Brattle Principals Richard Goldberg and James Read have authored an article published in Law360 that examines potential points of contention when implementing oil and gas contract termination payments, in light of the ongoing decline of energy commodity prices.
In the article, Dr. Goldberg and Mr. Read discuss that despite the relatively straightforward nature of termination payment calculations, there is plenty of room left for disagreement, particularly in implementation. The authors identify potential points of contention when implementing the terms of master agreements that govern most oil and gas contracts. The authors argue that disagreements about these points can result in large differences in monetary claims. They suggest that in many cases, thoughtful and careful application of economic principles can narrow the range of opinion and lead to better outcomes for well-prepared contract parties.
Dr. Goldberg and Mr. Read also share lessons that can be applied to future disputes in contract termination payments. First, contract counterparties should be sure to obtain price quotes or other valid market price data as close as possible to the termination date and time to avoid potential disputes over market value. Additionally, attorneys should be aware of the potential points of contention, be prepared to negotiate, and if necessary, be prepared to litigate by undertaking analysis of alternatives in advance.
The article, “Oil and Gas Termination Payments: Devil Is in the Details,” is available for download below.