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These materials reflect only the personal views of the authors and are not individualized legal advice. It is understood that each case is fact-specific, and that the appropriate solution in any case will vary. Therefore, these materials may or may not be relevant to any particular situation. Thus, the authors and their law firm cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in these materials. The presentation of these materials does not establish any form of attorney-client relationship with the authors or their law firm. While every attempt was made to insure that these materials are accurate, errors or omissions may be contained therein, for which any liability is disclaimed.
Texas
Chalker Energy Partners III, LLC et al. v Le Norman Operating LLC Cause No. 18-0352 Texas Supreme Court Varying a Written Contract By Email
The Texas Supreme Court released the above opinion on December 4, 2019. The lessons learned from the case are very important in today’s world of on-line auctions and contract negotiations by email/phone. More importantly, the court addresses when and under what conditions a written contract can be altered by other contemporaneous writings, including emails. Factually, the Sellers owned oil and Assets worth hundreds of million of dollars and had decided to sell same utilizing an on-line auction procedure. Bidding procedures were put in place by the Sellers and a virtual data room was created to provide information about the Assets. Key to this decision was the creation of what was denominated as a “No Obligation” clause, which clause was found in a Confidentiality Agreement. This Confidentiality Agreement had to be signed by both parties as a prerequisite to entry into the virtual data room by potential buyers. The No Obligation Clause provided in part the following: “The Parties hereto understand that unless and until a definitive agreement has been executed and delivered, no contract or agreement providing for a transaction between the Parties shall be deemed to exist and neither Party will be under any legal obligation of any kind whatsoever with respect to such transaction by virtue of this or any written or oral expression thereof… For purposes of this Agreement, the term “definitive agreement” does not include an executed letter of intent or any other preliminary written agreement or offer, unless specifically so designated in writing and executed by both Parties.” (emphasis added) The following timeline activities, confirmed by email, took place: 1. Company 1 emailed Sellers a counterproposal to
Sellers’ offer of sale. 2. Sellers voted to sell 67% of the assets and
confirmed such vote to Company 1 via email. A separate and distinct definitive agreement (such as a PSA) by and between the parties was not entered into by said parties. 3. Company 2 thereafter presented Sellers with a new offer of purchase. 4. Sellers elected to sell to Company 2 and executed, along with Company 2, a PSA to that effect. 5. Company 1 demanded that Sellers honor their alleged contract entered into via the email exchange. 6. A lawsuit by Company 1 was brought alleging breach of contract by Sellers. The trial court held, in part, that the entry into a PSA (per the No Obligation Clause) was a condition precedent to the formation of a valid contract. Therefore, there was no meeting of the minds and thus no binding contract by and between Company 1 and Sellers. The appeals court reversed the trial court’s decision. It held that whether the alleged contract between Company 1 and Sellers was subject to the Confidentiality Agreement, and thus the No Obligation Clause, was an issue of fact precluding summary judgment and remanded the case back to the trial court. The Supreme Court held that, by including the No Obligation Clause in the Confidentiality Agreement, an agreement signed by both parties, that Company 1 and Sellers had agreed that a definitive agreement (PSA) was a condition precedent to the formation of a valid contract. In the absence of the execution of a definitive agreement, such as a PSA, by both parties, THERE WAS NO BINDING CONTRACT BY SELLERS TO SELL
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G r o w t h T h r o u g h E d u c a t i o n - J u l y / A u g u s t / S e p t e m b e r 2 0 2 0
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