Energy Law

Fifth Circuit Considers Conditional Consent Issue in Cedyco v. Petroquest

By Anna Knull:

In Cedyco Corp. v. Petroquest Energy LLC, No. 05-20493, the Fifth Circuit considered claims for breach of contract and specific performance brought under Texas law and arising from the sale of the working interest in two Louisiana oil wells at auction. The wells were sold under the condition that PetroQuest would not sell or assign the mineral rights without first obtaining the written consent of Exxon, from whom PetroQuest had subleased the interest. Exxon granted consent conditioned on PetroQuest remaining obligated for the original sublease and indemnifying Exxon for any liability arising from Ceydco's operation of the lease. PetroQuest refused to complete the sale to Ceydco under these terms, and Ceydco sued PetroQuest for breach of the contract for sale and specific performance. In reversing summary judgment in favor of Ceydco, the Fifth Circuit held that though a contract for the sale of the wells had been formed, the contract contained a condition precedent that Exxon consent to the assignment. Because PetroQuest was not obligated to accept Exxon's terms, Exxon's conditional consent was not consent under the contract; consequently, PetroQuest's obligation to perform under the contract never came due.

Full post as published by The Energy Law Blog on August 23, 2007 (boomark / email).