Arkansas Valley Smelting Company v. Belden Mining Company
127 U.S. 379 (1888)
Rule of Law:
A contract is not assignable without consent when it involves a relationship of personal confidence, such as when a party extends credit in reliance on the other party's character and solvency.
Facts:
- Belden Mining Co. (defendant) entered into a contract to deliver 10,000 tons of lead ore to a partnership, Billing and Eilers, at their smelting works.
- The contract stipulated that ore would be delivered in daily increments, but the price would not be determined or paid until after an assay was performed on 100-ton lots.
- This arrangement meant Belden Mining Co. extended credit to Billing and Eilers, as ore was delivered before payment was made.
- The partnership of Billing and Eilers dissolved, and Eilers transferred his interest in the contract to his partner, Billing.
- Belden Mining Co. consented to this change and continued to deliver ore to Billing.
- Subsequently, Billing assigned the entire contract to a new corporation, the Arkansas Valley Smelting Co. (plaintiff), without the consent of Belden Mining Co.
- Arkansas Valley Smelting Co. demanded that Belden Mining Co. continue delivering ore under the terms of the assigned contract.
- Belden Mining Co. refused to deliver ore to the Arkansas Valley Smelting Co., asserting it had only contracted with Billing and Eilers.
Procedural Posture:
- Arkansas Valley Smelting Co. filed a lawsuit against Belden Mining Co. in the U.S. Circuit Court for the District of Colorado for breach of contract.
- The Circuit Court ruled in favor of the defendant, Belden Mining Co., and dismissed the complaint.
- Arkansas Valley Smelting Co., the plaintiff, appealed the dismissal to the Supreme Court of the United States.
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Issue:
Does a party's duty to perform under a contract for the sale of goods on credit extend to a third-party assignee of the original buyer, when the seller's performance relied on the personal credit and character of that original buyer?
Opinions:
Majority - Mr. Justice Gray
No. A party's contractual duty to deliver goods on credit does not extend to an assignee of the buyer where the contract was based on the personal confidence and credit of the original buyer. The court reasoned that every person has the right to select and determine with whom they will contract and cannot have another person thrust upon them without their consent. In this case, the contract was for the sale of ore on credit; payment was only made after delivery and assay. During this period, Belden Mining Co.'s only security for payment was the 'character and solvency of Billing and Eilers.' Therefore, Belden could not be compelled to accept the liability and credit risk of a stranger, the Arkansas Valley Smelting Co., as a substitute for those with whom it originally contracted. The prior consent to an internal partner change did not waive Belden's right to object to a subsequent assignment to an entirely new entity.
Analysis:
This decision solidifies a key exception to the general principle of contract assignability. It establishes that contracts involving personal trust, credit, or skill are not freely assignable because the identity of the contracting party is a material term of the agreement. The ruling clarifies that the 'personal' nature of a contract is not limited to artistic performance or professional services but extends to any agreement where financial reliability and character are central to the bargain, such as a requirements contract on credit. This precedent requires courts to look beyond the subject matter of a contract to the substance of the obligations to determine if it is assignable without consent.
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