pjc-oil-and-gas-2024-lib

O IL AND G AS I NDUSTRY A GREEMENTS

PJC 305.20

PJC 305.20 Trade Custom (Comment) Evidence of trade custom may aid interpretation of ambiguous contract. When a court determines that a contract is ambiguous, the meaning of the ambiguous language becomes a fact issue for the jury, and extraneous evidence, such as industry custom and usage, may be admitted to aid interpretation of it. Barrow Shaver Resources Co. v. Carrizo Oil & Gas, Inc. , 590 S.W.3d 471, 480 (Tex. 2019). Like other evidence, evidence of trade custom and usage cannot be used to add, alter, or change the contract’s terms. Barrow-Shaver Resources Co. , 590 S.W.3d at 485. If the court determines that the contract contains ambiguous language, and one or more of the parties have submitted evidence of industry custom or practice related to the ambiguous language, the following instruction may accompany PJC 305.3 and 305.12: You may consider evidence of custom and usage of trade in the interpretation of a contract if you find that a custom and usage of trade in the [ specify type of industry or trade ] industry was— 1. known personally to the parties to the contract; or 2. so general and universal that the parties are charged with knowledge of its existence to such an extent as to raise a presump tion that they dealt with reference to it. State National Bank of Houston v. Woodfin , 146 S.W.2d 284, 286 (Tex. App.—Galves ton 1940, writ ref’d); Barreda v. Milmo National Bank , 252 S.W. 1038, 1039–40 (Tex. Comm’n App. 1923, judgm’t adopted); Virginia Power Energy Marketing, Inc. v. Apache Corp. , 297 S.W.3d 397, 406–07 (Tex. App.—Houston [14th Dist.] 2009, pet. denied). Industry. An industry custom and usage of trade inquiry is limited to that indus try or trade in which the parties operate. See, e.g. , Energen Resources MAQ, Inc. v. Dalbosco , 23 S.W.3d 551, 556 n.1 (Tex. App.—Houston [1st Dist.] 2000, pet. denied). Presumption. Once a presumption of knowledge of industry custom and usage of trade is raised, “one asserting lack of knowledge must rebut the presumption.” Ener gen Resources MAQ, Inc. , 23 S.W.3d at 556 n.1. The instruction may need to be modi fied if the rebutting party proffers evidence of lack of knowledge. Silent terms in agreement. “[W]hen a contract is unambiguous yet silent as to an immaterial, non-essential term, it requires no further supplementation” and a jury can not consider custom and usage of trade to add such a term to an agreement. Barrow Shaver Resources Co. , 590 S.W.3d at 486. UCC article 2 cases. Trade custom, course of dealing, and course of performance are relevant in determining the meaning of the agreement. See Tex. Bus. & Com. Code §§1.303, 2.202 (Tex. UCC). Under the Uniform Commercial Code, “[a] ‘usage of trade’ is any practice or method of dealing having such regularity of observance in a

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