* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion

should not be published and is not precedent except under the limited circumstances

set forth in 5TH CIR. R. 47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________

No. 95-21004 

Summary Calendar

_______________

ENRON PETROCHEMICALS COMPANY,

A DIVISION OF ENRON GAS LIQUIDS, INC.,

Plaintiff-Appellant,

versus

THE BARGE DXE 233, et al.,

Defendants,

DIXIE CARRIERS, INC.,

Defendant-Appellee.

_________________________

Appeal from the United States District Court

for the Southern District of Texas

(3:94-CV-533-D)

_________________________

September 10, 1996

Before SMITH, BENAVIDES, and DENNIS, Circuit Judges.

JERRY E. SMITH, Circuit Judge:*

This admiralty suit arises out of the contamination of a

shipment of methanol delivered to Enron Petrochemicals Company

(“Enron”) by a barge owned by Dixie Carriers, Inc. (“Dixie”). The

parties submitted cross-motions for summary judgment, and the

district court, finding that a clause in the contract absolved
2

Dixie of liability, granted Dixie’s motion. We affirm. 

I.

Dixie entered into a charter party agreement or “blanket

agreement” (the “Agreement”) with Tenneco Menthol Company

(“Tenneco”) that provided the terms and conditions of any subsequent contract of affreightment between them. The Agreement

provided Tenneco with the option to utilize Dixie’s barges for

commercial shipping. Enron purchased Tenneco and assumed its

rights, responsibilities, and obligations under the Agreement and

any subsequent contracts of affreightment.

Enron later exercised the option, requesting that Dixie supply

a barge to ship 20,000 barrels of methanol. Dixie tendered the

DXE 233, which had most recently shipped 10,000 barrels of

methanol, to Enron as “last cargo methanol.” After Enron’s cargo

had been discharged, it was found contaminated with acrylonitrile.

II.

We review a grant of summary judgment de novo. Hanks v.

Transcontinental Gas Pipe Line Corp., 953 F.2d 996, 997 (5th Cir.

1992). Summary judgment is appropriate “if the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine

issue as to any material fact and that the moving party is entitled
 

1 The relevant provisions of clause 22 state:

INSURANCE AND MARINE PERILS: . . . [Enron] hereby acknowledges that the

towage rate specified herein does not contemplate or include liability for

loss of or damage to the cargo or an allowance for liability insurance

covering the cargo, and as additional consideration supporting [Dixie’s]

undertakings[,] [Enron] shall and it does hereby agree to hold [Dixie]

. . . harmless from claims for cargo . . . contamination, whether arising

or resulting from an act of neglect or default in the navigation or

(continued...)

3

to a judgment as a matter of law.” FED. R. CIV. P. 56(C). The party

seeking the summary judgment carries the burden of demonstrating

that there is an absence of evidence to support the non-moving

party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).

After a proper motion for summary judgment is made, the non-movant

must set forth specific facts showing that there is a genuine issue

for trial. Hanks, 953 F.2d at 997.

We begin our determination by consulting the applicable

substantive law to determine what facts and issues are material.

King v. Chide, 974 F.2d 653, 655-56 (5th Cir. 1992). We then

review the evidence relating to those issues, viewing the facts and

inferences in the light most favorable to the non-movant. Id. If

the non-movant sets forth specific facts in support of allegations

essential to his claim, a genuine issue is presented. Celotex, 477

U.S. at 327.

III.

The threshold question is whether clause 22 of the Agreement

absolves Dixie of liability for the cargo contamination.1 The
(...continued)

management of the tow, including but not limited to explosion, fire,

collision, stranding, salvage, operations, equipment defects, or other

peril, danger or accident of navigable waters or from any other cause of

whatsoever kind arising. In furtherance hereof, [Enron] agrees to secure

and maintain in effect a contract of cargo insurance, to the full market

value of all cargoes transported hereunder, insuring against all marine

risks and perils, including loss, damage, contamination, salvage and

general average contributions, etc., and to have [Dixie’s] name inserted

as an additional insured in said policies, with loss payable to [Enron]

and [Dixie] as their respective interests may appear, and [Dixie] shall be

deemed to be co-insured, whether so named or not, or to secure a waiver of

assignment and/or subrogation from the cargo underwriters in favor of

[Dixie] on account of any cargo claims paid by such underwriters. In the

event that [Enron] shall fail to procure and maintain insurance as

provided herein, [Enron] shall be liable to and hold [Dixie] harmless from any

claims or demands, losses, cost and expenses, to the same extent that the

required insurance would have protected [Dixie]: and in any claim or suit for

cargo loss or damage, it will be presumed that such insurance, if it had been

procured and maintained would have covered the occurrence, loss or damage in

question. . . .

