Alexander H. Revell & Co. v. C.H. Morgan Grocery Co.

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Brief Fact Summary. Party 1 contracted to perform work for party 2.  Party 1 directed, and party 2 agreed to pay party 3 a certain amount of money after party 1 finished their work.  Party 1 never completed the work.

Synopsis of Rule of Law. In order for a third party beneficiary to successfully sue on a contract, the action taken by another party generating which income entitles him to the compensation, must be performed.

Facts. The Defendant, C.H. Morgan Grocery Company (the "Defendant") entered into a contract with William Lidke ("Mr. Lidke") to do certain work in the Defendant's store.  Mr. Lidke purchased certain fixtures from the Plaintiff, Alexander H. Revell & Co. (the "Plaintiff") to install in the Defendant's store.  The Defendant was not satisfied with the Plainitff's work.  The parties subsequently entered into another contract.  The contract required Mr. Lidke to perform certain work and for the Defendant to pay the Plaintiff $671.80.  Mr. Lidke never did any work and consequently the Plaintiff never was paid $671.80.  The Plaintiff sued for the $671.80.

Issue. Is payment to the third party beneficiary, the Plaintiff, conditioned upon Mr. Lidke performing the work he was obligated to do for the Defendant?

Held. Yes.  The court observed "[i]t would be a strange rule of law that would permit the plaintiff to recover in this case."  A condition to the Plaintiff being paid was Mr. Lipke completing the required work.  As such, a rule enforcing this agreement without the work being completed would be "against all sense of justice and fair dealing–contrary to common sense."

Dissent. The dissenting justice contended "[t]he contract, as soon as signed, created mutual obligations, one of which was to pay the plaintiff $671.80. That promise, according to the writing, was unconditional; it was not provided that it should be paid at some future time or dependent in any way upon Lidke's future conduct."

Discussion. Generally, a third party beneficiary has the power to enforce the contract it is a party to, but this case demonstrates that certain prerequisites sometimes must be fulfilled before this is the case.