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14. What Contracts and Claims are Assignable.-Construction contracts are in general assignable, if there be no clause contained expressly forbidding an assignment, and if the statute authorizing the work does not prohibit it, and such an assignment is valid. Any executory contract, not necessarily personal in its character, and which is consistent with the rights and interests of the adverse party, may be as fairly and sufficiently executed by the assignee as by the original contractor, if the contractor has not disqualified himself from its performance. A contract to do work on a street can therefore be assigned, and if the assignee fulfills the conditions of the contract he can enforce it and recover the contract price.
of a contract for cleaning streets is not against public policy so long as the city retains the personal obligation of the original contractor and his sureties,' and an assignee can maintain an action in equity for a division of the profits of a building contract if he has performed his undertakings. A contract to put on a gravel roof, to be done in first-class shape and guaranteed for a certain time,' and a contract to drill an oil-well," have been held such contracts as might be sublet or assigned, when it was not shown that the contractor was specially fitted to do the work and was employed on account of his knowledge, experience, or pecuniary ability.
15. Contracts Awarded to Lowest Bidder may be Assigned.-Contracts awarded to the lowest bidder after advertising for proposals are not of a personal character, requiring rare genius or extraordinary skill, but may be assigned. The public are invited to bid for and take these contracts regard less of professions, trades, or occupations. Aside from the discretion usually vested in the board to reject all bids when they deem it for the public good, or the bid of any party who may have proved delinquent or unfaithful in any previous contract, there is no restriction upon the capacity of the contractor. He is not expected or required to do the work in person. Whether he knows anything about the work, or can tell the difference. between a mud turnpike and a Nicholson pavement, or whether a sewer should be constructed in the shape of a longitudinal section of an egg-shell, or which end of the section should be uppermost, is of no consequence, for the contract is not awarded him because of his superior knowledge or skill, but because his bid is the lowest and his bond for the performance of the work in a workmanlike manner and according to the specifications is good, Moreover, by the terms of the contract, the work is to be performed under the direction and to the satisfaction of the engineer; it is his skill and genius therefore which gives form and excellence to the work, and it is there
1 Bates v. Lumber Co. (Miun.), 57 N. W. Rep. 218. 29 Amer. & Eng. Ency. Law 978, and cases cited.
Taylor . Paimer, 31 Cal. 241. *Devlin . Mavor et al., 63 N. Y. 8 ; and see Little v. City of Portland (Ore.), 37 Pac. Rep. 911.
'Dougherty . Grouff (Neb.), 36 N. W. Rep. 351, .
5 Curran v. Clifford (Colo. App.), 40 Pac. Rep. 477.
Galey v. Mellon (Pa. Sup.), 33 Atl. Rep. 560.
fore in his genius and skill, if anywhere, that trust and confidence are reposed.'
In New York State everything that could be transmitted to the assignor's personal representatives is assignable. The test is, whether or not the thing assigned would pass to the executors and administrators of the assignor at his death."
16. What Interest does an Assignee Take.-Where the assignees of a contract to construct a railroad agree to save the assignor harmless from all liability by reason of subcontracts previously let by him, a failure to pay the amounts due on such subcontracts is a breach by the assignees for which the assignor can recover without first showing payment by himself.
An assignment of money due and to become due on a building contract effects an immediate and present transfer to the assignee of a right to demand and receive the money assigned without notice to the debtor.*
To complete the assignment notice should always be given the debtor to establish priority o claims of the assignee over those of materialman, other assignees, and creditors. Until informed of the assignment the debtor may regard the contractor or assignor as the creditor and may pay him and accept a release, or settle the claim with him, or purchase a debt which he owes and use it as set-off."
When a contractor assigns his contract with a city to build a structure it seems there is no implied warranty on his part of its validity, and if it turns out to be invalid and worthless the assignee cannot avoid the payment of notes he has given in consideration of such assignment, there being no misrepresentation, concealment, or fraud on the part of the contractor.
The cases are common where contractors have assigned to subcontractors," and the latter may maintain an action on such assignment, but subject to defenses existing against the assignor or principal contractor. Moneys not yet earned, but expected to be earned in the future under an existing contract, may be assigned, as can the lien of a mechanic or materialman,' but the lien must have been perfected first. An assignment of claims ior work done or materials furnished was held to give no right to the assignee to a lien." The assignment by a subcontractor of his account for work performed
1 Emery v. Bradford, 29 Cal. 75; Taylor
v. Palmer, 31 Cal. 240 .
