Hi I am new to this forum and site. I am a land owner in Michigan and never even thought about oil and gas leases, a few weeks ago a landman contacted me and presented me and my wife a lease. We researched it made some changes and aggreed on a lease and we signed it. Now I am having second thoughts and would like to get out of the lease. I have recieved no money yet and was wondering can I get out of this since I have not recieved any form of bounus yet?
Consideration is a requirement. What did the landman tell you in that regard? It had to have been discussed.
For example, how much an acre? Check or draft? When you would be paid for the lease? What was discussed in that regard?
Consideration can exist even if no money has been paid. Tread carefully.
In general, money is the consideration for an oil & gas lease. He doesn't give enough information for me to answer his question. I'm out.
Michigan is a race to record state. I am uncertain about Michigan but in other race to record states if you have two potential lessees with leases in their hands, the one that records first is the winner and you must return to the loser his consideration, if he gets around to tendering it after your other lessee records your lease. In North Dakota, this is done because there are so many deadbeat lessees that a large amount of mineral owners would never receive the promised consideration for their leases and be held in limbo. I would do some internet searching, possibly consult a lawyer to learn precisely how the law works in Michigan.
Did you receive a draft as conditional payment and have you placed it with your bank? If you have a 30 day draft, the clock does not start ticking until the draft reaches the lessee/payors bank. If you have a draft, make a copy of it for your records and get it in the bank as soon as possible, no sense giving them longer than necessary to check title on a lease you have qualms about.
jon:
I totally agree with Mr. Kennedy in his response. Pay particular attention to what he states about the 30 day draft as the clock does not start until the draft reaches the lessee/payors bank. Also, the advice to contact an attorney with oil and gas experience is very important in regards to learning how the laws in Michigan work in a situation such as yours.
I guess I missed something. He says he has received "nothing" in the way of bonus yet. What does that mean? What did the landman tell him or promise him, or actually give him? We don't know. The issue is whether a valid contract was formed or not. All replys thus far are speculation and conjecture. More information is needed. The reply about race vs. race notice, et al is interesting, but clearly not applicable to the facts. He states that only one co. has contacted him.
Sometimes I think I'm in the Twilight Zone. HE WANTS TO TRY AND GET OUT OF THE LEASE!
Why would he want to take a draft (if he even has one) to the bank and prove up consideration on the part of Lessee?
Michigan is a race state? He changed his mind about leasing? In the future, don't sign anything unless you are sure that is what you want to do. Act more responsibly.
Try this. Well, uh. No. Reply back first. I need more info. before I can help you out.
When the lease was signed the land man said I would recieve a check in 75days. I only signed this lease 10 days ago. I was offered 100 dollars a acre and I own 90 acres. If I am stuck with this lease fine, but if I could get out of it I would. My question is a contract valid if I havent recieved any monies yet?
Dave Quincy said:
Sometimes I think I'm in the Twilight Zone. HE WANTS TO TRY AND GET OUT OF THE LEASE!
Why would he want to take a draft (if he even has one) to the bank and prove up consideration on the part of Lessee?
Michigan is a race state? He changed his mind about leasing? In the future, don't sign anything unless you are sure that is what you want to do. Act more responsibly.
Try this. Well, uh. No. Reply back first. I need more info. before I can help you out.
The lease reads under order for payment. (Lessee shall, subject to its approval of title, make payment to lessor as indicated herein by check within 75 banking days of lessee's reciept of this order for payment). My question is since no monies have been exchanged can I cancel this lease? The amount of the bounus is 100 per acre and I own 90 acres.
So all the discussion about a bank draft wasn't applicable either. Just as I suspected. We didn't know what they had told you or given to you. Now we do. Thanks for the reply.
Let me think about it. Not a good way to do business on other side either.
Dear Jon,
As far as I know, there is no applicable law in Michigan. However, in Texas, that language was tested about 25 years ago. The holding of the court was that the "Upon approval" language constituted a conditional payment and was rescindable by either party prior to payment.
However, it takes a good lawyer familiar with Michigan contract law to look at the entire agreement to make an informed decision.
Good answer.
I had a few notions, but really didn't want to offer legal advice without a license.
