diff --git a/src/actions/actionBoundText.tsx b/src/actions/actionBoundText.tsx
index 9f9fbfc0..990f98d4 100644
--- a/src/actions/actionBoundText.tsx
+++ b/src/actions/actionBoundText.tsx
@@ -2,6 +2,7 @@ import { BOUND_TEXT_PADDING, ROUNDNESS, VERTICAL_ALIGN } from "../constants";
 import { getNonDeletedElements, isTextElement, newElement } from "../element";
 import { mutateElement } from "../element/mutateElement";
 import {
+  computeBoundTextPosition,
   computeContainerDimensionForBoundText,
   getBoundTextElement,
   measureText,
@@ -33,6 +34,7 @@ export const actionUnbindText = register({
   trackEvent: { category: "element" },
   predicate: (elements, appState) => {
     const selectedElements = getSelectedElements(elements, appState);
+
     return selectedElements.some((element) => hasBoundTextElement(element));
   },
   perform: (elements, appState) => {
@@ -52,13 +54,15 @@ export const actionUnbindText = register({
           element.id,
         );
         resetOriginalContainerCache(element.id);
-
+        const { x, y } = computeBoundTextPosition(element, boundTextElement);
         mutateElement(boundTextElement as ExcalidrawTextElement, {
           containerId: null,
           width,
           height,
           baseline,
           text: boundTextElement.originalText,
+          x,
+          y,
         });
         mutateElement(element, {
           boundElements: element.boundElements?.filter(
diff --git a/src/element/textElement.ts b/src/element/textElement.ts
index 26cf91a8..38da5df5 100644
--- a/src/element/textElement.ts
+++ b/src/element/textElement.ts
@@ -245,10 +245,16 @@ export const handleBindTextResize = (
   }
 };
 
-const computeBoundTextPosition = (
+export const computeBoundTextPosition = (
   container: ExcalidrawElement,
   boundTextElement: ExcalidrawTextElementWithContainer,
 ) => {
+  if (isArrowElement(container)) {
+    return LinearElementEditor.getBoundTextElementPosition(
+      container,
+      boundTextElement,
+    );
+  }
   const containerCoords = getContainerCoords(container);
   const maxContainerHeight = getMaxContainerHeight(container);
   const maxContainerWidth = getMaxContainerWidth(container);
diff --git a/src/element/textWysiwyg.test.tsx b/src/element/textWysiwyg.test.tsx
index cb852cd1..c55a9bef 100644
--- a/src/element/textWysiwyg.test.tsx
+++ b/src/element/textWysiwyg.test.tsx
@@ -740,6 +740,45 @@ describe("textWysiwyg", () => {
       expect(rectangle.boundElements).toBe(null);
     });
 
+    it("should bind text to container when triggered via context menu", async () => {
+      expect(h.elements.length).toBe(1);
+      expect(h.elements[0].id).toBe(rectangle.id);
+
+      UI.clickTool("text");
+      mouse.clickAt(20, 30);
+      const editor = document.querySelector(
+        ".excalidraw-textEditorContainer > textarea",
+      ) as HTMLTextAreaElement;
+
+      fireEvent.change(editor, {
+        target: {
+          value: "Excalidraw is an opensource virtual collaborative whiteboard",
+        },
+      });
+
+      editor.dispatchEvent(new Event("input"));
+      await new Promise((cb) => setTimeout(cb, 0));
+      expect(h.elements.length).toBe(2);
+      expect(h.elements[1].type).toBe("text");
+
+      API.setSelectedElements([h.elements[0], h.elements[1]]);
+      fireEvent.contextMenu(GlobalTestState.canvas, {
+        button: 2,
+        clientX: 20,
+        clientY: 30,
+      });
+      const contextMenu = document.querySelector(".context-menu");
+      fireEvent.click(
+        queryByText(contextMenu as HTMLElement, "Bind text to the container")!,
+      );
+      const text = h.elements[1] as ExcalidrawTextElementWithContainer;
+      expect(rectangle.boundElements).toStrictEqual([
+        { id: h.elements[1].id, type: "text" },
+      ]);
+      expect(text.containerId).toBe(rectangle.id);
+      expect(text.verticalAlign).toBe(VERTICAL_ALIGN.MIDDLE);
+    });
+
     it("should update font family correctly on undo/redo by selecting bounded text when font family was updated", async () => {
       expect(h.elements.length).toBe(1);
 
diff --git a/src/tests/linearElementEditor.test.tsx b/src/tests/linearElementEditor.test.tsx
index ac4d801b..15fd105e 100644
--- a/src/tests/linearElementEditor.test.tsx
+++ b/src/tests/linearElementEditor.test.tsx
@@ -23,7 +23,7 @@ import {
   getMaxContainerWidth,
 } from "../element/textElement";
 import * as textElementUtils from "../element/textElement";
-import { ROUNDNESS } from "../constants";
+import { ROUNDNESS, VERTICAL_ALIGN } from "../constants";
 
 const renderScene = jest.spyOn(Renderer, "renderScene");
 
@@ -1191,5 +1191,62 @@ describe("Test Linear Elements", () => {
       expect(queryByTestId(container, "align-horizontal-center")).toBeNull();
       expect(queryByTestId(container, "align-right")).toBeNull();
     });
+
+    it("should update label coords when a label binded via context menu is unbinded", async () => {
+      createTwoPointerLinearElement("arrow");
+      const text = API.createElement({
+        type: "text",
+        text: "Hello Excalidraw",
+      });
+      expect(text.x).toBe(0);
+      expect(text.y).toBe(0);
+
+      h.elements = [h.elements[0], text];
+
+      const container = h.elements[0];
+      API.setSelectedElements([container, text]);
+      fireEvent.contextMenu(GlobalTestState.canvas, {
+        button: 2,
+        clientX: 20,
+        clientY: 30,
+      });
+      let contextMenu = document.querySelector(".context-menu");
+
+      fireEvent.click(
+        queryByText(contextMenu as HTMLElement, "Bind text to the container")!,
+      );
+      expect(container.boundElements).toStrictEqual([
+        { id: h.elements[1].id, type: "text" },
+      ]);
+      expect(text.containerId).toBe(container.id);
+      expect(text.verticalAlign).toBe(VERTICAL_ALIGN.MIDDLE);
+
+      mouse.reset();
+      mouse.clickAt(
+        container.x + container.width / 2,
+        container.y + container.height / 2,
+      );
+      mouse.down();
+      mouse.up();
+      API.setSelectedElements([h.elements[0], h.elements[1]]);
+
+      fireEvent.contextMenu(GlobalTestState.canvas, {
+        button: 2,
+        clientX: 20,
+        clientY: 30,
+      });
+      contextMenu = document.querySelector(".context-menu");
+      fireEvent.click(queryByText(contextMenu as HTMLElement, "Unbind text")!);
+      expect(container.boundElements).toEqual([]);
+      expect(text).toEqual(
+        expect.objectContaining({
+          containerId: null,
+          width: 160,
+          height: 25,
+          x: -40,
+          y: 7.5,
+        }),
+      );
+    });
   });
 });