Pelican Well & Tool Supply Co. v. Johnson - 194 La. 987, 195 So. 514 (1940)

Rule:

In construing and interpreting contracts, the courts are bound to give legal effect to all such contracts according to the true intent of all the parties. This intent is to be determined by the words of the contract, when these are clear and explicit and lead to no absurd consequences. La. Rev. Civ. Code Ann. art. 1945.

Facts:

The creditor supplied a debtor with materials to drill oil wells. The debtor subsequently conveyed its mineral lease to the assignees. The creditor filed an action against the assignees to collect on the debt owed to it by the debtor. The creditor claimed that the assignees assumed the debt when they acquired the mineral lease. The assignees filed exceptions of no cause of action, which the trial court granted. The creditor sought review.

Issue:

Did the debt owed to the creditor fall within the terms of the contract?

Answer:

Yes.

Conclusion:

The court annulled and set aside the judgment and remanded the action for further proceedings. The court found that the original contract between the debtor and the assignees gave the latter six months to examine the titles and pay the purchase price of the lease. Although that instrument did not mention the debtor's debts, a supplemental contract incorporated into the agreement several months later did refer to the debts. The supplemental contract granted the assignees an extension for examining the titles and paying the purchase price. In exchange, the assignees obligated themselves to pay all of the debtor's obligations relative to the oil drilling operation. The debt owed to the creditor fell within the terms of the supplemental contract.