CONTRACTSCONTRACTS FORFOR THETHE BENEFITBENEFIT OFOF THIRDTHIRD PERSONSPERSONS1' ARTHURARTHUR L.L. CORBINCORBIN ProfessorProfessor ofof Law,Law, YaleYale UniversityUniversity

ByBy thethe greatgreat weightweight ofof authorityauthority inin thethe UnitedUnited StatesStates thethe samesame factsfacts thatthat operateoperate toto createcreate contractualcontractual relationsrelations betweenbetween thethe offerorofferor andand thethe acceptoracceptor maymay alsoalso operateoperate toto createcreate rightsrights inin aa thirdthird person.:person. 2 ItIt maymay bebe useful,useful, therefore,therefore, toto examineexamine inin detaildetail thethe naturenature andand limitslimits ofof thisthis doctrinedoctrine andand toto classifyclassify andand discussdiscuss thethe casescases inin distinctdistinct groups.groups. ToTo manymany studentsstudents andand practitionerspractitioners ofof thethe commoncommon lawlaw privityprivity ofof contracflcontract3 becamebecame aa fetish.fetish. AsAs such,such, itit operatedoperated toto deprivedeprive manymany aa claimantclaimant ofof aa remedyremedy inin casescases wherewhere accordingaccording toto thethe moresmores ofof thethe timetime thethe claimclaim waswas just.just. ItIt hashas mademade manymany learnedlearned menmen believe-believe thatthat aa chosechose inin actionaction couldcould notnot bebe assigned.assigned. EvenEven now,now, itit isis gravelygravely assertedasserted thatthat aa man cannotcannot bebe mademade thethe debtordebtor of anotheranother againstagainst his will.will. ButBut thethe commoncommon lawlaw was gradually influencedinfluenced byby and byby thethe lawlaw merchant, soso thatthat by assignmentassignment a debtor couldcould becomebecome boundbound to pay a perfect stranger to himself, although until thethe legisla­legisla- tureture stepped in,in, the common-lawcommon-law courtscourts characteristicallycharacteristically made of a fictionfiction and pretended that theythey were not doing that which theythey really were doing.

TRUST BENEFICIARIES If without privity of , one may become indebtedindebted to another, the lack of privity is surely no reason for denying him a beneficial right. As usual, equity saw this long before the did.·did.'

This article 1 This article contains the substance of certain sections in an edition of Anson on toto be published by thethe Oxford University Press. Some use has been made ofof thethe notes of Professor E. W. Huffcut in an earlier edition. 2 See 13 C. J.7o5, sec. 815, 2 See 13 C. I. 705, sec. 815, citing more thanthan 350 cases; 6 R.R C. LL. 884,884. sec. 271;271 ; Wald's Pollock, Contracts (Williston's ed. 1906)i9o6) 237-278. 'In• In orderorder thatthat privityprivits ofof contract may exist,exist, itit seemsseems toto be necessarynecessary for AA toto say toto B "I promisepromise you."sou:' It requiresrequires thethe voluntaryvoluntary selection of eacheach partyparty bybv thethe other.other. See criticismcriticism ofof thethe termterm privityprivity inin i5IS Am.AM.. LAwLAW Rnv.REv. 244-5.244-5- ForFor recentr~ent adherenceadherence toto thethe fetish,fetish, seesee 66 R.R C.C. L.L. 885,885, sec.sec. 271. 'Not• Not alone inin thethe cases ofof trusteetrustee andand cestuicestui que trusttrust waswas thisthis true.true. The courtcourt diddid notnot shrinkshrink fromfrom expandingexpanding thethe conceptconcept ofof aa trusttrust toto covercover thethe casecase ofof aa contractcontract .beneficiary. See TomlinsonTomlinson v.v. Gill (756)(1756) Ambler,Ambler, 33o,330, beforebefore Hardwicke,Hardwicke, LL. C.;c.; MooreMoore v.v. DartonDarion (1851)(1851) 44- DeG.DeG. && Sm.Sm. 517.517. SeeSee alsoalso SchoolSchool DistrictDistrict'lJ. v. LiversLivers (1899)(1899) 147147 Mo.Mo. 58o;580; ForbesForbes'lJ. v. ThorpeThorpe (ig91)(I9U) 2o9209 Mass.Mass. 570;570; GrimeGrime v.'lJ. BordenBorden (1896)(dlg6) x66166 Mass.Mass. i98;19B; NashNash v.'lJ. CommonwealthCommonwealth (1899)(1899) 174174­ Mass.Mass. 335.335. [xoo83[1008]

HeinOnline -- 27 Yale L.J. 1008 1917-1918 CONTRACTCONTRACT BENEFICIARIESBENEFICIARIES 1001oo99 NoNo privityprivity isisis necessarynecessary tototo createcreate rightsrights inin aa cestuicestui queque trust,trust, andand nono considerationconsiderationconsideration needneed movemove fromfrom him.him. IfIf itit waswas possiblepossible andand desirabledesirable forforfor equityequity tototo recognizerecognizerecognize thethe veryvery extensiveextensive rights,rights, powers,powers, privileges, andand immunitiesimmunitiesimmunities ofof aa cestuicestui queque trust,trust, itit isis equallyequally possible, possible, and itit appearsappearsappears tototo thethethe AmericanAmerican courtscourts toto bebe equallyequally desirable,desirable, toto recognizerecognize similarsimilarsimilar relationsrelationsrelations betwenbetwen aa promisorpromisor andand a a contractualcontractual beneficiary. ItIt isisis nono answeranswer tototo saysay thatthatthat inin thethe oneone case case thethe magicmagic wordswords "in"in trust"trust" werewere used,used, whilewhile ininin thethethe latterlatter theythey werewere not.not. ThisThis wouldwould bebe meremere fetishfetishfetish worshipworship onceonce more.more. ItIt maymay bebe thatthat thethe rights,rights, powers, privileges,privileges, andand immunitiesimmunitiesimmunities ofof aa cestuicestui queque trusttrust areare moremore numerous andand valuablevaluable thanthanthan areare thosethose ofof aa contractcontract beneficiary.beneficiary. The cestui que trust,trust,trust, withoutwithout privityprivity andand without givinggiving value, gets soso much;­much;- shouldshould notnot thethethe contractcontract beneficiarybeneficiary be givengiven at leastleast a crumb?5crumb ?5 ItIt maymay bebe arguedargued thatthatthat inin thethe casecase of trusttrust therethere isis a specific res,res, whilewhile inin thethe casecase ofof thethethe contractcontract therethere isis not.not. This isis also a dis­dis- tinctiontinction thatthat provesproves nothing.nothing. SupposeSuppose therethere isis a specific physical res-itsres-its meremere existenceexistence isis nono reasonreason for creatingcreating rights inin aa benefi-benefi­ ciaryciary withoutwithout privity andand without value given by him. InIn many cases ofof trust,trust, however,however, theretherethere isis nono physicalphysical res.res. The trusttrust res isis then said toto consistconsist ofof thethethe rightsrights andand powers of thethe trustee, which he "holds" inin trusttrust and must exerciseexercise forfor thethe benefit of the cestui que trust. If suchsuch anan unreal resres may be the basis of rightsrights in a beneficiary, there isis no greatergreater difficultydifficulty in the case of contract.contract. TheThe reasonsreasons forfor recognizingrecognizing rights inin the contract beneficiary are substantiallysubstantiallysubstaritially thethe samesame asas thosethose underlying the rights of a cestui que trust.trust. By so doing thethe intention ofof the parties is carried out and the beneficiary'sbeneficiary's justjust expectations are fulfilled. The reason is not, as hashas sometimessometimes beenbeen suggested,suggested, that the promisee was acting as the agentagent ofof thethe thirdthird party.6party.' He was not inin fact so acting and nobody supposedsupposed thatthat he was. Nor is thethe beneficiary's right to be explained 7 on somesome theorytheory of subrogation.subrogation.T

POSSESSION OF ASSETS BY THE PROMISOR InIn nearly all of thethe American jurisdictions, including those that deny a rightright of action toto most thirdthird party beneficiaries, there is one sortsort of beneficiary who is given a right of action. "Where, under a

•'See•See Pennsylvania Steel Co. v. New York City R. Co. (1912)(1912) 19Bi98 Fed. 721, 749.749. Lord Mansfield inin Martyn v. Hind (1776) Cowp. 437.437, 443, 443. saidsaid itit was a matter of surprisesurprise how a doubt could have arisen inin a case like Dutton v. Poole (1677)(1677) 22 Lev. 2IO.210. •'See•See opinion of Johnson, C. J.,J., and Denio, J.,J., in Lawrence v.v. Fox (859)(1859) 2020 N.N. Y. 268; Union Inst. v. Phoenix Ins. Co. (i9o7)(1907) 196 Mass. 23o.230. InIn accord with thethe texttext isis thethe opinion of Finch J., inin Gifford v. Corrigan (188g)(1889) 117II7 N.N. Y. 257·257.257· '11 See discussion belowbelow inin connection with mortgagee-beneficiaries. 68

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contractcontract betweenbetween twotwo persons,persons, assetsassets havehave comecome toto thethe promisor's promisor's handshands oror underunder hishis controlcontrol whichwhich inin equityequity belongbelong toto aa thirdthird person,"person," thethe beneficiarybeneficiary cancan maintainmaintain anan actionaction atat lawlaw inin hishis ownown name.name.88 TheseThese casescases essentiallyessentially recognizerecognize thatthat aa ·beneficiarybeneficiary cancan acquireacquire aa legallegal rightright withoutwithout privityprivity andand withoutwithout givinggiving .consideration. InIn somesome suchsuch casescases aa truetrue equitableequitable trusttrust maymay existexist withwith respectrespect toto somesome specificspecific res.res. InIn mostmost suchsuch cases,cases, however,however, thisthis isis notnot so.so. IfIf therethere isis aa trusttrust andand aa specific specific res,res, thethe dutyduty ofof thethe promisorpromisor shouldshould bebe heldheld toto bebe merely thethe dutyduty toto account.account. TheThe factfact isis thatthat thethe dutyduty enforcedenforced againstagainst thethe promisorpromisor isis thatthat ofof aa debtor.debtor."9 SomeSome ofof thesethese casescases maymay properlyproperly bebe regardedregarded asas basedbased uponupon thethe quasi-contractual doctrinedoctrine ofof unjustunjust enrichment,enrichment, inin whichwhich casecase thethe defendant'sdefendant's dutyduty isis limitedlimited by thethe value receivedreceived byby him.him. By thethe greatgreat majoritymajority ofof courts,courts, however,however, itit isis regardedregarded as unjust forfor thethe promisorpromisor notnot toto performperform asas hehe promised inin returnreturn forfor a consideration; and thethe beneficiiry'sbeneficiary's rightright isis dependent upon neitherneither aa specificspecific res nornor anan unjust enrich­enrich- 10 ment, butbut upon thethe existence ofof a valid contract.contract.10

PLAINTIFF A PROMISEE, BUT CONSIDERATIONCONSIDERATION GIVENGIVEN BY ANOTHER In somesome cases thethe promise isis mademade to thethe plaintiff, but the consid­consid- eration movesmoves from.a thirdthird party. Here the plaintiffplaintiff is a promisee and there is no lack of privily.privity. The problem isis merely one as to con-

'See National Bank v. Grand Lodge (1878) 98 U. S. 123; Hall v. Marston • See National Ba,~k 1/. Grand Lodge (1878) 98 u.. S. 123: Hall 1/. Marston (1822) I7 (1822) 17 Mass. 575; Fitch 1/.v. Chandle,..Chandler (1849, Mass.) 4 Cush. 254:254; Mellen 1/.v. Whipple (1854,(1854, Mass.) I Gray, 317:317; EzcllangeExchange Bank 1/.v. Rice (1871) 107IO7 Mass. 37. And see cases cited in 13 C. J. 704, secs. Bog,8og, 810.8io. A recent Massachusetts case says that the plaintiff's right is "in equity";equity": but this does not affect the character of the right and thethe duty, for the defendant is treated as a debtor and -a not as a trustee. Forbes 1/.v. Thorpe (I9II)(I9U) 209 Mass. 57o.570. Ct.Cf. Borden v.1/. Board­Board- man man (1892)(I8g2) 157 Mass. 41o.410. A remedy at law was denied in Morgan v.1/. Randolph & Clowes Co. (igoo)(1900) 73 Conn. 396.396· The "assets" here referred to are assets in the hands of the promisor and do not include the promise itself,itself, which isis sometimes regardedregarded as an asset of thethe promisee. •'ForFor example, where a devise given on condition that a certain sum be paid to a beneficiary isis accepted by the devisee, the latter is a debtor of the beneficiary irrespectiveirrespective ofof thethe value of the devise. Felch v.1/. Taylor (I832,(1832, Mass.)Mass.) 13 Pick. 133; Adams v.1/. Adams (1867,(1867, Mass.) 14 Allen, 65; Olmstead v.1/. Brush (1858)(1858) 2727 Conn. 530;530: BrownBrown v.1/. Knapp (1879)(1879) 79 N.N. Y.Y. 136;136: Flickingerv. 1/. Saum (1884)(1884) 40400h. Oh. StSt. 591;591: Porter 1/.v. Jackson (1884) 95 Ind. 210;210: LaValleLaValle v.1/. DroitDroit (1913)(1913) 179 Ill.Ill. App. 484;484: Etter v.1/. Greenawalt (1881)(1881) 98 Pa. 422.422. See.also Feldman v.v. McGuireMcGuire (1899)(1899) 34 Ore.Ore. 309.309· 1D TheThe plaintiff's action,action, therefore,therefore, may be assumpsit for unliquidated damagesdamages asas wellwell asas debt forfor aa specificspecific sum.sum. HisHis actionaction lieslies alsoalso wherewhere the defendant hashas assumedassumed toto settle a claimclaim forfor unliquidated damagesdamages thatthat thethe plaintiffplaintiff hadhad against thethe promisee.promisee. LikewiseLikewise thethe beneficiarybeneficiary hashas beenbeen givengiven an injunctioninjunction forfor thethe enforcementenforcement ofof aa negativenegative covenantcovenant. FerrisFerris v.v. Amer.Amer. Brewing Co.Co. (igoo)(1900) 155155 Ind.Ind. 539.539.

