Manchester Pipeline Corp. v. Peoples Natural Gas Co.

Manchester Pipeline Corp. (Manchester) (plaintiff) and Peoples Natural Gas Company (PNG) (defendant) began negotiating PNG’s purchase of gas from Manchester. During negotiations, Rod Donovan of PNG sent Manchester several sample gas purchase contracts, each stamped “draft copy.” Eventually, Donovan sent Manchester three copies of a document titled “Gas Purchase Contract.” There was no “draft copy” stamp on this document. Donovan also sent a letter that stated: “Enclosed for your review and approval, please find three copies of our Gas Purchase Contract . . . . If you find this Contract acceptable, please fully execute all three copies . . . and return to this office.” The alleged contract was for a ten-year term. Manchester signed and returned the copies. PNG never signed the received copies, and informed Manchester that it would not be doing so. Manchester signed a sales contract with a third party to mitigate its damages. Manchester brought suit for breach of contract. PNG argued that a contract did not exist, because Manchester had reason to know that PNG did not intend to form a contract until it had signed the document. At trial, Donovan testified that he “often, but not always” told parties with whom he was negotiating that any offers he made were subject to PNG management approval. Donovan’s boss testified that he let Donovan send out the Gas Purchase Contract “with the understanding that it may not get approved.” The jury found that a contract was formed and the district court awarded damages to Manchester. The district court instructed the jury to determine damages based on prevailing market price for year one of the contract, but gave the jury discretion to consider future market uncertainty in years two through ten of the contract. PNG appealed.