trine imports an acceptance of that criterion of beneficial interest which

In this case the court refused to ascribe a differentiating effect to the circumstance that the contract was embodied in a municipal ordinance.

In House v. Houston Waterworks Co. (1895) 88 Tex. 233, 28 L.R.A. 532, 31 S. W. 179, the following remarks were made with reference to a contract by which the defendant undertook to supply a specified quantity of water daily at a certain pressure: "It is true that plaintiffs in error might have received benefit from the performance of the contract by the defendant, but 'it is not every promise made from one to another, from the performance of which a benefit may inure to a third, which will give a right of action to such third person, he being neither privy to the contract nor to the consideration. The contract must be made for his benefit as its object, and he must be the party intended to be benefited.' Simson v. Brown (1877) 68 N. Y. 355; Burton v. Larkin (1887) 36 Kan. 246, 59 Am. Rep. 541, 13 Pac. 398; Wright v. Terry (1887) 23 Fla. 169, 2 So. 6. In this case, the contract does not embrace the plaintiffs either by name or by mentioning a class to which they belong; it was not made for the purpose of benefiting them, or a class to which they belong. The object and purpose of making the contract was to keep water in the mains, which the city might apply to use in the public fountains, by flushing the gutters, or in extinguishing fires in case a conflagration should occur. If a fire occurred, and if plaintiffs' property should be involved, and if the fire company should arrive in time, they might be benefited by the performance of the contract. Such benefit would be incidental, however-not flowing immediately from the performance of the contract. So, the injury resulting from a failure on the part of the water company would not be proximate, but remote, as a cause." It should be observed that the sentence italicized is descriptive of a situation which is not presented in all the cases in which the right of action has been denied.

For other explicit affirmations of this doctrine stated in the text, see Lovejoy v. Bessemer Waterworks Co. (1906) 146 Ala. 374, 6 L.R.A. (N.S.) 429, 41 So. 76, 9 Ann. Cas, 1068, 20 Am.

is defined in a leading New York case cited in an earlier section.9 In the

Neg. Rep. 1; Hone v. Presque Isle Water Co. (1908) 104 Me. 217, 21 L.R.A. (N.S.) 1021, 71 Atl. 769; 104 Am. St. Rep. 525, 27 So. 980; Wilkinson v. Light, Heat & Water Co. (1900) 78 Miss. 389, 28 So. 877; Eaton v. Fairbury Waterworks Co. (1893) 37 Neb. 546, 21 L.R.A. 653, 40 Am. St. Rep. 510, 56 N. W. 201 (ordinance granting franchise required company to keep all hydrants supplied with water); Greenville Water Co. v. Beckham (1909) 55 Tex. Civ. App. 87, 118 S. W. 889; Nichol v. Huntington Water Co. (1903) 53 W. Va. 348, 44 S. W. 290, and the cases cited in the next note.

In most of the cases cited in note 1, supra, the question whether the plaintiffs were entitled to sue as beneficiaries of the contract was not adverted to at all.

9 Vrooman v. Turner (1877) 69 N. Y. 280, 25 Am. Rep. 195. See § 21, supra. For cases in which the statement of the law in that case was explicitly relied upon as a reason for denying the liability of water companies, see Howsmon v. Trenton Water Co. (1893) 119 Mo. 304, 23 L.R.A. 146, 41 Am. St. Rep. 654, 24 S. W. 784 (where it was observed that "the rule [as to contracts beneficial to third persons] is not so far extended as to give to a third person, who is only indirectly and incidentally benefited by the contract, a right to sue upon it"); Ferris v. Carson Water Co. (1881) 16 Nev. 44, 40 Am. Rep. 485.

In Wainwright v. Queens County Water Co. (1894) 78 Hun, 146, 28 N. Y. Supp. 987, one of the grounds on which Little v. Banks (1881) 85 N. Y. 258, was distinguished on the ground that the plaintiffs there belonged to a class for whose benefit the promise in question was made. In McEntee v. Kingston Water Co. (1900) 165 N. Y. 27, 58 N. E. 785, the court observed: It needs no argument to show that the plaintiff [in the Wainwright Case] was a stranger to the contract.

In Smith v. Great South Bay Water Co. (1903) 82 App. Div. 427, 81 N. Y. Supp. 812, the court followed the Wainwright Case, although the contract in question contained this general provision: "And said party of the first part (the water company) shall and will assume and pay all damage sustained by any persons or property, or recovered or adjudged against

point of view which is indicated by this exposition of the law, it is clear that an individual owner of property is not entitled to sue a water company the town, by reason of the negligence of the said party of the first part, of their servants, agents, or employees, in constructing, operating, or repairing said waterworks, or in the exercise of the rights and privileges hereby granted during the continuance of the franchise, or of any extension or renewal thereof."