HeinOnline -- 27 Yale L.J. 1010 1917-1918 CONTRACTCONTRACT BENEFICIARIESBENEFICIARIES IOII1011 sideration.sideration. ItIt isis thethe EnglishEnglish lawlaw thatthat thethe considerationconsideration mustmust movemove fromfrom thethe promisee.promiseeP1 SuchSuch isis notnot thethe AmericanAmerican law law as.as. generallygenerally laidlaid downdown byby ourour courtsCOUrts,121 2 andand somesome ofof thethe casescases drawdraw aa clearclear dis-dis­ tinctiontinction betweenbetween aa promisepromise toto thethe plaintiffplaintiff uponupon aa considerationconsideration mov-mov­ inging fromfrom anotheranother1313 andand aa promisepromise toto XX forfor thethe benefitbenefit ofof thethe plaintiffplaintiff uponupon aa considerationconsideration movingmoving fromfrom X.X. InIn somesome casescases thethe promisepromise seemsseems toto bebe mademade simultaneouslysimultaneously toto bothboth thethe plaintiffplaintiff andand thethe oneone furnishingfurnishing thethe consideration.consideration.l4.4 WhereWhere aa promisepromise isis mademade toto twotwo personspersons jointly,jointly, itit seemsseems notnot toto bebe questionedquestioned whetherwhether thethe considera-considera­ tiontion mustmust movemove fromfrom both.both. NoNo doubtdoubt aa fictionfictiqn isis indulgedindulged andand thethe jointjoint promiseespromisees areare regardedregarded asas aa unity.unity. WhereWhere thethe beneficiarybeneficiary is.is. notnot himselfhimself thethe promisee,promisee, hehe cancan alwaysalways establishestablish aa sufficientsufficient "privity""privity" toto satisfysatisfy thethe courtscourts byby obtainingobtaining anan assignmentassignment fromfrom thethe promisee.promisee. HeHe willwill thenthen possesspossess whateverwhatever rightsrights thethe promiseepromisee hadhad asas wellwell asas suchsuch rightsrights asas aa beneficiarybeneficiary asas maymay bebe recognizedrecognized inin thethe particularparticular jurisdic-jurisdic­ tion.ution.lG

DONEE-BENEFICIARIESDONEE-BENEFICIARIES ANDAND SOLESOLE BENEFICIARIESBENEFICIARIES InIn many casescases thethe purposepurpose of thethe promiseepromisee inin securing a promisepromise for thethe benefitbenefit of a thirdthird party isis toto confer a gratuitous benefitbenefit uponupon thatthat thirdthird party.party. InIn suchsuch cases thisthis third party will usually be thethe only person whowho will be benefited by thethe promisedpromised performance; he will be thethe sole beneficiary.'beneficiary.16 Performance will notnot benefit the promisee; he isis not toto receive it, and such performance will not dis-dis­ charge any duty of the promisee, for he owes none to thethe beneficiary. If the purpose is to discharge some duty owed by thethe promisee to thethe third party, the latter is not a donee.

11-DunlopDunlop v. Selfridge [1915][i915] A. C. 847. 131 Van Eman v. Stanchfield (1879) 10io Minn. 255; Rector v. Teed (1890)(i8go) 12012o N. Y. 583; Palmer Sav. Bk. v. Insurance Co. (18g6)(1896) 166 Mass. ISg.i89. See also Gardner v. Denison (1914) 217 Mass. 492. ,." InIn First N.N. B. v.vL.Chalmers (ISg5)(i895) 144i44 N. Y. 432, 439, thethe court says: "I"I do not deemdeem thethe doctrinedoctrine of Lawrence v. Fo~Fox (1859)(i859) 2020 N. Y. 268 involvedinvolved in thisthis controversy. That doctrine appliesapplies wherewhere nono expressexpress promise has beenbeen mademade to the party suing,suing, but he claims thethe rightright toto rest upon a promise between otherother parties having respectrespect toto thethe debt duedue toto himhim and asas havinghaving beenbeen made forfor his benefit.benefit ItIt strugglesstruggles toto obviateobviate a lacklack ofof privity uponupon equitableequitable principles,principles, butbut isis needless andand hashas nono properproper applicationapplication where thethe privity exists,exists, andand aa directdirect promise has been made uponupon whichwhich thethe actionaction may rest." SeeSee alsoalso DeDe CiccoCicco v.v. SchweizerSchweizer (1917.(917, N. Y.)Y.) II7ii7 N.N. E.E. 807,807, andand thethe dissenting opinionopinion ofof Comstock,Comstock, J.,J., inin LawrenceLawrence v. Fo~Fox (1859)(I859) 202o N.N. Y.268.Y. 268. U"BoutonBouton v.v. WelchWelch (1902)(I902) 17017o N.N. Y.Y. 554;554; FurbishFurbish v.v,. GoodnowGoodnow (1867)(1867) g898 Mass.Mass. 296.296. 129;2 15"HylandHyland vv.•. Crofut.Crofut (1913)(I913) 8787 Conn.Conn. 49;49; Reed v.v. PaulPaul (1881)(188) 131131 Mass.Mass. 129; LitchfieldLitchfield v.v. FUntFlint (1887)(1887) 1041o4 N.N. Y.Y. 543;543; SocietaSocieta ItaUanaItalianav. v. SulzerSulzer (ISg3)(1893) 138138 N.YN. Y.. .¢8.468. 10 is not the sole 'TheThe plaintiffplaintiff maymay bebe aa donee-beneficiarydonee-beneficiary eveneven thoughthough hehe is not the sole Chesapeake & 0. R. beneficiary.beneficiary. InIn suchsuch casecase hehe cancan maintainmaintain suit.suit JenkinsJenkins v.v. CTlesapeake & O. R. Co.Co. (1907)(19o7) 6161 W.W. Va.Va. 597··597.

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It is clear that a sole beneficiary should be allowed to enforce the contract, and great numbers of cases have so held.1177 It was once suggested by thethe United States Supreme Court 18 that a sole beneficiary was the only kind who could sue, on ·thethe ground that to allow a creditor-beneficiary to sue would subject the promisor to two suits for breach.'breach.199 On the other hand, the New York courts long repeated the rule that no beneficiary could sue unless he was a creditor (or an obligee) of the promisee.2'promisee.20 Neither of these limitations, contradic-contradic­ tory to each other as they are, should be sustained. Some cases have decided in favor of a donee-beneficiary on the ground of a relationship by blood or marriage between the beneficiary and the promisee.1promisee.21 Such relationship is an evidential fact showing

11'InIn re Edmundson's (19i8,(1918, Pa.) io3103 Atl.AtI. 277; Rogers v. Galloway Female College (18g8)(1898) 64 Ark. 627 (beneficiary of a charitable subscription) ; St. Louis v. Von Phul (1895) 133i33 Mo. 561;56I; Todd v. Weber (1884) 95 N. Y. 181I81 (promise to the mother of plaintiff to furnish support. See other cases of this type in note 21 infra); Whitehead v. Burgess (1897)(1897) 61 N. J. L. 75; Bouton v. WeIchWelch (1902)(192) 170 N. Y. 554; Pond v. New Rochelle W. Co. (1906)(19o6) 183 N. Y. 330 (promise to a village for the benefit of the inhabitants); Rigney v. New York Central R. R. Co. (1916) 217 N. Y. 3131 (same); Smyth v. New York (1911)(19U) 2o3203 N. Y. 106io6 (same); Independent Sch. Dist. v. Le Mars Water Co. (19o6)(1906) 131 Iowa, 14; Doll v. Crume (1894) 41 Neb. 655; Gorrell v. Water Co. (1899) 124 N. C.;;28;C. 328; Tweeddale v. Tweeddale (1903)(19o3) u6116 Wis. 517; Simons v. Bedell (18g8)(1898) 122 Cal. 341 ( decreed). Contra, Knights of the Maccabees v. Sharp (igio)(1910) 163 Mich. 449. See further 22 L. RR. A. (N. S.) 492; 39 L. RR. A. (N. S.) 151; 49 L. R. A. (N. S.) II66.1166. 10"NationalNational Bank v. Grand Lodge (1878) 98 U. S. 123. By statute, this rule seems to prevail in the Virginias. Newberry Land Co. v. Newberry (1897) 95 Va. II9;iig; King v. Scott (1915)(915) 76 W. Va. 58. 10"TheThe rights of the promisee will be discussed below.below. ..King v. Whitely (1843, N. Y.) 10io Paige,465Paige, 465 [but see Thorp v. Keokuk & Co. (1872)(x872) 48 N. Y. 253]; Vrooman v. Turner (x877)(1877) 696g"N. N. Y. 280;28o; Durnherr v. Rau (1892) 135 N. Y. 219; Jefferson v. Asch (1893) 53 Mino.Minn. 446.446- Their substantial abandonment .ofof this doctrine will be indicated below. NeverthelessNeverthe1ess the doctrine continues to influence the decisions in many states in certain classes of cases. See the sections below on "Mortgagee-beneficiaries" and "Liability of Water Companies." >l'DuttonDutton v. Poole (1677)(I677) 2 Lev. 210;21o; In re Edmundson's Estate (1918,(1918, Pa.) 1031o3 AtlAt. 277; Daily v. Minnick (1902)(902) II7117 Iowa, 563; Benge v. Hiatt (1885) 82 Ky. 666; Schemerhorn v. Vanderheyden (1806,(i8o6, N. Y.) Ii Johns, 139; Todd v. Weber, supra; Coleman v. Whitney (188g)(1889) 62 VtVt. 123. Contra, Linneman v. Morass (1893) 98 Mich. 178. In the following cases, it is believed, the relationship by blood or marriage caused the court to strain the facts and to hold, contrary to thethe fact, that the beneficiary was also a promisee: DeCicco v. Schweizer (1917,(i97, N. Y.) II7117 N. E. 807;8o7; Gardner v. Denison (1914) 217 Mass. 492; Eaton v. Libbey (18g6)(1896) 165 Mass. 218; Freeman v. Morris (1907) 131 Wis. 216. In the following cases such relationship caused the court to hold that the promisee owed the bene-bene­ ficiaryficiary a legal or an equitable duty when in fact there was none: Buchanan v. TildefSTilden (1899) 158 N. Y. iog;log; Seaver v. Ransom (1917,(i917, App. Div.) 168 N. Y. SuppSupp... 454-.4. Cf. Opper v. Hirsh (1901)(i9Oi) 68 N. Y. Supp. 879.879- *•

HeinOnline -- 27 Yale L.J. 1012 1917-1918 CONTRACTCONTRACT BENEFICIARIESBENEFICIARIES 10131013 thatthat thethe promiseepromisee trulytruly intendedintended thatthat thethe thirdthird partyparty shouldshould receivereceive aa benefit,benefit, andand indicatesindicates thethe causa-thecausa-the reasonreason oror motive-formotive--for whichwhich hehe paidpaid thethe consideration.consideration. ButBut thethe intentionintention toto benefitbenefit thethe thirdthird partyparty cancan bebe dearlyclearly shownshown byby thethe expressexpress wordswords ofof thethe contract,contract, oror byby otherother ,evidence, andand relationshiprelationship shouldshould notnot bebe heldheld toto bebe aa necessarynecessary 2222 operativeoperative fact.fact. InIn lifelife insuranceinsurance thethe beneficiarybeneficiary isis usuallyusually aa solesole beneficiary,beneficiary, andand inin allall jurisdictionsjurisdictions hehe cancan maintainmaintain suitsuit onon thethe policy.policy. InIn EnglandEngland andand 2323 aa fewfew ofof ourour states,states, this this resultresult waswas attainedattained byby statute.statute. ItIt wouldwould indeedindeed createcreate aa scandalscandal toto denydeny himhim aa rightright ofof actionaction eithereither becausebecause hehe waswas notnot thethe promiseepromisee oror becausebecause hehe gavegave nono consideration.consideration.

