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Court Looks to Unambiguous Meaning of Contract Terms
Description Appeals court affirmed district court decision in favor of party that insisted on strict reading of terms of contract. When terms are unambiguous, the court will not interpret a contract in a way that leads to unreasonable results.
Topic Contracts
Key Words Meaning of Terms
C A S E   S U M M A R Y
Facts Amerada Hess produces natural gas from offshore mineral leases. In 1982, Hess and Texas Eastern, a gas pipeline company, executed a 20-year contract in which Eastern agreed to "take or pay" for gas produced from a specific lease area, up to the amount believed to exist in the gas field. The contract stated that Hess could substitute gas from other sources up to the quantity believed to exist in the field. As the gas from the specified lease area began to run out, Hess substituted gas from another lease area. Eastern did not want more gas than was believed to exist in the gas field because the contract price was higher than the market price. Hess insisted that Eastern continue to take the same quantity of gas for the full 20 years. District court held for Eastern that it did not have to take gas from the new lease area; Hess appealed.
Decision Affirmed. "Under Louisiana law, the interpretation of an unambiguous contract is an issue of law for the court." The contract is clear in its wording about how substitution of gas may occur. Hess may not vary from the terms of the contract and substitute more gas than Eastern had an obligation to buy.
Citation Texas Eastern Transmission Corp. v. Amerada Hess Corp., 145 F.3d 737 (5th Cir., 1998)

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