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Fortune Prod. v. Conoco – Case Brief Summary (Texas)

In Fortune Prod. v. Conoco, 52 S.W.3d 671, 679 (Tex. 2000), Conoco paid a premium to purchase the Concho Valley Gas System, including gas purchase contracts. The contract price for residue gas exceeded the market price.

Plaintiffs were producers of natural gas who were operating within the Concho Valley Gas System under existing gas processing contracts. When Conoco bought the plants and the contracts, it terminated the old gas purchase contracts and entered into new contracts with lower prices to the producers.

The gas producers sued for fraud in the inducement on the new contracts. The court discussed the issue of whether the ratification of a contract induced by fraud precluded the right to sue for damages and recognized that, in some circumstances, a party induced to enter a contract by fraud may ratify the contract in such a manner that a claim for damages is foreclosed. Id. at 676--79.

Those producers who continued to sell to Conoco without a written contract (after having learned of the fraud) were not entitled to sue for damages. Those producers who continued to sell to Conoco under a written contract were not precluded from bringing a suit for damages. Id. at 676.

This distinction rests on a requirement to fulfill the terms of a written contract. Those producers selling without written contracts delivered their gas and accepted payment. They were not required to sell, and Conoco was not required to purchase. Those producers who continued to sell to Conoco pursuant to written contracts with Conoco which were induced by fraud did not, as a matter of law, foreclose their right to sue for fraud damages. Id. at 679.