* Pursuant to 5 TH C IR

. R. 47.5, the court has determined that this opinion

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

set forth in 5 TH C IR

. 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 Petrochem icals Company

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

parties submitted cross-motions for summary judgment, and th e

district court, finding that a clause in the contract absolved2

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 20,00 0 barrels of methanol. Dixie tendered the

DXE 233, which had most recently shipped 10,0 00 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 j udgment de novo

. H anks 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 fi le,

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

issue as to any material fact and that the moving party is entitled1 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 t he 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.” F E D

. R. C IV

. 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. C elotex 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 deter mination by consulting the applicable

substantive law to determin e 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. I d. If

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

essential to his claim, a genuine issue is presented. C elotex

, 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,

co l lision, 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 p erils, 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

a ssignment 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 a nd expenses, to the same extent that the

required insurance woul d 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 da mage in

question. . . .

2 The relevant provisions of clause 21 state:

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

expressly provided, be responsib l e 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, equipp ed 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 specif ic 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 breaches3 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 o r 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, o r to secure a waiver of assignment and/or subrogation from the

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

such underwriters.”

5 of its warranty to use due diligence.

Cent ral 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. S ee

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.” D ow 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 insuranc e 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 forgo5 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, 69 2 (5th Cir.), c ert.

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 agr e ement 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. N orthw inds

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 I d. 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

explici t 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, w hich does not

exclude liability for the brea ch of due diligence, cannot waive

lia bility 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 t endered suitable to load intended

cargo as determined by C harterer’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 rea sons why the Agreement never became

operable. We disagree with all three.

1.

Enron f irst argues that the contract is void because Dixie

failed to meet several conditions precedent to the agreement.

Enron relies on the preamble, cla uses 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. T exas 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 m ust tak e 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. C itizens 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.2d9 C itizens 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. C hristofferson v. Halliburton

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

Read broadly, as Texas law requires, 9 the Agreement doe s 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 c an cite no law to support its argument. When Enron

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

exercised its option under the Agreement S S and the contract became

bilateral. W estern Federal Sav. & Loan Ass’n v. Atkinson Fin.1 0 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. SS Fort Worth 1988, no writ).

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

10, and 16 makes no difference r egarding the contract’s

operability.

3.

Third, Enron claims that because it was not oblig ated to

p urchase anything from Dixie (as each contract of affreightment

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

lacked the necessary consideration or mutuality of obligation to

make the contract operable. Consideration makes mutuality

unnecessary f or the existence of a contract: “With option

contracts that are supported by consideration there is no

requirement of mutuality of obligation beca use by their very

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

other who is not bound by any executory ob ligation.” H ott v.

Pearcy/Christon, Inc.

, 663 S.W.2d 851, 854 (Tex. App. SS Dallas 1983,

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

freight rates served as consideration for abs olving Dixie of

liability. 10

Moreover, even if the Agreement l a cked 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. SS Fort Worth 1985, wri t ref’d n.r.e.); A dvance Components,

Inc. v. Coodstein

, 608 S.W.2d 737, 740 (Tex. Civ. App. SS Dallas 1980, writ ref’d

n.r.e.); Ferguson v. von Seggren

, 434 S.W.2d 380, 385 (Tex. Civ. App. S S Dallas

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 binding SS and all provisions, including

cla use 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 Agreement SS in particular,

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

theories SS fraud, negligent misrepresentation, and breach of the

warranty of seaworthiness SS explaining why we sh ould rescind the

entire contract. All three arguments fail, however, because

rescission is not a viable remedy.

Rescission should be granted only when bo th parties can be

returned to the status quo ante

. 10 T EX

. J UR

. 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 the12

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 u nder any of Enron’s

three theories.

IV.

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

unremedied. Assuming a rguendo 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 bargain S S it paid lower shipping rates and bore

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

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

unavailability o f cargo insurance to cover this particular fact

pattern is an absolute bar to the oper ation of clause 22. S ee

Ashland Oil

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

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

do not fashion remedies to compensate a party for its litigation

strategy.

AFFIRMED.