On December 12, 1968, Centralia Plywood (Centralia) entered into a contract with Oregon Pacific Industries (Oregon Pacific) (defendant) for the delivery of plywood. On December 13, 1968, Centralia assigned Oregon Pacific’s invoice to Seattle-First National Bank (Seattle-First) (plaintiff). Seattle-First immediately notified Oregon Pacific of the assignment. On January 3, 1969, Centralia failed to deliver the plywood to Oregon Pacific. Oregon Pacific argued that because of Centralia’s breach of contract, Oregon Pacific was allowed to setoff the damages Oregon Pacific suffered against the amount owed to Seattle-First. Seattle-First sued for the full amount of the invoice. The trial court held for Seattle-First. Oregon Pacific appealed.