CREDITOR-BENEFICLARESCREDITOR-BENEFICIARIES WhereWhere thethe thirdthird partyparty isis aa creditorcreditor ofof thethe promisee,promisee, oror hashas aa rightright againstagainst himhim forfor somesome particularparticular performance,performance, thethe purposepurpose withwith whichwhich thethe promiseepromisee contractscontracts withwith thethe promisorpromisor maymay bebe toto induceinduce thethe latterlatter toto paypay thethe debtdebt oror otherwiseotherwise toto dischargedischarge thethe thirdthird party'sparty's claim.claim. InIn suchsuch case,case, performanceperformance willwill directlydirectly benefitbenefit bothboth thethe thirdthird partyparty (the(the creditorcreditor oror claimant)claimant) andand thethe promisee.promisee. TheThe thirdthird partyparty isis notnot aa donee andand isis notnot aa solesale beneficiary.beneficiary. AlthoughAlthough notnot thethe firstfirst casecase ofof thethe 224 sort, thethe famousfamous case of LawrenceLecwrence v.v. FoxFox <1 isis nownow regardedregarded asas thethe leadingleading authority toto thethe effect thatthat aa creditor-beneficiarycreditor-beneficiary hashas anan enforceable right. Here a money debtdebt of $300 was owed byby Holly toto Lawrence, and hehe had that sumsum readyready toto 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 toto enforce thisthis promise. For a good many years this decision was severely criticised, the critics being obsessed with the ideaidea that privity was logically necessary. Fine distinctions were often drawn so as to avoid followingfollowing thisthis decision, but in spite of some confusion thus caused, the great weight of authority is inin harmony with it and aa caused, the great weight 2 5 creditor-beneficiarycreditor-beneficiary can maintainmaintain suit.suit 25

..' ItIt nownow seemsseems toto bebe assumedassumed toto bebe thethe settledsettled lawlaw ofof EnglandEngland thatthat bloodblood relationshiprelationship will notnot enableenable aa beneficiarybeneficiary toto sue.sue. TweddleTweddle v.v. Atkinson (1861)(1861) Ii B.B. && S.S. 393.393. 23' InIn MassachusettsMassachusetts thethe beneficiary'sbeneficiary's rightright hashas beenbeen said..saick toto bebe inin equityequity only.only. NimsNires v.v. FordFord (1893)(1893) 159i59 Mass.Mass. 575.575. ItIt isis notnot apparentapparent onon casualcasual inspectioninspection whywhy thethe proceduralprocedural statute,statute, R.R. L.L. 1902,i9o2, C.C. 159,159, sec.sec. 8,8, shouldshould notnot sustainsustain anan actionaction ofof "contract.""contract." "(1859)"'(1859) 202o N.N. Y.Y. 268.268. Joslil~ Co. ::;Bohanan'Bohanan v.v. PopePope (1856)(i856) 4242 Me.Me. 93;93; Joslin v.v. NewNew Jersey'CarJersey'CarSpring Spring Co. 45; Wood v. (1873) 3636 N.N. J.J. L.L. 141;i4i; BarkerBarker v.v'. BucklinBucklin (1846,(1846, N.N. Y.)Y.) 22 Den.Den. 45; Wood v. (1873) v. MoriartyMoriarty (1887)(887) ISi5 R.R. I.I. 518;5i8; Zen'sZeIrsAppeal Appeal (1886)(1886) IIIiI1 Pa.Pa. 532,532, 547;547; BallardBallardv. Bal~k HomeHome Nat'l.Nat'l. Bank (1913)(1913) 91gi Kan.Kan. 91,9i, L.L. R.R. A.A. 1916i9r6 C,C, 161,I61, andand note.note. SeeSee 2525 L.L. R.R. A.A.257, 257, note;note; 1313 C.C. J.J.705, 705, sec.sec. 815.815, citingciting hundredshundreds ofof cases.cases. to pay a WhereWhere aa newnew partnerpartner entersenters aa firmfirm andand promisespromises thethe oldold membersmembers to pay a

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MORTGAGEE-BENEFICIARIESMORTGAGEE-BENEFICIARIES OneOne ofof thethethe mostmost frequentfrequent casescases where aa thirdthird partyparty attempts toto enforceenforce aa contractcontract onon thethe theorytheory thatthat hehe isis aa beneficiary is that of a mortgagee.mortgagee. A mortgageemortgagee isis nearly always toto be regardedregarded as thethe creditorcreditor ofof somebody,somebody, butbut he may notnot bebe thethe creditorcreditor ofof thethe promisee. WhereWhere aa mortgagormortgagor whowho isis himselfhimself personally indebted sells his interestinterestinterest inin thethe propertyproperty mortgagedmortgaged toto aa granteegrantee whowho assumesassumes payment ofof thethethe mortgagemortgage debt,debt, thethe mortgagee isis aa creditor-beneficiary, and he isisis almostalmost universallyuniversally allowedallowed toto maintainmaintain suitsuit againstagainst thethe grantee andand tototo getget aa personalpersonal judgment against himhim forfor thethe amount of the debt.2266

shareshareshare ofof thethe previousprevious debts hehe maymay properlyproperly bebe sued byby the creditors. Arnold v. Nichols (1876)(1876)(876) 6464 N. Y.Y. 117;117; Lehow v. Simonton (1877)(1877) 3 Colo. 346; Dunlap v.v. McNeil (1871)(1871)(1871) 3535 Inci.Ind. 316;3x6; Floyd v. Ort (1878)(1878) 2020 Kan. 162;z62; Hannigan v. AllenAllen (1891)(1891)(18gi) 127127 N.N. Y. 639;639; Claflin v.v. OstromOstrom (1874)(1874) 5454 N. Y. 581;581; Maxfield v.v. SchwartzSchwartz (ISgo)(ISgo)(189o) 4343 Minn. 221;21; i3f3 c.C. J. 7og.709. It was once held that a promise tototo pay one--halfone-half oror some other fraction of all the previous debts cannot be enforcedenforced byby any creditor because no single creditor can well showshow that itit isis forfor hishis benefitbenefit. WheatWheat v.v. RiceRice (1884)(1884) 97 N. Y. 296; Serviss v. McDonnell (1887) 107107 N. Y.Y. 260;26o; distinguisheddistinguished inin Hannigan.v. Allen, supra. Contra: Johnson v.v. McClungMcClung (1885)(1885)(1885) 2626 W.W. Va. 659. WhereWhere aa mortgagor insuresinsures premises and thethe policy isis made payable to the mortgageemortgagee as his interestinterest maymay appear, the mortgagee cancan sue the insurer. UnionUnion Inst.Inst. v.v. Phoenix Ins.Ins. Co. (1907)(19o7) 196196 Mass. 230 (on theory of agency)agency); ; PalmerPalmer Savings Bank v. Ins.Ins. Co.Co. (18g6)(I896) 166166 Mass. 189.I89. Contra: Minnock v. EurekaEureka F.F. & M. 1.L Co.Co. (18g2)(1892) 90go Mic11-.Mich. 236. WhereWhere a municipality owesowes a duty to travellerstravellers to keep a street in repair andand makes a contractcontract withwith thethe defendant for the latter to do this, a traveIlertraveller who isis injuredinjured cancan suesue thethe defendant by virtue of this contractcontract, JenreeJenree v. Metrop.Metrop. St. Ry.Ry. Co. (1912) 86 Kan. 479; McMahon v. Second Ave. R. Co. (1878)(1878) 75 N. Y. 231. See many other casescases of this sort cited in 49 L. R. A. (N.(N. S.) 1166,x166, note. SeeSee further,further, mortgagee-beneficiary cases, infra. A very fewfew statesstates stiIlstill hold thatthat a creditor-beneficiary cannot sue in a com­com- mon lawlaw action.action. Morgan v.v. Randolph & Clowes Co. (1900)(igoo) 73 Conn. 396; Mellen v. WhippleWhipple (1854,(1854, Mass.) IIi Gray 317; Exchange Bank v. Rice (1871)(287i) 1071o7 Mass. 37; Borden v. Boardman'Boardman (1892)(1892) 157157 Mass. 41o;410; Minnock v. Eureka F. & M. 1. L Co.Co. (18g2)(18g2)(1892) 90go Mich. 236; Edwards v. Thoman (1915) 187 Mich. 361; National Bank v.v. Grand Lodge (1878)(1878) 98 U. S. 123. _-W"""" Gifford v. CorriganCorrigan(1889) (x889) 117 N. Y.257;Y. 257; Thorp v. Keokuk Coal,Co.Coal.Co. (1872) 48 N. Y. 253.253, 257; Burr v. Beers (186~(i86i4 24 N. Y. 178; Gay v. Blanchard (1880)(x88o) 32 La. Ann. 497;497;'Pope..Pope v. Porter (1887)(1887) 33 Fed. 7; Urquhart v. Brayton (1878) 1212 R. I.I. 169;i6g; Carver v. EOOsEads (1880)(288o) 65 Ala. 190;29o; Allen v. Bucknam (1883) 75 Me.Me 352;352; Figart v. Halderman (1881)(188i) 75 Inci.Ind. 567; Huyler v. Atwood (1875) 26 N. J. Eq. 504; George v. Andrews (1882) 606o Md. 26; Cooper v. Foss (1884) IS15IS Neb. SIS.515. Contra inin the Virginias, where by statute only a sole beneficiary cancan sue:sue: Newberry Land Co. v. Newberry (1897) 95 Va. iig;119; King v. Scott (1915)(1915) 7676 W. Va. 58. See, further,further, cases cited in 13 C. J. 707, sec. 816. In Michigan and Connecticut aa mortgagee-beneficiary can sue by virtue of a special statute. Mich. CompoComp. LawsLaws 1897,I897, sec. 519;5i9; Corning v. Burton (1894) 1022O2 Mich. 86; Conn. G. S. 1902.2902, sec.sec. 587.

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Suppose,Suppose, however,however, thatthat thethe mortgagormortgagor sellssells hishis interestinterest toto aa granteegrantee whowho buysbuys subjectsubject toto thethe mortgagemortgage butbut whowho makesmakes nono promisepromise what-what­ everever toto paypay thethe mortgagemortgage debt.debt. HeHe doesdoes notnot "assume"assume thethe mortgagemortgage debt."debt." InIn suchsuch aa case,case, thethe grantee'sgrantee's rightsrights inin remrem areare limitedlimited byby thethe mortgage,mortgage,2727 butbut hehe undertakesundertakes nono dutyduty toto paypay thethe debt.debt. TheThe mortgagee,mortgagee, therefore,therefore, cancan maintainmaintain nono actionaction againstagainst him,him, andand neitherneither cancan thethe grantor.grantor. SuchSuch aa grantee,grantee, however,however, hashas inin numerousnumerous casescases soldsold hishis interestinterest toto aa secondsecond granteegrantee andand hashas causedcaused thethe latterlatter toto assumeassume paymentpayment ofof thethe mortgagemortgage debt.debt. ThereThere isis herehere anan expressexpress promisepromise thethe performanceperformance ofof whichwhich requiresrequires aa paymentpayment directlydirectly toto thethe mortgagee.mortgagee. TheThe firstfirst granteegrantee isis thethe promisee,promisee, andand hehe willwill notnot bebe benefitedbenefited atat allall byby thethe payment.payment. SoSo farfar asas thethe promiseepromisee isis con-con­ cerned,cerned, therefore,therefore, thethe mortgageemortgag~e seemsseems toto bebe aa meremere donee-beneficiarydonee-beneficiary andand thethe solesole beneficiary.beneficiary. AtAt thisthis pointpoint thethe decisionsdecisions areare foundfound toto bebe 228 hopelesslyhopelessly at variance.variance. 8 ThoseThose holdingholding thatthat thethe mortgageemortgagee cancan suesue thethe promisorpromisor inin thesethese casescases seemseem toto be moremore nearly consistentconsistent withwith thethe weightweight of authority inin otherother beneficiarybeneficiary cases.cases. ThoseThose holdingholding thethe contrary generally do so onon thethe groundground that a thirdthird partyparty can-can­ notnot enforce a contractcontract unlessunless thethe performance willwill operate notnot only asas aa benefit toto him, butbut also as thethe fulfillmentfulfillment ofof a legallegal or an equitableequitable duty owing by the promiseepromisee toto him. This rulerule waswas laidlaid downdown during thethe periodperiod when many of the courts desired toto limit the application of the rule of Lawrence v.'lI. Fox.Fox.2299 It denies all donee-beneficiaries a remedy, and is being abandoned. 30 Some of thethe cases denying the mortgagee a remedy under thesethese circumstances rest upon thethe theory that a beneficiary's right is based upon the equitable doctrine of subrogation. It is generally held in equity that a creditor is not only entitled to sue his principal debtor and allail collateral sureties and to realize on such securities as may have been charged with the debt, but also toto make use of allail securities

or'TheThe grantee lacks many rights and immunities because of thethe mortgage;mortgage: he has certaincertain "no-rights" because the mortgagee has privileges, and he has liabilitiesliabilities because the mortgagee has powers. :a The mortgagee can sue:sue: McDonald 11.v. Finseth (1915)(i915) 3232 N. D.D. 400: 40o; Cassel­Cassel- man v. Gordon (1916)(I916) 118ii8 Va. 553:553; Llewellyn 11.v. Butler (1915)(i915) 186186 Mo. 525:525; ThorpThorp v. Keokuk CoalCoal Co.,Co., supra. Dean 11.v. WalkerWalker (1883)(1883) 107io7 IlL 540:54o; Marble SaveSav. Bank v. MesaroeyMesarvey (1897)(897) 101ioi Iowa,Iowa, 285; CroneCrone 11.v. Stinde (1900)(igoo) 156156 Mo.Mo. 262:262; HareHare 11.v. Murphy (1895)(1895) 4545 Neb.Neb. Bog:8og; McKayMcKay 11.v. WardWard (1899)(1899) 2020 Utah,Utah, 149:149; alsoalso manymany otherother casescases inin accord,accord, cited,incited, in Fry 11.v. Ausman, infra.infra. Contra: Fry 11.v. Ausman (1912)(2922) 2929 S.S. D. 30;30; 3939 L. R.R. A.A. (N.(N. S.)S.) ISO,15o, citingciting manymany other cases:cases; VroomanVrooman v. TumerTurner (1877)(1877) 6g69 N.N. Y.280:Y. 28o; WardWard v.v. DeOcaDeOca (18gB)(I8g8) 120120 Cal.Cal. 102.i02. SeeSee notenote inin 2222 1...1.R. A.A. (N.(N. S.)S.) 492-492 ..'JeffersonJefferson 11.v. Asch (1893)(1893) 5353 Mino.Minn. 446;446; VroomanViooman 11.v. TurnerTurner (1877)(1877) 6g69 N.N. Y.Y. 280;28o; DurnherrDurnherr11.v. RauRau (18g2).135(1892),135 N. Y.Y. 219229.. ...' SeeSee discussiondiscussion ofof donee-beneficiaries,donee-beneficiaries, ante;ante; alsoalso post,post, "New"New YorkYork Law."Law." ModernModern decisionsdecisions are:are: BuchananBuchanan 11.v. TildenTilden (1899)(i899) 158258 N.N. Y.Y. 109:io9; PondPond 11.v. NewNew RochelleRochelle WaterWater Co.Co. (1906)(i9o6) 183183 N.N. Y.Y. 330:330; DeDe CiccoCicco 11.v. SchweizerSchweizer (19(29i7,17, N.N. Y.)Y.) 117117 N.N. RE. 807:8o7; GardnerGardner11.v. DenisonDenison (1914)(i914) 217217 Mass.Mass. 492-492.

