Texaco v. Pennzoil p.39 1987 Facts: Pennzoil is suing Texaco for tortuous interference with a contract. Pennzoil claims to have a contract to buy Getty Oil. Texaco then came in and purchased Getty Oil. The trial is a tort trial but we are concerned on the concept that Pennzoil and Getty may or may not have a contract. Pennzoil initially makes a tender offer (offer to shareholders to buy stock at a given price). They make a memorandum agreement which says the deal is subject to board approval. The board does not approve the deal. The board makes a counter proposal for $110 a share plus a $10 debenture (bond). They continue to negotiate and eventually agree on a $110 price and a $5 stub. The board approves the offer and Pennzoil accepts it. The next day both companies print press releases. The investment bankers for Getty continue to shop the deal and they find Texaco to pay a higher deal. The board votes to withdraw the counter-proposal with Pennzoil and continue on with Texaco. Court looks at 4 main points as factors (1) whether a party expressly reserved the right to be bound only when a written agreement is signed. For this Texaco says the agreement says “subject to blah blah,” the court says this is just typical writing and they didn’t mean anything by it. (2) whether there was any partial performance by one party that the party disclaiming the contract accepted. There was none in this case but they court says that is not unusual in this short period of time (a few days). (3) whether all essential terms of the alleged contract had been agreed upon. There had not been but in a contract like this you are not going to agree upon every little detail in the offer and acceptance phase. (4) whether the complexity or magnitude of the transaction was such that a formal, executed writing would normally be expected. This one goes to Texaco. In the end the court felt all the factors added up in favor of Pennzoil.
Proc:
Holding: