The leasing company removed "the paying instrument" for the lease deal by closing the account that the bank draft would be paid from and the collecting bank returned the bank draft to me unpaid.
Does this legally end the lease deal?
Can a verbal promise to pay with a cashiers check instead legally replace a signed bank draft?
This is the exact reason I have recently refused a bank draft. I have heard nightmares and I won’t go there. I have insisted on my recent lease that a check be issued not a bank draft.
The question is, do they have your lease, and have they recorded it? If they don’t have your lease then you just have a deal that fell through. If they have your lease, you need that back, and may need a lawyer. If they recorded it, I think you will need a lawyer. I’m at 50/50. of two leases I was not paid for which were recorded, I have gotten one lease released by dealing with the company, the other my complaint is being filed in court this week. Good luck, hope the deal just fell through.
So far, the company is still verbally promising to pay when they finish their title report. We have 2 other companies that have expressed interest in leasing some of the same properties so I hope we are not legally bound to have to wait to deal with these other companies until this company's title report is completed or they say the deal is off.
I was told by a landman (for a different company) that in TX "the lease cannot be filed before payment is tendered." So I'm really surprised to hear that they can record a lease before payment is made to you. We do have a lawyer that helps with all our leases (pugh clauses, etc) but I guess we do need to find out if this one has been recorded.
Thanks for the help and good luck to you as well!
r w kennedy said:
The question is, do they have your lease, and have they recorded it? If they don't have your lease then you just have a deal that fell through. If they have your lease, you need that back, and may need a lawyer. If they recorded it, I think you will need a lawyer. I'm at 50/50. of two leases I was not paid for which were recorded, I have gotten one lease released by dealing with the company, the other my complaint is being filed in court this week. Good luck, hope the deal just fell through.
That sounds like a great idea right about now!
Do they issue you the check before they finish their mineral title search?
Thanks for your advice!
Gerald said:
This is the exact reason I have recently refused a bank draft. I have heard nightmares and I won't go there. I have insisted on my recent lease that a check be issued not a bank draft.
I think the problem may be that they tendered a collection item as payment. If they have your executed lease they could record it, and if they failed to honor the collection item it may be considered a business matter. Not the same as bouncing a check. Of course you could sue them. I’m no expert on how it works in Tx. In fact I have never received anything but a check for leasing minerals in Tx. In ND you would likely be having to sue as I am having to do with one company now. From looking on the internet I see Tx is a notice state. From what I read, mind this is from the internet and should not be taken as gospel, if your original lessee recorded the lease, a second lessee could not prevail, because I’m pretty sure that recording the lease would constitute notice. Your lessee may take the position that owing people money is not illegal. Good luck.
Am interested in knowing what companies are failing to honor their Drafts?
Wilson,
I too would like to know the name of the company that closed the account
to keep you from collecting funds on a draft. I really wish more pople would
make the names of companies known so people on this forum will know who
to avoid doing business with. In my opinion that's what this forum is about.
Giving people knowledge so they can do business without fear of problems
down the road. It would also help weed out some of the people who think
they can run over others without consequence. As long as they can get away
with it they will continue doing it. Personally, I would be hard pressed to do
business with someone who basically has already shown they can't be trusted.
Have you had any other offers on your minerals? Thanks in advance for any
help you can give us.
Yours,
Wes Luke
A bank draft is typically a collection item. We always used bank drafts in the Illinois basin as an efficient method to make payment that could be initiated by the landman upon execution of the lease document. This process would allow the "Office" review the actual lease document to verify that the landman had executed lease terms that the office had agreed to by phone before we actually made payment. If there ever was an issue we would be immediately on the phone with the mineral owner to try and resolve it. Our reasons for using bank drafts have generally vanished with today's technology. E-mails can quickly satisfy the need to verify the land man's work. and ETF's or wires can promptly fund the agreement.
The ND Supreme Court recently issued an opinion that might shed light upon some of your questions:
Irish Oil & Gas, Inc. v. Riemer, 2011 ND 22, 794 N.W.2d 715
http://www.ndcourts.gov/_court/opinions/20100064.htm
Note that the decision was not unanimous as to all the parts which may make reading the case somewhat confusing. You should consult an attorney ASAP.
Dear DG,
What an eye opener for this novice!
I never imagined that the possibility (or promise) of receiving royalty payments could be construed as adequate "consideration" to allow the Lessee to not pay the bonus to the Lessor and still possess the lease as these paragraphs from the link state.
[¶21] The Reimers assert Irish Oil's failure to timely pay the bonus payments was a total failure of consideration. Irish Oil argues consideration has not failed, even without timely tender of the bonus payment. In particular, Irish Oil argues the primary consideration was the promise of "a 1/6th royalty in the event of production."
[¶22] In Davis v. Meagher Oil & Gas Props., Inc., the court held:
"A 'royalty' is considered the compensation or consideration a lessee pays to the lessor to secure the privilege of exercising the right to explore and develop the property for the production of oil and gas. The nature of a 'royalty' allows the lessee to avoid paying the lessor up front for the privilege of exploration, and to defer payment of 'consideration' upon an eventual yield accruing from the lessee's production efforts."
Thanks for the link.
DG said:
The ND Supreme Court recently issued an opinion that might shed light upon some of your questions:
Irish Oil & Gas, Inc. v. Riemer, 2011 ND 22, 794 N.W.2d 715
http://www.ndcourts.gov/_court/opinions/20100064.htm
Note that the decision was not unanimous as to all the parts which may make reading the case somewhat confusing. You should consult an attorney ASAP.
Actually, bonus dollars are in the nature of pre-paid royalty. I know others will flip out when I say that consideration need not be in the form of greenbacks. It could, and many times is, consideration of the mutual agreement and covenants of the agreements.
Oh, Merlin, a bank draft is always a collection item. Illinois and Michigan and the like have all ratified the Uniform Commercial Code.
All I can say is that I blogged on this matter as my first blog here, almost 18 months ago. That is how important I felt as if it was then - and now.
http://www.mineralrightsforum.com/profiles/blogs/oil-and-gas-bank-d...
I won't flip but, I will admit disbelief/surprise at this interpretation even though I can follow the logic.
Legal's aside, from an operator perspective I can't think of a dumber move to start off on the wrong foot with your leasee's and alienating all his friends and neighbors. You renege on making your bonus payment and it better be the last lease you ever want in the area.