HeinOnline -- 27 Yale L.J. 1015 1917-1918 zo16 1016 YALEYALE LAWLAW JOURNALJOURNAL thatthatthat thethethe principalprincipal debtordebtor maymay havehave givengiven toto thethe surety surety forfor thethe indemnityindemnityindemnity ofof thethethe latter.latter.latter.3131 ItIt isis alsoalso heldheld thatthat wherewhere oneone assumesassumes thethe debtdebt ofof another,another, althoughalthough thethe latterlatter isis notnot therebythereby discharged,discharged, hehe occupiesoccupies thereafterthereafterthereafter thethe positionposition ofof aa suretysurety andand thethe newnew promisorpromisor occupiesoccupies thethethe positionposition ofof aa principalprincipal debtor.debtor. ThusThus where thethe promisee isisis himselfhimself indebtedindebtedindebted toto thethe mortgagee, butbut has become,become, underunder thethe aboveabove theory,theory,theory, aa meremere suretysurety byby reasonreason ofof hishis contractcontract with thethe newnew promisor,promisor, thethethe courtscourts maymay resortresort toto the the doctrinedoctrine ofof subrogationsubrogation andand sustainsustain anan actionaction byby thethethe mortgageemortgagee againstagainst thethe promisor becausebecause thethe promisee couldcould havehave maintainedmaintained suchsuch anan action.action. On thethe other hand,hand, ifif thethe promiseepromisee isisis notnot hims~lfhimself boundbound toto paypay thethe debt,debt, he isis notnot aa suretysurety and thethethe doctrinedoctrine ofof subrogationsubrogation isis not applicable.applicable. ItIt appears,appears, however,however, thatthat thisthis isis aa veryvery doubtful groundground upon which toto sustainsustainsustain thethethe actionaction ofof thethe mortgageemortgagee (or(or otherother beneficiary) against thethethe promisor.promisor. TheThe doctrinedoctrine ofof subrogationsubrogation has nono doubt beenbeen very beneficialbeneficial inin spitespite of fictionfiction andand artificiality;artificiality; butbut inin thisthis instance instance it hashas beenbeen usedused tototo confer new security andand new rightsrights upon a creditor, asas aa giftgift outout of a clearclear sky.sky. InIn suretyshipsuretyship it isis used only as against oneone whowho isisis alreadyalready legallylegally indebtedindebted inin order to secure thethe fulfillmentfulfillment ofof thatthat legallegallegal duty.duty. A doctrinedoctrine whose purposepurpose was the enforcement of aa previously recognizedrecognized dutyduty cannot properly be given as the sole a previously recognized duty cannot properly32 be given as the sole reasonreason forfor creatingcreating an entirely new duty.32duty. To restrest thethe beneficiary's rightright toto recoverrecover on such a theory as this would shutshut out allall doneedonee (or(or non-creditor) beneficiaries altogether, yetyet theythey areare thethe very persons onceonce thought by thethe Supreme Court of thethe United StatesStates to be the only beneficiaries who should be permitted toto suesue onon a promise made toto another person.3333 Included among such beneficiaries are most of the persons for whose benefit life insurance policies are issued.issued. The mortgagee's right against the promisor should rest on the same groundground as thethe right of other beneficiaries. The promisor has under- "Brandt, Suretyship (3d ed.) sec. 357; Sheldon, Subrogation, (2d ed.) sec. 3131 Brandt, Suret)'ship (3d ed.) sec. 357; Sheldon, Subrogatio7~ (2d ed.) sec. 154;154; Spencer, Suret)'ship,Suretyship, sec. 181;i8i; Ames, Cases on Suretyship, 62062o and note; Keller v. Ashford (1890)(1890)(i89o) 133 U. S. 610;6io; Hopkins v. WarnerWamer (i8g5)(1895) ioglog CalCal. 133·133·133. z::z::'TheThe extension of thethe subrogation theorytheory to this case, where thethe promisor was not indebtedindebted toto thethe third party by reason of any operative fact other thanthan his promise toto thethe promisee, is merely a cumbrous intellectual expedi-expedi­ entent forfor holding thatthat a contract between twotwo parties can create an enforceable rightright inin a third.third. E. g. see Keller v. Ashford (188g)(i889) 133 U. S. 6io,610, 623.623. ....See Nat'l Bank v. Grand Lodge (1878)(1878) 98 U. S. 123. The Virginia court regardsregards thethe fact thatthat thethe promisee was not bound toto pay thethe debt as showingshowing thatthat thethe mortgageemortgagee waswas necessarily thethe "sole beneficiary"beneficiary" withinwithin thethe meaningmeaning of thethe Va.Va. Code, sec.sec. 2415, giving such a beneficiarybeneficiary aa remedy.remedy. Casselmal~Casselman v.v. Gordon (igi6)(1916) II8118 Va. 553. See also MerrimanJ1ferri17lan v. MooreMoore (1879) 909o Pa.Pa. 78;78; Davis v.v. Davis (1912)(1912) 19ig Cal. App. 797. Under such aa statutestatute itit waswas heldheld thatthat thethe mortgagee could not suesue thethe grantee of oneone who waswas himselfhimself personallypersonally indebted.indebted. King v. ScottScott (I915)(1915) 76 W. Va. 58.58.

HeinOnline -- 27 Yale L.J. 1016 1917-1918 CONTRACTCONTRACT BENEFICIARIESBENEFICIARIES 10110177 takentaken forfor aa sufficientsufficient considerationconsideration toto performperform anan actact thatthat willwill bebe beneficialbeneficial toto thethe thirdthird party.party. IfIf suchsuch benefitbenefit waswas thethe contemplatedcontemplated result,result, andand ifif judgmentjudgment andand executionexecution inin favorfavor ofof thethe thirdthird partyparty willwill givegive effecteffect toto thethe intentionintention ofof thethe promisorpromisor andand ofof thethe partyparty givinggiving thethe consideration,consideration, therethere isis ampleample justificationjustification forfor sustainingsustaining actionaction byby thethe beneficiary.beneficiary. SomeSome ofof thethe casescases denyingdenying thethe mortgageemortgagee aa remedyremedy maymay perhapsperhaps bebe justifiedjustified forfor thethe reasonreason thatthat thethe contracting contracting partiesparties hadhad nono inten-inten­ tion of benefiting the mortgageemortgagee oror ofof conferringconferring aa rightright ofof actionaction tion of benefiting the 3 ground. 3 uponupon him.him. Indeed,Indeed, somesome ofof themthem areare placedplaced squarelysquarely onon thisthis ground. • ButBut itit isis believedbelieved thatthat wherewhere thethe promisorprom~sor hashas receivedreceived considerationconsideration for a promisepromise thethe fulfillmentfulfillment ofof whichwhich necessarilynecessarily requiresrequires himhim toto paypay moneymoney directlydirectly toto aa mortgageemortgagee oror otherother thirdthird person, itit wouldwould seemseem notnot unreasonableunreasonable toto draw an invariableinvariable inferenceinference thatthat suchsuch thirdthird personperson waswas contemplated asas aa beneficiarybeneficiary and asas the holderholder ofof aa new and additional right ofof action.action.

INCIDENTALINCIDENTAL ANDAND UNINTENDEDUNINTENDED BENEFICIARIES These are persons not intendedintended by thethe contracting partiesparties toto have new rights, and not named as beneficiaries or even as thethe persons to whom payment is toto be made or other performance given. InIn order thatthat a third party may sue upon a contract made by others he must show that he was intendedintended by them to have an enforceable right or at leastleast that thethe performance of the contract must necessarily be of benefit to him and such benefit must have been within the con-con­ 33 5 templation and purpose of the contracting parties. 3:! He has no right of action where he incidentally finds a provision inin some contract which makes to his advantage. On this ground a remedy has, in some instances, been refused to a material man suing on a builder's bond conditioned on paying all claims for material,material,3638 and likewiselikewise to a

.. See Fry v. Ausman (1912)(92) 29 S. D. 30; King v. Scott (1915)(x15) 76 W. Va. 58. '"'DurnherrDurnherr v. Rau (1892)(1892) 135 N. Y. 219; Wheat v. RiceRiC6- (1884)(1884) 97 N. Y. 2g6;296; Campbell v. Lacock (1861) 40 Pa. 448; Adams v.v. Kuehn (1888)(I888) II9iig Pa. 76; ,iI,fillerMiller v.v. Winchell (1877)(I877) 707o N. Y. 437; Case v.v. Case (19II)(19I1) 2032o3 N.N. Y. 263; Lockwood v. Smith (1913)(913) 143143 N. Y. Supp. 480;48o; Thomas Mfg. Co. 1/.v. Prather (18gB)(1898) 65 ArkArk. 27; Buckley v.v. GrayGray (1895)(895) IIOii0 CatCal. 339. In New OrleansOrleans St. J. Ass,~.Assn. v. jI,[agnierMagnier (1861) 1616 La.La. Ann. 338,338, thethe plaintiff was denieddenied a remedyremedy because performanceperformance ofof the defendant'sdefendant's primaryprimary contractualcontractual duty wouldwould not have benefitedbenefited the plaintiff, althoughalthough the plaintiffplaintiff was expresslyexpressly named asas bene­bene- ficiaryficiary ofof a penaltypenalty clause.clause. ThisThis decisiondecision shouldshould not be followed.followed. See furtherfurther 1313 C.C. J. 709·709. 05' StandardStandard GasGas Power Corp.Corp. 1/.v. NewNew EnglandEngland Cas14altyCasualty Co. (1917,(1917, N.N. J.)J.) 1011oi At!.At. 281,27281, 27 YALEYALE LAWLAW JOUR~AL,JOURNAL, 274-274. Cf.Cf. SchoolSchool District v.v. LiversLivers (1899)(i8gg) J47147 Mo.Mo. 580.580. SeeSee i'~frainfra asas toto statutorystatutory provisions.provisions. ManyMany casescases contra areare citedcited inin 4949 LL R. A. (N.(N. S.)S.) u66,ii66, note.note.

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citizen who sues on a contract between a water company and the citizen who sues37 on a contract between a water company and the municipality.57municipality. ItIt isisnot notalways always easyeasy totodetermine determine inin factfactwhether whether oror not not thetheplaintiff plaintiffwas was contemplatedcontemplated bybythe theparties parties asasa abeneficiary, beneficiary, andand muchmuch ofof thethe apparentapparent conflictconflict inin decisionsdecisions cancan bebe explainedexplained onon thisthis ground.ground. WhereWhere thethe beneficiarybeneficiary isis aa solesole beneficiary,beneficiary, thethe difficultydifficulty doesdoes notnot exist;exist; butbut inin thethe casecase ofof creditor-beneficiariescreditor-beneficiaries thethe questionquestion may may alwaysalways bebe regardedregarded asas anan openopen one.one. IfIf thethe intentionintention toto createcreate aaright rightin ina a thirdthirdparty party isisindicated indicated withwith reasonablereasonable certainty,certainty, anan actionaction by by himhim shouldshould bebe maintainablemaintainable eveneven thoughthough thethe intentionintention toto benefitbenefit him 8 him waswas onlyonly secondarysecondary andand conditional,3sconditional, andand irrespectiveirrespective ofof whetherwhether hehe isis aa doneedonee oror aa creditor.creditor. WhereWhere thethe agreedagreed performanceperformance involvesinvolves aa paymentpayment directdirect toto thethe thirdthird party,party, thethe enforcementenforcement ofof thethe contractcontract byby himhim willwill carrycarry outout thethe intentionintention ofof thethe parties.parties.

