Western Oil Sales Corp. v. Bliss
299 S.W. 637 (1927)
Rule of Law:
Unless the parties agree otherwise, or the non-assigning party consents to a novation, a party to an executory contract for the sale of goods remains liable for its contractual obligations even after assigning the contract to a third party, notwithstanding a clause stating the contract binds 'assigns.'
Facts:
- On March 7, 1923, McCamey, Sheerin & Dumas (sellers), who held oil leases, contracted with Western Oil Sales Corporation (Western Corporation) to sell all crude oil produced from four specific Pioneer oil field leases for a period of six months.
- Under the contract, Western Corporation agreed to lay gathering lines, connect them to the sellers' tanks, run the oil, and pay the posted market price plus 25 cents per barrel premium.
- The agreement explicitly stated it would 'extend to and be binding on the parties hereto, their heirs, executors, administrators, successors, and assigns.'
- The parties operated under the contract for approximately three months without a division order, as mutually agreed.
- Western Corporation assigned the contract to the American Oil Company, which assumed all obligations and acquired all rights under the instrument.
- Western Corporation notified the sellers of the assignment, demanding they look to American Oil Company for future payments and unequivocally disclaiming and renouncing all liability for future oil deliveries.
- American Oil Company, being solvent, demanded that the sellers continue to deliver oil to it under the contract, but the sellers refused.
- Sellers treated the contract as terminated due to Western Corporation's repudiation and subsequently conveyed their leaseholds to Bliss & Wetherbee, assigning them all claims against Western Corporation arising from the contract.
Procedural Posture:
- Bliss & Wetherbee sued Western Corporation in the trial court for damages resulting from its alleged breach of the contract.
- The trial court found that the sellers and their assignees exercised due diligence in minimizing damages and rendered judgment for Bliss & Wetherbee for $4,420.25.
- Western Corporation, as appellant, appealed the trial court's judgment to the Court of Civil Appeals.
- The Court of Civil Appeals affirmed the trial court's judgment (292 S. W. 640).
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Issue:
Does a party to an executory contract for the sale of goods release itself from its contractual obligations by assigning the contract to a solvent third party, when the contract explicitly states it binds 'assigns'?
Opinions:
Majority - HARYISY, P. J.
No, a party to an executory contract for the sale of goods does not release itself from its contractual obligations by merely assigning the contract to a third party, even if the contract specifies it binds 'assigns,' unless the other party to the contract consents to such a release. The court reasoned that the contract was wholly executory, involving interdependent promises, and the provision binding 'assigns' merely indicates the contract's assignability, not that assignment automatically releases the original obligor from liability. An assignor remains liable for the proper performance of delegated obligations unless the other party agrees to a release (a novation). Western Corporation's repudiation of all future liability constituted an anticipatory breach, which entitled the sellers to terminate the contract. The sellers were not obligated to accept American Oil Company's promise as a substitute for Western Corporation's or to continue deliveries to minimize damages after the breach.
Concurring - CURETON, C. J.
Chief Justice Cureton concurred, affirming the judgments of the district court and Court of Civil Appeals as recommended by the Commission of Appeals.
Analysis:
This case clarifies the critical distinction between assigning contractual rights and delegating contractual duties, emphasizing that delegation of duties does not, by itself, relieve the original obligor of liability unless the non-assigning party agrees to a novation. It reinforces that a general clause binding 'assigns' merely indicates assignability, not automatic release. This principle protects non-assigning parties by ensuring they maintain recourse against the original contracting party and can treat an assignor's repudiation of liability as an anticipatory breach, impacting how businesses structure contracts and assess counterparty risk in assignments.
