IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 12-20716

ANADARKO PETROLEUM CORPORATION,

Plaintiff - Appellant

v.

WILLIAMS ALASKA PETROLEUM, INCORPORATED,

Defendant - Appellee

Appeal from the United States District Court

for the Southern District of Texas

Before SMITH, HAYNES, and GRAVES, Circuit Judges.

HAYNES, Circuit Judge:

Anadarko Petroleum (“Anadarko”) appeals the district court’s grant of

summary judgment in favor of Williams Alaska Petroleum (“Williams Alaska”)

in this breach-of-contract action. Anadarko argues that Williams Alaska ignored

the parties’ agreements to pass through shipping credits on purchased oil,

denying it more than $9 million due under the contract. In light of the 

agreements, we REVERSE and RENDER judgment in favor of Anadarko for the

amount of the credit, and REMAND for a determination of interest and

attorney’s fees.

United States Court of Appeals

Fifth Circuit

F I L E D

July 10, 2013

Lyle W. Cayce

Clerk

 Case: 12-20716 Document: 00512302437 Page: 1 Date Filed: 07/10/2013
No. 12-20716

I.

Anadarko produces crude oil on the Alaskan North Slope, and Williams

Alaska operates a refinery in Alaska near the Trans Alaska Pipeline System

(“TAPS”). The two parties entered into two purchase agreements in 2000 and

2001, under which Anadarko agreed to sell crude oil to Williams Alaska. The

first agreement became effective on September 1, 2000, and expired pursuant to

its own terms on November 30, 2001. The second purchase agreement was

executed and became effective on December 1, 2001. Anadarko terminated the

second agreement pursuant to a termination agreement, signed on September

25, 2002, and becoming effective on December 31, 2002. 

Under both agreements, the parties tied the contract price for crude oil to

several factors, including an independent quality assessment performed by the

TAPS Quality Bank.1 The TAPS Quality Bank is a third-party accounting

arrangement designed to ensure that pipeline users are appropriately

compensated for the value of the crude oil they ship through the common-carrier

pipeline. The Quality Bank is a “zero sum” operation: shippers of lower-quality

crude oil pay into the Quality Bank, while shippers of higher-quality crude oil

receive payments from the Quality Bank. Both are known as “Quality Bank

adjustments.”

During the contractual relationship, the exact amounts of the prevailing

Quality Bank adjustments were not known at the time Anadarko invoiced

Williams Alaska for the crude oil delivered the prior month. Anadarko derived

1 The contract pricing provision reads:

Price will be the average of [an index price for crude oil] less the following amounts[:]

. . . Quality Bank payments required for the shipment of Alpine crude oil from the inlet

of the Alpine Pipeline to Pump Station #1 on TAPS. If Quality Bank for Alpine crude

oil is a credit, Price will be increased by the amount of the credit. Price will not be

adjusted for any Quality Bank payments or credits downstream of Pump Station #1 on

TAPS.

(emphasis added).

2

 Case: 12-20716 Document: 00512302437 Page: 2 Date Filed: 07/10/2013
No. 12-20716

the contract price using the other known factors and by estimating the amounts

for the Quality Bank adjustments. The parties would then “true-up” the price,

or bring it to the correct balance, the following month based on the actual

Quality Bank credits or debits received by Williams Alaska.

Several years after the termination of the contracts, the Federal Energy

Regulatory Commission (“FERC”) determined thatthe methodology for assessing

the quality of oil entering the pipeline was inaccurate. FERC changed the

methodology and applied the change retroactively to February 1, 2000. The new

methodology resulted in a substantial credit—over 9 million dollars—issued to

Williams Alaska by the Quality Bank, based on the crude oil that was produced

by Anadarko and sold under the agreements. 

II.

We review a grant of summary judgment de novo, applying the same

standard as the district court. Moss v. BMC Software, Inc., 610 F.3d 917, 922

(5th Cir. 2010). Summary judgment is appropriate if no genuine issue of

material fact exists and the moving party is entitled to judgment as a matter of

law. FED. R. CIV. P. 56(a). Contract interpretation, including the question of

whether a contract is ambiguous, is a question of law subject to de novo review. 

