Texas Supreme Court Building
In Equinor Energy LP v. Lindale Pipeline, LLC, the Texas Supreme Court held that Equinor did not breach its agreement with Lindale by purchasing water from other suppliers for certain fracking operations. The Court concluded that the contract’s exclusivity provision applied only to water services “on the Pipeline,” and that the oil wells themselves were outside that defined term. As a result, Equinor was free to buy water for those wells elsewhere.
The opinion is notable because it continues a trend by the Texas Supreme Court of textual based contract analysis. The Court treated the contract as unambiguous and focused closely on the words the parties actually used. It rejected arguments based on the contract’s broader purpose, the parties’ course of performance, and fairness concerns about whether Lindale got the benefit of its bargain. In the Court’s view, once the text is clear, those considerations do not permit a court to expand the agreement beyond its written terms. An example of this philosophy is found towards the end of the Court’s opinion:
As we have said time and again, courts may not rewrite a contract under the guise of interpretation.” Sundown Energy LP v. HJSA No. 3, L.P., 622 S.W.3d 884, 889 (Tex. 2021) (per curiam).
Perhaps Lindale understood the contract to make it the exclusive provider of water to the wells, not just of water on the Pipeline. But the contract didn’t say that. We’ve repeatedly emphasized that the “principle of freedom of contract requires us to recognize that sophisticated parties have broad latitude in defining the terms of their business relationship, and courts are obliged to enforce the parties’ bargain according to its terms.” Id. (internal quotation marks omitted). If Lindale wanted the exclusive right to provide water to the wells, then it was perfectly free to refuse the contract as drafted and to propos alternative language. But cf. The Godfather (Paramount Pictures 1972) (describing offers that, unlike the one here, can’t be refused).
That makes Equinor another strong example of the Texas Supreme Court’s continuing preference for strict textualism in contract disputes. The lesson for Texas businesses is straightforward: courts are unlikely to rescue a party from imprecise drafting by declaring ambiguity or by looking to how the deal operated in practice. If a party wants broader contractual protection, it must say so clearly in the contract itself.