Smyth v. New York (i92i) 203 N. Y. xo6; Rigney v. New York,etc. R. Co. (i9x6) 217 N. Y. 3; Schnaier v. Bradley Cont. Co., decided Feb.x, i9x, in N. Y. App. Div. See also City of St. Louis v. Von Phul (1895)z33 Mo. 561.

Gula v. Barton (1924, N. Y.) x64 App. Div. 293.

"A contract, made expressly for the benefit of a third person, may beenforced by him at any time before the parties thereto rescind it." Cal. Civ.Code, § x559;.Idaho Civ. Code, § 2728; Mont. Civ. Code, § 2103; N. Dak. Rev.Codes, § 5285; S. Dak. Civ. Code, § 4688.

"If a covenant or promise be made for the sole benefit of a person with whomit is not made, such person may maintain in his own name, any action thereonwhich he might maintain in case it had been made with him only, and the con-sideration had moved from him to the party making such covenant or promise."Va. Code, § 24x5; W. Va. Code, ch. 71, § 2.

"If there be a valid consideration for the promise, it matters not from whomit is moved; the promisee may sustain his action, though a stranger to the con-sideration." Georgia Code (1911) § 4249.

"Any person or persons for whose benefit any contract shall have been madeor may hereafter be made, whether such contract be under seal or not, maymaintain an action thereon in any court of law or equity and may use the same

1028



beneficiaries to sue and shutting out sole or donee-beneficiaries. Theexistence of the relation of debtor and creditor between the promiseeand the third party was required, or at least the former must owe thelatter some "legal or equitable duty" which will be discharged by thepromisor's performance.8o The New York courts are rapidly destroying this very unsatisfactory limitation, but are doing it by greatlyexpanding the content of the term "legal or equitable duty." Thus,the general duty that a husband owes to his wife to care for and support her is sufficient to enable her to sue on a promise (made to thehusband) to pay her $50,000.81 An aunt owes a sufficient duty to herfavorite niece when the latter has lived in the aunt's house free ofcharge and has loved her aunt.82 A resident of a municipality cansue on a contract made between it and the defendant for the benefitof the inhabitants even though the resident could not have sued themunicipality in this particular case, inasmuch as the municipalityowes some sort of duty to conserve the interests of the inhabitants.83

On the same principle, the duty that a labor union owes to its members who pay dues is sufficient to sustain an action by a member asbeneficiary.U


Some states provide by statute that one for whose benefit a promiseis made may maintain an action upon the promise.8li Third parties

- DNrnhnr fl. RaN (1892) 135 N. Y. 219; Vrooman fl. Turner (1877) 6gN. Y. 280; Lonillard tl. Clyde (ISgo) I22 N. Y.49& Todd tl. Weber (1884) 95N. Y. 181 is directly corstra.

.. BNChtmarJ tl. Tildm (1899) IsS N. Y. 109; Bouton fl. Welch (1902) 170N. Y. SS4- See also DeCicco fl. Schweizer (1917, N. Y.) II7 N. E. 807. It maybe observed that the payment by the promisor will Dot discharge the duty ofthe husband to support his wife.

• Seaver tl. Ransom (1917, App. Div.) 168 N. Y. Supp. 454--Little tl. Banks (.881) 85 N. Y.2sS; Pond tl. New Rochelle W. Co. (1906)

183 N. Y. 330; Sm)'th tl. New York (19U) 203 N. Y. 106; Rigney fl. New York,nco R. Co. (1916) 217 N. Y. 31; SchMier tl. Bradley Cont. Co., decided Feb.IS. 1918, in N. Y. App. Div. See also City of St. Louis tl. Von Phul (1895)133 Mo. 561•

.. Gulla tl. Barton (191.... N. Y.) 164 App. Div. 293-- "A contract, made expressly for the benefit of a third person, may be

enforced by him at any time before the parties thereto rescind it." Cat CW.Code, § 1559;. Idaho Civ. Code, § 2728; Mont. Civ. Code, § 2103; N. Dale. Rev.Codes, § s28s; S. Dak. Civ. Code, § 4688.

"If a covenant or promise be made for the sole benefit of a person with whomit is Dot made, such person may maintain in his own name, any action thereonwhich he might maintain in case it had been made with him only, and the consideration had moved from him to the party making such covenant or promise."Va. Code, § 24IS; W. Va. Code, ch. 71, § 2-

"If there be a valid consideration for the promise, it matters not from whomit is moved; the promisee may sustain his action, though a stranger to the consideration." Georgia Code (19U ) § 4249-

"Any persou or persons for whose benefit any contract shall have been madeor may hereafter be made, whether such contract be under seal or DOt, maymaintain an action thereon in any court of law or equity and may ttse the same






























can everywhere maintain suit upon statutory official bonds that havebeen required by law for their protection. 88 Likewise there arestatutes providing that contractors engaged on public works shall givea bond to secure performance and also to protect material men andlaborers, a suit by such third persons being expressly or impliedlyauthorized.