Instone Travel Tech Marine & Offshore v. Int’l Shipping Partners, Inc., 334 F.3d

423, 428 (5th Cir. 2003). 

III.

The district court interpreted the contractual language and concluded that

the agreements called for “contemporaneous” payments and thus did not entitle

Anadarko to the later-determined Quality Bank credits.2 The pricing provision

2 Alternatively, the district court also concluded that Williams Alaska’s receipt of

adjustments from the Quality Bank was a condition precedent to its duty to pay any credit to

Anadarko under the agreement, and that condition did not arise prior to the contract’s

termination. We disagree. A condition precedent is an event that must be performed before

a right can accrue to enforce an obligation. Centex Corp. v. Dalton, 840 S.W.2d 952, 956 (Tex.

3

 Case: 12-20716 Document: 00512302437 Page: 3 Date Filed: 07/10/2013
No. 12-20716

states that “if Quality Bank for Alpine crude oil is a credit, Price will be

increased by the amount of the credit.” The payment provision in the

Agreements provided that: “Payment will be made by wire transfer of

immediately available funds on or before the 20th day of the month following the

month of delivery.”

A contract for the sale of oil is a contract for the sale of goods under the

Texas Uniform Commercial Code (“U.C.C.”). TEX. BUS. & COM. CODE § 2.107(a); 

Fletcher v. Ricks Exploration, 905 F.2d 890, 892 (5th Cir. 1990); Lenape Res.

Corp. v. Tenn. Gas Pipeline Co., 925 S.W.2d 565, 577 (Tex. 1996) (Phillips, C.J.,

concurring in part and dissenting in part). Although the terms of a written

agreement may not be contradicted by contemporaneous or antecedent evidence,

terms may be explained by course of dealing or course of performance. TEX.BUS.

& COM. CODE §§ 1.205; 2.202; 2.208.

Construing the effect of the agreements in light of the contract and the

parties’ course of performance, we conclude that the judgment for Williams

Alaska cannot stand. While the payment provision providing for payment by the

twentieth day of the month indicates the parties’ intent that Williams Alaska’s

monthly payments should be made on a timely basis, that is the extent of its

reach. Nothing in this provision—or in the remainder of the

agreements—indicates that if Williams Alaska’s payments were later

determined to be inaccurate, the parties would let the error stand. Furthermore,

the plain language of the price provision clearly states that if Quality Bank

1992). Although the provision “[i]f Quality Bank for Alpine crude oil is a credit, Price will be

increased by the amount of the credit” uses conditional language, it does not create a condition

precedent to Williams Alaska’s ultimate obligation to pay Anadarko the contract price for the

crude oil delivered. Here, the “if” term is meant to differentiate the situation where the

Quality Bank instead assessed a payment because the value ofthe crude oil delivered was less

than the common stream. The obligation to pass through Quality Bank credits attached to

Anadarko’s tender of the crude oil, and the wording does not speak to when the credits are

given.

4

 Case: 12-20716 Document: 00512302437 Page: 4 Date Filed: 07/10/2013
No. 12-20716

adjustments are a credit, “Price will be increased by the amount of the credit.” 

The price provision contains no encumbering terms to indicate that there is a

time limitation on Williams Alaska’s obligation to pay following receipt of the

credit.

Moreover, the undisputed evidence shows that the parties’ course of

performance indicates that they consistently made adjustments to the amount

of payment due at a time after the contract payment date, in order to “true-up”

the actual Quality Bank adjustments from the estimated amounts. We construe

the express terms of an agreement, where reasonable, to be consistent with the

applicable course of performance. See TEX.BUS. &COM.CODE §§ 1.303(e), 2.202. 

While the parties were not confronted with FERC-ordered retroactive Quality

Bank adjustments, their course of performance shows that through their “trueup” arrangement, they did not treat the payment provision’s monthly schedule

as conclusive on Williams Alaska’s obligation to pay the correct purchase price. 