 

2 The relevant provisions of clause 21 state:

FORCE MAJEURE: [Dixie] . . . shall not, unless otherwise in this charter

expressly provided, be responsible or liable in any way for any loss or

damage or for any failure or delay in performance hereunder, arising or

resulting from: . . . unseaworthiness of the tow unless caused by want of

due diligence on the part of [Dixie] to make the tow seaworthy or to have

it properly manned, equipped and supplied: or from any other cause of

whatsoever kind arising without the actual fault or privity of [Dixie]. 

(Emphasis added.)

4

district court concluded that clause 22 prevents Enron from

recovering from Dixie for cargo contamination. 

With regard to that specific holding, Enron argues that

clause 22 should not be interpreted to cover breach of the implied

warranty to use due diligence. Specifically, Enron argues that

courts disfavor contractual provisions that relieve vessel owners

of liability for breaches of warranty. Moreover, Enron argues that

clause 21,2 when read in conjunction with clause 22, demonstrates

that the agreement does not absolve Dixie of liability for breaches
 

3 The relevant portion of clause 22 states, “[Enron] hereby acknowledges

that the towage rate specified herein does not contemplate or include liability

for loss of or damage to the cargo or an allowance for liability insurance

covering the cargo . . . . In furtherance hereof, [Enron] agrees to secure and

maintain in effect a contract of cargo insurance, to the full market value of all

cargoes transported hereunder. . . .”

 

4 The portion of clause 22 that allows Dixie to recover under the insurance

states that Enron will “have [Dixie’s] name inserted as an additional insured in

said policies, with loss payable to [Enron] and [Dixie] as their respective

interests may appear, and [Dixie] shall be deemed to be co-insured, whether so

named or not, or to secure a waiver of assignment and/or subrogation from the

cargo underwriters in favor of [Dixie] on account of any cargo claims paid by

such underwriters.”

5

of its warranty to use due diligence.

Central to Enron’s argument is the mischaracterization of

clause 22 as a waiver of liability. It is no such thing; rather,

it is a compulsory insurance clause that shifts the cost of

procuring cargo insurance from the carrier to the shipper. See

Twenty Grand Offshore, Inc. v. West India Carriers, Inc., 492 F.2d

679, 682 (5th Cir.), cert. denied, 419 U.S. 836 (1974). In return

for a lower shipping charge, Enron agreed to pay for the cargo

insurance that Dixie normally would provide.3 

The clause requires Enron “either to obtain marine cargo

insurance or to assume liability for those losses that would be

covered by such a policy.” Dow Chem. Co. v. Ashland Oil, Inc., 579

F.2d 902, 904 (5th Cir. 1978) (describing how compulsory insurance

contracts work). If Enron elects to procure cargo insurance, Enron

recovers its loss from the insurance underwriter, and the underwriter is unable to recover from Dixie based on the waiver of

subrogation or the co-insured clause.4 If Enron elects to forgo
 

5 The provision in clause 22 that treats Enron as self-insured states: “In

the event that [Enron] shall fail to procure and maintain insurance as provided

herein, [Enron] shall be liable to and hold [Dixie] harmless from any claims or

demands, losses, cost and expenses, to the same extent that the required

insurance would have protected [Dixie]. . . .”

 

6 See In re Carib Prince, 170 U.S. 655, 659-60 (1898); Transcontinental Gas

Pipe Line Corp. v. Mobile Drilling Barge, 424 F.2d 684, 692 (5th Cir.), cert.

denied, 400 U.S. 832 (1970). 

 

7 Thus, the proper way for Enron to challenge Dixie’s claim that it is free

of liability is to argue that standard cargo insurance does not cover breaches

of the duty to use due diligence. Enron, however, conceded in its cross-motion

for summary judgment that if the agreement is given effect, Dixie is absolved

from liability. 

Moreover, the only time Enron argues that the insurance contract does not

cover this claim is in its reply brief. Raising a claim for the first time in

a reply brief is insufficient to preserve an argument on appeal. Northwinds

Abatement, Inc. v. Employers Ins., 69 F.3d 1304, 1308 n.3 (5th Cir. 1996); Cinel

v. Connick, 15 F.3d 1338, 1345 (5th Cir.) (“An appellant abandons all issues not

(continued...)