91 Amer. & Eng. Ency. Law 832.
3 Mills v. Allen, 10 Sup. Ct. Rep. 413. Board of Education Duquesnet (N. J. Ch.), 24 Atl. Rep. 922; Union Pac. Rv. Co. v. Douglas Co. Bank (Neb.), 60 N. W. Rep. 886.
51 Amer. & Eng. Ency. Law 840.
For a case where notice was given in English to one who could not read English, see Renton v. Monnier, 77 Cal. 449.
Gould v. Bourgeois, 51 N. J. Law 361
*See Secs. 132-200, 499-507, infra.
as collateral security does not defeat his right to perfect a mechanic's lien therefor.'
17. Third Parties, Strangers, and Beneficiaries.-Persons not parties to a contract may subsequently acquire rights under it by assignment and operation of law, as the right of administrators, receivers, and successors in office, but, as a general rule, strangers can not sue on a contract. If the contract, not under seal, be made for the benefit of a third party, it has been repeatedly held that the third party can bring an action to recover what he is fairly entitled to under the contract. Evidence may be introduced to show that a written contract was made in behalf of parties other than those named, and to charge such other persons. A third person, who is only indirectly or incidentally benefited by the contract, will not be allowed to sue upon it. For example, a stipulation in an engineering contract, by which the contractor is to indemnify the owner for damages, does not give to a party injured a cause of action against the contractor.** A provision in a contract that a city may retain money until the contractors shall have paid his laborers, does not give the laborers any rights against the city when the contractor has been paid in full.* †
A provision that the owner shall retain a certain percentage of the contract price till the completion of the work is for the benefit of the owner, and does not afford a ground of personal liability by the owner to subcontractors."
The mere fact has been held,
The third party cannot sue on the contract, unless it is that both parties to the contract intended it for his benefit. that the third party might be benefited is insufficient. It however, that a bond to a city by contractors, providing that they will pay for all labor and materials furnished, is a promise for the benefit of all persons. furnishing labor and materials, and such persons may sue on it, especially when the city or county is required by statute to secure its laborers and material men by a bond that the contractor will pay them. If the bond be to pay for all materials furnished, the contractor is not liable either under his contract or on the bond to creditors of subcontractors for materials furnished, and the contractor's assignee is no more liable.' It has frequently
'Ittner. Hughes (Mo. Sup.), 34 S. W. Rep. 1110.
Ropes v. Arnold, 30 N. Y. Supp. 997. French . Vix (N. Y. App.), 37 N. E. Rep. 612.
Old Dom. Gran. Co. v. District of Columbia, 20 Ct. of Claims 127; Sayre Lumb. Co. v. Union Bank (Colo. App.). 41 Pac. Rep. 844; Lawrence v. United States (C. C), 71 Fed. Rep. 228.
'Steele v. McBurney (Iowa), 65 N. W. Rep. 332; Weller v. Goble, 66 Iowa 113. Wright . Terry (Fla.), 2 So. Rep. 6 .
*See Sec. 638, infra.
Lyman v. Lincoln (Neb.), 57 N. W. Ren. 531; Kauffman v. Cooper (Neb.), 65 N. W. Rep. 796; St. Louis v. Von Puhl (Mo.), 34 S. W. Rep. 843.
Bd. of Ed. v. Grant (Mich.), 64 N. W. Rep. 1050; Gilmore v. Westerman (Wash.), 43 Pac. Rep. 345; Wilson v. Webber (Sup.), 36 N. Y. Supp. 550; but see contra, Buffalo Cement Co v. McNaughton (Sup), 35 N. Y Supp. 45; see 17 Amer. & Eng. Ency. Law 527-9.
9 Brower v. Thompson Lumber Co. (Oreg.), 43 Pac. Rep. 659.
See Sec. 758, infra.
been held that the right of a third party to a contract to sue upon it does not extend to the case of a contract under seal.'
For like reasons, a subcontractor is not liable to the owner for negligently and unskillfully doing his work by which the owner is injured, there being no contract between them. The owner should bring suit against the principal contractor. A subcontractor can not hold a company or proprietor liable on their contract with the principal contractor; nor can the theory that the contractor was an agent of the company be a ground on which to hold it liable.* A wife is not liable for a contract for sinking a well upon her property, made by the husband without her authority, as his own enterprise and in his own interest. A third party is not liable to a contractor for work done on the representation, by the owner and employer, that the said third party would pay for the work, the contractor never having communicated such representation to the third party nor having obtained his assent to it. A property owner on a street is not a party to a contract for the improvement of the street made between the contractor and the superintendent of the streets; and where a city has entered into a contract to furnish certain things to its citizens, the city, and not a citizen, is the proper party to bring action against the company for a breach of such contract.'