LIABILITYLIABILITY OFOF WATERWATER COMPANIESCOMPANIES Where '¥here aa waterwater companycompany hashas contractedcontracted withwith aa municipalitymunicipality toto main­main- tain tain aa certaincertain supplysupply ofof waterwater forfor thethe puttingputting outout ofof :firesfires andand hashas failed to do failed to do so,so, withwith thethe resultresult thatthat thethe propertyproperty ofof anan individualindividual citizen has citizen has beenbeen destroyed,destroyed, itit isis veryvery generallygenerally heldheld thatthat thethe citizencitizen has no claim against the water company has no claim against the water company forfor breachbreach ofof contract.contracts'It Various reasons Various reasons areare givengiven forfor thesethese decisions. SometimesSometimes theythey are made to made to restrest solelysolely upon thethe lacklack of privity, withoutwithout observing thatthat this is inconsistent this is inconsistent with otherother casescases inin thethe samesame jurisdiction allowing beneficiaries to maintain beneficiaries to maintain suit. InIn otherother cases it is asserted that the contract was not contract was not made for thethe benefit of the citizens, an assertion thatthat would seem to be would seem to be generally untrue inin fact; and in others it is said that the municipality that the municipality had no legal power toto make such a contract for the benefit of for the benefit of its c~tizens,citizens, a statement that we may be permitted to doubt as a to doubt as a matter of law. Most of the cases denying any right to the citizen have to the citizen have done so for thethe reason formerly given by the New York courts in all beneficiary York courts in all beneficiary cases, toto thethe effect that no beneficiary

'Davis v. Clinton Water Co. (i88o) 54 Iowa, 59; Boston Safe aT Davis v. Clinton Water Co. (1880) 54 Iowa, 59; Boston Safe D.D. && T.T. Co. v.v. Salem W. Co. (1899) 94 Salem W. Co. (1899) 94 Fed. 238.238. Contra:Contra: Gorrell v.v. GreensboroGreensboro' W.W. Co. (1899) i24 N. C. 328. See further Post, "Liability (1899) 124 N. C. 328· See further post, "Liability ofof Water Companies toto ThirdThird Persons."Persons." " For this reason the decision "For this reason the decision inin NewNew OrleansOrleans St.St. J.J. Assn.Assn. v.v. Magnier,Magnier, supra,supra, shouldshould bebe disapproved.disapproved. "'Ancrum v. Camden W. Co. (igog) 82 S. C. 284, 21 L. R. A. (N. S.) io29, 80 Ancrum v. Camden W. Co. (1909) 82 s. C. 284, 21 LRL R A. (N. S.) 1029, 64 S. E. 151; Hone v. 64 S. E. 151; Hone v. Presque-IslePresque-Isle W.W. Co.Co. (i9o8)(1908) io4104 Me.Me. 217.217. Contra,Contra, Wood-Wood­ bury v. Tampa Waterworks (igog) 57 Fla. 243, bury v. Tampa Waterworks (1909) 57 Fla. 243, 2121 L.L. RR A.A. (N.(N. S.)S.) i034.1034- TheThe cases are very numerous. See Arthur cases are very numerous. See Arthur L.L. Corbin,Corbin, LiabilityLiability ofof WaterWater CompaniesCompanies (191o) 19 YALE LAW JoURNAL, 425, where the (1910) 19 YALE LAW JOUIL'

HeinOnline -- 27 Yale L.J. 1018 1917-1918 CONTRACTCONTRACT BENEFICIARIESBENEFICIARIES 1o91019 cancan suesue unlessunless thethe performanceperformance byby thethe promisorpromisor willwill dischargedischarge somesome legallegal oror equitableequitable dutyduty ofof thethe promiseepromisee toto thethe beneficiary.beneficiary. ThisThis reasonreason hashas alreadyalready beenbeen shownshown toto bebe unsound,unsound, asas denyingdenying rightsrights toto allall donee-donee­ beneficiaries.beneficiaries. AlsoAlso itit hashas beenbeen practicallypractically abandonedabandoned byby thethe courtscourts ofof NewNew YorkYork wherewhere itit waswas invented.invented. InIn allall casescases ofof thisthis classclass thethe rightsrights ofof thethe citizencitizen willwill varyvary withwith thethe wordswords usedused byby thethe partiesparties inin thethe expressexpress contract;contract; butbut ifif aa waterwater companycompany contractcontract isis inin factfact forfor thethe benefitbenefit ofof thirdthird personspersons theythey shouldshould havehave thethe samesame rightright ofof actionaction thatthat otherother beneficiariesbeneficiaries have.have.

CONTRACTSCONTRACTS UNDERUNDER SEALSEAL TheThe factfact thatthat thethe partiesparties toto aa contractcontract havehave executedexecuted aa formalformal instrumentinstrument underunder sealseal shouldshould notnot affectaffect thethe rulerule asas toto aa thirdthird partyparty beneficiary'sbeneficiary's rightright toto sue.sue. IfIf thethe rightright ofof aa beneficiarybeneficiary isis recognizedrecognized atat all,all, itit shouldshould bebe recognizedrecognized inin thethe casecase ofof contractscontracts underunder seal,seal, andand 40 therethere isis much authorityauthority toto thisthis effect.effect.40 ManyMany ofof thethe courts,courts, however,however, make thethe presencepresence ofof aa sealseal aa reasonreason forfor refusingrefusing toto recognizerecognize aa rightright make 4 1 inin thethe beneficiary.beneficiary.u

THE BENEFICIARY'S RIGHT ISIS NOT BASEDBASED ONON It has beenbeen held inin a fewfew cases thatthat thethe thirdthird party beneficiary must elect between his former debtor and thethe new promisor, and that a suit against either one, even thoughthough it does not result in. collection, will against either 4 2 bar any action against the other.other."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 toto the beneficiary. The chief objobjec-ec­ tiontion to this theory is that inin fact the parties contemplate no such offer and thethe beneficiary has no reasonreason to believe that inin takingtaking advantage of thethe ne\vnew contract hehe isis extinguishing his previous rights.rights. IfIf suchsuch an offer isis inin factfact mademade and accepted, thethe casecase nono longerlonger fallsfalls under the presentpresent heading.heading. Where aa novationnovation is effected, therethere isis aa newnew contract between thethe promisor and thethe new promisee, andand thethe latterlatter

«>'BassettBassett 'lI.v. HughesHughes (1877)(1877) 5353 Wis.Wis. 319;3x9; HughesHughes 'lI.v. OregonOregon R.R. && Na'lI.Nay. Co.Co. (1884)(1884) II11 Ore.Ore. 437;437; CosterCoster 'lI.v. Albany (1871)(1871) 4343 N.N. Y.Y. 399;399; PondPond 'lI.v. NewNew RochelleRochelle W.W. Co.Co. (1906)(x9o6) 183183 N.N. Y.Y. 330;330; King 'lI.v. ScottScott (1915)(i9g5) 7676 W.W. Va.Va. 58,58, 84 S. E. 954 (Code 1913. sec. 3740); Newberry Land Co. 'lJ. Newberry (1897)(1897) 84 S. E. 954 (Code 1913, sec. 374o); Newberry Land Co. v. Newberry 9595 Va.Va. II9iig (Code(Code 1904,i9o4, sec.sec. 2415).2415). SeeSee furtherfurther 1313 C.C. J.J. 7II,711, sec.sec. 818.818. <1'HarmsHarms 'lJ.v. McCormickMcCormick (1889)(i889) 132132 Ill.Ill. 104;io4; HendrickHendrick 'lI.v. LindseyLindsey (1876)(1876) 9393 U.U. S.S. 143;143; Willard'lJ.Willard v. WoodWood (IBgo)(I89) 135135 U.U. S.309;S. 309; CrowellCrowell'lI. v. HospitalHospital (1876)(1876) 2727 N.N. J.J. Eq.Eq. 650650.. ..1BohananBohanan 'lJ. v. PopePope (1856)(i856) 4242 Me.Me. 93;93; WoodWood 'lJ.v. MoriartyMoriarty (1887)(1887) IS15 R.R. 1.1. 518;518; v. Carpenter WarrenWarren 'lI.v. BatchelderBatchelder (1845)(1845) 16i6 N.N. H.H. 580.58o. SeeSee alsoalso AldrickAldrick 'U. Carpenter (1893)-160(i893)-i6o Mass.Mass. 166.i66.

HeinOnline -- 27 Yale L.J. 1019 1917-1918 X020 YALE 1020 YALE LAWLAWJOURNAL JOURNAL is not a beneficiary of is not a beneficiary of a acontract contractbetween betweenother otherpersons. persons. Instead,Instead,he he is a prowmisee and is a promisee and hehehas hasgiven givenvaluable valuableconsideration considerationby bydischarging discharging his previous his previous debtor.debtor. In the absence of In the absence of a anovation, novation,there thereseems seemsto tobe beno nosufficient sufficientreason reason for holding that the for holding that the beneficiary'sbeneficiary'sattempt attemptto toenforce enforcethe theduty dutycreated created by the new contract by the new contract amountsamountsto toa adischarge discharge ofofhis hisprevious previous rightsrights against the promisee. The against the promisee. The historyhistoryof ofthe thelaw lawof ofdischarge dischargeat atcommon common law justifies no such holding, law justifies no such holding, andand nono sufficientsufficient reasonreason appearsappears forfor inducing equity to intervene and inducing equity to intervene and totodischarge discharge thethepromisee. promisee. InInlike like manner, a suit by the beneficiary manner, a suit by the beneficiary againstagainsthis hisformer formefdebtor debtorshould shouldnot not affect his rights affect his rights againstagainstthe thenew newpromisor. promisor. Where the beneficiary is Where the beneficiary is notnota acreditor creditor ofofthe thepromisee promisee hehe hashas nono rights to discharge, and the novation rights to discharge, and the novation theorytheory isis whollywholly inapplicable.inapplicable. Clearly also, the better authority Oearly also, the better authority appearsappears toto bebe thatthat thethe credit<;>r­creditor- beneficiary's right against beneficiary's right against thethe newnew promisorpromisor isis anan additionaladditional security. This carries out security.4a This carries out thethe realreal intentionintention ofof thethe parties.parties.

CHARACTER OF THE CHARACTER OF THE THIRDTHIRD PARTY'SPARTY'S RIGHTRIGHT The right of a third party beneficiary The right of a third party beneficiary shouldshould bebe describeddescribed asas aa legallegal right and as a contractual right. right and as a contractual right. ItIt isis contractualcontractual becausebecause thethe opera­opera- tive facts creating it are acts of offer and tive facts creating it are acts of ;acceptance; thethe partyparty whowho assumes the duty does so by assumes the duty does so by consentingconsenting thereto,thereto, andand thethe necessarynecessary consideration is the same as that consideration is the same as that requiredrequired forfor anyany contract.contract. UponUpon breach of the primary duty by the breach of the primary duty by the promisor, thethe secondary right ofof the beneficiary may be a right to the beneficiary may be a right to damages collectible inin express assumpsit; the beneficiary is not restricted assumpsit; the beneficiary is not restricted to an action of debt or indebitatus assumpsit for the amount indebitatus assumpsit for the amount of the defendant's . Indeed, in most enrichment. Indeed, in most cases it is held that the promisor need not have received anything at all; not have received anything at all; it is merely necessary thatthat the promisee shall have given consideration promisee shall have given consideration for the promise. There isis no particular reason therefore for describing no particular reason therefore for describing thethe rightright and thethe duty as quasi-contractual. We cannot properly as quasi-contractual. We cannot properly saysay thatthat thethe promisor and the third party have made a contract, the third party have made a contract, eveneven thoughthough thethe thirdthird partyparty hashas assented; the contract was made assented; the contract was made byby thethe promisorpromisor andand thethe promisee.promisee. The assent of the third party The assent of the third party isis certainlycertainly notnot thethe acceptanceacceptance ofof anan offer, and the third party gives offer, and the third party gives nono consideration.consideration. Nevertheless,Nevertheless, thethe 'Fischer v. Hope Mat. Life Ins. Co (1877) 69 N. Y. 161; Rodenbarger v. Q Fischer v. Hope Mut. Life Ins. Co, (1877) 69 N. Y. 161; Rodenbarger v. Bramflett (x88I) 78 Ind. 213; Davis v. Hardy Bramjlett (1881) 78 Ind. 213; Davis v. Hardy (I88I)(1881) 7676 Ind.Ind. 272;272; GayGay v.v. Blanchard (I88o) 32 La. Ann. 497, 5o5 ("True, Blanchard (1880) 32 La. Ann. 497, 50S ("True, therethere waswas nono novationnovation ofof thethe debt There was simply an additional obligor debt. There was simply an additional obligor boundbound forfor it.");it."); FeldmanFeldman v.v. McGuire (i89g) 34 Ore. 3o9; Smith v. Pfluger McGuire (1899) 34 Ore. 309; Smith v. Pfluger(19o5)(1905) 126126 Wis.Wis. 253,253, 1O5105 N.N. W.W. 476. See also Poe v. Dixon (1899) 476. See also Poe v. Dizon (1899)6o60 Oh.Oh. StSt. i24.124- This is necessarily true in mortgagee-beneficiary This is necessarily true in mortgagee-beneficiarycasescases wherewhere thethe courtcourt basesbases the mortgagees right against the grantee who has the mortgagee's right against the grantee who hasassumedassumed thethe debtdebt uponupon thethe doctrine 6f subrogation. See Hopkins v. doctrine cif subrogation. See Hopkins v.WarnerWarner (1895)(1895) io9109 Cal.Cal. 133.133.