6

the insurance, it has chosen to self-insure.5 Id. In either case,

Dixie is absolved of liability only for those risks that normally

would be covered by a marine cargo insurance policy. Id.

Because clause 22 is not a waiver of liability, Dixie properly

argues that Enron misunderstands the impact of clause 22. The

premise of Enron’s argument is that a waiver of liability must be

explicit

6 and that clause 21, which does waive liability explicitly, excluded breach of warranty of due diligence. From those two

propositions, Enron extrapolates that clause 22, which does not

exclude liability for the breach of due diligence, cannot waive

liability for its breach. In addition to the logical leap in

Enron’s argument, the problem with the argument is that clause 22

does not waive liability; Dixie is still liable for any damage that

the cargo insurance normally does not cover.7 Id.
(...continued)

raised and argued in its initial brief on appeal.”), cert. denied, 115 S. Ct. 189

(1994). For that reason, Enron has waived any argument that the cargo insurance

does not cover damage caused by Dixie’s breach of implied warranties. 

 

8 Clause 4 states:

CARGO: Methanol - 10M Bbls or 20M Bbls minimum.

Clause 10 states:

PREVIOUS CARGO: Methanol or tendered suitable to load intended

cargo as determined by Charterer’s terminal representation or

independent surveyor.

7

IV.

In the alternative, Enron advances two reasons why this court

should not uphold clause 22: first, the contract never became

operable; and second, even if it did become operable, it was

voidable. We address each in turn.

A.

Enron provides three reasons why the Agreement never became

operable. We disagree with all three.

1.

Enron first argues that the contract is void because Dixie

failed to meet several conditions precedent to the agreement.

Enron relies on the preamble, clauses 4 and 10, to support its

claim.8 Enron argues that clauses 4 and 10 establish that Dixie

must tender a barge that is capable of carrying methanol. Relying

on the preamble, which states that Enron “hires a tow for transpor-
8

tation . . . upon the following terms and conditions,” Enron claims

that the characteristics of the barge are a condition precedent to

the remainder of the contract.

Under Texas law, a condition precedent invalidates a contract

if (1) the contract creates a condition precedent and (2) the

condition precedent is not met. Texas Dept. of Housing & Community

Affairs v. Verex Assurance, Inc., 68 F.3d 922, 928 (5th Cir. 1995).

A condition precedent is an act or event that must take place

before performance of a contractual obligation is due. Huhenberg

Brothers Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex.

1976). 

The law does not favor conditions precedent. Sirtex Oil

Indus. v. Erigan, 403 S.W.2d 784, 787 (Tex. 1966). In determining

whether a condition precedent exists, a court must glean the intent

of both parties by looking at the entire contract. Citizens Nat'l

Bank v. Texas & P. Ry., 150 S.W.2d 1003, 1006 (Tex.), cert. denied,

314 U.S. 656 (1941). Specific words can be important in overcoming

the legal presumption against conditions precedent:

In order to make performance specifically conditional, a

term such as ‘if,’ ‘provided,’ ‘on condition that,’ or

some similar phrase of conditional language must normally

be included. If no such language is used, the terms will

be construed as a covenant in order to prevent a forfeiture. While there is no requirement that such phrases be

utilized, their absence is probative of the party’s

intention that a promise be made, rather than a condition

imposed.

Criswell v. European Crossroads Shopping Center, Ltd., 792 S.W.2d
 

9 Citizens Nat'l Bank, 150 S.W.2d at 1006 (“It is not usually proper to

consider a single paragraph, clause or provision of a contract by itself in order

to ascertain its meaning but each and every part so that the effect or meaning

of one part or any other part may be determined.” ). 

9

945, 948 (Tex. 1990) (citations omitted). The effect of a

condition will be confined to those parts of the contract to which

the condition specifically relates. Christofferson v. Halliburton

Co., 617 F.2d 403, 406-07 (5th Cir. 1980). 

Read broadly, as Texas law requires,9 the Agreement does not

condition clause 22 on clause 4 or 10. In fact, nowhere in

clause 22 or any other clause does language appear suggesting a

connection with, or dependence on, another clause. The district

court correctly observed that this contract arose when the parties

entered into the Agreement and that Dixie’s fulfillment of each

provision is an entirely separate matter.

2.

Enron next asserts that the Agreement was inoperable because

Dixie failed to tender exact performance, violating clauses 4, 10,

and 16. The premise of Enron’s argument is that the option

contract between it and Dixie would become operable only when both

parties met all their obligations.

