Landman comes back and says," oops I made a mistake 20 months ago so send me the money back! its spent and gone!! now what??? Thanks for answers
Even IF you struck the warranty provision in the lease, you are still bound to return the money. There is an unpublished case just like that and I will look it up and post it here.
The covenant of seizin, when there are words of grant (such as the grants, lease, sets over, etc in the lease) promises that you have the authority to lease.
Striking the warranty does no good to allow you to keep the bonus money. You would need a broad disclaimer to do that, which states that any monies paid will not be returned in the event of title failure.
I have imagined this same scenerio in some of my past lease negotiations. I have never added any type of disclaimer in my paperwork that would prevent this type situation. Luckily, this has never happened to me in the many leases I have negotiated. Also, who would be responsible for recovering damages caused by this type of mistake such as the lessor who may have paid taxes on this money from a bonus?
Dear Mr. Williams,
You are 100% correct. Mistake could mean anything. Failure of title is something else. I was thinking failure of title.
Thanks for being an eagle eye.
I will look tomorrow for the case.
Mr. Cotten and Mr. Williams, I would be interested in any elaboration you can do on this subject. In my own limited experience I have learned that for the purpose of leasing that some companies will settle for considerably less than proof of marketable title. Does covenant of seizn mean that any lease signed without clear title could be cancelled and subject to return of bonus? It would seem the lessee should be responsible for his own due diligence or lack thererof. I guess you can learn an expensive lesson by failing to read the fine print.
Fender v Farr is one. 262 SW 2nd 539 542-43 Sued over the return of $935.00 of bonus or thereabouts. In this case the warranty was struck and the court held that the covenant of siezen gave the Lessee the expectation of an conveyance, since words of conveyance were used and supported by the covenant of Siezen. Important to note that the covenant of siezen is not a covenant running with the land.
Another is Barton v Parnell Morrow Company Lexis 3835 To my knowledge, this case is not published.
I have not read this case.
Mr. Hutchison,
"The big print giveth and the small print taketh away" - an old adage. Seen a lease form? It's ALL small print and every word has been carefully crafted and has a specific legal definition, many times from court decisions that did not have a favorable outcome to the Lessee and the Lessor wins, then a new lease clause.
It seems you are referring to a situation where "title failure" implies the Lessor did not own any of the interest. However, would there be the same result (refund of bonus paid) if there was a miscalculation on acreage by the landman? In other words, a Lease was struck and bonus payment made for 40 net acres then later (say 2 months or 2 years) it's determined the Lessor only owned 30 acres. Would the law require the Lessor to return a proportional amount of the bonus?
Buddy Cotten said:
Even IF you struck the warranty provision in the lease, you are still bound to return the money. There is an unpublished case just like that and I will look it up and post it here.
The covenant of seizin, when there are words of grant (such as the grants, lease, sets over, etc in the lease) promises that you have the authority to lease.
Striking the warranty does no good to allow you to keep the bonus money. You would need a broad disclaimer to do that, which states that any monies paid will not be returned in the event of title failure.
Best of luck,
My question is, how common is this problem in the leasing process? This is first time on this forum that I have read about this particular situation occuring between a lessor and lessee. I would think that the landman on the other end has conducted an extensive research of the records in order to avoid this type of mistake.
How would a 'Stipulation of Interest" signed by all unleased mineral cotenants affect this situation?
Dear Mr. Williams,
On a mutual mistake situation, would not the bonus dollars be returned? Here is my language to avoid the Lessee dancing on the head of a pin with a siezen claim after a broad disclaimer of warranty:
"It shall be the responsibility of Lessee to make title examinations sufficient to satisfy itself as to Lessor’s right, title and interest in the Leased Premises and the rights of Lessor to execute this Lease."
Charles, It may be fairly common. You may recall a few months back I started a discussion about a problem with someone having leased some mineral acreage I had already leased and the company paid both of us. After talking to a couple of attorneys as well as landmen I am now under the impression that for leasing purposes, especially small amounts of land, it is common practice to do a "cursory" title search. Isn't that similar to pooling for curative purposes? The attitude of one Landman was it will all come out in the wash, meaning division orders.
Dear Mr. Hutchinson,
In my shop we run four types of title:
Buy title
In depth title
title for an abstract
Division Order title
Buying leases we run buy title unless the client tells us that the tract is going to be likely drilled. The we run in-depth title.
Dear Mr. Williamson
Glad I could help.
Do you have time for another title opinion? My client asked for me to find an lawyer to render a quickie.
Best,
Cliff Williams said:
Is this what it means to not warranty the mineral title. I've read through some of your do's and don't and I don't know what it means...any help
Thanks,
RK
Buddy Cotten said:
Even IF you struck the warranty provision in the lease, you are still bound to return the money. There is an unpublished case just like that and I will look it up and post it here.
The covenant of seizin, when there are words of grant (such as the grants, lease, sets over, etc in the lease) promises that you have the authority to lease.
Striking the warranty does no good to allow you to keep the bonus money. You would need a broad disclaimer to do that, which states that any monies paid will not be returned in the event of title failure.
Best of luck,