Accordingly, the agreements require Williams Alaska to remit any Quality Bank

credits it receives for the crude oil purchased under the contract. 

We further reject Williams Alaska’s contention that the obligation to remit

the credits expired upon the termination of the agreement. When a contract

terminates, “all obligations which are still executory on both sides are

discharged but any right based on prior breach or performance survives.” TEX.

BUS. & COM. CODE § 2.106(c). An obligation is executory on both sides if it is

“one that is still unperformed by both parties or one with respect to which

something still remains to be done on both sides.” Lee v. Cherry, 812 S.W.2d 361,

363 (Tex. App.—Houston [14th Dist.] 1991, writ denied) (emphasis in original)

(internal quotation marks omitted). Anadarko gave notice under the terms of

the agreements that the contract would not renew as of January 1, 2003. 

Effectively, Anadarko no longer promised to sell crude oil to Williams Alaska,

and Williams Alaska was not obligated to purchase oil after that date. Williams

5

 Case: 12-20716 Document: 00512302437 Page: 5 Date Filed: 07/10/2013
No. 12-20716

Alaska’s obligation to remit Quality Bank credits, however, is tied to Anadarko’s

prior tender of the crude oil. This is again evidenced by the parties’ conduct:

Williams Alaska made “true-up” payments in early 2003, after termination,

based on crude oil sold in the months prior. Thus, we conclude that where

Anadarko has already discharged its full performance under the contract by

tendering the oil, Williams Alaska’s obligation to pay the correct contract price,

including the Quality Bank credits, is no longer executory and thus survives the

contract’s termination.

Williams Alaska argues that Anadarko is barred by the statute of

limitations. A four-year period applies to actions based upon breach-of-contract

claims for the sale of goods. TEX. BUS. & COM. CODE § 2.725(a). “A cause of

action accrues when the breach occurs[.]” Id. § 2.725(b). Because the contract’s

price provision required Williams Alaska to account to Anadarko for Quality

Bank adjustments on the purchased oil, Williams Alaska did not breach this

provision of the contract until it received the Quality Bank adjustments and

failed to remit them. The contract thus was breached in August 2007. As

Anadarko filed suit in March 2011, it was brought within the four-year statute

of limitations and is not time-barred.

Finally, we conclude that Anadarko is entitled to interest on the unpaid

Quality Bank credits from the time of breach. The contract expressly provided

for the accrual of interest for any payment not made when due.3 Contrary to

Williams Alaska’s contention, Anadarko was not required to issue an invoice to

3 Paragraph F of the General Provisions incorporated into the agreements provides

that: “In the event that [Williams Alaska] fails to make any payment when due, [Anadarko]

shall have the right to charge interest on the amount of the overdue payment at a per annum

rate which shall be two percentage points higher than the published prime lending rate of

Morgan Guaranty Trust Company of New York on the date payment was due, but not to

exceed the maximum rate permitted by law.” The “published prime lending rate” of the

successor in interest to Morgan Guaranty Trust Company was 8.25% on August 20, 2007,

making the prejudgment interest rate applicable here 10.25%.

6

 Case: 12-20716 Document: 00512302437 Page: 6 Date Filed: 07/10/2013
No. 12-20716

trigger the running of prejudgment interest. Indeed, as we discussed above,

there was no contractual precondition on Williams Alaska’s obligation to pay the

contract price, other than Anadarko’s tender of the oil. Therefore, Williams

Alaska’s failure to remit the credits was a “fail[ure] to make any payment when

due” under the agreements, and Anadarko is entitled to charge interest on this

amount from the time of the breach in August 2007. Further, as the prevailing

party in a breach-of-contract action, Anadarko is entitled to attorney’s fees under

Texas law. See TEX. CIV. PRAC. & REM. CODE § 38.001(8).

Based on the foregoing discussion, we REVERSE and RENDER judgment

in favor of Anadarko for the amount of the credit, and REMAND to the district

court to calculate the interest and determine attorney’s fees owed to Anadarko,

and any other proceedings consistent with this opinion.

7

 Case: 12-20716 Document: 00512302437 Page: 7 Date Filed: 07/10/2013