Enron can cite no law to support its argument. When Enron

requested Dixie’s barge, as both parties stipulate it did, it

exercised its option under the AgreementSSand the contract became

bilateral. Western Federal Sav. & Loan Ass’n v. Atkinson Fin.
 

10 Clause 22 states that “as additional consideration supporting [Dixie’s]

undertakings, [Enron] shall and it does hereby agree to hold [Dixie] . . .

harmless from claims for cargo.” 

10

Corp., 747 S.W.2d 456 (Tex. App.SSFort Worth 1988, no writ).

Consequently, Dixie’s performance (or lack thereof) of clauses 4,

10, and 16 makes no difference regarding the contract’s

operability.

3.

Third, Enron claims that because it was not obligated to

purchase anything from Dixie (as each contract of affreightment

went into effect entirely at Enron’s discretion), the Agreement

lacked the necessary consideration or mutuality of obligation to

make the contract operable. Consideration makes mutuality

unnecessary for the existence of a contract: “With option

contracts that are supported by consideration there is no

requirement of mutuality of obligation because by their very

nature, one party is obligated to perform at the election of the

other who is not bound by any executory obligation.” Hott v.

Pearcy/Christon, Inc., 663 S.W.2d 851, 854 (Tex. App.SSDallas 1983,

writ ref’d n.r.e.). Indeed, clause 22 expressly states that lower

freight rates served as consideration for absolving Dixie of

liability.10 

Moreover, even if the Agreement lacked consideration, it

became operable as soon as Enron requested the barge from Dixie.
 

11 See also Western Fed., 747 S.W.2d at 461; Tye v. Apperson, 689 S.W.2d

320, 323 (Tex. App.SSFort Worth 1985, writ ref’d n.r.e.); Advance Components,

Inc. v. Coodstein, 608 S.W.2d 737, 740 (Tex. Civ. App.SSDallas 1980, writ ref’d

n.r.e.); Ferguson v. von Seggren, 434 S.W.2d 380, 385 (Tex. Civ. App.SSDallas

1968, writ ref’d n.r.e.). 

11

El Paso Natural Gas Co. v. Western Bldg. Ass’n, 675 F.2d 1135, 1140

(10th Cir. 1982).11 Once Enron exercised its option, the contract

became bilateral and bindingSSand all provisions, including

clause 22, kicked in. We thus reject Enron’s claim that the

Agreement is inoperable for want of mutuality.

B. 

As an alternative ground for not giving full force to the

contract, Enron asserts that the AgreementSSin particular,

clause 22SSshould be voided. To this end, it offers three

theoriesSSfraud, negligent misrepresentation, and breach of the

warranty of seaworthinessSSexplaining why we should rescind the

entire contract. All three arguments fail, however, because

rescission is not a viable remedy.

Rescission should be granted only when both parties can be

returned to the status quo ante. 10 TEX. JUR. 3d Cancellation and

Reformation of Instruments § 40 (1980); United States v. Texarkana

Trawlers, 846 F.2d 297, 304-05 & n.20 (5th Cir.) (applying federal

common law and discussing Texas law), cert. denied, 488 U.S. 943

(1988). Here, we cannot put both Dixie and Enron in their precontract positions. Even if it were to compensate Enron for the
12

cargo contamination, Dixie would still be out of pocket for the

amount it paid Enron. By the same token, leaving Dixie in the same

economic position status quo ante fails to return to Enron the

value of the uncontaminated cargo. Consequently, the contract

cannot be rescinded, and it is not voidable under any of Enron’s

three theories.

IV.

Enron’s final argument is that a breach of contract cannot go

unremedied. Assuming arguendo that Dixie did breach the Agreement,

we are unpersuaded by Enron’s siren call. Enron may still recover

for the cargo contamination under the cargo insurance it procured.

If the insurance covers Dixie’s conduct, then Enron has received

the benefit of the bargainSSit paid lower shipping rates and bore

the cost of buying insurance. If, as we suspect, Enron cannot

recover from its underwriters, it did have a remedy. The

unavailability of cargo insurance to cover this particular fact

pattern is an absolute bar to the operation of clause 22. See

Ashland Oil, 579 F.2d at 904. If Enron had made that argument, it

might have prevailed; it chose not to do so. See supra note 7. We

do not fashion remedies to compensate a party for its litigation

strategy.

AFFIRMED.