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.]
HUSKINS, JUSTICE.
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.