in the areas of commercial litigation, general litigation and defense of tort claims against governmental entities. 2829 Lakeland Dr., Suite 1502 P.O. Box 23546 Jackson, Mississippi 39225-3546 601.939.8900 Phone 601.932.4400 Fax sstack@wjpalaw.com www.watsonjoneslaw.com negotiations, it is not uncommon for boilerplate clauses such as so-called "force majeure" provisions to receive scant attention. After all they say essentially the same thing, right? These common clauses essentially free both parties from liability or obligation when an event beyond the control of the parties, such as a war, strike, crime or weather event, occurs. The recent decision of the United States Court of Appeals for the Fifth Circuit in Ergon-West Virginia, Inc. v. Dynegy Marketing & Trade, 706 F.3d 419 (5th Cir. 2013) serves as a reminder to contract lawyers that careful, or careless, drafting of force majeure provisions may prove to be of vital importance. Hurricanes Katrina and Rita slammed into the Gulf Coast in August and September of 2005, wreaking havoc on the oil and gas industry. Many suppliers and purchasers of natural gas found themselves in a position of of their contracts to determine whether non-performance was excused. Two such contracts were those entered into by two sister companies ("Buyer 1" and "Buyer 2" or collectively "the Buyer Companies"), respectively, with the seller in Dynegy ("Seller"). Under both contracts, Seller agreed to deliver a daily contract quantity (DCQ) of natural gas to specified delivery points which the Buyer Companies agreed to purchase at a set price. Each contract contained a force majeure provision excusing a party's performance when it was rendered unable to meet its contractual obligations due to certain designated events beyond its control. In the aftermath of the hurricanes, Seller failed to deliver the DCQ under both contracts. Seller's internally designated suppliers which it was using to supply the Buyer Companies (but which were not identified in either contract or known to the Buyer Companies) had declared force majeure pursuant to their contracts Companies that it was invoking the force majeure clause under the respective contracts and took the position its failure to deliver the DCQ was thereby excused. As a result, the Buyer Companies were forced to procure gas on the open market at a higher price than that specified in the contracts. The Buyer Companies filed suit seeking recoupment of the additional sums paid for the replacement gas. The Buyer Companies' position at trial was that the respective contracts' force majeure provisions required Seller to attempt to secure replacement gas, which Seller admitted that it did not even attempt to do. The force majeure provision of the Buyer 1 contract stated in pertinent part (emphasis added): being rendered unable, wholly or in part, by force majeure to carry out its obligations under this Contract...it Force Majeure Provisions |