Frontier Drilling, LLC v. XTO Energy, Inc. has the indicia of an inequitable result, but as I remind my wife every time she objects to what she deems to be an outrageous jury verdict, we don't know all the facts and the court's gotta follow the law, so let's not judge.
The facts
Drilling contractor Frontier and operator XTO were parties to a drilling contract that was amended several times by negotiations via oral and/or email communications and then written agreements memorializing the discussions. Frontier's Rig 27 was moved to a site where a certain blowout preventer was required. Frontier offered to install the BOP in exchange for a one-year contract extension. XTO emailed Frontier, " ... XTO will need the 10000 BOP stack immediately. Can we just do an amendment on the stack and another separate amendment later?"
Frontier said yes and sent the amendment to be executed. The contract stated that XTO's execution would serve as the amendment. Having not received the XTO-signed copy, Frontier emailed XTO, stating that they are in the process of taking the BOP to the rig and asked for the signed agreement. XTO responded, "Please consider this email as authorization to execute the swap ... Management is traveling and is in the process of approval." Six months later XTO said it would not execute the amendment and would not pay the costs associated with the installation.
Frontier sued. XTO asserted that the parties never reached an agreement and in any event, such an agreement would violate the Statute of Frauds. XTO's motion for summary judgment was granted and the case was dismissed.
The SOF applies to any agreement in which performance cannot be completed within one year. The court said it did not have to decide if the parties reached an agreement because if they did, the SOF would render the agreement unenforceable. The agreement would be effective in February 2020 and it would not be completed until December 2021. The SOF applied and barred enforcability.
Was the contract signed?
The parties disputed whether the agreement was signed by the person to be charged. XTO's "Please consider this email as authorization ... " email did not satisfy the signature requirement. Under the Texas Uniform Electronic Transactions Act, if a law requires a signature an electronic signature satisfies the law if the transaction is between parties who have both agreed to conduct the transaction by electronic means.
Whether the parties had such an agreement is determined from in the context and surrounding circumstances, including the parties' conduct. The court concluded that every prior contract and amendment consisted of a written agreement signed by both parties. Their conduct did not demonstrate an agreement to conduct transactions via email. In fact, it demonstrated the opposite.
Performance?
Performance can constitute an exception to the SOF. Under the full performance exception, the SOF does not apply "where one party has fully performed under the contract and the only thing remaining is performance by the other party." Although Frontier installed the BOP, it did not provide Rig 27 for XTO's use through December 2021. Frontier did not fully perform.
The partial performance exception allows for equitable enforcement of a contract that otherwise fails to comply with the SOF when the contract is partially performed and denial of enforcement would amount to virtual fraud. But the partial performance must be unequivocally referable to the agreement and corroborative of the fact that a contract actually was made. Frontier's installation was not unequivocally referable to the alleged agreement because Frontier had previously installed a BOP on a different rig free of charge.
That the court was "sympathetic to Frontier's predicament" didn't alter the result.
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