Denbury Onshore, LLC v. Precision Welding, Inc.
| Docket Number: | 2010-CA-01880-SCT Linked Case(s): 2010-CA-01880-SCT |
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| Supreme Court: | Opinion Link Opinion Date: 08-02-2012 Opinion Author: Dickinson, P.J. Holding: Reversed and Remanded |
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| Additional Case Information: |
Topic: Contract - Validity of contract - Future contracts - Terminable at will - Time and materials bid - Hard money bid - Reasonable time Judge(s) Concurring: Carlson, P.J., Randolph, Lamar and Pierce, JJ. Dissenting Author : King, J. Dissent Joined By : Kitchens and Chandler, JJ. Procedural History: Jury Trial Nature of the Case: CIVIL - CONTRACT |
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| Trial Court: |
Date of Trial Judgment: 08-12-2010 Appealed from: Lincoln County Circuit Court Judge: David H. Strong Disposition: Jury verdict for $1,500,000 in favor the Appellee. Case Number: 2007-100-LS |
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| Party Name: | Attorney Name: | |||
| Appellant: | Denbury Onshore, LLC |
W. SCOTT WELCH, III
WILLIAM N. REED |
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| Appellee: | Precision Welding, Inc. | ROBERT V. GREENLEE WALTER C. MORRISON, IV JOHN HOWARD SHOWS |
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Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Contract - Validity of contract - Future contracts - Terminable at will - Time and materials bid - Hard money bid - Reasonable time |
| Summary of the Facts: | For four years, Precision Welding, Inc., a subcontractor, provided construction services to Denbury Onshore, LLC, under an oral agreement. Denbury – claiming its contract with Precision was terminable at will – terminated the relationship in 2006. Precision filed suit, claiming Denbury had breached its obligation to keep Denbury on the job until the completion of the project. A jury found for Precision and awarded it $1,500,000 in damages. Denbury appeals. |
| Summary of Opinion Analysis: | Issue 1: Validity of contract Denbury argues that the trial court erred by denying its motions for directed verdict, summary judgment, and JNOV. While it is undisputed that Denbury and Precision had an oral contract regarding the hourly rate to be paid by Denbury for Precision’s work, Denbury claims that it never agreed to any particular duration or scope of the work, or – other than the hourly rate – to any particular price for the job. Without some written evidence of purchase price or a method of determining a purchase price, the agreement would have to be regarded as merely a memorandum of intent. While courts may supply reasonable terms which the parties omitted in the contracting process, such as a time for performance, essential terms such as price cannot be left open ended questions in contracts which anticipate some future agreement. Contracts to enter into future contracts must contain all material and essential terms and leave none to be agreed upon as the result of future negotiations. That is because mere agreements to agree are unenforceable. When the parties to a contract agree to the scope of the work performed, but do not specify the time or duration for performance, the Court may infer a reasonable time. But where parties enter a contract with no specific scope of work, the contract is terminable at will by either party. A valid contract existed here. The relationship between Denbury and Precision was for hourly construction labor. And Denbury hired Precision by accepting the rate sheet Precision supplied. That rate sheet provided specific hourly rates for manual labor, hourly rates for use of certain equipment, and per-day and per-month charges for other specific types of equipment. The scope of the bid went no further than an agreement for Precision to be paid its hourly rate for each hour of work performed, according to the rate sheet. So, while the price for each hour of work performed was known and agreed to, the parties had no agreement as to any particular number of hours of work. Just as Denbury was free to increase the number of work hours given to Precision, it was free to bring in other welding contractors to do part of the work; and it was free to terminate the relationship so long as it paid Precision for each hour worked, as agreed. Issue 2: Terminable at will Denbury argues that the contract was indefinite in time, and therefore terminable at will by either party upon reasonable notice and that the issue of whether the contract was terminable at will never should have gone to the jury. To determine the terms of a contract – so as to determine definiteness – the Court applies an objective standard. The Court looks to the parties’ conduct to determine whether the contract was indefinite in time. The relationship between Denbury and Precision began in 2002 and ended in 2006. During that time, Precision provided construction services at multiple plant locations across the state, and the parties never discussed any end date or any particular amount of work for Precision. A “time and materials” bid is distinct from a “hard-money” bid (also known as a “turnkey” or “fixed-price” bid). A “hard-money” bid is an exclusive contract whereby the parties negotiate a total sum for labor, equipment, materials, and profit. Further, a hard-money bid is a contract to build an entire project – as a whole or as a unit – for a fixed amount. Because the bid here was a “time and materials” bid, the agreement was for hourly labor – not a definite agreement to build the entire plant. Because Denbury orally contracted for Precision’s labor – charged at hourly rates with no specific end date, no particular number of hours, and no set scope of work committed to Precision – the contract was indefinite in duration. A contract without limit as to duration, will not be construed as a perpetual contract but rather as terminable at the pleasure of either party, or that the things to be done shall be performed within a reasonable time. Denbury was free to terminate the contract, but Precision was entitled to reasonable notice of the termination. A reasonable time is an issue for resolution by the jury as to whether appellant’s notice to terminate the contract was reasonable under the circumstances. Therefore, that issue is reversed and remanded for trial. The contract was clearly terminable at will, and the trial judge should have so instructed the jury. |
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