HeinOnline -- 27 Yale L.J. 1020 1917-1918 CONTRACTCONTRACT BENEFICIARIESBENEFICIARIES 1021 rightright ofof thisthis partyparty andand thethe dutyduty ofof thethe promisorpromisor areare properlyproperly describeddescribed asas contractual.contractual. ThereThere isis nono sufficientsufficient reasonreason forfor describingdescribing thethe thirdthird party'sparty's rightright asas anan equitableequitable rightright insteadinstead ofof aa legallegal one.one. TheThe recognitionrecognition ofof thethe thirdthird party'sparty's rightright hashas veryvery largelylargely comecome aboutabout inin jurisdictionsjurisdictions wherewhere theretJ1ere havehave nevernever beenbeen separateseparate courtscourts ofof commoncommon lawlaw andand ofof equity;equity; andand eveneven inin otherother jurisdictionsjurisdictions thethe rightright hashas beenbeen enforcedenforced inin thethe courtscourts ofof lawlaw asas wellwell asas inin equity.equity. Moreover,Moreover, inin fundamentalfundamental character,character, therethere isis nono differencedifference betweenbetween anan equitableequitable rightright andand aa legallegal right.right. AnyAny right,right, legallegal oror equitable,equitable, impliesimplies aa dutyduty ofof performanceperformance byby another,another, thethe non-performancenon-performance beingbeing penalizedpenalized byby society.society. ItsIts existenceexistence doesdoes notnot dependdepend uponupon thethe numbernumber ofof officialsofficials oror courtscourts toto whom applicationapplication mustmust bebe made or uponupon thethe complexitycomplexity ofof thethe machinerymachinery of enforcement,enforcement, although thesethese maymay determinedetermine whatwhat thethe secondarysecondary andand other subsequent rightsrights willwill be. TheThe termterm equitableequitable hashas often meantmeant inin the pastpast that applicationapplication must bebe mademade toto aa chancellor inin aa particularparticular formform called a "bill" and thatthat thethe societal penaltypenalty forfor nonperformancenonperformance will be of a particular kind. It nono longerlonger has that definite meaning; and ifif it has such a meaningmeaning itit isis inappli-inappli­ cable in thisthis instance.instance. InIn thethe past, certain rightsrights have been described as equitableequitable because therethere was aa liability toto theirtheir for the benefit ofof some innocentinnocent purchaser. CertainCertain admittedly legallegal rightsrights were likewise subject toto such a liability by the rules of market overt, and hence the existence of such a liabilityliability is not thethe basis of a clear distinction. The right of the thirdthird 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 material on this point. There is no chance here for the application of special doctrines.doctrines."4H The accuracy of the foregoing seems not to be doubted in the case of a solesale beneficiary. In the case of a creditor-beneficiary, however, the contrary has been maintained, especially in cases where the court overlooked altogether thethe rights of a sole beneficiary. Thus it has been held that a mortgagee or other creditor cancdn sue thethe promisor only according to the procedure of a court of equity, and on the theorytheory thatthat thethe promise isis anan "asset" of thethe promisee.promisee."ill Not only

.."TheThe relationrelation betweenbetween aa beneficiary and thethe promisor is not aa fiduciary one. Attorney General 1/.v. American Legion of Honor (1910)(igio) 2062o6 Mass.Mass. 158.s58. •*KellerKeller 1/.v. Ashford (1889)(1889) 133i33 U. S. 610;61o; Green 1/.v. Turner (1898)(i898) 808o Fed. 41,41, 86 Fed. 837;837; HOPkinsHopkins 1/.v. Warner (1895) 109io9 CaLCal. 133;133; ForbesForbes 1/.v. Thorpe (19U)(191) 209 Mass. 570.570. ObserveObserve thatthat thisthis assetasset theorytheory isis different from thethe oneone discussed previously.previously. HereHere thethe promissory duty isis thethe asset,asset, andand isis toto bebe reachedreached asas anan asset ofof thethe promisee.promisee. TheThe otherother doctrinedoctrine supposessupposes thethe existenceexistence of assetsassets inin thethe handshands ofof thethe promisor.promisor. ForbesForbes 1/.v. Thorpe,Thorpe, suprrs,supra, might restrest upon bothboth doctrinesdoctrines at once.once.

HeinOnline -- 27 Yale L.J. 1021 1917-1918 10221022 YALEYALE LAWLAW JOURNALJOURNAL isis suchsuch aa theorytheory whollywholly inapplicableinapplicable toto solesole beneficiaries,beneficiaries, butbut itit isis notnot thethe theorytheory onon whichwhich thethe rightsrights ofof creditor-beneficiariescreditor-beneficiaries havehave generallygenerally beenbeen basedbased a.."1dand itit hashas notnot beenbeen consistentlyconsistently adheredadhered toto inin anyany state.~estate."' IfIf thethe promiseepromisee hashas anan "asset""asset" inin thisthis casecase itit shouldshould bebe availableavailable likelike otherother assetsassets toto hishis otherother creditorscreditors asas wellwell asas toto thethe particularparticular creditorcreditor whowho isis namednamed asas thethe payee.payee. TheThe presentpresent writerwriter hashas seenseen nono creditor'screditor's billbill forfor realizingrealizing onon thisthis assetasset broughtbrought byby anyany creditorcreditor otherother thanthan thethe namednamed payee;payee; butbut ifif otherother creditorscreditors couldcould maintainmaintain suchsuch aa bill,bill, itit wouldwould resultresult inin thethe payee'spayee's gettinggetting thethe who.lewhole ofof thisthis assetasset andand stillstill sharingsharing otherother assetsassets propro ratarata withwith thethe otherother creditorscreditors asas toto anyany balancebalance thatthat mightmight bebe duedue him.him. ByBy differentiatingdifferentiating thisthis particularparticular creditorcreditor fromfrom otherother creditorscreditors andand thisthis particularparticular "asset""asset" fromfrom otherother assetsassets wewe areare merelymerely recognizingrecognizing thatthat hehe hashas obtainedobtained aa specialspecial rightright inin personampersonam asas againstagainst thethe promisor, aa rightright thatthat isis createdcreated byby aa contractcontract toto whichwhich hehe waswas notnot aa party. HeHe gainsgains thisthis specialspecial rightright becausebecause thethe contractingcontracting parties intendedintended thatthat hehe shouldshould havehave it,it, oror atat leastleast thatthat the-the performanceperformance shouldshould gogo directdirect toto him. ToTo applyapply thethe "equitable"equitable asset" theorytheory isis merelymerely toto recognizerecognize thethe thirdthird party beneficiary'sbeneficiary's right under another and mis-descriptive name. There isis no doubt thatthat thethe chancery procedureprocedure had many advantagesadvantages over thatthat of thethe commoncommon law. This was especially true with respect toto its flexibilityflexibility inin thethe matter of parties toto the suit, where more than two parties were involved.involved. In allall beneficiary casescases therethere areare three interested parties, although thethe interest of thethe promisee is-is not quite the same in sole beneficiary cases as it is in creditor-beneficiary cases. The rights and duties of the threethree can no doubt be better determined and enforced in one suit to which all are parties than inin two or more suits in each of which only two are parties. If the promisor is sued by either thethe promisee or the third party he should have thethe power to make thethe other one a party to the suit No doubt the procedure of nearly 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 has undertaken duties to twotwo persons severally.

THE RIGHTSRIGHTS OF THE PROMISEE It was once heldheld in EnglandEngland thatthat where a third party waswas sole beneficiary,beneficiary, thethe promiseepromisee having no pecuniary interestinterest inin thethe per-per­ formance, thethe promisee could maintainmaintain nono action at law.4741 The same

,".. (i)(1) SoleSale beneficiaries.beneficiaries. EveryEvery statestate recognizesrecognizes thethe rightright ofof aa solesote bene-bene­ ficiary inin somesome cases.cases. (2)(2) StatuteStatute ofof limitations.limitations. The mortgagee cancan suesue thethe mortgagor'smortgagor's granteegrantee whowho assumesassumes thethe debt,debt, eveneven thoughthough thethe statutestatute ofof limita-limita­ tionstions has barredbarred thethe remedyremedy againstagainst thethe mortgagor.mortgagor. DavisDavis v.'lJ. DavisDavis (1912)(1912) 19 Cal.Cat. App.App. 797;797; DanielsDaniels v.'lJ. JohnsonJohnson (i9oo)(1900) 129129 CaL 415.415. (3)(3) OtherOther defenses.defenses. ItIt isis nono defensedefense toto thethe promisorpromisor thatthat thethe promiseepromisee maymay havehave hadhad aa goodgood defensedefense againstagainst thethe plaintiff.plaintiff. WsherWasher'lJ. v. IndependentIndependent M.M: && D.D. Co.Co. (i9o4)(1904) x42142 Cal.Cat. 7o8708. rLevet v. Hawes Cf Le'lIet fl. Hawes (1599)(1599) Cro.ere. ErzEtiz. 61g,619, 652.652-

HeinOnline -- 27 Yale L.J. 1022 1917-1918 CONTRACTCONTRACT BENEFICIARIESBENEFICIARIES 10210233

8 hashas beenbeen heldheld inin somesome casescases inin thethe UnitedUnited States.'States.'s ThereThere seemsseems toto bebe nono sufficientsufficient reasonreason forfor this.this. TheThe promiseepromisee hashas paidpaid thethe consid-consid­ erationeration andand thethe lawlaw shouldshould vindicatevindicate hishis rightright thatthat performanceperformance shallshall taketake place,place, eveneven thoughthough thethe damagedamage toto thethe plaintiffplaintiff isis nominal.nominal. Where'Where thethe promiseepromisee hashas aa pecuniarypecuniary interestinterest inin performance,performance, asas wherewhere itit isis toto dischargedischarge aa debtdebt owedowed toto thethe thirdthird partyparty beneficiary,beneficiary, thethe promiseepromisee 9 certainlycertainly cancan suesue thethe promisorpromisor inin casecase ofof breach.'breach.'l1 ThusThus thethe latterlatter maymay bebe suedsued byby twotwo personspersons onon thethe samesame contract;contract; butbut thisthis isis notnot unjust,unjust, becausebecause hishis breachbreach causescauses anan injuriousinjurious disappointmentdisappointment toto twotwo separateseparate persons.persons. ByBy availingavailing himselfhimself ofof modemmodem codecode procedureprocedure oror thatthat ofof equityequity thethe promisorpromisor cancan avoidavoid thethe expenseexpense ofof twotwo actionsactions andand thethe dangerdanger ofof aa doubledouble recovery.recovery. InIn statesstates wherewhere thethe beneficiarybeneficiary cannotcannot sue,sue, ofof coursecourse thethe promiseepromisee 50 can,can, andand hehe cancan recoverrecover thethe fullfull amountamount promised1promised. TheThe promisee'spromisee's rightright isis assignable,assignable,5151 andand ifif thethe assignmentassignment isis toto thethe beneficiarybeneficiary thethe 5 latterlatter cancan suesue asas assignee.assignee.5 2:

POWERPOWER OFOF THETHE PROMISEEPROMISEE TOTO RELEASERELEASE THETHE PROMISORPROMISOR ItIt isis nownow clearclear thatthat afterafter thethe beneficiarybeneficiary hashas becomebecome awareaware ofof thethe contractcontract mademade forfor hishis benefit,benefit, andand hashas eithereither actedacted inin reliancereliance onon itit oror hashas inin somesome mannermanner expressedexpressed anan assentassent andand approval,approval, thethe promiseepromisee nono longerlonger has power toto releaserelease thethe promisorpromisor fromfrom hishis duty toto thethe beneficiary.beneficiary.5533 This isis truetrue whether thethe relationrelation ofof thethe beneficiary toto thethe promiseepromisee isis that ofof donee oror thatthat of creditor.creditor. NoNo notice of his ..'AyersAyers v.v. Dixon (879)(1879) 78 N. Y. 318;338; AdamsAdams v.v. Union Ry.Ry. (1899) 21 RR. I. 134; ReevesReeves v. Bluff City Bank (i9oi)(1901) 63 Kan. 789; New Haven v. New Haven & D. R. Co. (1892)(ISgz) 62 Conn. 252.252. ..'MeyerMeyer v. Hartman (1874) 72 Ill.IlL 442; Tinkler v. Swaynie (1880) 71 Ind. 562; Baldwin v. Emery (1897) 89 Me. 496; Merriam v. Lumber Co. (1877)(i877) 23 Minn. 314, 3322;22 ; O'Neill v. American Legion of Honor (1904)(19o4) 70 N. J. L. 410; Langan v. America,~ Legion of Honor (1903) 174 N. Y. 266 (semble);(semble) ; 410; Langan v. American Legion of Honor (19o3) 174 N. Y. 266 Kelly v. Security Co. (1906)(i9o6) 186i86 N. Y. 16.16. The last twotwo casescases suggestsuggest that the U. promiseepropiisee is entitled to a decree for.for. specific performance. SeeSee furtherfurther U.U. S. Fidelity && G.G. Co. v.v. U.U. S.S. (1917)(1917) 246 Fed. 433433.. .."FurnasFurnas v. Durgin (1876)(1876) 119ii9 Mass. 500;5oo; Boardman v.v. Larrabee (1883)(1883) 51 Conn.Conn. 39. TheThe promisorpromisor cancan compelcompel thethe promiseepromisee toto paypay overover thethe sumsum collectedcollected toto thethe thirdthird partyparty beneficiarybeneficiary ifif thethe latterlatter holdsholds aa mortgagemortgage onon thethe promisor'spromisor's land.land. WilliamsWilliams v.v. Fowle (1882)(1882) 132132 Mass.Mass. 385385 (semble);(semble); Furnas v.v. Durgin,Durgin, supra,supra, (semble).(semble). 11I HylandHyland v.v. CrofutCrofut (1913)(1913) 8787 Conn.Conn. 4949.. .."ReedReed v.v. PaulPaul (1881)(188i) 131131 Mass.Mass. 129-I29. "Gifford"Gifford v.v. CorriganCorrigan (1889)(889) 117II7 N.N. Y.Y. 257;257; NewNew YorkYork Ins.Ins. Co.Co. v.v. Aitke71­Aitken (1891)(i89i) 125125 N.N. Y.Y. 660;66o; HillHill v.v. HoeldtkeHoeldtke (1912)(I1Q2) 104io4 Tex:.Tex. 594.594, 142142 S.S. W.W. 871;871; -404o L.L. R.R. A.A. (N.(N. S.)S.) 672,672,with with note;note; BassettBassett v.v. HughesHughes (1877)(1877) 4343 Wis.Wis. 319.319. "The"The personperson whowho hashas mademade thethe stipulationstipulation cannotcannot revokerevoke itit ifif thethe thirdthird partyparty sec. hashas declareddeclared thatthat hehe wishedwished toto taketake advantageadvantage ofof it."it." FrenchFrench CivilCivil Code,Code, sec. sec. 1193; Rev. L. 1121.I121. SeeSee alsoalso Civ.Civ. CodeCode CaLCal. sec.sec. 1559;1559; Civ.Civ. CodeCode S.S. Dak.Dak. sec. II93; Rev. L OIda.Okla. 1910,191o, sec.sec.895- 895.

