Kouatli v. Endeavor Energy Resources L.P.  offers valuable (and obvious) lessons on how NOT to perform a Master Service Agreement in the oil patch (or, per Billly Bob and friends, “The Patch”), to wit:

  1. Don’t bother to comply with the most basic and unambiguous requirements of the contract.
  2. Take informality for granted.
  3. Assume that if your counterparty ignores those most basic and unambiguous requirements for 10 years the court will force him to keep on doing it.

The litigants were parties to an MSA which provided:

  1. When Operator (Endeavor) desired work to be performed by Contractor (Kouatli), Operator will request a Work Order, which could also be a purchase order, letter, memorandum or other document, or it may be oral.
  2. Upon acceptance of the Work Order, Contractor will commence performance of the work.
  3. A requested Work Order “shall be” confirmed in writing within three business days by Contractor.   
  4. Any Work Order not in conformity with the MSA “shall be null and void”.
  5. The MSA constituted the entire understanding between the parties and would supersede all negotiations, prior discussions, prior agreements and understandings relating to the subject matter.
  6. The MSA could not be modified or amended except by express written consent.

None of this is surprise to those who deal in MSAs.

Kouatli sued for breach of the MSA alleging that Endeavor failed to remit payment for 16 invoices. Endeavor’s motion for summary judgment stated that Kouatli had no evidence that:

  1. The work described in the invoices was requested by Endeavor either through a written Work Order or an oral request confirmed in writing,
  2.  Kouatli correctly performed the work described in each invoice in compliance with the MSA and a Work Order, and
  3. An authorized officer of both parties agreed to waive compliance with the requirements of the MSA with respect to the work described in the invoices.

Endeavor thus asserted that there was no evidence of:

  1. Fulfillment of a condition precedent (written Work Order or written confirmation of a verbal Work Order)
  2. Kouatli’s performance, or
  3. Breach by Endeavor.

Koualtli responded by affidavit testimony that:

  1. The work was verbally authorized,
  2. Kouatli submitted daily reports that described the work, and
  3. Endeavor’s representatives signed each report thereby accepting and confirming the work.

Endeavor objected for evidentiary reasons having nothing to do our purposes here (see p. 2 of the opinion).

The trial court dismissed Kouatli’s suit.

On appeal Kouatli argued that the manner of conduct by which the parties operated for 10 years precluded enforcement of requirements of the MSA. The court determined that there was no legal authority that Endeavor’s conduct precluded Kouatli from enforcing the MSA related to the work.

Kouatli did not expressly argue that he fulfilled or was excused from fulfilling the alleged condition precedent (submission of a Work Order or written confirmation) nor did he argue that confirmation was not a condition precedent. Koutali admitted that he never submitted written confirmation of any verbal Work Order.

The affidavit did not raise a genuine issue of fact on Kouatli’s own performance under the MSA. The affidavit was devoid of facts to support Endeavor’s waiver of the contract requirements.

The result: Kouatli (it appears) did a lot of work in return for nothing.

Your musical interludes, a carnival of covers:

Bob Dylan by Sam Bush and Jerry Douglas

Bob Dylan by Pete Townshend

Beatles by Michael Jackson

Eurythmics by Toni Lindgren