Opinion ID: 2429057
Heading Depth: 1
Heading Rank: 4

Heading: good faith and mutuality

Text: Conoco further argues that this Court must place a good-faith limit on Northern's ability to cancel its gas purchase contracts because the alternativeNorthern's freedom to cancel those contracts at willwould render the contract illusory and void for lack of mutuality. In support of its position, Conoco cites two Texas cases that examined contracts that imposed no explicit duties on one of the parties to the contract. See Clement v. Producers' Ref. Co., 277 S.W. 634 (Tex. Com. App.1925, judgm't adopted); Holguin v. Twin Cities Servs., Inc., 750 S.W.2d 817 (Tex.App.El Paso 1988, no writ). In both of these cases, the court examined the contract's purpose and imposed an implied obligation on the otherwise uncommitted party to avoid holding the contract void for lack of mutuality. See Clement, 277 S.W. at 635 (relying on the purpose and nature of the agreement, and on the promises and expenses of the sales agent appointed by the contract, to bind a petroleum company to furnish products for the agent to sell); Holguin, 750 S.W.2d at 818-19 (avoiding a finding that the contract at issue lacked mutuality by determin[ing] that the contract before us implies an obligation on Appellee's part to provide the subject matter of the contract). [3] Both Clement and Holguin state that obligations should be implied only [w]here no other consideration is shown, making an implied obligation necessary to avoid holding the contract void for lack of consideration. Clement, 277 S.W. at 635; accord Holguin, 750 S.W.2d at 819. Here, however, the Agreement is supported by consideration completely apart from the court of appeals' implied good-faith obligation. Consideration is defined as either a benefit to the promisor or a loss or detriment to the promisee. Surrendering a legal right represents valid consideration. Receiver for Citizen's Nat'l Assurance Co. v. Hatley, 852 S.W.2d 68, 71 (Tex.App.Austin 1993, no writ) (citations and quotation omitted). Northern's promise to deliver for processing all gas that it receives under the gas purchase contracts is the surrender of a legal right and therefore is sufficient consideration. See id. Because consideration exists apart from the good-faith duty that the court of appeals inferred, the Agreement does not lack mutuality according to its express terms, rendering Clement and Holguin irrelevant to this case. Conoco relies heavily on one additional case, Portland Gasoline Co. v. Superior Mktg. Co., 150 Tex. 533, 243 S.W.2d 823 (1951). Portland, a natural gas processor, entered into a marketing contract with Superior. See id. at 826. Portland promised to deliver to Superior all of the net butane and propane mixture that it produces, and Superior promised in return to market the mixture to customers, collect on sales, and share the proceeds with Portland. Id. Paragraph Five of the contract provided that, although the parties expected the daily production to exceed 10,000 gallons, Portland would not be in default if it delivered less than that amount so long as what it delivered was its total production. See id. Superior argued that Paragraph Five made the entire contract illusory, because Portland could cease production entirely and thereby avoid any obligation. See id. at 827. We held that mutuality was not lacking and noted that in this contract there was the implied promise of Portland to manufacture and deliver the mixture to Superior.... Id. We think the result in Portland Gasoline was correct; the contract was not void for lack of mutuality. We also think the legal principles stated in the opinion are valid, such as the essential holding of Clement  Mutuality may result from an implied obligation on the part of one of the parties. Id. at 825 (quotation omitted). However, we need not have imposed on Portland an implied obligation to produce and deliver the natural gas mixture because mutuality was not otherwise lacking; Portland's promise to deliver all the mixture that it produced was sufficient consideration to support the contract. Indeed, Portland Gasoline has been squarely criticized for needlessly imposing an implied obligation: This was rightly held to be a bilateral contract, not lacking in mutuality. Portland did not expressly promise that its factory would run or that there would be any output. The court appears to find such a promise by implication (implied promise of Portland to manufacture and deliver, 243 S.W.2d at 827)[,] intimating that such an implication is necessary to the validity of the contract. It is not. 2 JOSEPH M. PERILLO & HELEN HADJIYANNAKIS BENDER, CORBIN ON CONTRACTS § 6.7, at 274 n. 1 (rev. ed.1995) (emphasis added). We agree that an implied obligation was unnecessary in Portland Gasoline and to the extent Portland Gasoline found that such an implied obligation was necessary for the contract to be enforceable, we overrule it.