## Facts

- Carter Baron Drilling, a drilling contractor, and Badger Oil Corporation, listed as “operator,” executed a daywork drilling contract on June 24, 1981 using a standardized IADC form.
- The contract required Carter Baron to furnish equipment and labor to drill a well; a payment provision stated that the “Operator shall pay contractor” specified charges, including daily rates and move-related costs.
- Badger allegedly disclosed that the working interest was owned by Knee Hill Energy and that Badger operated the well on Knee Hill’s behalf.
- Drilling began in August 1981; by September 1981 Badger reported difficulty obtaining funds from Knee Hill and attributed payment arrearages to that shortfall.
- Carter Baron contacted Knee Hill directly about payment; the arrangement continued until January 1982, when Badger resigned as operator due to persistent nonpayment by Knee Hill.
- After Badger resigned, Carter Baron stopped invoicing Badger, dealt directly with Knee Hill, and received a substantial portion of amounts due, but an unpaid balance remained.
- Carter Baron sued Badger for breach of contract to recover the unpaid balance and moved for partial summary judgment on liability, asserting Badger’s direct obligation to pay under the written contract.

## Issues

1. Whether extrinsic evidence of trade usage and course of performance is admissible under Colorado law to interpret or qualify a written payment clause that appears facially clear.
2. Whether that extrinsic evidence created genuine disputes of material fact about the parties’ intended allocation of payment risk and whether Badger undertook personal liability.

## Decision

- The court denied Carter Baron’s motion for partial summary judgment on liability.
- The court held that evidence of industry trade usage and the parties’ course of performance was admissible to interpret or qualify the payment provision.
- The court concluded that the proffered extrinsic evidence raised genuine issues of material fact regarding the meaning of “Operator shall pay contractor” and Badger’s potential personal liability.

## Legal Principles

- Under Colorado’s approach influenced by UCC interpretive concepts, trade usage, course of dealing, and course of performance may be considered to explain or qualify written contract terms even if the language appears unambiguous on its face.
- Such extrinsic evidence is generally excluded only when it would wholly negate an express contractual term, not when it plausibly supplements or qualifies the parties’ obligations.
- Summary judgment is improper where admissible interpretive evidence supports competing reasonable understandings of a material contract term and the parties’ intent.

## Conclusion

Because evidence of industry custom and the parties’ conduct could support a finding that Badger’s payment obligation was limited to paying from funds received from the working-interest owners, the court found triable fact disputes over contract meaning and denied partial summary judgment on liability.


Carter Baron Drilling v. Badger Oil Corp., 581 F. Supp. 592 (D. Colo. 1984)