Let me tell you about a case where

you had two huge corporations, oil companies.

One of them thought they were still negotiating.

And the other one thought no, we weren't still negotiating.

And even though they had not put this multi-billion dollar deal on paper

and signed it, it ended up that the court said that's a deal.

So here's the story.

In the 1980s Pennzoil wanted to expand its access to oil in the ground.

They could have tried a major exploration

off Alaska or in the Arabian Gulf or whatever.

That would take time, and the results would be uncertain.

It could get there much faster by buying an existing oil

company with lots of oil in the ground.

Now, Getty oil was such a company.

It had lots of oil in the ground.

And it's controlling ownership was divided

in complicated ways between family members

who didn't particularly get along or have

the same goals in mind for their very great wealth.

Maybe they might want to sell the company, take their money,

and go their separate ways.

So Pennzoil went after them.

And they had some very complicated negotiations

with armies of lawyers on each side.

But in the end, it was a matter of price.

Although, of course, with any deal this big there are a great many loose ends.

Not to mention all sorts of government permissions and regulations

to get around.

Any of these might be a deal breaker for this Getty Pennzoil bargain.

After many negotiating sessions between the executives of the two

companies and their lawyers, and telephone meetings with boards

of directors, they finally arrived at a price

that seemed to satisfy the owners and the executives on each side.

They never signed anything, but each company put out a press release

saying that Pennzoil had agreed to buy Getty at a particular price.

Of course, everybody knew that a deal this big

would require a detailed contract.

Remember at the very beginning of our time together,

I showed you a picture of a contract like that, about up to my knee?

That's the kind of contract that in the end everybody

expected you'd have to have.

Maybe several hundred pages long, and every clause of which

would have been gone over with a metal detector

by armies of lawyers on each side.

There were lots of details that still had to be worked out.

For example, what would happen to the Getty employees?

What would happen to their pension plans?

And what about the top executives of each?

Who would be running the show?

Who would be out of work?

Well, while they were still negotiating these details, some of Getty's lawyers

began talking to Texaco.

And shortly after Pennzoil announced it's deal-- or the deal

they thought they had with Getty-- Texaco and Getty

made a final binding agreement, all written out and nicely signed,

selling Getty to Texaco for a higher price

than Pennzoil thought it had agreed on.

And that last deal between Getty and Texaco's the one that went through.

Well Pennzoil was not happy.

It thought it had been cheated out of its prize.

Pennzoil claimed that it had had a contract.

And that Texaco, at Getty's instigation, had snatched away

what it thought rightly belong to it.

But instead of suing Getty for breach of promise, Pennzoil-- for reasons

I won't go into, but they're pretty cute-- Pennzoil

sued Texaco for interfering with its contractual rights.

The contractual rights they claimed to have to buy Getty.

By the way, in spite of their names, Pennzoil is a well known Texas company.

Well known in Texas, And Texaco is a Delaware corporation with headquarters

in New York, with lots of New York lawyers.

Well the Texas jury awarded the home team $11 billion.

Yeah.

Think back to Hoffman against Red Owl.

$11 billion.

Today that would be even more.

Of course, the whole premise of such an enormous recovery

was that Getty and Pennzoil had had a deal that

had been snatched away from Pennzoil.

Despite the Texaco lawyers' arguments that in a deal this size,

there is no contract to interfere with if all you have is a handshake.

And not even that.

Because in the end, Getty and Pennzoil weren't even in the same room.

They were on the telephone with each other.

There was no piece of paper that both had signed.

And certainly no 100 page contract worked out

by the lawyers setting out all the details.

Never mind, the Texas jury in the Texas courts

ruled that the two parties had gone far enough.

They had agreed in principle.

The price had, so far, been the big bone of contention.

And they had settled that.

In the end, by the way, Texaco and Pennzoil settled the suit.

Texaco kept Getty and paid Pennzoil a mere $3 billion.

Do you see why this is like Hoffman and Red Owl?

Red Owl had said that for $18,000 as their contribution,

the Hoffman's would be set up in a Red Owl store.

Although all kinds of things, size, location, a lot of other stuff,

had not been settled.