ROSE v. VULCAN MATERIALS CO.
282 N.C. 643, 194 S.E.2d 521 (1973)
[Plaintiff instituted suit to recover damages for breach of contract. The trial court held for the plaintiff but on appeal the Court of Appeals reversed. This opinion is of the Supreme Court of North Carolina.]
The agreement between the original parties, embodied in plaintiff's Exhibits A and B, consisted of mutual promises: Plaintiff, after leasing his quarry to J. E. Dooley and Son, Inc., promised not to engage in the rock-crushing business within an eight-mile radius of Elkin for a period of ten years. In return for this promise, J. E. Dooley and Son, Inc., promised, among other things, to furnish plaintiff stone f.o.b. the quarry site at Cycle, North Carolina, at stipulated prices for ten years. Thus, the agreement was an executory bilateral contract under which plaintiff's promise not to compete for ten years gained him a ten-year option to buy stone at specified prices.
In most states, the assignee of an executory bilateral contract is not liable to anyone for the non performance of the assignor's duties thereunder unless he expressly promises his assignor or the other contracting party to perform, or "assume," such duties. These states refuse to imply a promise to perform the duties, but if the assignee expressly promises his assignor to perform, he is liable to the other contracting party on a third-party beneficiary theory. And, if the assignee makes such a promise directly to the other contracting party upon a consideration, of course he is liable to him thereon.
A minority of states holds that the assignee of an executory bilateral contract under a general assignment becomes not only assignee of the rights of the assignor but also delegatee of his duties; and that, absent a showing of contrary intent, the assignee impliedly promises the assignor that he will perform the duties so delegated. This rule is expressed in Restatement, Contracts, S 164 (1932) as follows:
1. Where a party under a bilateral contract which is at the time wholly or partially executory on both sides purports to assign the whole contract, his action is interpreted, in the absence of circumstances showing a contrary intention, as an assignment of the assignor's rights under the contract and a delegation of the performance of the assignor's duties.
2. Acceptance by the assignee of such an assignment is interpreted, in the absence of circumstances showing a contrary intention, as both an assent to become an assignee of the assignor's rights and as a promise to the assignor to assume the performance of the assi~s duties. (Emphasis added.)
We . . . adopt the Restatement rule and expressly hold that the assignee under a general assignment of an executory bilateral contract, in the absence of circumstances showing a contrary intention, becomes the delegatee of his assignor's duties and impliedly promises his assignor that he will performsuch duties.
The rule we adopt and reaffirm here is regarded as the more reasonable view by legal scholars and textwriters. Professor Grismore says:
It is submitted that the acceptance of an assignment in this form does presumptively import a tacit promise on the part of the assignee to assume the burdens of the contract, and that this presumption should prevail in the absence of the clear showing of a contrary intention. The presumption seems reasonable in view of the evident expectation of the parties. The assigmnent in its face indicates an intent to do more than simply to transfer the benefits assured by the contract. It purports to transfer the contract as a whole, and since the contract is made up of both benefits and burdens both must be intended to be included.
(Grismore, Is the Assignee of a Contract Liable for the Nonperformance of Delegated Duties? 18 Mich.L.Rev. 284 (1920).)
In addition, with respect to transactions governed by the Uniform Com. mercial Code, an assignment of a contract in general terms is a delegation Of performance of the duties of the assignor, and its acceptance by the assignee constitutes a promise by him to perform those duties. Our holding in this case maintains a desirable uniformity in the field of contract liability.
We further hold that the other party to the original contract may sue the assignee as a third-party beneficiary of his promise of performance which he impliedly makes to his assignor, under the rule above laid down, by accepting the general assignment. Younce v. Lumber Co., 61 S.E. 624 (1908), holds that where the assignee makes an express promise of performance to his assignor, the other contracting party may sue him for breach thereof. We see no reason why the same result should not obtain where the assignee breaches his promise of performance implied under the rule of Restatement 5 164. "That the assignee is liable at the suit of the third party where he expressly assumes and promises to perform delegated duties has already been decided in a few cases [citing Youncel. If an express promise will support such an action it is difficult to see why a tacit promise should not have the same effect." Grismore, supra. Parenthetically, we note that such is the rule under the Uniform Commercial Code, G.S. 5 25-2-210(4).
We now apply the foregoing principles to the case at hand. The contract of 23 April 1960, Exhibit F, between defendant and J. E. Dooley and Son, Inc., under which, as stipulated by the parties, "the defendant purchased the assets and obligations of
J. E. Dooley and Son, Inc.," was a general assignment of all the assets and obligations of J. E. Dooley and Son, Inc., including those under Exhibit B. When defendant accepted such assignment it thereby became delegatee of its assignor's duties under Exhibit B and impliedly promised to perform such duties.
When defendant later failed to perform such duties by refusing to continue sales of stone to plaintiff at the prices specified in Exhibit B, it breached its implied promise of performance and plaintiff was entitled to bring suit thereon as a third-party beneficiary.
The decision of the Court of Appeals is reversed with directions that the case be certified to the Superior Court of Forsyth County for reinstatement of the judgment of the trial court in accordance with this opinion.