Jon, my recommendation would be to do this:
1. Send the Lessee a certified letter requesting payment per the lease terms within 10 days and failing payment you will file an affidavit stating the lease had not been paid, keep track of the tracking number. Also send them a release of lease and respectfully request that they either provide payment or sign the release.
2. They will likely sign the release and you will have to record it.
3. If they don't release the lease file an affidavit at the county stating that payment was not paid and thereby the lease was not valid. They will want good marketable title, so if you do this it will come up in a title opinion. It depends on state laws and I am not familiar with Michigan, but by doing this you will stir the pot which is what you need to do. If they pay you even if its late, you will have a hard time getting out of it without going to court.
Jon, did you actually receive an Order for Payment?
They will most likely NOT sign the release, and inform that they still have 65 days to pay Jon, per the terms of the lease. Jon signed the lease 10 days ago. It contains language that they have 75 days to pay him. (upon some type of notice or request by him.)
Clearly, if this was day 76, then your advice would have merit.
He doesn't want to wait that long, and may not have to.
He needs a Michigan atty. to review it, and see if it constitutes a valid contract. In the alternative, he can wait them out, and see what happens. Your advice may come into play at some point, but at present it doesn' t fit the facts. I'm not really sure on the language he presented us about his having to request payment before the 75 days start ticking. He needs to have an atty. look at it. While we know a little more than we did before, no one here has actually read the lease.
The language presented by Jon says that the Order for Payment will go to Lessee, not Lessor, so no, he never received an Order for Payment.
Dave Quincy said:
They will most likely NOT sign the release, and inform that they still have 65 days to pay Jon, per the terms of the lease. Jon signed the lease 10 days ago. It contains language that they have 75 days to pay him. (upon some type of notice or request by him.)
Clearly, if this was day 76, then your advice would have merit.
He doesn't want to wait that long, and may not have to.
He needs a Michigan atty. to review it, and see if it constitutes a valid contract. In the alternative, he can wait them out, and see what happens. Your advice may come into play at some point, but at present it doesn' t fit the facts. I'm not really sure on the language he presented us about his having to request payment before the 75 days start ticking. He needs to have an atty. look at it. While we know a little more than we did before, no one here has actually read the lease.
Jon says he has received an Order for Payment which is much like a bank draft. Jon has received conditional consideration. I believe that the 75 day order for payment would remain live until 75 banking days after it was placed with the lessees bank. I'm not sure you do understand, as you didn't understand that Michigan was a RACE state.
Jon may have qualms about this lease but he may still be interested in leasing. Many people regret the first lease they sign, but they probably would still be interested in leasing with different terms and I have sometimes told people in ND to contact the operators in their area to tell them that your acres are up for lease because they might act a little faster than another potential lessee.
I sometimes try to read between the lines and offer something contingent on what I think is likely. Bank draft/Order for Payment, mostly a distinction without a difference.
You mentioned draft yourself, so I guess your post isn't "applicable" also.
Dave Quincy said:
So all the discussion about a bank draft wasn't applicable either. Just as I suspected. We didn't know what they had told you or given to you. Now we do. Thanks for the reply.
Let me think about it. Not a good way to do business on other side either.
Ok, I will write this slowly, is the lessee, or lessees agent, going to send the Order for Payment to himself? I believe that an Order for Payment, like a bank draft must be endorsed by the person the Order for Payment is tendered to as payment.
What would be the point of an order for payment if it were not given to Jon? If Jon never received and endorsed the Order for Payment, then Jon has received no consideration, not even conditional consideration.
Dave Quincy said:
The language presented by Jon says that the Order for Payment will go to Lessee, not Lessor, so no, he never received an Order for Payment.
Dave Quincy said:They will most likely NOT sign the release, and inform that they still have 65 days to pay Jon, per the terms of the lease. Jon signed the lease 10 days ago. It contains language that they have 75 days to pay him. (upon some type of notice or request by him.)
Clearly, if this was day 76, then your advice would have merit.
He doesn't want to wait that long, and may not have to.
He needs a Michigan atty. to review it, and see if it constitutes a valid contract. In the alternative, he can wait them out, and see what happens. Your advice may come into play at some point, but at present it doesn' t fit the facts. I'm not really sure on the language he presented us about his having to request payment before the 75 days start ticking. He needs to have an atty. look at it. While we know a little more than we did before, no one here has actually read the lease.