178 So. 3d 1061
La. Ct. App.2015Background
- E & Pco International (operator) signed a standard Daywork drilling contract with NorAm Drilling (contractor) on Dec. 7, 2007 for a one-year term and a $22,500/day rate (with mobilization/escrow Exhibit A attached). NorAm was to provide a Super Single rig.
- E & Pco lacked funding and never deposited funds into the escrow; NorAm nonetheless kept rigs and crews available in Houston. NorAm began proposing a reduced standby rate as an alternative.
- Parties exchanged emails in Feb. 2008 memorializing a $15,000/day standby rate (the “Email Agreement”), with NorAm charging from Feb. 11, 2008. NorAm issued monthly invoices; E & Pco paid nothing.
- June 25–26, 2008 letter exchange (the “Letter Agreement”) included NorAm’s statement that the Daywork Contract was “in full force and effect” and Edwards’ signed “Acknowledged and Agreed.” E & Pco later used another contractor after securing financing.
- NorAm sued for unpaid standby charges (~$4.9M claim). The trial court found the Daywork Contract effective Feb. 11, 2008, awarded $2,010,000 (standby rate Feb. 11–June 25), interest, and attorneys’ fees. E & Pco appealed.
Issues
| Issue | Plaintiff's Argument (NorAm) | Defendant's Argument (E & Pco) | Held |
|---|---|---|---|
| Whether the unsigned Addendum (conditioning contract on $1M deposit) was part of the contract | Addendum is not part of the contract; Daywork + Exhibit A control | The Addendum (or escrow condition) prevented formation/commencement without deposit | Court: Addendum was drafted by E & Pco, unsigned by NorAm, and not part of the contract — reject E & Pco’s claim |
| Effect of the Escrow Clause (Exhibit A) and whether failure to fund voided obligations | Escrow clause was part of contract but NorAm waived the strict deposit requirement by conduct | E & Pco: Escrow was a condition precedent; without funding there was no obligation | Court: Escrow clause did not create an enforceable condition precedent preventing contract; NorAm waived it by subsequent conduct |
| Whether Feb. 21, 2008 emails constituted agreement to begin charges effective Feb. 11 (Email Agreement) | Emails confirmed standby arrangement and effective start date; NorAm relied on them | E & Pco: Emails were tentative, only reduced rate, did not activate the contract | Court: Emails reasonably show agreement to standby at $15,000/day from Feb. 11; E & Pco’s acknowledgement did not dispute start date |
| Whether June 2008 letter constituted admission the contract was in force and modified terms | Letter and Edwards’ signed acknowledgement confirm contract remained in force and modifications were limited to rate/rig | E & Pco: Letter merely discussed NorAm mitigating damages and renting rig; did not fix start date or admission of liability | Court: Letter and signed acknowledgment reasonably confirm contract in full force and modifications; supports damages award |
Key Cases Cited
- Sun Exploration & Prod. Co. v. Benton, 728 S.W.2d 85 (Tex. 1987) (condition precedent and waiver principles)
- Garza v. Southland Corp., 836 S.W.2d 214 (Tex. App.—Houston [14th Dist.] 1992) (party may waive a condition precedent)
- Wes-Tex Tank Rental Inc. v. Pioneer Natural Res., 327 S.W.3d 316 (Tex. App.—Eastland 2010) (letter agreements can modify contracts)
- BACM 2001-1 San Felipe Rd. v. Trafalgar Holdings I, 218 S.W.3d 137 (Tex. App.—Houston [14th Dist.] 2007) (letter modifications alter only referenced terms)
- Wagner & Brown v. E.W. Moran Drilling Co., 702 S.W.2d 760 (Tex. App.—Fort Worth 1986) (validity of daywork contracts — payment due for availability even if no work performed)