I Accept Your Offer and Ask for More

Originally published by Richard Smith.

The appeal of an oil and gas dispute has led to a multi-million dollar swing in favor of the appellants. The district court had granted a $14 million summary judgment in favor of the seller of oil and gas interests located in New Mexico. The fact scenario is somewhat complex, but the essence seems to be that Three Rivers Operating Co. offered to sell its interests in five properties to MRC Permian Co. pursuant to a preferential purchase right provision in their joint operating agreement. MRC accepted that proposal, for a purchase price of just under $7 million, and further wrote that it was exercising a preferential right to purchase “one hundred percent (100%) of Three Rivers’ interest in the land comprising the Contract Area . . . .” Three Rivers responded to say that there were actually 10 properties for sale for approximately $14 million. MRC then wrote back that it was ready to move forward on Three Rivers’ original offer, but Three Rivers nevertheless concluded that MRC had agreed to buy all ten properties. On cross-motions for summary judgment, the district court entered judgment for Three Rivers, requiring MRC to specifically perform the $14 million deal. The Court of Appeals reversed and rendered judgment for MRC that there was only a $7 million contract for the original five properties.

Three Rivers argued that the initial $7 million offer had been made under a mistaken interpretation of the preferential purchase right clause, and that MRC did not accept that offer in any event because its acceptance letter was actually a counteroffer to buy all of Three Rivers’ interests covered by the JOA. The Court of Appeals disagreed, holding that MRC did not condition its acceptance of the $7 million offer on Three Rivers’ assent to sell any additional properties. So long as it is clear that the acceptance is positive and unequivocal, a contract is formed regardless of whether the offeree makes additional requests at the same time. And when Three Rivers offered to sell all 10 of its properties, that was not an acceptance of an offer by MRC to purchase “100%” of Three Rivers’ interests. MRC had not stated the essential terms of a contract, including purchase price, nor did MRC’s letter indicate any acceptance of a prior offer by MRC. Instead, Three Rivers’ $14 million offer letter was an independent offer of its own, and MRC did not accept it in the manner specified by Three Rivers. The Court of Appeals therefore reversed the trial court’s judgment, rendered judgment for MRC on the $7 million contract, and remanded for consideration of MRC’s costs and attorney fees.

MRC Permian Co. v. Three Rivers Operating Co., No. 05-14-00353-CV

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