Dear Mr. Hodges,
First, as to the reason that I use the required filing on the Memorandum language is that the lease is my intellectual work product. That I sell. I do not want it to be placed of record, for anybody to copy or image.
Sometimes it is not feasible for all people to get together to sign a document, or they are scattered all over the country. Counterpart execution says a couple of things typically, but the main thing it does is allow the signing of multiple documents, each of which is treated as an original. The reassembling part is not really required, but like I say, I am picky. Language is then added that says in a nutshell, that all the signature pages can be stapled to each lease so everybody has one document with all of the named parties original execution on it.
Counterpart provisions typically are called a "boilerplate provision" Something that has been passed down from generations of master drafters of contracts. Since so many business transactions vary from one to another, some language stays the same. Those are the boilerplate provisions.
Jack hodges said:
Mr Cotten,
Your advice is very good. Exchanging signed lease with check is what i've always been told to do. I have one question. You mentioned -when it is not feasible- you have language on "counterpart execution". What does that mean as far as exchanging a signed lease for promised considerations? also, i don't think what you said is overkill. it is professional. as far as memorandums... aren't those were filed when the O/G company don't want others to know the details of a lease. is that a correct assessment or just being cynical? thanks, jhh
Jack hodges said:
Mr Cotten,
Your advice is very good. Exchanging signed lease with check is what i've always been told to do. I have one question. You mentioned -when it is not feasible- you have language on "counterpart execution". What does that mean as far as exchanging a signed lease for promised considerations? also, i don't think what you said is overkill. it is professional. as far as memorandums... aren't those were filed when the O/G company don't want others to know the details of a lease. is that a correct assessment or just being cynical? thanks, jhh
Buddy Cotten said:
Thanks, i sort of understand. In a general sense... we mail the lease to far away relatives... and then have nearby relatives come to a central location for signature. then after all signatures are collected... we exchange lease for checks. everyone gets a copy. sometimes it takes several weeks to accomplish. we've also run into a situation where the O/G company filed a memorandum to be filed at the courthouse. i think i have that correct. thanks again. jhh
You can avoid all of that by having the landmen put a clause in the lease form that allows the leases to be executed in counterpart.
If they don't pay you, or if their check bounces, the lease will fail for lack of consideration.
You will be free to accept any other offers to lease.
I just read Cotten's reply after I responded to you (Jack Hodges). I noticed in his reply that he too requires a Memo to be filed in lieu of the actual lease. It wasn't his form that I was referring to. However, there you have it. Another myth busted. You and others seemed to imply or infer that a Memo is only filed because the lessee is trying to hide something. Obviously, that is not a given, as I wrote above.
Mr. Dave: That's a good idea about writing in a special clause. Never thought about that. You learn something every day. About the memorandum... filing because they don't want the lease details out. Sorry if i inferred anything surreptitious... it was not meant to be. in my short life experience with mineral leases... i'm told memorandums are filed to keep details of the lease secret... especially if there are special clauses.
It is true that no one can ascertain the terms if a memo. is filed. Are they trying to be secretive? Only The Shadow knows.
Buddy,
I don’t think your approach is overkill at all. I think the approach you described is an excellent summary of best-practices for executing any contract, but particularly mineral leases. When I am working on a lease for property that is substantial (and therefore one that merits a non-typical lease form) I also take essentially the same steps you outlined. In particular, it a very good practice to have a properly authorized representative of the lessee sign the agreement and memo, as well as have both parties initial every page - both will eliminate potential disputes regarding what the parties intended to sign in the future.
Regarding the reason for using memos, Dave and Buddy make a valid point that they are useful for any party who doesn’t want their contract in the public records. I occasionally use memos for the same reason as Buddy, I.e. so as not to give a free professionally-written lease away to the general public.
Buddy Cotten said:
Andrew, thanks.
Personally, when representing substantial landowners, I am very picky on execution. The majority of my clients are substantial landowners and they want me to handle the transaction from start to finish and just get their signature at some point and hand them the check. For those clients, here is my way. It might not be the best, but it is mine.
Each page is numbered and there is a space for the Lessor and Lessee to initial each page at the bottom, on all pages except signature or acknowledgment pages. As an aside the initialing of pages really proved it value once. There was a dispute on seismic option language. The company said that they were not aware of the clause and I replied, "Your initialed the page! Are you in the habit of initialing pages that you do not read?"
The Lessor and Lessee (obviously) both sign the lease.
ANY page that has white space, has a boundary sentence, such as "The balance of this page intentionally left blank." In italics. And initialed at the bottom of the page.
The Memorandum is attached to the lease as Exhibit A. The description is attached as Exhibit A-1. The language of the lease requires that only Exhibit A and A-1 be filed for record. The Memorandum is executed by the Lessor only and the Lessor initials Exhibit A-1. Language is the Memorandum states that original copies of the lease are in the offices of Lessor and Lessee and anyone with a reasonable need to review the document will be granted permission during regular business hours. (That came about as the result of a recent request from a title company who was handling the sale of the surface where we owned the minerals and it was under lease. A reasonable reason to look at the lease.)
The lease is executed in duplicate originals.
I prepare the lease and the company signs the lease and has the landman deliver the check with the signed lease and sits down for the client to execute. If that is not feasible, we do have language on counterpart execution and the lease can be assembled into one document. When the landman comes, I take and exchange signature and acknowledgment pages so each party has an original signed agreement.
We require a certified (or authentic) copy or whatever it is called where the property venue is located.
Is this overkill or professionalism? You can make the choice for yourself. Clearly for me, it removes all doubt as to consideration or lease alteration.
Buddy Cotten
Mineral Manager