In German Alliance Ins. Co. v. Home Water Supply Co. (1912) 226 U. S. 220, 57 L. ed. 195, 42 L.R.A.(N.S.) 1000, 33 Sup. Ct. Rep. 32, the court said: "Before a stranger can avail himself of the exceptional privilege of suing for a breach of an agreement to which he is not a party, he must, at least, show that it was intended for his direct benefit.. Here the city was

under no obligation to furnish the manufacturing company with fire protection, and this agreement was not made to pay a debt or discharge a duty to the Spartan Mills, but, like other municipal contracts, was made by Spartanburg in its corporate capacity, for its corporate advantage, and for the benefit of the inhabitants collectively. The interest which each taxpayer had therein was indirect-that incidental benefit, only, which every citizen has in the performance of every other contract made by and with the government under which he lives, but for the breach of which he has no private right of action."

In Blunk v. Dennison Water Supply Co. (1905) 71 Ohio St. 250, 73 N. E. 210, 2 Ann. Cas. 852, the court, referring to the language of the New York court of appeals, observed: "That such legal obligation from the promisee to the plaintiff is wanting in the present case is made clear by Wheeler v. Cincinnati (1869) 19 Ohio St. 20, 2 Am. Rep. 368, where it is decided that a municipality is not liable to individuals for failure to furnish apparatus for extinguishing fires. If a stranger to a contract were held entitled to secure the benefit which might incidentally result to him from its performance, not only would an established rule of the law be violated, but parties entering into contracts could not determine the extent of their obligations, nor the numbers of those to whom they might be incurred. The view of the subject urged 38 A.L.R.-33.

on the mere ground that he, in common with all other residents, derives an indirect or incidental benefit from the making of the contract with it.10 on behalf of the plaintiff finds even less support in the reasons involved than it does in the decided cases."

10 In Davis v. Clinton Waterworks Co. (1880) 54 Iowa, 59, 37 Am. Rep. 185, 6 N. W. 126, the effect of the contract in question, which had been made in pursuance of an ordinance which authorized the establishment of waterworks, and provided for the payment of compensation for furnishing water for public purposes, including the extinguishment of fires, was thus discussed: "The only question presented in the case is this one: Is the defendant liable to plaintiff upon the contract embodied in the ordinance? The petition does not allege or show any privity of contract between plaintiff and defendant. The plaintiff is a stranger, and the mere fact that she may find benefits therefrom by the protection of her property, in common with all other persons whose property is similarly situated, does not make her a party to the contract, or create a privity between her and defendant. It is a rule of law, familiar to the profession, that a privity of contract must exist between the parties to an action upon a contract. One whom the law regards as a stranger to the contract cannot maintain an action thereon."

In Ferris v. Carson Water Co. (1881) 16 Nev. 44, 40 Am. Rep. 485, the court observed: "The plaintiff, in common with the other residents of the town, enjoyed the advantages of this contract. He had an indirect interest in the performance of the contract by the water company, as had all of the property holders of the town, but such an interest is not sufficient to constitute the privity, either directly or by substitution, which must exist in order to give him a right of action upon the contract."

See also the extracts from the opinions in German Alliance Ins. Co. v. Home Water Supply Co. (U. S.) note 9, supra, and House v. Houston Waterworks Co. (Tex.) note 6, supra.

"In Davis v. Clinton Waterworks Co. (1880) 54 Iowa, 59, 37 Am. Rep. 185, 6 N. W. 126, cited in note to 33 Am. Rep. 5, the facts were quite similar to those in the Connecticut case, and the defendant was held not liable, on the ground that the plaintiff was a

The divergent views which, as is indicated by the cases cited in the present section and in § 26, infra, are entertained with respect to the question whether he is a beneficiary of the agreement in such a sense as to enable him to maintain an action upon it, reflect the difference of judicial opinion in regard to a broader question, affecting the remedial rights of parties to contracts of all descriptions, viz., how far it is proper, with reference either to general principles of law or to statutory provisions regulating procedure, to carry the relaxation of the rule which precludes strangers to a contract from suing upon stranger to the contract between the defendant and the municipal corporation, and the mere fact that she might find the benefits therefrom, by the protection of her property, in common with all other persons whose property was similarly situated, did not make her a party to the contract, or create a privity between her and the defendant."

11 The decisions on the subject are collected in 13 C. J. pp. 703 to 707, and Anson, Contr. (Corbin's Am. ed.) §§ 284-301.

