86 A.3d 723
N.J. Super. Ct. App. Div.2014Background
- ENI (seller) and Hess (buyer) executed a NAESB-based Base Contract (Sept. 5, 2007) plus monthly Transaction Confirmations; April 2008 transaction specified firm delivery of 20,000 MMBTU/day at the Tennessee 500 pool for April 1–30, 2008, but did not identify a transporter or source of gas.
- ENI produced gas from Gulf of Mexico wells routed through the Independence Hub (I‑Hub) and then the Independence Trail Pipeline (operated by Enterprise) to reach the Tennessee 500; other producers also feed the pool.
- On April 8, 2008 Enterprise shut the Independence Trail due to a leak, halting ENI’s ability to move gas from the I‑Hub until repairs in June.
- ENI declared force majeure citing interruption of transporter service and did not deliver; Hess purchased replacement gas on the spot market and sued for breach, seeking damages, interest, and fees.
- Trial court found the contract unambiguous, held ENI’s obligation was to deliver gas at the Tennessee 500 regardless of source or route, rejected force majeure, and awarded Hess damages; judgment affirmed on appeal.
Issues
| Issue | Plaintiff's Argument (Hess) | Defendant's Argument (ENI) | Held |
|---|---|---|---|
| Whether a transporter pipeline leak (Independence Trail) is a force majeure excusing non‑delivery | Contract required ENI to deliver gas at Tennessee 500; pool had other sources so transporter leak did not prevent availability | Interruption of ENI’s transporter (Enterprise) was a force majeure under clause covering interruption/curtailment of Firm transportation by transporters | Held: No. Contract did not limit ENI to a particular source/transporter; force majeure not available because gas could have been procured from other sources or the spot market to satisfy the firm delivery at the pool |
| Whether the contract was ambiguous about source/route such that extrinsic evidence could be used | Contract is clear: delivery point controls; do not allow parol/extrinsic evidence to rewrite obligation | ENI argued industry usage could limit “gas supply” to seller’s internal sources, making clause applicable | Held: Contract unambiguous under New York law; no parol evidence; obligations assessed from the written terms |
| Whether omission of a named transporter in the Transaction Confirmation is insignificant | Hess: omission means seller must supply at pool regardless of route | ENI: route need not be specified; omission is immaterial and does not preclude force majeure for transporter interruption | Held: Omission is significant here — because no transporter/source was specified, ENI could not rely on transporter interruption as a force majeure excuse |
Key Cases Cited
- Kel Kim Corp. v. Cent. Mkts., Inc., 70 N.Y.2d 900 (N.Y. 1987) (force majeure clauses are narrowly construed)
- W.W.W. Assocs. v. Giancontieri, 77 N.Y.2d 157 (N.Y. 1990) (unambiguous contract terms control; parol evidence excluded)
- Virginia Power Energy Mktg., Inc. v. Apache Corp., 297 S.W.3d 397 (Tex. Ct. App. 2009) (NAESB‑form contract; seller cannot invoke force majeure when contract does not limit supply to a particular source)
- Loomis v. N.Y. Cent. & Hudson River R.R. Co., 203 N.Y. 359 (N.Y. 1911) (omission of route leaves selection to carrier; principle supports that route/source was incidental)