Texas Gas Utilities Co. v. Barrett

460 S.W.2d 409 (Tex. 1970)

 

RULE:

Where no other consideration is shown, mutual obligations by the parties to the agreement will furnish a sufficient consideration to constitute a binding contract. It is presumed that when parties make an agreement they intend it to be effectual, not nugatory. A contract will be construed in favor of mutuality. The modern decisional tendency is against lending the aid of courts to defeat contracts on technical grounds of want of mutuality.

FACTS:

Petitioner's predecessor and respondents entered into a contract wherein the predecessor was to supply respondents' farm with natural gas. There was no consideration moving from one party to another. Thereafter, petitioner filed suit against respondents for payments due under the contract. The trial court held in respondents' favor. The appellate court affirmed, holding that the contract was unenforceable for lack of mutuality of obligation. The state supreme court reversed the judgment and remanded the case.

ISSUE:

Was a mutual obligation between parties sufficient to constitute a binding contract considering that there was no consideration moving from one party to another?

ANSWER:

Yes.

CONCLUSION:

Due to the fact that petitioner's predecessor was bound to deliver natural gas to respondents' property, and where respondents were in turn bound to pay for the gas, the contract embodied an exchange of obligations of value to each party. Accordingly, the contract was enforceable against respondents.

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