Facts
- Mary Tweeddale owned land and conveyed it to her son Daniel under an arrangement that included Daniel’s bonded duty to support Mary, secured by a mortgage on the land.
- The agreement also required Daniel, upon selling the land, to pay specified sums: $1,200 to Mary, $50 to a sister, and $100 to Mary’s other son, Edward.
- Daniel later sold the land, triggering the promised payments.
- After the sale, Mary agreed to discharge Daniel’s $1,200 obligation to her and executed a satisfaction/release of the mortgage.
- Edward did not learn of the $100 payment provision until after the mortgage was released.
- Edward sued Daniel to recover the $100 as an intended third-party beneficiary; the trial court dismissed the complaint.
Issues
- Whether an intended third-party beneficiary may sue in his own name to enforce a promise made for his benefit in a contract between others, despite furnishing no consideration.
- Whether the original contracting parties may later revoke or impair a third-party beneficiary’s established contractual right without the beneficiary’s consent.
- Whether the promisee’s release and satisfaction of the mortgage extinguished the promisor’s duty to pay the beneficiary after the triggering event (sale of the land) occurred.
Decision
- The Wisconsin Supreme Court reversed the dismissal.
- Edward, as an intended third-party beneficiary, could sue Daniel directly to enforce the $100 promise.
- Daniel’s sale of the land triggered the duty to pay Edward, creating an enforceable liability to Edward.
- Mary’s later release and satisfaction of the mortgage could discharge only her own interests and was ineffective to defeat Edward’s established claim.
Legal Principles
- A third person for whose benefit a promise is made, supported by consideration moving from the promisee to the promisor, may maintain an action in his own name to enforce the promise.
- Once a contractual liability to an intended third-party beneficiary has arisen and the beneficiary’s right has attached, the contracting parties cannot, without the beneficiary’s consent, rescind or modify the contract to extinguish or diminish that right.
- A release or satisfaction executed by the promisee cannot nullify a third-party beneficiary’s established right to payment when the contract created a direct benefit to the beneficiary and the triggering condition has occurred.
Conclusion
The court held that Edward was an intended beneficiary of the land-transfer agreement and, once Daniel sold the land, Edward’s right to the $100 became enforceable and could not be defeated by Mary’s subsequent release of Daniel or satisfaction of the mortgage.