Face Challenges Confidently

522 Matador Prod. Co. v. Weatherford Artificial Lift Sys., Inc.

Tuesday, December 8th, 2015

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.

Matador Prod. Co. v. Weatherford Artificial Lift Systems, Inc. held that a party to a contract seeking indemnity from the consequences of its own negligence must disclose such intent in a reasonable manner using specific terms within the four corners of the contract. Matador (“Operator”) drilled a well and hired Weatherford (“Contractor”) to frac it. It was the first time they had worked together. Contractor’s Stimulation Recommendation contained, in a very small, indistinct font, the following:

[Contractor] . . . will provide the requested equipment, materials, or services to its customer. Such provision shall be governed by the terms and conditions of the applicable master service agreement between the parties. In the event that there is no such master services agreement, [Contractor’s] standard terms and conditions, a copy of which can be found at [its website] shall be applicable to the provision of such equipment, materials, or services.

The parties did not utilize a master services agreement, nor did Contractor ever provide a copy of the terms and conditions on the website to Operator. The terms on the website included a waiver by Operator of Contractor’s responsibility for “incidental or consequential damages of any kind.”

Contractor suffered equipment malfunctions which caused delays and altered the crucial amount and timing of materials Contractor was able to pump into the frac, which resulted in a bad frac. Operator refused to pay, and Contractor sought to avoid liability for the bad frac by the language in Contractor’s terms and conditions listed only on their website and tucked away by reference in small print in the Stimulation Recommendation.

The court relied heavily on the express negligence doctrine and the leading case of Dresser Industries, Inc. v. Page Petroleum, Inc. “The express negligence doctrine states that a party seeking indemnity from the consequences of that party’s own negligence must express that intent in specific terms within the four corners of the contract [conspicuously enough] to attract the attention of a reasonable person when he looks at it.” Here, because Contractor could not reasonably argue that it provided conspicuous notice of its intent to substantially limit its liability for its own negligence, the court determined that the onerous terms and conditions found only on Contractor’s website were “unenforceable as a matter of law.” The case was reversed and remanded for trial without Contractor’s website provisions.

The significance of the case is the reaffirmation of the express negligence doctrine that waiver provisions relieving a party from the consequences of its own negligence must be both explicit and conspicuous within the four corners of the controlling instrument.