Lawrence v. Fox
Citation: Court of Appeals of New York, 20 N.Y. 268 (1859)
Facts
Holly owed 300 to Fox, and Fox expressly promised Holly that he would repay the loan by paying $300 to Lawrence (Holly’s creditor). Fox failed to pay Lawrence. Lawrence sued Fox directly on the promise Fox had made to Holly.
Issue
Whether a third party who is the intended beneficiary of a promise made between two other parties has standing to bring a direct action to enforce that promise, despite not being in privity of contract with the promisor.
Holding
The New York Court of Appeals held that Lawrence could sue Fox directly. The court reasoned that because the promise was made for Lawrence’s benefit, and Lawrence relied on it, he could enforce it even though he was not a party to the agreement between Holly and Fox.
Rule
An intended third-party beneficiary — one for whose direct benefit a promise is made — has the right to enforce that promise directly against the promisor, even in the absence of privity of contract between the beneficiary and the promisor.
Significance
The seminal American case establishing third-party beneficiary rights, departing from strict privity doctrine. It laid the groundwork for Restatement (Second) §§ 302-315 and the distinction between intended beneficiaries (who can enforce) and incidental beneficiaries (who cannot). The case is central to any discussion of privity and the erosion of its strictures.