Citation. 299 S.W.637(Commission of Appeals of Texas, 1927)
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Brief Fact Summary.
Company 1 entered into a contract with company 2 to sell and deliver oil covered by certain leases. Company 1 assigned its obligations and rights to company 3. After the assignment, company 1 refused to recognize any liability under the original contract. Company 2 transferred its leasehold to company 4 after company 1 refused to accept liability.
Synopsis of Rule of Law.
"When a contract is assignable, a party may assign the benefits of his contract to another, and delegate to his assignee the performance of his obligations under the contract; but he remains liable for the proper performance of those obligations, unless the other party to the contract consents for the assignment to have the effect of releasing him."
The Plaintiff in error, Western Oil Sales Corp. (the "Plaintiff in error"), entered into a contract on March 7, 1923 with McCamey, Sheerin & Dumas (the "Partnership"), to sell and deliver the oil covered by certain leases. The Partnership agreed to gather its lines and connect certain oil tanks with the Plaintiff's tanks and pay the market price for oil plus a 25 cent premium per barrel. The Plaintiff in error then assigned the parties' contract to American Oil Company ("American"). American assumed all of the Plaintiff in error's obligations and rights. The Plaintiff in error notified the Partnership of the assignment and insisted that the partnership look to American "for their pay for all future deliveries of oil under the contract of sale". Additionally, the Plaintiff in error "disclaim[ed] and renounc[ed] all liability on the part of said corporation for any future deliveries of oil under the contract." American demanded the Partnership to continue making deliveries of oil under the contract to it. The Partnership refused to continue making deliveries unless the Plaintiff in error recognized its liability under the contract, which it refused to do. The Partnership conveyed – treating the initial March 7, 1923 contract as terminated – its leaseholds to the Defendants in error, Bliss & Wetherbee (the "Defendants in error"), and "assigned to them all their rights and claims against the Western Corporation growing out of the contract of sale in question." The Defendant in error then brought suit against the Plaintiff and error "for damages resulting from its alleged breach of said contract of sale in repudiating its liability under the contract". The trial court granted the Defendants in error $4,420.25.
Is an obligor required to deliver goods to an assignee if the assignor does not acknowledge its liability under a contract?
No. The court first recognized "there is no provision in the contract for the release of either promisor by the substitution of the promise of another." Thus, "[t]he provision declaring that the agreement should extend to and be binding on the assigns of the parties is not to be construed as authorizing such a release." Further, "[w]hen a contract is assignable, a party may assign the benefits of his contract to another, and delegate to his assignee the performance of his obligations under the contract; but he remains liable for the proper performance of those obligations, unless the other party to the contract consents for the assignment to have the effect of releasing him."
• The Plaintiff in error was not released from its obligations after the contract was assigned to American. When the Plaintiff in error "repudiated all liability for future deliveries of oil, it committed an anticipatory breach, and the sellers thereupon became entitled to terminate the contract", due to the anticipatory breach
It is interesting to read this case alongside [Kagan v. K-Tel Entertainment, Inc.], another case dealing with assignments.