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Supreme Court of Texas
December 10, 1998, Argued ; November 18, 1999 Opinion Delivered
[*311] This is an appeal from a judgment awarding respondents Minco Oil & Gas, Inc. and Charles F. Doornbos as Trustee for the Charles F. Doornbos Revocable Trust damages for breach of gas purchase agreements against petitioner, El Paso Natural Gas Company. As to Minco, the principal issue is whether the Uniform Commercial Code's good faith obligations apply to its final release of its agreement with El Paso. We conclude that the UCC 1 does not impose a duty of good faith upon the formation or procurement of a final release of liability. Thus, we hold that Minco's release is enforceable and releases El Paso from its take-or-pay obligations to Minco. Regarding Doornbos, the issue is whether El Paso waived error thus limiting the court of appeals' authority [**2] to render judgment for El Paso on the enforcement of Doornbos's release. Because we conclude El Paso did not waive error, we reach the question and conclude that Doornbos's release is enforceable and releases El Paso from its take-or-pay obligations to Doornbos. Accordingly, we reverse the court of appeals' judgment and render judgment for El Paso.
In 1979, Minco and Doornbos entered into separate agreements with El Paso containing identical "take-or-pay" clauses. The agreements' take-or-pay provisions required El Paso to purchase a stated minimum quantity of gas or pay Minco and Doornbos the difference between the quantity actually taken and the stated minimum quantity. Due to the mid-1980's sharp decline in natural gas prices and demand, El Paso determined that it was unprofitable to continue purchasing gas under the agreements' take-or-pay requirements. To mitigate its losses, El Paso executed with Minco and Doornbos [**3] various amendments to the agreements that reduced El Paso's take-or-pay obligations and granted El Paso the right to unilaterally reduce the price it paid for gas. In addition, the parties executed over eighty other contracts ("monthly releases") that: (1) released El Paso from its monthly take-or-pay obligation; (2) allowed Minco and Doornbos to sell their gas on the spot market during the relevant time period; and (3) allowed El Paso the option either to reduce its annual take-or-pay obligation by the amount of gas Minco and Doornbos sold on the spot market or to disregard El Paso's obligation for the month covered by the contract.
In 1988, Minco requested and received from El Paso a final termination of its agreement and a mutual release of liabilities ("Minco termination letter"). Under this termination letter, El Paso and Minco released each other "from any and all claims, causes of action or liability that may have existed concerning the Agreement."
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8 S.W.3d 309 *; 1999 Tex. LEXIS 116 **; 43 Tex. Sup. J. 116; 144 Oil & Gas Rep. 197; 40 U.C.C. Rep. Serv. 2d (Callaghan) 84
EL PASO NATURAL GAS CO., PETITIONER v. MINCO OIL & GAS, INC., AND CHARLES F. DOORNBOS AS TRUSTEE FOR THE CHARLES F. DOORNBOS REVOCABLE TRUST, RESPONDENTS
Prior History: [**1] ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE SEVENTH DISTRICT OF TEXAS.
Disposition: Reversed the court of appeals' judgment and rendered judgment for El Paso.
good faith, termination, take-or-pay, releases, court of appeals, unconscionable, trial court, modification, ambiguity, formation, obligations, monthly, procured, bad faith, amendatory, contracts, parties, waived, final termination, duty of good faith, impose a duty, matter of law, letters
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