HeinOnline -- 27 Yale L.J. 1023 1917-1918 10210244 YALEYALEYALE LAWLAW JOURNALJOURNAL assentassent byby thethethe beneficiarybeneficiary toto thethe promisorpromisor isisis necessary.G~necessary.G~necessary."4 PriorPrior toto assentassent byby thethe beneficiarybeneficiary thethethe promiseepromisee may may perhapsperhaps havehave thethethe power toto release.release.release."G5G55 WhereWhereWhere thethethe thirdthird partypartyparty isisis thethethe solesole beneficiarybeneficiary ofof thethe con­con- tracttract thethe promiseepromisee isisis generallygenerally heldheld tototo havehave nono powerpower whateverwhatever toto releaserelease thethethe promisor,promisor, eveneven beforebefore thethethe thirdthirdthird partyparty isisis awareaware ofof thethethe contract.contract.contract5G6G68

DEFENSESDEFENSES OFOF THETHE PROMISORPROMISOR ASAS AGAINST THETHE BENEFICIARYBENEFICIAMY TheThe beneficiary'sbeneficiary's rightsrights againstagainst thethethe promisor springspring fromfrom thethe con­con- tracttracttract asas itit waswas made,made, andand ififif thatthat contractcontract waswas inin thethethe beginning voidvoid forfor lacklack ofof anyany essentialessentialessential elementelement thethe thirdthird party hashas no rights.rights. So likewiselikewiselikewise ifif thethe contract contract waswas voidablevoidable forfor infancyinfancy oror insanityinsanity or ,fraud, ititit isis voidablevoidable asas againstagainst thethe beneficiary.51beneficiary.57 IfIf thethethe duty ofof thethe promisor is subject to some condition precedent, the correlative right of the isis subjectsubject toto somesome conditioncondition precedent,58 thethe correlative right of the beneficiarybeneficiary isisis likewiselikewiselikewise conditional.conditional.5858 OnOn thethe other hand,hand, justjust as·as- soonsoon asas the rightright of thethe beneficiary isis in existenceexistence andand beyondbeyond thethe power of thethe promisee to destroy by a releaserelease oror rescission,rescission,rescission, itit isis alsoalso beyond hishis power toto destroy by wrong­wrong- fulfulful actsacts thatthat would dischargedischarge thethe promisor's duty to himself. Thus a beneficiarybeneficiary cancan stillstill hold a suretysurety on hishis bond even thoughthough the promiseepromisee hashas dischargeddischarged suchsuch surety'ssurety's dutyduty toto himself by surrendering collateralcollateral securitiessecurities5G9G9" oror by makingmaking anan alteration of the contract with thethethe principalprincipal andand withoutwithout thethe surety's surety's consent.consent860 0°

...... "HillHillHill v.v.v. Hoeldtke, Hoeldtke, suprasupra.. .."TrimbleITrimbleTrimble 'lJ.'lJ.v. Strother (1874)(874) 25 Oh..Oh. .St.-StSt. 378; Berkshire Life Ins. Co. v.'lJ. Hutchings (1884)(1884) 100oo Ind.Ind. 496;496; Commercial N. B. 'lJ.v. Kirkwood (1898)(18gB) 172 Ill.Ill. 563; Gilbert 'lJ.'lJ.v. Sanderson (1881)(I88) 56 Iowa, 349349...... " Tweeddale 'lJ.'lJ.v. Tweeddale (1903)(19o3) u6116 Wis. 517; Wetutzke 'lJ.v. Wetutzke (1914)(1914) 158[58 Wis. 305,3o5, 148148 N. W. 1088.io88. The right of the beneficiary of a life insuranceinsurance policy isis generally held to be irrevocableirrevocable by the insured, even prior toto anyany knowledge oror assent by the beneficiary, unless thethe power of revocation isis reservedreserved inin thethe policy. Such a power may of course be reserved. ...."ArnoldArnold 'lJ.'lJ.v. Nichols (1876) 64 N. Y. U7117 (the usual rules as to rescission for fraudfraud concerningconcerning thethe returnreturn of the consideration,consideration, etc., apply);apply) ; JennessJenness'lJ. v. Simp­Simp- sonson (1910)(i91o)(1910) 8484 VtVt. 12';,127, 139; Cohrt 'lJ.v.'lJ. Koch (i88i)(1881) 56 Iowa, 658; Crowe 'lJ.v. LewinLewin (1884)(1884) 9595 N. Y. 423; Dunning'lJ.Dunning v. Leavitt (1881)(i88i) 85 N. Y. 30; Green'lJ.Green v. Turner (18gB)(1898) So8o Fed. 41,8641, 86 Fed. 837837..• ....'JennessJenness 'lJ.v.'lJ. Simpson (1910)(i91o) 84 VtVt. .12';,.127, 143; Osborne v.'lJ. Cabell (1883)(1883) 7777 Va. 462 (nonperformance or failure of consideration). The case of O'Rourke 'lJ.'lJ.v. John Hancock M. L. 1. L Co. (1902)(19o2) 23 R.R 1.I. 457, isis in effect contra, and cannot be supported. The power of rescission or alteration may be reserved in express terms.terms. .."Doll..Doll 'lJ.'lJ.v. Crume (1894) 41 Neb. 655; School District v.'lJ. Livers (i899)(IBgg) 147 Mo. SSo.58o. "Equitable Sur. Co. v. McMillan (1913) toto Equitable Sur. Co. 'lJ.'lJ. McMillan (1913) 234 U. S. 448; United States v.'lJ.'lJ. National Sur. Co. (i899)(lBgg) 92 Fe

HeinOnline -- 27 Yale L.J. 1024 1917-1918 CONTRACTCONTRACT BENEFICIARIESBENEFICIARIES ro25

TheThe dutyduty ofof thethe promisorpromisor toto thethe beneficiarybeneficiary isisis quitequite independentindependent of previousprevious oror subsequentsubsequent relationsrelations betweenbetween thethe promiseepromisee andand thethe benefi-benefi­ ciary.61ciary.ciary.618 '

MASSACHUSETTSMASSACHUSETTS LAWLAW PriorPrior toto 18501850 thethe SupremeSupreme Court of MassachusettsMassachusetts held inin aa numbernumber ofof casescases thatthat a a beneficiarybeneficiary could suesue on aa contract mademade by others.others.62622 ItIt waswas largelylargely upon thesethese cases thatthat thethe decision inin LawrenceLawrence v.v. Fox'FFoxox6363 waswas based,based, andand theythey havehave hadhad anan important influenceinfluenceinfluence uponupon thethe law law inin thethe United StatesStates to-day.to-day. In Mellen v.v. 66 WhippleWhipple"Whipple />/> itit waswas heldheld thatthat aa mortgagee could not sue thethe grantee of thethe mortgagormortgagor althoughalthough hehe hadhad assumedassumed thethe debt, and Judge MetcalfMetcalf putput allall thethe earlierearlier casescases intointo threethree classes which he declared toto be exceptionsexceptions tototo thethe generalgeneral rulerule thatthat no action lieslies by one not a promisee. TwoTwo ofof thesethese classesclasses were,were, first,first, casescases where thethe defendant had receivedreceived assetsassets which hehe ought toto pay over and, second, cases where thethe beneficiarybeneficiary was relatedrelated by blood toto the promisee. In Putnam v. Fieldf.5Field"Fieldf.55 aa liberalliberal applicationapplication was made of the assets exception. In ExchangeExchange BankBank v. RiceRice"66668 a creditor-beneficiary was not allowed toto sue,sue, JudgeJudge GrayGray referringreferring toto thethe threethree classes of exceptions with no veryvery markedmarked approval.approval. Somewhat laterlater all of Judge Metcalf's classes ofof exceptionsexceptions seemseem toto have been disapproved, and thethe cases on which theythey werewere basedbased have been declared toto be overruled. In Marston v. BigelowBigelow6T6T67 itit was heldheld thatthat a sole beneficiary who was the son of the promiseepromisee couldcould not enforce thethe contract in either law or equity; and inin BordenBorden v.v. Boardman68688 thethe assetsassets exception was disregarded and it waswas held thatthat thethe beneficiary could not sue unless the parties had

...... ' The fraudfraud ofof thethe plaintiffplaintiff asas against thethe promisee is not available as a defensedefense toto thethethe promisor. Hurst 1/.v. Knight (1914, Tex.) 164 S. W. 1072.Io7z. The granteegrantee ofof thethe mortgagormortgagor who has assumed the mortgage debt can set up no defensesdefenses againstagainst thethe mortgagee exceptexcept aa satisfaction.satisfaction. Washer 1/.v. Independent M. && D.D. Co.Co. (1904)(1904)(i9o4) 142z42 Cal.Cal. 702, 708;7o8; Davis 1/.v. Davis (19(1912)(1922)12) 19ig Cal. App. 797 (statute(statute of limitations);limitations);limitations) ; Daniels 1/.v. JohnsonJohnson (1900)(igoo) 129129 Cal. 415 (same)(same)...... "FeltonFeltol~Feltol~ 1/.1/.v. Dickinson (1813)(1813)(813) 10io Mass. 287287 (sole(sole beneficiary and blood rela­rela- tion);tion);tion) ; ArnoldArnold 1/.1/.v. LymanLyman (1821)(1821)(282I) 1717 Mass. 400; Hall 1/.v. MarstonMarston (I8zz)(1822) 1717 Mass. 575;575; FitchFitch 1/.1/.v. ChandlerChandler (1849)(1849) 4 Cush. 254; Brewer 1/.v. Dyer (185(i85i)1) 7 Cush.Gush. 337337 ("the("the law,law,law, operating onon thethe act of thethe parties, creates the duty, establishes thethethe privity,privity, andand impliesimplies thethe promise andand obligation")obligation")...... (1859)(1859) 2020 N. Y.Y. 268268...... (1854)(1854)(854) II Gray, 317. SeeSee also Dow 1/.v. Clark (1856,(1856, Mass.) 7 Gray, 198·198. .... (1870)(1870)(1870) 1031O3 Mass.Mass. 556556...... (1871)(1871)(1871) 107107 Mass. 37. But see NasHNash"1/. v. Commonwealth (1899)(899) 174 Mass. 335, wherewhere thethe exceptionsexceptions laidlaid down inin Mel/enMellen 1/.v. WhippleWhipple seem toto be approved.approved. firfir' (1889)(1889)(i889) ISOISO1SO Mass.Mass. 45.45. But seesee DeanDean 1/.v. American Legion ofof Honor (1892)(892) 156i56 Mass.Mass. 435.435, 438;438; Attorney Gen.Gen. 1/.v. American Legion of Honor (1910)(igio) 2062o6 Mass.Mass. 158.158, 166.i66. eoeo" (1892)(1892)(1892) 157157 Mass.Mass. 410.410. A rightright inin thethe plaintiff inin this sortsort of case has sincesince beenbeen recognizedrecognizedrecognized asas enforceableenforceable by aa bill inin equity. Forbes 11.v. Thorpe (I9(i911)II) 6969

HeinOnline -- 27 Yale L.J. 1025 1917-1918 1026io26 YALEYALE LAW JOURNAL createdcreated aa trust.trust.trust. Had thethe magic wordword "trust" beenbeen used, itit isis clearclear thatthatthat thethe beneficiary'sbeneficiary's action inin "contract""contract" wouldwould have have been sustained..sustained. ThusThus thethethe Massachusetts lawlaw isis supposedsupposed toto have been broughtbrought intointo harmonyharmony withwith thatthatthat ofof England.England. ThereThere isis somesome reasonreason to to believe, however,however, thatthat thethethe MassachusettsMassachusetts court isis not wholly satisfied, and numerousnumerous decisionsdecisions veryvery materially limitlimit thethe rule.rule. In severalseveral cases thethethe court has .established.establishedestablished the existence of "privity" "privity" by thethe liberalliberal use ofof fiction.fiction.fiction. Thus where thethe defendant promised an expectant fatherfather tototo paypay aa sumsum of moneymoney toto the the yet unborn child in return for for thethe father'sfather's givinggiving thethethe childchild aa certain name itit was held thatthat the child 6 9 couldcould maintain suitsuit on thethe contract. 69 InIn somesome curious fashionfashion thethe courtcourt waswas able tototo convinceconvince itselfitself that thethe child was the promisee and alsoalso gavegave partpart ofof thethe consideration.consideration. TheThe child was reallyreally a solesole (and donee)donee) beneficiary. InIn likelike manner an artificial privity in favor of a creditor-beneficiarycreditor-beneficiary was discovered discovered by thethe court in aa case where thethe licenseelicensee ofof a patent had had agreedagreed toto pay aa royaltyroyalty and had laterlater assigned his licenselicense tototo thethe defendant "subject"subject to covenants." The licensor 7 0 was given judgmentjudgment againstagainst the assignee forfor the royalty due.'1Odue. Again, where an insurance insurance policy was issuedissued to a mortgagor but the lossloss waswas payable to the mortgageemortgagee "as itsits interestinterest may appear," itit 71 was held thatthat thethethe mortgagee couldcould suesue on the policy in its own name.'11 InIn a laterlater case,72case,72 thethe question was raisedraised whether the mortgagee here suedsued asas a·a- promiseepromisee or as an an assignee;assignee; but so farfar as appears, thethe plaintiff waswas a creditor-beneficiary."13creditor-beneficiary. 3 Much earlier, the court had held thatthatthat aa mortgagee-beneficiary could suesue the promisor ifif he held 74 anan assignment fromfrom thethe promisee.n