12 In Ancrum v. Camden Water, Light & Ice Co. (1909) 82 S. C. 284, 21 L.R.A. (N.S.) 1029, 64 S. E. 151, one of the grounds of the decision was thus stated: "When the parties themselves stipulate in the contract what shall be the consequences of a breach of the agreement, such stipulation, if reasonable, is controlling, and excludes other consequences. In this case the parties agreed by the contract that the consequences to the water company for a neglect to perform any of the duties undertaken by it should be a forfeiture of its franchise, except [as regards one particular instance]

The court cannot add to the contract by imposing other and additional consequences."

In Britton v. Green Bay & Ft. H. Waterworks Co. (1892) 81 Wis. 48, 29 Am. St. Rep. 856, 51 N. W. 84, the contract in question was embodied in a municipal ordinance, by which the defendant was required to supply the city and the inhabitants thereof with water for public and private uses, for public and private consumption, and for putting out fires. It was argued by counsel that "by the language of

it. So far as agreements of the particular type now under discussion are concerned, the doctrine enunciated at the commencement of this paragraph is now supported by such a decided preponderance of authority that there is but little likelihood of its being condemned hereafter in any jurisdictions except those in which it has been already rejected. Some further remarks upon this phase of the subject will be found in § 26, subdiv. a, infra.

The effect of two cases in which the nonliability of the defendants was predicated with reference to the phraseology of the particular agreements involved is stated below.12

the ordinance the waterworks company entered into contract relations with the inhabitants of the city, as individuals, to supply them, or for their use and benefit, water for public use, and for public consumption, and for putting out fires." But the court said: "Such does not appear to be the meaning of this language. It is not that the company shall supply the city and the inhabitants thereof with water jointly, and for the same purposes and uses. The city and the inhabitants are by this general language joined together, but it is followed by distributive uses and purposes appropriate to each to the city for public uses and consumption and for putting out fires, and to the inhabitants for private use and consumption. It wil hardly be claimed that the company is to supply the individual inhabitants with water to put out fires by this peculiar language. They can, if they choose, use the water for such purpose, or to put out their own fires in their own way, but that right is given by another clause of the contract. The company shall furnish the inhabitants with water for private use, and may charge and collect rates therefor. If both the city and the inhabitants are given the right to water for putting out fires generally, their rights would clash; and, besides, such a right is a public one, and in no sense private. Such public use of water would be supplied to the inhabitants generally, as to the public, but the above language does not require the company to supply the inhabitants with water, even in this sense. The inhabitants are mentioned only in respect to their private use of water."

$ 25. Same agreements. Discussion of this doctrine continued.

a. Presumptive intention of the parties.

There is some specific authority for the theory that the nonliability of water companies with respect to individual owners of property may appropri

In Niehaus Bros. Co. v. Contra Costa Water Co. (1911) 159 Cal. 305, 36 L.R.A. (N.S.) 1045, 113 Pac. 375, the court made the following remarks: "Keeping in mind, as suggested by the authorities just referred to, that the primary business of a water company is to furnish water as a commodity, and not to extinguish fires, and further recognizing that under the law of this state the defendant is a quasi public corporation engaged in the exercise of a public use and discharging a public duty which would otherwise devolve upon the municipality itself, and furnishing water at rates fixed exclusively by the municipality, it would appear plain that it was never contemplated that from the simple relation of distributor and consumer the former undertook to assume liability for failure to furnish water to extinguish fires. In the nature of things the compensation fixed by the municipality has no relation to the assumption of any such liability; that compensation is based on the expense of furnishing water simply as a commodity; liability for destruction of premises to which the company may be required to supply water was not taken into consideration in fixing the rates, nor, we apprehend, was it even thought that any such liability could be imposed by the ordinance, or was to be assumed by the company in doing Our conclusion, therefore,

So.

is that the only relation shown to exist between the defendant and the plaintiff was that of a water company engaged in distributing water for public use to a consumer who had availed himself of his legal right to have the company connect its water system with his premises for the purpose of furnishing him with water solely at ordinance rates fixed by the town of Berkeley; that under such relation no liability is imposed by any statute of this state upon such public service company for failure, from whatever cause, to have a supply of water available on the premises of the consumer for use in fire protection, although he

ately be predicated on the ground that the absence of an intention on the part of water companies to assume a responsibility so burdensome as that of indemnifying individual inhabitants is indicated by the smallness of the remuneration which is ordinarily provided for in their agreements. 1 It may have installed ample facilities for that purpose, and no legal liability for such failure, independent of the statute, is implied from the relation; that such liability can only be created by contract between the parties, under which the water company expressly assumes the liability. As no such contract was proven here, the plaintiff was not entitled to maintain this action."

