## Facts

- Manchester Pipeline Corporation was formed to market natural gas produced from the Manchester Field in Grant County, Oklahoma.
- Peoples Natural Gas Company (PNG) negotiated with Manchester beginning in November 1983 through PNG representative Rod Donovan, who supplied sample contract forms marked “draft copy.”
- In April 1984, Donovan sent Manchester three copies of a document titled “Gas Purchase Contract” (not marked as a draft) and instructed Manchester to “fully execute” and return them if acceptable.
- The contract contemplated a ten-year term for PNG’s purchase of Manchester’s gas.
- Manchester signed and returned all copies; PNG did not countersign and later refused to proceed, asserting the transaction required PNG management approval and PNG’s signature.
- Manchester later contracted with a third party to sell gas after PNG’s refusal.
- At trial, Donovan testified that he sometimes informed sellers that offers were subject to management approval; PNG’s supervisor testified Donovan could send contracts understanding they might not be approved.
- A jury found a binding contract existed, found PNG in breach, and awarded Manchester $1,450,000 in damages.
- The district court denied PNG’s post-trial motions, awarded costs, and (through a magistrate reference) awarded $175,000 in attorney’s fees; PNG appealed the merits judgment and fees.

## Issues

1. Whether sufficient evidence supported a finding that a binding gas purchase contract was formed when Manchester signed and returned the contract documents, despite PNG’s failure to sign and its claim of an uncommunicated management-approval condition.
2. Whether the jury instructions and resulting damages award applied the proper UCC measure of damages for anticipatory repudiation of a long-term gas purchase contract.

## Decision

- The court affirmed the judgment on liability, holding the evidence permitted a reasonable jury to find PNG made an offer and Manchester accepted by signing and returning the contract.
- The court rejected PNG’s reliance on internal approval practices where the alleged condition was not expressed in the writing and was not clearly communicated to Manchester.
- The court reversed the damages award and remanded for recalculation (or a new determination of damages) because the instructions allowed damages based on “future market uncertainty,” creating a risk of speculative recovery inconsistent with the UCC measure.
- Because damages were remanded, the court declined to decide the attorney’s fee award at that time.

## Legal Principles

- Contract formation under the UCC and Oklahoma law depends on objective manifestations of assent rather than unexpressed internal intent.
- A party’s internal requirement of management approval does not prevent formation unless made an express condition or otherwise communicated so the counterparty has reason to know assent is contingent.
- For a buyer’s anticipatory repudiation, the UCC seller’s damages measure generally is the contract price minus the market price at the time and place for tender, plus incidental damages, less expenses saved; instructions permitting recovery based on generalized future market uncertainty are improper.

## Conclusion

The court upheld the jury’s finding that the parties formed a binding ten-year gas purchase contract and that PNG breached it, but set aside the damages award and required a recalculation under the UCC’s contract–market differential framework, leaving attorney’s fees unresolved pending the damages outcome.


Manchester Pipeline Corp. v. Peoples Nat. Gas Co., 862 F.2d 1439 (10th Cir. 1988)