2092o9 Mass.Mass. 570.57o. And in in other cases aa trusttrust was held to be created by reason of aa statutestatute thatthat bears no obvious indicationindication of any such intent.intent See Nash v. Co~monwealthCommonwealth (1899)(1899)(i899) 174174 Mass. 335; George H. Sampson Co. v. Common­Common- wealth (1909)(1909)(igog) 2022o2 Mass. 326326...... 1GardnerGardner v. Denison (1914)(1914) 217 Mass. 492; Eaton v. Libbey (1896)(18g6) 165 Mass. 218. TOTO"PaperPaper Stock D. Co. v. Boston D. Co. (1888)(i888) 147 Mass. 318. In this case thethe licenseelicenseelicensee hadhad anan express powerpower toto assign; but this is not the power of an agent,agent, muchmuch lessless isis itit thethe power toto effect a novation. 1'11'1'PalmerPalmer Sa'll.Say. Bank v. v. InsuranceInsurance Co. (1896)(896) 166I66 Mass. 189. Even if the plaintiff ~swas inin factfact thethe promisee, which seems unlikely, it gaveg-ave no tonsidera-considera­ tion;tion; and in in the the English courts thisthis fact would deprive the plaintiff of a right toto sue.sue. Dunlop v. Selfridge figS][1915] A. C. 847. No doubt this Massachusetts decision was influencedinfluenced by R. L. 1902,i902, c. 1i8,lI8, sec. 58; but that statute does not purport toto conferconfer aa right of action upon a third party beneficiary. To the same effecteffect isis Union Inst. v.v. Phoen~Phoenix Ins. Co. (1907)(19o7) 196i96 Mass. 23o,230, where thethe mortgagor isis declared toto be thethe mortgagee's agent " Attleborough Bank v. Security Ins. Co. ('897) 168 Mass. -47, 149. ....Attleborough Bank v. Security Ins. Co. (1897) 168 Mass. ·147, 149· ...." The Michigan courts regard the mortgagee as a mere third party beneficiary, andand deny himhim a remedy.remedy. Minnock v. Eureka Ins. Co. (1892) 909o Mich. 236; Hartford F. I.I.I CO.Co. v. Davenport (1877)(i877) 37 Mich. 609. YO"ReedYO Reed v.v. Paul (1881)(1881)(i881) 131i31 Mass. 129-i29.

HeinOnline -- 27 Yale L.J. 1026 1917-1918 CONTRACT BENEFICIARIESBENEFICIARIES 10210277 InIn aa recentrecent casecase thethe court hashas heldheld thatthat aa creditor-beneficiarycreditor-beneficiary has anan equitable claimclaim againstagainst thethe promisor onon the theorytheory thatthat thethe duty ofof thethe promisorpromisor toto thethe promisee isis anan asset ofof thethe latterlatter thatthat is availableavailable toto his creditor.creditor.T55 In anotheranother case,case, wherewhere AA promisedpromised BB "as"as trustee"trustee" toto pay aa sum ofof moneymoney toto C,C, itit waswas heldheld thatthat BB couldcould recoverrecover substantialsubstantial damages and would holdhold them inin trusttrust forfor C.C. It isis toto bebe observedobserved thatthat thethe promisepromise ofof A was not to pay thethe moneymoney toto B, inin trusttrust forfor C, but was toto paypay thethe moneymoney directlydirectly toto C.76C.T4 AnotherAnother methodmethod ofof creatingcreating a rightright inin aa creditor-beneficiarycreditor-beneficiary isis toto describedescribe thethe defendant'sdefendant's failurefailure toto performperform his contract as a tort."tort." This method wouldwould bebe used only inin casescases where the defendant's con-con­ duct fallsfalls naturally within thethe tort field, and veryvery likely the other existingexisting factsfacts wouldwould be held toto createcreate a tort liability inin the absence ofof anyany contract whatever.whatever. The foregoingforegoing cases indicate thatthat the Massachusetts court is quite willing toto enforce a duty inin the absence of privity inin favor of certain kinds of beneficiaries. It may be admitted that thisthis tendencytendency isis as yet illustratedillustrated only inin decisions that are based upon a liberalliberal use of fictionfiction or upon specious distinctions. This isis thethe traditional manner inin which a conservative court abandons a previously asserted general rule.rule.T8TT8

NEW YORK LAW TheThe lawlaw inin NNewew York has already been sufficiently indicated in dis-dis­ cussingcussing thethe rulesrules prevailing throughout the whole country, for the NewNew York courts have had a decisive influenceinfluence on those prevailing rules.rules. InIn one respect,respect, however,however, these courts have been following a coursecourse similarsimilar toto thatthat indicatedindicated inin Massachusetts. In a number of 7 casescases itit was lai,dlai,dlaid down thatthat thethe doctrine of Lawrence v.7/. FoxTf)Fox ' was to bebe restrictedrestricted toto cases exactly parallel thereto, thus allowing creditor-

'"'""ForbesForbes TJ.TJ.v. ThorpeThorpe (19U)(19U)(1911) 2092o9 Mass. 570.570. See alsoalso Clare TJ.v. Hatch (1902)"(i9o2Y ISoISoi8o Mass.Mass. 194-x94. ObserveObserve thatthat thethe existenceexistence of thisthis "asset""asset" makes thethe promisor aa debtordebtor andand notnot aa trustee.trustee. The same isis truetrue where a devisee accepts a devise onon conditioncondition ofof paymentpayment ofof aa legacylegacy toto a thirdthird party. Felch TJ.v. Taylor (1832) 1313r3 Pick.Pick. 133;133; Adams TJ.v. Adams (1867)(1867) 1414 Allen, 65. See discussion of thisthis "asset""asset" theorytheory supra.supra. 101076GrimeGrime TJ.TJ.v. BordenBorden (18g6)(18g6)(1896) 166x66 Mass.Mass. 19B.198. TITIT'PhinneyPhinney TJ.TJ.v. BostonBoston EI.El. Co.Co. (1909)(i9o9) 2012o Mass. 286.286. "The"The contractcontract withwith thethethe city,city, whereby thethe defendant undertook to reli~erelieve thethe citycity ofof thethe performanceperformance ofof itsitsits statutorystatutory duty, br~>ught·brought, thethe defenda.ntdefendant ~ntointo a relationrelation tototo thosethosethose travellerstravellers whichwhich waswas thethe foundationfoundation of a legallegal oblIgationobligation to provideprovide forforfor theirtheir safety."safety."safety." TOTO"' ByBy statutestatute thethethe beneficiarybeneficiary ofof aa lifelife insuranceinsurance policy cancan suesue thereonthereon in hishis ownown name.name. StSt. 1894,1894, C.C. 225.225. SeeSee alsoalso DeanDean TJ.v. AmericanAmerican Legio1JLegion of Honor (18g2)(18g2)(,892) 156156 Mass.Mass. 435;435; AttorneyAttorney Gen.Gen. TJ.v. AmericanAmerican Legion of Honor (1910)(igio) 206206 Mass.Mass. 158i58 ("on("on("on aa broadbroad constructionconstruction ofof thethe statutes").statutes"). ,.,."(1859)(1859)(1859) 202o N.N. Y.Y. 268.268

HeinOnline -- 27 Yale L.J. 1027 1917-1918 1028 YALE LAW JOURNAL beneficiaries to sue and shutting out sole or donee-beneficiaries. The existence of the relation of debtor and creditor between the promisee and thethe thirdthird party was required, or at least the former must owe the latter some "legal or equitable duty" which will be discharged by the promisor's performance.808o The New York courts are rapidly destroy­destroy- ing this very unsatisfactory limitation, but are doing it by greatly expanding 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-sup­ port her is sufficient to enable her to sue on a promise (made to the husband) to pay her $50,000.81$5o,ooo.81 An aunt owes a sufficient duty to her favorite niece when the latter has lived in the aunt's house free of charge and has loved her aunt. 822 A resident of a municipality can sue on a contract made between it and the defendant for the benefit of the inhabitants even though the resident could not have sued the municipality in this particular case, inasmuch as the municipality owes some sort of duty to conserve the interests of the inhabitants.inhabitants.383 On the same principle, the duty that a labor union owes to its mem­mem- bers who pay dues is sufficient to sustain an action by a member as beneficiary."beneficiary.U

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

-'DurnherrDNrnhnr fl.v. RasRaN (1892) 135 N. Y. 219; Vrooman v.fl. Turner (877)(1877) 6g69 N. Y. 280;28o; LorrillardLonillard tl.v. Clyde (ISgo)(xi8o) I22i= N. Y.49&Y. 498. Todd tl.v. Weber (1884) 95 N. Y. i81181 is directly corstra.contra. ..'BuchananBNChtmarJ tl.v. TildmTilden (1899)(x899) IsSx58 N. Y. iog;109; Bouton fl.v. Welch (i9o2)(1902) 17027o N. Y. 554.SS4- See also DeCicco fl.v. SchweizerSchweLser (1917,(1g17, N. Y.) 117II7 N. E. 807.8o7. It may be observed that the payment by the promisor will Dotnot discharge the duty of the husband to support his wife. •:SeaverSeaver tl.v. Ransom (1917, App. Div.) 168i68 N. Y. Supp. 454-454. -LittleLittle tl.v. Banks (.881)(-.88x) 85 N. Y.2sS;Y. 258; Pond v.tl. New Rochelle W. Co. (1906)(x9o6) 183 N. Y. 33o;330; SmythSm)'th tl.v. New York (19U)(i92i) 203 N. Y. 106;xo6; Rigney fl.v. New York, etc.nco R. Co. (1916)(i9x6) 217 N. Y. 31;3; SchMierSchnaier tl.v. Bradley Cont. Co., decided Feb. x,IS. 1918,i9x, in N. Y. App. Div. See also City of St. Louis tl.v. Von Phul (1895)(1895) z33133 Mo. 561561.• ..GullaGula v.tl. Barton (191(1924,.... N. Y.) 164x64 App. Div. 293.293- - "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." Cal.Cat CW.Civ. Code, § 1559;.x559;.IdahoIdaho Civ. Code, § 2728; Mont. Civ. Code, § 2103; N. Dale.Dak. Rev. Codes, § 5285;s28s; S. Dak. Civ. Code, § 4688. "If a covenant or promise be made for the sole benefit of a person with whom it is Dotnot made, such person may maintain in his own name, any action thereon which he might maintain in case it had been made with him only, and the con­con- sideration had moved from him to the party making such covenant or promise." Va. Code, § 24IS;24x5; W. Va. Code, ch. 71, § 2-2. "If there be a valid consideration for the promise, it matters not from whom itit is moved; the promisee may sustain his action, though a stranger to the con-con­ sideration." Georgia Code (1911)(19U ) § 4249.4249- "Any persou person or persons for whose benefit any contract shall have been made or may hereafter be made, whether such contract be under seal or not,DOt, may maintain an action thereonthereon in any court of law or equity and may usettse the same

HeinOnline -- 27 Yale L.J. 1028 1917-1918 CONTRACT BENEFICIARIES 1029 can everywhere maintain suit upon statutory official bonds that have been required by law for their protection. ss88 Likewise theretllere are statutes providing that contractors engaged on public works shall give a bond to secure performance and also to protect material men and laborers, a suit by such third persons being expressly or impliedly 87 authorized. ST Most states having the reformed procedure provide that all actions shall be brought in the name of the real party in interest. It has been inferred that this provision "places the matter beyond all doubt, for the person for whose benefit the promise is made is certainly the real party in interest."ssinterest."88 In fact, however, thisthis statutory provision does not affect the problem. It was adopted merely for the purpose of creating a more direct and satisfactory procedure for the enforce-enforce­ ment of rights already recognized as existing by either law or equity (or by some other system of courts). The question to be determined here is what is the legal operation of the facts of offer and acceptance between promisor and promisee with respect to a third party benefi-benefi­ ciary. Do they create in such third party any legallegal' or equitable right? Until we answer this question in the affirmative, it can hardly be said that the beneficiary is "the real party in interest" as that term is used in the procedural statute. And after we have answered it in the affirmative, the beneficiary does not need the aid of this statute to sue in his own name.

as matter of defense to any action brought or to be brought against such person or persons, notwithstanding the consideration of such contract did not move from such person or persons." New Jersey Law 1902,igaa, c. 251. See also French Civil Code, sec. 1121.2. The Louisiana Code is similar to the French. See New Orleans St. J.I. Assn. v.fl. Magnier (1861) 16 La. Ann. 338; Gay v.fl. Blanchard (i88o)(1880) 32 La. Ann. 497. England and Massachusetts have statutes enabling the beneficiary of an insurance policy to sue. Mass. St. IB94,1894, c. 225.25. In Michigan and Connecticut there are similar statutes in favor of mortgagee-beneficiaries. Mich. Comp. Laws 1897, sec. 519; Conn. G. S. 1902,i9o2, sec. 587. •" Such bonds are distinguished in Jefferson fl.v. Asch (ISg3)(1893) 53 Minn. 446.446­ Coster 1/.v. Albany (1871) 43 N. Y. 399, 412 (semble).(semble)~ a'SeeSee the Federal statutes, 30 St. at L1.. 9o6,906, c. 218; 33 StSt. at L 8IX,8ri, c.Co 778. Mass. R. 1..L 1902,igo2, c. 6, sec. 77; Mass. St. igo9,1909. c. 514, ~ec.sec. 23023. Equitable Sur. Co. 1/.V. McMillan (19x3)(1913) 234 U. S. 448. Many cases of this sort are cited in note, 49 1..L. R. A. (N. S.) 1175-IX97·1175-,197. •"Pomeroy,Pomeroy, Rein.Rem. and Rem. Rights, § 139; Stevens v.fl. Flannagan (r891)(ISgt) 1313rt !Jill.Ind. 122;122; Ellis v.fl. HarrisonHamson (ISgI)(x89r) 104 Mo. z;o.270.

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