87

Most states having the reformed procedure provide that all actionsshall be brought in the name of the real party in interest. It hasbeen inferred that this provision "places the matter beyond all doubt,for the person for whose benefit the promise is made is certainly thereal party in interest."88 In fact, however, this statutory provisiondoes not affect the problem. It was adopted merely for the purposeof creating a more direct and satisfactory procedure for the enforce-ment of rights already recognized as existing by either law or equity(or by some other system of courts). The question to be determinedhere is what is the legal operation of the facts of offer and acceptancebetween promisor and promisee with respect to a third party benefi-ciary. Do they create in such third party any legal or equitableright? Until we answer this question in the affirmative, it can hardlybe said that the beneficiary is "the real party in interest" as that termis used in the procedural statute. And after we have answered it inthe affirmative, the beneficiary does not need the aid of this statuteto sue in his own name.

as matter of defense to any action brought or to be brought against suchperson or persons, notwithstanding the consideration of such contract did notmove from such person or persons." New Jersey Law igaa, c. 251.

See also French Civil Code, sec. 2. The Louisiana Code is similar to theFrench. See New Orleans St. I. Assn. v. Magnier (1861) 16 La. Ann. 338;Gay v. Blanchard (i88o) 32 La. Ann. 497.

England and Massachusetts have statutes enabling the beneficiary of aninsurance policy to sue. Mass. St. 1894, c. 25. In Michigan and Connecticutthere are similar statutes in favor of mortgagee-beneficiaries. Mich. Comp.Laws 1897, sec. 519; Conn. G. S. i9o2, sec. 587.

" Such bonds are distinguished in Jefferson v. Asch (1893) 53 Minn. 446.Coster v. Albany (1871) 43 N. Y. 399, 412 (semble).

'See the Federal statutes, 30 St. at L 9o6, c. 218; 33 St at L 8ri, c. 778.Mass. R. L igo2, c. 6, sec. 77; Mass. St. igo9, c. 514, sec. 23. Equitable Sur.Co. V. McMillan (19x3) 234 U. S. 448. Many cases of this sort are cited innote, 49 L. R. A. (N. S.) 1175-,197.

"Pomeroy, Rein. and Rem. Rights, § 139; Stevens v. Flannagan (r891) 13r

Ind. 122; Ellis v. Harrison (x89r) 104 Mo. 270.

102 9



can everywhere maintain suit upon statutory official bonds that havebeen required by law for their protection.ss Likewise tllere arestatutes providing that contractors engaged on public works shall givea bond to secure performance and also to protect material men andlaborers, a suit by such third persons being expressly or impliedlyauthorized.ST

Most states having the reformed procedure provide that all actionsshall be brought in the name of the real party in interest. It hasbeen inferred that this provision "places the matter beyond all doubt,for the person for whose benefit the promise is made is certainly thereal party in interest."ss In fact, however, this statutory provisiondoes not affect the problem. It was adopted merely for the purposeof creating a more direct and satisfactory procedure for the enforcement of rights already recognized as existing by either law or equity(or by some other system of courts). The question to be determinedhere is what is the legal operation of the facts of offer and acceptancebetween promisor and promisee with respect to a third party beneficiary. Do they create in such third party any legal' or equitableright? Until we answer this question in the affirmative, it can hardlybe said that the beneficiary is "the real party in interest" as that termis used in the procedural statute. And after we have answered it inthe affirmative, the beneficiary does not need the aid of this statuteto sue in his own name.

as matter of defense to any action brought or to be brought against suchperson or persons, notwithstanding the consideration of such contract did notmove from such person or persons." New Jersey Law 1902, c. 251.

See also French Civil Code, sec. 1121. The Louisiana Code is similar to theFrench. See New Orleans St. J. Assn. fl. Magnier (1861) 16 La. Ann. 338;Gay fl. Blanchard (1880) 32 La. Ann. 497.

England and Massachusetts have statutes enabling the beneficiary of aninsurance policy to sue. Mass. St. IB94, c. 225. In Michigan and Connecticutthere are similar statutes in favor of mortgagee-beneficiaries. Mich. Comp.Laws 1897, sec. 519; Conn. G. S. 1902, sec. 587.

• Such bonds are distinguished in Jefferson fl. Asch (ISg3) 53 Minn. 446Coster 1/. Albany (1871) 43 N. Y. 399, 412 (semble)~

a See the Federal statutes, 30 St. at 1.. 906, c. 218; 33 St. at L 8IX, Co 778.Mass. R. 1.. 1902, c. 6, sec. 77; Mass. St. 1909. c. 514, ~ec. 230 Equitable Sur.Co. 1/. McMillan (1913) 234 U. S. 448. Many cases of this sort are cited innote, 49 1.. R. A. (N. S.) 1175-IX97·

• Pomeroy, Rem. and Rem. Rights, § 139; Stevens fl. Flannagan (ISgt) 13t!Jill. 122; Ellis fl. Hamson (ISgI) 104 Mo. z;o.



















Contracts for Benefit of Third PersonsIf without privity of contract, one may become indebted to another, the lack of privity is surely no reason for denying him a beneficial right.

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