TEC Olmos, LLC v. ConocoPhillips Co.
555 S.W.3d 176 | Court of Appeals of Texas | 2018
What This Case Means for Subcontractors
TEC Olmos contracted to drill for ConocoPhillips but missed the deadline and faced $500,000 in liquidated damages. Olmos tried to invoke a force majeure clause, claiming market conditions prevented performance. The Texas Court of Appeals ruled that foreseeable market downturns—like oil price drops—do not qualify as force majeure events. The court enforced the liquidated damages clause, establishing that force majeure only covers truly unforeseeable events beyond reasonable control.
Key Takeaways
- •Market downturns and commodity price fluctuations are legally foreseeable and cannot excuse performance under force majeure clauses, even if they make the work unprofitable.
- •Force majeure catch-all provisions require proving the event was genuinely unforeseeable and beyond reasonable control—not just difficult or expensive to perform.
- •Liquidated damages clauses will be enforced when a subcontractor misses deadlines unless the delay stems from a truly unforeseeable force majeure event, not market conditions.
Fluctuations in the oil and gas market are foreseeable as a matter of law.
Frequently Asked Question
Can I use force majeure to avoid paying liquidated damages if market conditions make my job unprofitable?
No. Courts treat market downturns and commodity price fluctuations as foreseeable events that do not qualify for force majeure protection. You must perform or pay the agreed liquidated damages unless the delay was caused by a truly unforeseeable event beyond your reasonable control, such as a natural disaster or government action.
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