Background and Commercial Context

Marathon Oil Co. and Mercuria Energy America, LLC entered into a base contract for the sale and purchase of natural gas, supplemented by transaction confirmations that specified delivery terms for particular monthly transactions. When Marathon declared force majeure and delivered less natural gas than the agreed-upon quantity for a given month, Mercuria brought a breach of contract action challenging the validity of Marathon's force majeure declaration. The dispute centered on whether a pipeline delivery term in Marathon's transaction confirmation—which supported the force majeure declaration—became part of the binding contract between the parties.

The Confirmation Battle: Competing Transaction Terms

The parties exchanged timely transaction confirmations, but only Marathon's confirmation contained the specific pipeline delivery term that later became critical to its force majeure defense. Mercuria's confirmation omitted this pipeline term entirely. Mercuria argued that the absence of a check mark near the pipeline delivery term in its signed version of Marathon's confirmation constituted timely notice of disagreement, and that the material difference between the two confirmations prevented contract formation. The case required the Business Court to interpret provisions from the North American Energy Standards Board (NAESB) standard forms governing the parties' base contract.

The Court's Holdings on Contract Formation

Judge Melissa Davis Andrews, sitting by designation, issued five key holdings that resolved the dispute in Marathon's favor. First, the court held that the absence of a check mark near the gas pipeline delivery term in the signed transaction confirmation did not constitute timely notice of disagreement with Marathon over the transaction, and thus the confirmation constituted a binding agreement. Second, the court found that the timely transaction confirmations between the parties—only one of which contained the pipeline delivery term—did not materially differ, and thus the transactions were binding and formed part of the parties' integrated base contract.

Third, the court held that the pipeline term in Marathon's transaction confirmation did not require express agreement by the parties under an exception in the base contract that required express agreement for provisions other than those relating to commercial terms of the transaction. Fourth, the court ruled that the transaction confirmations combined with the base contract to form the contract for sale and purchase of natural gas, rather than the base contract combining with instant messaging chat that specified the transaction's delivery. Finally, the court held that the effectiveness of transaction confirmations was governed by the base contract, regardless of whether confirmations were mandatory or permissive, or whether the receiving party signed the confirmation, and thus both transaction confirmations were part of the contract.

The court's analysis focused on applying established principles of contract interpretation to the NAESB base contract provisions. The court found that Mercuria did not provide timely notice of disagreement as required by the contract terms, did not expressly object to the pipeline term, and that nothing in the prior course of dealing between the parties would have put Marathon on notice that the absence of a check mark signified disagreement with the term.