Contracts For The Benefit of Third Parties

In Coulls v . Bagot's Executor @ Trustee C o . Ltd.' Barwick C.J. said that 'it must be accepted that, according to our law, a person not a party to a contract may not himself sue upon it so as directly to enforce its obligation^'.^ Accordingly, if A (the promisor) agrees with B (the promisee) for consideration provided by B, that A will confer a bencfit upon C, C (the third party beneficiary) cannot himself enforce A's promise, since C is neither a party to the agreement nor to the consideration. This proposition (which I will call the third party rule) is now, as a matter of authority, unchallengeable. Yet it has never been much beloved by lawyers ( I except members of the Courts of ultimate resort) and has been warmly detested by legal reformers. I t is not of ancient lineage in its established form, and its parentage--or at least its juridical basis-has been the subject of controversy. I t has been eroded by exceptions-indeed certain "exceptions" were established before the rule, which has thus never been of universal application-occurring in diverse areas of maximum pressure where the social interest in preserving orthodox family structure (e.g. the right of children to enforce benefits in their favour under their parents' ante-nuptial marriage settlement) and the force of commercial exigencies (e.g. the doctrine of the undisclosed principal) have procured immunity from the rule. The great weight of American authority admits a directly enforceable right in the third party benefi~ i a r y . ~ Scots law recognizes a jus quaesitum tertio subject to the fulfilment of cetrain condition^.^ The principle of recovery generally recognized in American law is described by Williston6 as a 'distinct new principle of law' born out