Dresser Industries, Inc. v. Page Petroleum, Inc.
853 S.W.2d 505, 1993 WL 101861 (1993)
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Rule of Law:
Contractual provisions that relieve a party in advance of liability for its own negligence, whether labeled as indemnity agreements or releases, are not enforceable unless they satisfy the fair notice requirements of conspicuousness and the express negligence doctrine.
Facts:
- Page Petroleum, Inc. (Page) drilled an oil well and contracted with Dresser Industries, Inc. (Dresser) to conduct log tests.
- The contract between Page and Dresser included a provision stating Page would indemnify Dresser and hold it harmless from all claims for subsurface damage, including those caused by Dresser's own negligence.
- During the tests, a piece of Dresser's equipment became stuck in the well.
- Page then contracted with Houston Fishing Tools (Houston Fishing) to retrieve the stuck equipment.
- The contract between Page and Houston Fishing contained a provision stating Houston Fishing would not be liable to Page for any injury or damage to property, even if caused by Houston Fishing's own negligence.
- While attempting the retrieval, Houston Fishing lost several thousand feet of its own wireline and drill pipe in the well, which could not be recovered.
- After a failed remedial procedure, Page was forced to plug and abandon the original well and drill a new one.
Procedural Posture:
- Page Petroleum sued Dresser Industries and Houston Fishing Tools for negligence in a Texas trial court.
- A jury found Page 50% negligent, Houston Fishing 40% negligent, and Dresser 10% negligent.
- The trial court entered judgment against Houston Fishing for $334,400 and against Dresser for $83,600.
- Both Dresser (appellant) and Houston Fishing (appellant) appealed to the Texas Court of Appeals.
- The Court of Appeals affirmed the judgment against Dresser but reversed the judgment against Houston Fishing, finding the release in the Houston Fishing contract was enforceable.
- Both Page (petitioner) and Dresser (petitioner) filed applications for writ of error to the Supreme Court of Texas, which granted both applications.
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Issue:
Do the fair notice requirements of conspicuousness and the express negligence doctrine, which apply to indemnity agreements, also apply to contractual releases that relieve a party in advance of liability for its own negligence?
Opinions:
Majority - Gonzalez, Justice
Yes. The fair notice requirements of conspicuousness and the express negligence doctrine apply to both indemnity agreements and to pre-injury releases of a party's own negligence. Because the policy considerations for both types of agreements are the same—they represent an extraordinary shifting of risk—there is no reason to apply the protections to one but not the other. Both types of clauses are used to exculpate a party from the consequences of its own negligence and must therefore provide fair notice to the party against whom they will operate. The court also holds that whether a contractual provision is conspicuous is a question of law for the court to decide, not a question of fact for the jury, in order to promote commercial certainty and uniformity. Applying this standard, the court found the exculpatory clauses in both the Dresser and Houston Fishing contracts were unenforceable because they were located on the back of a work order in a series of numbered paragraphs without headings or contrasting type, and thus were not conspicuous.
Analysis:
This decision significantly clarifies Texas contract law by unifying the treatment of pre-injury releases and indemnity agreements that shield a party from its own negligence. By extending the fair notice requirements to releases, the court closed a potential loophole and ensured that any such extraordinary risk-shifting provision must be clear and obvious. Furthermore, by defining conspicuousness as a question of law for the judge, the ruling provides greater predictability for commercial parties drafting contracts and discourages burying significant liability waivers in fine print. This precedent forces contract drafters to use conspicuous methods like bold text, capital letters, or separate headings for any clause seeking to absolve a party of its own future negligence.
