Texas Business Court Reinforces Core Contract Interpretation Principles In Crude-Oil Storage And Pipeline Dispute

On May 27, 2026, the Texas Business Court issued an opinion in DK Trading & Supply, LLC v. Wink to Webster Pipeline LLC, addressing contract interpretation disputes arising from crude-oil terminal and pipeline agreements. While the specific holdings are tied to the facts of this case, the decision may offer guidance on how Texas courts treat extrinsic evidence when interpreting unambiguous contracts and the consequences of failing to satisfy contractual notice requirements.

Case Background

The dispute involves two 2021 agreements between DK Trading & Supply, LLC (Delek) and Wink to Webster Pipeline LLC (Wink) concerning crude-oil operations at a terminal facility in Midland County, Texas. Under a terminal services agreement between the two parties, Wink agreed to provide Delek with specified crude-oil storage capacity, while Delek agreed to reimburse Wink for capital, operating, and maintenance costs. A separate transportation agreement established a “ship or pay” arrangement, requiring Delek to ship committed volumes or make deficiency payments for any shortfall.

Both parties filed cross-motions for summary judgment. The court held that both agreements were unambiguous and ruled on each disputed issue as a matter of law.

Texas Courts May Not Consider Extrinsic Evidence of Subjective Intent to Interpret an Unambiguous Contract

An important, broadly applicable principle reinforced in this decision is the Texas Business Court’s refusal to consider extrinsic evidence of the parties’ subjective intent when construing unambiguous contract language. When Wink attempted to introduce evidence regarding its subjective intent, interpretation of contract terms, and evidence of the parties’ course of performance, the court struck such evidence as improper parol evidence, reaffirming that unambiguous contracts must be enforced as written “without considering extrinsic evidence bearing on the parties’ subjective intent.” The court further emphasized that course-of-performance evidence cannot be used to vary the terms of an unambiguous contract or render it ambiguous.

The court’s broader analysis illustrates this principle in practice. Rather than asking what the parties intended or their course of performance, the court focused exclusively on the written text, reading each agreement in its entirety, giving meaning to every provision, and refusing to add words or qualifications the parties themselves did not include. When a party’s proposed construction would have required the court to insert conditional language absent from the contract, or would have rendered a defined term meaningless, the court rejected that interpretation.

The court’s decision is consistent with longstanding Texas jurisprudence: extrinsic evidence, including evidence regarding subjective intent or course of dealing, may not be considered by courts in interpreting an unambiguous contract or creating an ambiguity. In most cases, sophisticated parties are presumed to have chosen their words deliberately, and courts may hold them to those words.

Failure to Provide Contractually Required Written Notice May Permanently Bar Claims

Another major takeaway from this decision concerns the consequences of failing to satisfy a contractual notice requirement. The court’s ruling on contractual notice requirements resulted in dismissal with prejudice of Delek’s claims on six disputed invoices, and the reasoning applies beyond the specific facts of this case.

Although the parties’ transportation agreement required Delek to provide written notice of any good-faith dispute no later than the invoice due date, Delek did not dispute the six oldest invoices in writing until after those deadlines had passed. The court held that this notice requirement was a condition precedent to bringing suit, not merely a covenant. The distinction matters: breach of a covenant gives rise to a claim of damages but does not bar enforcement of the contract, while failure to satisfy a condition precedent excuses the other party’s performance entirely and, as here, may bar any remedy entirely.

The court rejected Delek’s argument that Wink’s alleged miscalculation of invoices constituted a prior material breach excusing compliance with the notice provision, reasoning that allowing an allegedly improper invoice to discharge the obligation to follow a contractually mandated dispute-resolution process would effectively nullify that process. The court also rejected the argument that the notice requirement impermissibly shortened the statute of limitations, distinguishing between a provision that limits the time to file suit and one that requires written notice of a dispute to a counterparty.

Practical Takeaways for Businesses

Texas businesses may wish to consider the following, based on the court’s ruling in this case:

1. An Unambiguous Contract May Be Enforced as Written. Texas courts may enforce plain text. Subjective intent, prior negotiations, and post-signing conduct may be irrelevant and even inadmissible when language is unambiguous.
2. Identify and Calendar All Notice Deadlines. Notice requirements may be interpreted as conditions precedent, and failing to timely comply may permanently bar claims.
3. Do Not Assume a Counterparty’s Breach Excuses Compliance. An allegedly improper invoice or other breach does not automatically relieve a party of its obligation to follow a contractually mandated dispute-resolution process before pursuing litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.