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Energy & the Law

Railroad Commission Plugs the Wrong Well – Another Issue

Posted in Contract Disputes, Legislation

“Back in the day, when the Yankees always won the World Series and you could name a park after a Confederate general, we didn’t need no written contract; a man’s word was his bond, … yadda, yadda, yadda”.

Three things about that saying strike me. First, it was always a man; second, “the day” was always a time before the listener came on the scene; third, those fellows used some really bad grammar. R E LeeThe timeless truth is, a written agreement is always better, which returns us to Railroad Commission v Gulf Energy, discussed last week. Another question arose in that dispute: When did the Commission and Gulf Energy form a contract?  The trial court, in effect, decided as a matter of law that the parties had a binding contract.

What the trial court missed: Contract formation

The trial court deprived the jury of the ability to determine when the contract was formed:  At a May 19 meeting between the Commission and Gulf, or shortly after via conversations and emails, either of which was before the well was plugged – or on June 9 when a formal agreement was signed, which was after the unfortunate incident.  You can’t have a breach of contract claim without a contract, so the question was essential.

At trial there was disagreement aplenty among the witnesses about whether a meeting of the minds between the parties was achieved before or after the well was plugged. The Supreme Court decided that when a meeting of the minds occurred was a question of fact to be answered by the jury.

Practice tip

In lieu of our usual, customary, and frequently unconscionable fees for matters such as this, here is some free advice: If you want to avoid the “When was the contract formed?” dilemma, or worse, “Do we even have a contract?”, make it clear in your negotiations (emails, draft agreements, phone calls) something to the effect that that your understandings are subject to a final, binding agreement satisfactory to all parties. Or, if an enforceable agreement is your goal, say something like: The parties agree to cooperate in drafting and execution of future documents. The fact that such additional documents are contemplated does not affect the binding nature of this agreement.

Caveat

I call it “advice”, but what I say in this blog is not fact- or case-specific; I don’t know your situation, so don’t rely on what I say here without consulting a lawyer of your own choosing.

Musical interlude

At a loss for a song celebrating contract formation, think about this: New Orleans isn’t alone in the Africa-inspired musical universe, right? How about the Godfather of Soul and Africa itself?