Where one buys at sheriff's sale the property of a contractor who has failed and, taking the place of the contractor, under a partly performed building contract, completed the work for him, he is entitled only to the amount which would have been due the contractor, who had been overpaid for the work already done by him."
18. Third Party-Sureties.-When the contractor fails or refuses to complete his contract, it frequently happens that the surety of the contractor assumes the contract and completes the work, in which case he takes the place of the contractor, assumes all the burdens, and takes the benefits. He may be mentioned in the body of the contract as a party, or he may assume the work under an assignment from the contractor, or by permission of the owner of the works.
While not strictly a party to the contract, as contracts are usually expressed, yet the surety is frequently the responsible party behind the contractor, and the party to whom the company or owner looks for the ultimate performance and completion of the contract. The contractor is employed for his skill and competence to do the work, and the surety is regarded as the backer who will see to it that it is completely performed. It is, therefore,
13 Amer. & Eng. Ency. Law 866. See the codes of several states, which allow actions when the common-law practice would not. Bissel v. Roden, 34 Mo. 63 .
3 Blanding v. Davenport (Ia.), 55 N. W. Rep. 81: Epeneter v. Montgomery Co. (Iowa), 67 N. W. Rep. 93.
4 Devine v. McMillan, 61 Ill. App. 571.
Stidham Sanford, 36 N. Y. Super. Ct. 341 .
Dyer v. Barstow, 50 Cal. 652 . Cleburne W. I. & L. Co. v. City of Cleburne (Tex.), 35 S. W. Rep. 733.
8 Marshall . Brick (Pa. Sup.), 34 Atl Rep. 520.
*See Sec. 765, infra.
important that the relations of the surety to the parties and the contract be understood. The suretyship of a party is created usually, not in the contract, but in a separate instrument, called a bond. Frequently there is no mention
of the surety in the contract, yet upon the execution of the contract may depend the binding effect of the bond.
19. Third Parties, Sureties are Not Liable to Them.-If the bond guaranty that the contractor shall pay for all labor and materials furnished him in executing the contract, it seems that laborers and materialmen have certain rights. A contract of guaranty that a contractor should perform his contract to erect buildings, and to pay for the materials and labor so that there should be no liens, does not give a materialman a right to sue the guarantor. Sureties on a bond conditioned that the building should be turned over to the owner free from all liens for labor and materials, are not liable for labor and materials furnished to the contractor and subcontractors on their individual credit.' A surety on a bond conditioned that the contractor shall pay all debts incurred by the contractor is not liable to subcontractors for labor and materials furnished. For a creditor of the contractor to recover from the surety, it must appear that the creditor knew of the agreement on the part of the surety to pay, before he performed the work or furnished the materials. In other words, he must have trusted the contractor on account of or by reason of the additional security.
20. Surety Released by Unauthorized Changes in the Contract.-A surety is one who has assumed certain obligations in relation to a contract but who is not a party to the contract. He is bound in the manner and to the extent provided in the obligation and no further. If he has undertaken to guaranty the performance of an express contract under certain circumstances, he cannot be held to fulfill his obligation with respect to a different contract or under different circumstances. A variation or alteration made in the contract by the parties thereto without the surety's consent is fatal to his obligation." It is not necessary that he should sustain injury in consequence of the change; he may stand upon its terms, and if a change is made without his consent it is fatal to his liability,' even if the change is for the benefit of the surety."
Watriss v. Pierce, 32 N. H. 550; Gen'l St.
7 Simonson v. Thori (Minn.), 31 N. W. Rep. 861 : Berks Co. v. Ross, 3 Biun. (Pa.) 520; 24 Amer. & Eng Ency. Law 838; 29 Amer. & Eng. Ency. Law 796; but see contra, Hnone v. Dambach, 4 Pa. Co. Ct. Rep. 833; Commissioners, etc., v. Ross, 3 Binney (Pa.) 520; Miller v. Stewart, 4 Wash. C. C. 26; per Story in Miller v. Stewart, 9 Wheat. 680 .
Weir Plow Co. v. Walmslev, 110 Ind. 242; but see Hamilton v. Woodworth (Mont.), 42 Pac. Rep. 849.
See Secs. 761-5, infra.