See also Bush v. Artesian Hot & Cold Water Co. (1895) 4 Idaho, 618, 95 Am. St. Rep. 161, 43 Pac. 69.

In the Niehaus Bros. Co. Case (Cal.) supra, the reasoning of the following passage in Farnham on Waters, § 160 b, was approved: "Keeping in mind that fact, that the contract of the water company is to furnish water and not to extinguish the fire, the rule with respect to damages precludes holding the company liable. Damages must be such as were in the contemplation of the parties; and it certainly cannot be claimed that for the meager remuneration received, a water company undertakes to make good the loss which would result from the destruction of a modern city by fire. And the principle applies equally to the destruction of any part of it. For there is no place to draw a line short of absolute nonliability, if liability for loss of the entire city is denied." It is apparent from the latter portion of the passage quoted that what the learned author and the court by which his statements were adopted really had in view was the presumptive intention of the contracting parties, and not the "measure of damages," in the sense in which that phrase is ordinarily used.

A similar inference as to doctrinal standpoint may, having regard to the context, be drawn with regard to the following statement in Britton v. Green Bay & Ft. H. Water Works Co. (1892) 81 Wis. 48, 29 Am. St. Rep. 856, 51 N. W. 84; "The damages for the breach of a contract must be legal, natural, immediate, proximate, and

is apprehended, however, that a theory of this broad scope ascribes to the element in question a higher significance than is warrantable. The preferable view would rather seem to be that its probative value with relation to the ascertainment of the intention of the contracting parties is determinable as a question of fact, depending upon the particular evidence introduced in each case.2 In some instances the disproportion between the scale of remuneration and the financial risks arising from an assumption of responsibility for losses sustained by individuals would possibly be found to be clearly large enough to warrant a court in declaring, as a matter of law, that no such respsonsibility has been assumed. But this circumstance is obviously insufficient to justify the formulation of a general rule, applying to all contracts. The extent of the influence normally exercised upon the minds of prospecdirect. Remote damages are not recoverable."

But it is apprehended that phraseology of this tenor is inapposite in such a connection. The rule as to the measure of damages is applicable only to cases in which a breach of contract in respect of some person to whom a duty is admittedly owed by the defendant has been established. In the class of cases under discussion the question whether a duty is owed stands at the very threshold of the inquiry, and unless it is answered in the affirmative, the subject of damages cannot arise. It seems clear that, if a water company is assumed to be subject to a duty in respect of the individual inhabitants of a municipal district, it cannot escape liability upon the ground that injuries caused to their property by fire were not within its contemplation, as a consequence which might be expected to result from its failure to supply sufficient water to extinguish the fire.

2 In Ancrum v. Camden Water, Light & Ice Co. (1909) 82 S. C. 284, 21 L.R.A. (N.S.) 1029, 64 S. E. 151, the court argued thus: "The contract now under consideration contains no direct undertaking to respond to the individual inhabitant for fire losses; the stipulation that it shall keep a sufficient water supply for the protection

tive investors by the fact that a company formed by them will incur responsibility for damage inflicted upon private property is a matter which can only be determined by detailed investigation into the statistics of such enterprises, in a large number of municipalities. It seems questionable whether a court is competent to conduct such an investigation satisfactorily.

It should be pointed out that the correct view, whatever it may be, with regard to this phase of the subject, is chiefly important in those states in which the doctrine explained in the next section has been adopted. So far as respects the courts whose decisions are now under review, a conclusion based upon the financial aspects of an agreement is manifestly to be regard ed as being merely a factor corroborative of a deduction drawn upon other grounds.3

of public and private property is naturally to be referred to the purpose of the city to promote the general municipal welfare in the manner we have pointed out, rather than to indemnify individual property owners for fire loss; the compensation to be paid is $50 each for seventeen hydrants-a sum on its face utterly inadequate to meet the expenses of furnishing the water and to afford compensation for the enormous risk the plaintiff insists was assumed. These considerations seem to show plainly that the parties did not contemplate by their contract the assumption of liability by the water company for the plaintiff's fire losses, arising from its neglect to furnish an adequate water pressure.

That a water company assumed such liabilities [i. e., for inju ries to property of individuals] would have to demand very large compensation to have any profit, or even to save itself from bankruptcy, is most obvious." This case was followed in Cooke v. Paris Mountain Water Co. (1909) 82 S. C. 235, 64 S. E. 157.

3 In German Alliance Ins. Co. v. Home Water Supply Co. (1912) 226 U. S. 220, 57 L. ed. 195, 42 L.R.A. (N.S. 1000, 33 Sup. Ct. Rep. 32, it was observed that to impose upon a water company a liability to individuals "would unduly extend contract liabil