Background and Commercial Context

Marathon Oil Co. entered into a natural gas sales contract with Mercuria Energy America, LLC, an energy trader. When a winter storm disrupted operations, Marathon declared force majeure and delivered less natural gas for the month than the parties had agreed upon. Mercuria brought a breach of contract action, disputing Marathon's force majeure declaration and arguing that Marathon was obligated to purchase spot-market gas to fulfill its delivery obligations despite the force majeure event.

The Force Majeure Carve-Out Dispute

The central dispute turned on the interpretation of interconnected provisions in the contract's force majeure clause. The contract contained a carve-out provision stating that force majeure did not apply to the extent performance was affected by loss or failure of the company's gas supply or depletion of reserves, except as provided in the section identifying events exemplifying force majeure. A separate provision stated that a party claiming force majeure had no obligation to seek alternative gas supplies to satisfy contractual obligations. Mercuria argued that Marathon was required to purchase spot-market gas to satisfy its delivery obligations, while Marathon contended that such purchases constituted alternative gas supplies it had no duty to obtain.

The Court's Textual Analysis

The Business Court of Texas, applying principles of contract interpretation, held that courts hold parties to what they said in a contract and interpret what they said to mean what an ordinary person reading the contract would think it means. The court determined that the phrase "seller's gas supply" in the force majeure carve-out referred to gas the oil company had available to satisfy its delivery obligations under the contract and did not include gas available for purchase on the spot market. This construction meant Marathon was not required to purchase spot-market gas to fulfill its original delivery obligation and did not need to prove that the winter storm prevented it from doing so.

The court further held that spot-market gas constituted an alternative gas supply under the provision relieving Marathon of any obligation to seek such supplies. The court determined that the contract provision stating that a party claiming force majeure had no obligation to seek alternative gas supplies to satisfy contractual obligations relieved Marathon of any obligation to obtain spot-market gas as a reasonable effort required under the force majeure provisions to avoid the impact of force majeure and resume performance.

Reasonable Efforts and Buyback Obligations

The court also addressed whether Marathon was obligated to buy back its delivery obligations after declaring force majeure as a reasonable effort required under the force majeure provisions. The court held that Marathon was not obligated to buy back its delivery obligations after declaring force majeure as a reasonable effort required under the force majeure provisions to avoid the impact of force majeure and resume performance.