Mustang Pipeline Co. v. Driver Pipeline Co.

Rule of Law:

When a contract expressly states that "time is of the essence," a party's failure to timely perform constitutes a material breach as a matter of law, thereby discharging the other party from its contractual duties, and an express jury finding on the issue of materiality is not required.

Facts:

• In January 1997, Mustang Pipeline Co. (Mustang) entered into a contract with Driver Pipeline Co. (Driver) for Driver to construct the northern 100 miles of a 200-mile pipeline from Mont Belvieu to Longview, Texas.
• During the bidding process, Mustang emphasized that "time was of the essence," requiring pipeline construction to be completed no later than April 30, 1997, and Driver increased its bid by approximately ten percent in response to this demand.
• The parties agreed to a fourteen-week construction schedule, requiring work eleven hours per day, seven days a week.
• Soon after work began, extensive rains delayed the project, leading Driver to propose shutting down operations and, on March 5, 1997, request a thirty-day extension to the completion date.
• At a meeting on March 6, Driver reiterated its intent to shut down operations and proposed a new 161-day construction schedule.
• Fifty-eight days into the ninety-eight-day schedule, Driver had completed only fifteen miles of pipeline and suspended operations.
• By March 17, Driver stated it was still not ready to resume work, which led Mustang's project engineer to certify Driver as in default under the contract.
• Mustang subsequently contracted with Sunland Corporation to finish Driver’s portion of the pipeline, which Sunland completed in September 1997.

Procedural Posture:

• Mustang Pipeline Co. (Mustang) sued Driver Pipeline Co. (Driver) in a state trial court for breach of contract, seeking costs of completion, lost profits, and attorney's fees.
• Driver counter-sued Mustang for breach of contract, alleging wrongful termination, and sought damages, lost profits, and attorney's fees.
• Both parties raised the other's material breach as an affirmative defense in their answers.
• The case was tried to a jury, which found that Driver failed to comply with the contract (awarding Mustang $2,104,601) but also found that Mustang was not justified in terminating the contract (awarding Driver $2,515,958).
• Mustang moved for judgment notwithstanding the verdict (JNOV) to disregard the jury's finding of wrongful termination and the damages awarded to Driver, but the trial court denied this motion.
• Driver moved for JNOV to disregard the jury's finding that Driver breached the contract and the damages awarded to Mustang; the trial court refused to disregard Driver's breach but granted Driver's motion to disregard Mustang's damage award.
• The trial court rendered judgment for Driver, awarding Driver actual damages, attorney's fees, and interest.
• Both parties appealed the trial court's judgment to the Court of Appeals (an intermediate appellate court).
• The Court of Appeals affirmed the trial court's judgment, reasoning that a jury finding on materiality was a prerequisite for Driver's breach to justify termination and that Mustang had not adequately proven its damages were reasonable and necessary.
• Mustang petitioned the Supreme Court of Texas for review.