Nature of the Case
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Facts
D produces natural gas from, among other locations, sources under the sea floor in the Gulf of Mexico. On September 5, 2007, P and D reached an agreement that would govern a series of natural gas sales from D to P. Those general terms were prepared from an industry form published by the North American Energy Standards Board (NAESB). The NAESB form consists of three parts: (1) the Base Contract with General Terms and Conditions; (2) a Transaction Confirmation form, which allows the parties to fill in details regarding specific transactions; and (3) a 'Special Provisions' addendum, which could be used to modify the General Terms and Conditions. Under the Base Contract, D agreed to 'sell and deliver' and P agreed to 'receive and purchase' natural gas. The Base Contract did not recite the details for any specific transaction. Instead, the details of each subsequent sale were to be memorialized in written 'Transaction Confirmations.' The Base Contract did not specify a particular source of the gas D would sell, nor did it state that the gas would be produced by D rather than by another producer. The parties completed Transaction Confirmation forms for the months of December 2007, January, February, March, and April 2008. Each form specified that the performance obligation was 'Firm,' as well as the quantity, price, delivery period, and delivery point for the following month's transaction. Each form also reiterated that it was subject to the Base Contract dated September 5, 2007. Critically, the Transaction Confirmation forms did not specify which transporter was to be utilized for each transaction. The forms also did not state that D would produce the natural gas. The Base Contract and the Transaction Confirmation form for the delivery period of April 1 through April 30, 2008, constitute the full, integrated contract controlling the transaction at issue in this appeal. D's wells were connected through underwater pipelines to the Independence Hub (I-Hub), a floating platform in the Gulf. Other producers also sent gas to the I-Hub. The natural gas D produced at this location was transported through a single underwater pipeline called the Independence Trail Pipeline. The Independence Trail leads to another platform in the Gulf called the West Delta 68. From there, the gas goes to the Tennessee 500, where it is placed into the pool. On April 8, 2008, a leak was discovered in the Independence Trail Pipeline. This stopped all gas transportation through the Pipeline. D could not get any gas from the I-Hub to the Tennessee 500 until June 2008, when the Pipeline was finally repaired. D immediately notified P in writing that it was declaring force majeure under the terms of the Base Contract and that it would not be delivering any gas to the Tennessee 500. The force majeure terms of the contract state: [N]either party shall be liable to the other for failure to perform . . . to the extent such failure was caused by a Force Majeure. The term 'Force Majeure' as employed herein means any cause not reasonably within the control of the party claiming suspension[.]…Force Majeure shall include, but not be limited to . . . interruption and/or curtailment of Firm transportation and/or storage by Transporters[.] P rejected the claim and pointed out that the Tennessee 500 pool is fed by a number of different sources. Therefore, the leak did not affect the availability of natural gas at the Tennessee 500 delivery point. P noted that the Transaction Confirmation form did not identify Enterprise or the Independence Trail Pipeline as the specific transporter. P was forced to purchase gas on the 'spot market.' This gas cost over $300,000 more than P would have had to pay the defendant for the gas under the March 24, 2008 Transaction Confirmation. Plaintiff filed a breach of contract action and the trial judge found D liable for damages. The judge found that 'no base contract number is listed nor a transporter and transporter contract number identified. No special conditions are set forth.' This absence of details was critical to the disposition of this matter.' Nothing in the contract stated that d would only be able to provide the gas through a specific transporter, using a specific route. Gas remained available from other sources at the delivery point. The judge ruled that the leak did not constitute a force majeure event under the contract and was not grounds for excusing D's failure to perform the clear terms of its agreement with P. D appealed.
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