Norse Petroleum A/S v. LVO Intern., Inc.
Decision Date | 21 June 1978 |
Citation | 389 A.2d 771 |
Parties | NORSE PETROLEUM A/S, Plaintiff, v. LVO INTERNATIONAL, INC., Defendant. |
Court | Delaware Superior Court |
Upon cross-motions for summary judgment. Denied.
S. Samuel Arsht and A. Gilchrist Sparks, III, of Morris, Nichols, Arsht & Tunnell, Wilmington, for plaintiff.
Louis J. Finger of Richards, Layton & Finger, Wilmington, and J. Denny Moffett, Conner, Winters, Ballaine, Berry & McGowen, Tulsa, Okl., of counsel, for defendant.
This matter is before the Court on cross-motions for summary judgment. The central issue is whether the plaintiff, Norse Petroleum A/S ("Norse"), and the defendant LVO International, Inc. ("LVOI"), entered into a binding contractual agreement. An examination of the record reveals the following factual setting:
Norse is a joint stock company organized and existing under the laws of Norway, and is engaged in the exploration and development of petroleum resources. LVOI is a corporate vehicle for investments by farm cooperatives which constitute its shareholders. The cooperatives provide funds and credit to LVOI which, like Norse, is engaged in petroleum development.
Norse and Sante Fe International Corp. ("Sante Fe"), a California corporation, were the sole shareholders of Sante Fe Minerals (U.K.), Inc. ("SFM"), a Delaware corporation. Under their shareholders' agreement, Sante Fe and Norse were to provide for the financing of drilling operations in the United Kingdom sector of the North Sea. The financing was to be done in proportion to their respective ownership interests in SFM: Sante Fe having an eight-ninths interest and Norse, one-ninth.
In the summer of 1975 Norse entered into negotiations with LVOI to obtain financing for Norse's interest in the North Sea petroleum project. During the course of negotiations LVOI was represented largely by its President, Wayne E. Swearingen. In August, 1975, the parties met in Bergen, Norway to discuss the terms of their arrangement. Thereafter, they entered into a letter of intent dated August 20, 1975. The letter contemplated a financial agreement whereby LVOI would receive a call on all production of oil, gas, or other hydrocarbons to which Norse was entitled under its agreement with SFM. In return LVOI was to pay cash and assume certain of Norse's related financial obligations to SFM. Paragraph six of the letter of intent contained certain conditions including approval of the agreement by the Board of Directors of LVOI, to be obtained not later than at a scheduled Board meeting on September 23, 1975. The letter further provided that "any binding agreement on both parties must necessarily be the subject of a mutual satisfactory and definite contract."
After a meeting in Tulsa, Oklahoma, Norse and LVOI continued negotiations into September of 1975. Between September 15 and September 22, the parties negotiated a proposed arrangement by trans-Atlantic telephone and telex communications. Instead of the financial arrangement outlined in the letter of intent, this new arrangement was a proposal to buy outright the Norse position.
The first pertinent telex in the series was dated September 15, 1975. It was sent by Swearingen and confirmed LVOI's offer to purchase Norse's interest. After setting forth the major terms the telex provided:
It also stated:
"INTERIM FINANCING AVAILABLE ONLY IN THE EVENT LVOI BUYS ALL NORSE STOCK IS PROPOSED TO COVER A MAXIMUM DELAY OF SIX MONTHS AND A MAXIMUM AMOUNT OF 3.5 MILLION DOLLARS WHEN AND AS CALLED BY SFM FROM DATE OUR BINDING DEAL IS SIGNED (PERHAPS EARLY IN OCTOBER) UNTIL APPROVAL FOR STOCK TRANSFER AND FINAL CONSUMATION OF SALE."
Norse sent a reply telex dated September 16 seeking to clarify the terms of the proposal. One of the concluding paragraphs of the message provided:
"I UNDERLINE THAT THE PROPOSITION HERE MADE IS ENTIRELY ON BEHALF OF THE TWO OF US AS NEGOTIATORS, AND HAS NEITHER BEEN INTRODUCED TO NORSE'S BOARD NOR STOCKHOLDERS' COMMITTEE, NOR TO OUR BANK DUE TO THE SHORTAGE OF TIME."
After some further exchanges Swearingen sent a telex dated September 18 on behalf of LVOI, the essence of which appears as follows:
After still further communications, Norse sent the following message as part of a September 22 telex:
The following day, however, Swearingen informed Norse by telex that LVOI was having difficulty with bank financing. While he expressed hope that the deal would still be completed, he stated that:
" . . . I MUST RELEASE YOU TO DEAL WITH OTHERS IF YOU CHOOSE TO."
Allegedly LVOI's bank, the Continental National Bank of Illinois, had altered the loan arrangement which it had proposed to LVOI. The new terms would have exposed LVOI's shareholders to considerably greater financial risks and so LVOI's Board refused to approve it. Subsequently, in October, 1975, Norse brought suit alleging a breach of contract on the part of LVOI.
Initially, the parties have raised a choice of law issue. Norse alleges that its September 22 telex is an acceptance; therefore, a binding contract was formed in Norway on that date. Morse further argues that since the contract was formed in Norway, the Court must apply Norwegian law.
A contract is considered to exist when the final act necessary for its formation takes place. Filson v. Bell Tel. Labs, Inc., 82 N.J.Super. 185, 197 A.2d 196 (1964); Varas v. Crown Life Insurance Company,204 Pa.Super. 176, 203 A.2d 505 (1964), cert. denied, 382 U.S. 827, 86 S.Ct. 62, 15 L.Ed.2d 72 (1965); 2 Beale, Conflict of Laws, § 326.1 (1935). Norse's telex of September 22 is purported to be an acceptance. Since an acceptance would have been effective as of the time it was transmitted, Linn v. Employers Reinsurance Corporation, 392 Pa. 58, 139 A.2d 638 (1958); Restatement of Contract (Second), § 64 (Tentative Drafts Nos. 1-7, 1973), Norse's September 22 telex may have created a contract in Norway. As Norse has pointed out, the rule in Delaware is that the law of the place where a...
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