Mobil Oil Exploration and Producing Southeast, Inc. v. United States 530 U.S. 604 (2000) Mobil paid the Federal government $158M for a conditional permit to drill for oil off the coast of North Carolina. The deal had a caveat that Mobil's drilling plan had to be in compliance with other Federal regulations such as the Outer Continental Shelf Lands Act (OCSLA) and the Coastal Zone Management Act of 1972 (CZMA). That required getting approval from the Department of the Interior (DOI). Mobil submitted their plan to DOI. While DOI was reviewing it, Congress passed the Outer Banks Protection Act (OBPA), which put a moratorium on offshore drilling. In addition, North Carolina started arguing that the Mobil plan was not in compliance with the CZMA. Mobil sued for breach of contract. Mobil argued that their original deal had a clause that the Federal government would grant a final permit to Mobil within 30 days after they submitted a plan in compliance with OCSLA. Since more than 30 days had passed since Mobil submitted their plan, the Federal government was in breach of contract. The Federal government made numerous arguments in their defense: The Federal government argued that the original deal said that Mobil had to be in compliance with other regulations, and OBPA is an 'other regulation', so the contract had not been breached. They also argued that even if they were in breach, it wasn't a substantial breach because the 30-day clause wasn't 'the essence of the contract'. They also argued that Mobil knew that North Carolina was likely to block the drilling, so they weren't really harmed by the delay resulting from the passage of OBPA. They also argued that Mobil had waived their right to sue for breach of contract because they had continued performance under the contract. Mobil kept submitting their plans to the government after the passage of OBPA. The Trial Court found for Mobil. The Federal government appealed. The Trial Court found that passage of the OBPA effectively breached the contract with Mobil, since it was impossible for the Federal government to live up to their end of the contract. The Appellate Court reversed. Mobil appealed. The Appellate Court found that since North Carolina could have vetoed the drilling, the OBPA wasn't the ultimate reason Mobil couldn't drill, so there was no breach of contract. The US Supreme Court reversed and awarded Mobil $158M. The US Supreme Court found that the Federal government had sold the drilling rights to Mobil. Since Mobil was now forbidden to drill because of the OBPA, the Federal government should give them their money back. "We find that the oil companies gave the United States $158 million in return for a contractual promise to follow the terms of pre-existing statutes and regulations. The new statute prevented the Government from keeping that promise, therefore the Government must give the companies their money back." The Court found that the Federal government was in breach of the contract because the original deal did not contemplate the new Statute. The problem was the contract was not drafted in a way to anticipate future actions that might change the government's position. If it had been in there, then Mobil might have paid less for the lease because of uncertainty. But Mobil thought they had a guaranteed deal. The Court found that Mobil's continued performance was not a bar to bringing suit. The Court found that any problems related to getting North Carolina's approval was not relevant because Mobil was not asking for damages, they were only asking for restitution for an uncontested breach. The Court found that since OBPA had prevented drilling for over 4 years, and might never allow drilling again, it was a substantial breach, and therefore required compensation. Basically, this case said that when a new Statute prevents the Federal government from following a contractual promise to follow the terms of pre-existing Statutes and regulations, that constitutes a repudiation of a contract, and damages should be awarded.