Case shows perils of standard language in non-binding deals

A Dallas judge is considering a case that could force companies to use legal language that more explicitly states preliminary agreements are non-binding.

The issue arose over an agreement  between Houston’s Enterprise Products Partners and Dallas’ Energy Transfer Partners to build a pipeline from Cushing, Oka. to the Gulf Coast. Enterprise later backed out of the deal, and Energy Transfer sued, alleging their preliminary arrangement constituted a legally binding partnership.

In March, a jury sided with Energy Transfer and awarded damages of $319 million. Energy Transfer also wants a the judge to order Enterprise Products Partners to disgorge another $718 million in profits and interest.

State District Judge Emily Tobolowsky is considering whether to agree to the big payout or toss the jury verdict.

Lawyers say the preliminary agreement between the two companies contained standard boilerplate language, and now companies are likely to choose their words more  carefully in drafting and announcing preliminary deals.

See the full story at houstonchronicle.com