The Houston [11th Division] Business Court has determined that a pipeline term added by the seller of natural gas to a form purchase-and-sale contract was binding on the parties and became part of their contract for purposes of the seller’s invocation of a force-majeure provision. The seller declared force majeure when Winter Storm Uri prevented it from delivering the promised amount of gas to the pipeline in February 2021.
Marathon Oil Co. v. Mercuria Energy American, LLC (No. 25-BC11A-0013; 2025 Tex. Bus. 36; September 18, 2025) stemmed from Winter Storm Uri’s impact on a natural-gas purchase and sale agreement between Marathon and Mercuria. The parties entered into a master contract that governed individual transactions. They agreed to the transaction at issue in the case in January 2021 by way of ICE Chat, an instant messaging platform used by natural gas traders. As described by the court, the chat detailed the transaction’s quantity, duration, price, and delivery location. Mercuria sent Marathon a transaction confirmation stating the same terms, along with some additional terms and details. Marathon replied with its own confirmation, adding only a “pipeline” term entitled “Enable Gathering and Processing.” On January 25 Mercuria signed and returned the confirmation with checkmarks near some of the terms but not the “Enable Gathering and Processing” term. A couple of weeks later Winter Uri struck. Marathon declared force majeure and delivered only 424,000 of the 560,000 MMBtu for the month. Mercuria disputed the declaration and filed suit for breach of contract.
Pursuant to the business court’s scheduling order, the parties filed a “Joint Advisory on Early Legal Issues” that identified the legal issues that the court could resolve early in the case for purposes of efficiency or resolution. The court requested briefing on two issues, one of which it decided in this opinion: the parties’ disagreement over the interpretation of the “pipeline term” specified above. Marathon argued that the term was part of the contract because Marathon’s confirmation was binding, became part of the contract, and “either controls over Mercuria’s confirmation or, alternatively, can be read together with Mercuria’s confirmation.” Mercuria countered that the pipeline term was not part of the agreement because the ICE Chat terms control and that, in any event, it rejected the pipeline term when it returned Marathon’s confirmation without checkmarking it.
In an opinion by Judge Andrews (sitting by assignment in the 11th District), the court determined that both confirmations became part of the base contract and neither “trumped” the other. The court observed that the master contract was based on a form published by the North American Energy Standards Board (NAESB) and has been interpreted by several courts, including force-majeure disputes arising out of Uri. Consequently, “[w]hen parties use well-established industry forms without modification, it indicates an intent for the contract to operate in the manner courts have previously construed them,” unless the parties modify the language. Under the NAESB form, parties may elect between written and oral transaction procedures. Here the parties opted for an oral procedure effectuated over the phone or by an electronic data exchange transmission. An oral agreement conforming to the procedure is binding and treated as a signed writing. Further confirmation is not required, though timely transaction confirmations are binding unless the receiving party timely objects in writing or in its own transaction confirmation that specifically reflects the objection. In this case, Judge Andrews wrote, “neither party sent the other a notice stating that a confirmation differed materially from their understanding of the agreement,” i.e., the lack of a checkmark near the pipeline term did not indicate express disagreement with it. The parties went ahead with the transaction on that basis, and Mercuria “pointed to nothing in the Base Contract, the parties’ interactions in this instance, or their prior course of dealing that would put Marathon on notice that Mercuria intended the absence of a check mark on the signed confirmation to constitute notice that the confirmation materially differed from its understanding of the agreement.” (In fact, the parties’ transaction for the prior month, which included the same pipeline term, also featured Mercuria’s checkmarks next to some terms but not others.)
The court next turned to the question of whether competing confirmations reflected a material difference in terms. It determined that they did not, basing its determination partly on a recent federal court decision out of the Southern District of Texas (to which Marathon was also a party), Marathon Oil Co. v. Koch Energy Services (Marathon I), 2023 WL 4032879. In that case, on virtually identifical facts the court ruled that “the base contract and any binding transaction confirmations should be read together as one integrated agreement governing the parties’ transaction.” The facts of Marathon I differed only in that the confirmations contained different pipeline terms, but the terms did not conflict. Consequently, the court held that “the absence of any pipeline in Mercuria’s confirmation does not conflict with the designation of a delivery pipeline in Marathon’s confirmation. As the seller, solely responsible for delivery under the Base Contract, it makes sense for Marathon to identify the means of delivery. If Mercuria wanted the agreement not to include any such delivery specification, it could have told Marathon that or so stated its own confirmation.”
Mercuria further argued that the pipeline term modified the Base Contract’s force-majeure provision and had to be expressly agreed to by both parties. The court rejected this argument, determining that the pipeline term implicated the “commercial terms of the transaction” (i.e., price, quantity, performance obligation, delivery point, period of delivery and/or transportation conditions). Consequently, it did not require express agreement. As to Mercuria’s contention that the ICE Chat, not the confirmations, formed part of the contract, the court held that since the form contract makes transaction confirmations binding and part of the contract, they must be read together with the Base Contract. Here both parties sent transaction confirmations, and Mercuria signed and returned Marathon’s confirmation. It didn’t matter, as Mercuria argued, whether they did it by telephonic or EDI transactions because the Base Contract allows either. The Base Contract also doesn’t distinguish between mandatory and permissive confirmations nor does it privilege one or the other. Finally, the Base Contract doesn’t require that a party sign and return a confirmation in order for it to bind the parties. Both parties sent timely confirmations as provided by the Base Contract. They thus bound the parties and became part of the contract.
