ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Thursday, April 4, 2024

Implied Contracts and Good Faith in Norman, Oklahoma

Screenshot 2024-03-18 at 5.32.08 PMOklahoma City University School of Law 1L Lino Sengkhamvilay (right) shared this story with me.  Thanks, Lino!

In 2023, voters in the city of Norman rejected a long-term agreement between the city and the utility company, OG&E. The matter was on the ballot again in 2024, and it was defeated by 33 votes, as reports for KOCO News. Those who voted no apparently objected to the 25-year term of the agreement. Why couldn't the city enter into a five-year agreement with OG&E, so that it would have some leverage that it could exercise regularly? 

According to the reporting, Oklahoma requires municipalities to have agreements with power companies. So what now?

OG&E issued the following statement:

We are disappointed in the election outcome. Without a franchise agreement, OG&E and the city of Norman will continue to operate under an implied contract. Over the last five years OG&E has worked in good faith with the city, investing tens of millions of dollars improving reliability in the absence of a franchise agreement. Unfortunately, that good faith was not reciprocated. We will evaluate the long-term status of other agreements or projects underway with the city. OG&E has served Norman for more than 100 years and remains committed to our customers. We will continue to provide the electricity they need to power their homes and businesses.

So many interesting questions! 

First, when the legislature requires that municipalities and utilities be governed by an "agreement," did they have an implied contract in mind? Second, what are the terms of the implied contract and what limits does it place on OG&E's discretion to "evaluate the status of other agreements or projects underway with the city." Finally, who is OG&E accusing of not reciprocating its good faith? The city? How did the city violate its good faith obligations? The city put the contract on the ballot, as it presumably was required to do, and the mayor advocated for its approval. 

Is a monopoly utility accusing the voters who rejected a 25-year agreement of acting in bad faith. If so, that is wonderfully on brand. For those customers, this is a 25-year rolling contract of adhesion. What? You don't want to be bound for 25 years by a contract that you had no role in negotiating and cannot change, under which your utility bills may double or triple or quadruple while you have no alternative source of energy to heat or cool your home? How dare you!

Screenshot 2024-03-18 at 7.29.28 AM
Solar Array Nestled in Agricultural Fields

People of Norman: get thee some solar panels or geothermal!

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