Contract Disputes

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Co-authors Lydia Webb and Rusty Tucker

Until Monarch Midstream v. Badlands Energy, midstream companies facing rejection of their contracts in a producer’s bankruptcy were left with Abraham Lincoln’s least favorite negotiating option: If the both law and the facts are against you, pound on the table. Under Sabine (which we covered here, here, and here) gathering agreements are not covenants running with the land and can be rejected in the producer’s bankruptcy. Sabine was the only law on the books, but now a Colorado bankruptcy court has determined that a gathering agreement was a covenant running with the land.…
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Reacting to Hurricane Barry, get it?
Co-author Chance Decker

In Barrow-Shaver Resources Company v. Carrizo Oil & Gas, Inc the Supreme Court of Texas has held again, here in a consent-to-assign dispute, that a contract means what the words say, even if in negotiations a landman said something he didn’t mean, … or changed his mind later, and even if “industry custom” is to the contrary.…
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Co-author Alexis Foster

Thanks to the power of the trucking lobby, the prevailing policy on the question of who wins and who loses if a carrier of goods goes unpaid favors the carrier over the broker, shipper, consignor and consignee. The rationale is that allowing shippers the benefit of carriage of goods without compensating the carrier would eventually cripple the shipping industry and the economy. Thus, the carrier will be paid, irrespective of the carrier’s failure to collect from the shipper or consignee or payment by one of the other parties to another.

The Bill of Lading …
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Confess … Confess!

When  you prepare, review and/or sign settlement agreements you sometimes pay less attention than you should to the details of those “standard” releases! Acme Energy Services, d/b/a Big Dog Drilling v. Staley et al. says, Beware the “boilerplate”; before signing consider what you are actually trying to accomplish.…
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Co-author Trevor Lawhorn

A lot, if the claim before the court is for fraudulent inducement. Points to remember:

  • Oral promises that contradict contract terms are pretty much worthless. In reviewing a fraudulent inducement claim, a court will assume the “victim” knows facts that would have been discovered by a reasonably prudent person similarly situated.
  • Which means ask questions. A negotiating party is rarely obliged to volunteer information.
  • If you want understandings to be binding, put them in the contract. A court will tell the plaintiff that he “… should have insisted on these [exclusivity] terms in the parties’ contract rather than agreeing in writing to the opposite.”
  • Merger clauses are there for a reason.

…
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An opinion that observes “Obviously the jury was not overly enamored with Appellants.” is worth discussing. The decision is Stephens et al v. Three Finger Black Shale Partnership et al.

What to know about partnerships 

Parties to a transaction need to be mindful that if a business deal is a partnership, there will be rights and duties not present in arms-length commercial transactions. The main question in Stephens: Was a partnership formed by a letter agreement, a participation agreement and the actions of the parties?…
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Co-author Chance Decker

It’s a tale as old as the oilfield: A non-operator doesn’t pay joint interest billings, operator sues, non-payer claims the expenses were unwarranted and the operator was negligent—no, grossly negligent—for incurring them in the first place. Welcome to OBO, Inc. v. Apache Corporation et al. Despite a creative argument by non-operator OBO that contract operator Apache didn’t have authority to charge JIB’s in the first place, OBO must pay.

The facts…
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