Nearly four years after having signed a purchase and sale agreement formalizing an approximately $2.4 billion acquisition by Marathon Petroleum of a Houston-area refinery from its previous owner, British Petroleum (BP), Marathon has filed a lawsuit alleging that BP breached terms contained in the 2013 purchase and sale agreement signed by the two companies. Specifically, Marathon’s stated position is that at the time of the transaction BP knew that its refinery was not in compliance with a number of environmental laws but had stopped trying to correct areas of non-compliance in the period leading up to the sale date, all of which was in violation of the terms set forth in the purchase and sale agreement. In response, BP has stated that “[b]efore the sale, BP spent billions of dollars on substantial upgrades to the refinery, and Marathon insisted on and received a discounted sales price so it could make some additional capital investments,” and that “Marathon conducted extensive due diligence and was given virtually unrestricted access to documents and equipment at the refinery. When BP transferred ownership of the refinery to Marathon, it had satisfied all commitments made to federal regulators and was in full compliance with the terms of the purchase agreement.”
Regardless of whether Marathon’s lawsuit has any merit, its suit underscores the importance of due diligence clauses and how each party will certify both that it is in compliance with the terms of the purchase and sale agreement and what corroborating documentation is required for the completion of the sale. Your Contract Lawyer can help you review, draft, or negotiate a purchase and sale agreement whether you are the buyer or seller of a business or its assets. Please contact our office to learn more about how our attorneys may be able to help.