595 S.W.3d 668
Tex.2020Background
- Eighteen working-interest owners (the Sellers) hired Chalker as their agent to market the "Kitty Stroker" oil-and-gas assets; Raymond James handled the sale process. Bidders signed a Confidentiality Agreement that contained a No Obligation Clause stating no contract exists "unless and until a definitive agreement has been executed and delivered."
- Bidding procedures set form/format and a November 5, 2012 deadline; each Seller had 24 hours to accept a submitted bid. LNO bid for 100%, later increased, and then ceased pursuing that structure.
- On November 19, LNO emailed a "Counter Proposal" to buy 67% for $230 million, listing seven terms and a deadline; Chalker told Sellers the group was "on board . . . subject to a mutually agreeable PSA." Sellers initially voted to sell to LNO.
- Chalker worked on PSA drafts with LNO but negotiations continued; Jones Energy later submitted a better offer, Sellers elected Jones, and Chalker and Jones executed a PSA on November 28.
- LNO sued for breach of contract based on the November 19–20 emails. The trial court granted Sellers summary judgment (no contract; PSA was a condition precedent); the court of appeals reversed in part. The Texas Supreme Court reversed the court of appeals and rendered judgment for the Sellers.
Issues
| Issue | Plaintiff's Argument (LNO) | Defendant's Argument (Chalker/Sellers) | Held |
|---|---|---|---|
| Whether the Nov. 19–20 email exchange constituted a binding, "definitive" agreement despite the No Obligation Clause | Emails fixed price, assets, closing date and key terms, so they formed a definitive agreement or at least create a fact issue | The Confidentiality Agreement unambiguously made a "definitive agreement" (e.g., an executed and delivered PSA) a condition precedent; emails were preliminary | Held: No contract as a matter of law. Emails were preliminary; the No Obligation Clause precluded formation absent an executed/delivered definitive agreement. |
| Whether intent to be bound is a fact issue precluding summary judgment | Intent is usually a fact question; prior cases allow jury determination | The No Obligation Clause is unambiguous and establishes a condition precedent; no fact issue when parties agreed that a definitive agreement was required | Held: Clause controlled; no fact issue. Summary judgment proper for Sellers. |
| Whether Sellers waived the condition precedent by their conduct (e.g., saying they were "committed to sell") | Sellers’ conduct and communications (not objecting to deviations, congratulatory emails, "committed to sell") show intentional relinquishment/waiver | Conduct was consistent with continuing negotiations and repeated references to a PSA; no unequivocal, intentional relinquishment | Held: No waiver as a matter of law; conduct not unequivocally inconsistent with insisting on the definitive-agreement requirement. |
| Effect of unresolved ancillary defenses (UETA, statute of frauds, agency) | LNO raised UETA/agency/statute-of-frauds issues below | Sellers argued those issues are irrelevant if no contract formed | Held: Moot — because no contract formed, ancillary issues were not reached. |
Key Cases Cited
- Railroad Comm’n of Tex. v. Gulf Energy Exploration Corp., 482 S.W.3d 559 (Tex. 2016) (intent to be bound may be a question of fact in some contexts)
- Foreca, S.A. v. GRD Dev. Co., 758 S.W.2d 744 (Tex. 1988) (language that an agreement is "subject to legal documentation" can create a fact issue)
- WTG Gas Processing, L.P. v. ConocoPhillips Co., 309 S.W.3d 635 (Tex. App.—Houston [14th Dist.] 2010) (bidding procedures making PSA execution a condition precedent precluded contract formation)
- Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276 (Tex. 1998) (plaintiff bears burden to prove satisfaction of conditions precedent)
- First Bank v. Brumitt, 519 S.W.3d 95 (Tex. 2017) (extrinsic evidence cannot create an ambiguity in unambiguous contract language)
- Jernigan v. Langley, 111 S.W.3d 153 (Tex. 2003) (definition and standard for waiver)
- Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831 (Tex. 2000) (multiple writings may be read together to ascertain intent)
- Centex Corp. v. Dalton, 840 S.W.2d 952 (Tex. 1992) (definition and role of condition precedent)
- Texaco, Inc. v. Pennzoil Co., 729 S.W.2d 768 (Tex. App.—Houston [1st Dist.] 1987) (illustrating that agreements may be formed outside formal documents)