I have negotiated an oil lease for mineral rights in the State of Montana and was presented with a lease for my signature as lessor. I noticed that there is no provision for the oil company to sign as lessee. I have questioned several people that are (or should be), knowledgeable in that area and have been told that it is common for the oil company NOT to sign. However, no one has been able to explain the reason. How can this be considered a legally enforceable contract if it is only signed by one of the parites? Has anyone else experienced this. Thank you for your comments
I am a newbie to this and was waiting to see what answers you get. I’m in Colorado and in similar situation. I looked at multiple oil & Gas leases on file at the county clerks office and they all are like that. (the ones I looked at)
I am with an Oil Co, we don't sign the lease. Just the lessor signs the lease and once it is recorded and the lessor is paid via draft which is cashed or check, then the lease is consumated...
Be very cautious. Drafts are worthless. Also look up DAP56 in the thread NORTH DAKOTA- UNLEASED ACRES IN SPACING UNIT WITH WELL BEING DRILLED. They obviously don’t know what they are talking about or deliberately not telling the truth. Weigh carefully anything a landman or oil company says or you may get …consumated…RWK
Drafts are worthless pieces of paper that’s not even as good as an iou, they are worth less than the paper they are printed on. Companies that lease want the mineral owner to have complete trust and faith in them but offer none in return, filing their lease before paying and making the trusting mineral owner wait as long as 3 or 4 months to get paid while they decide if they will even want to pay. Of coarse they don’t want to sign the lease, then they couldn’t back out of the agreement and would legally have to pay you. Without signing they can just not honor their worthless piece of paper and walk away leaving you to deal with trying to get a release. If a company ever fails to keep their word and honor their draft then that company for what ever reason has proven they can not be trusted as their word to pay should be the same as your signature on the lease they filed and there should be no way to back out.
What Joe just said, goes double for me.
Mineral Joe said:
Drafts are worthless pieces of paper that's not even as good as an iou, they are worth less than the paper they are printed on. Companies that lease want the mineral owner to have complete trust and faith in them but offer none in return, filing their lease before paying and making the trusting mineral owner wait as long as 3 or 4 months to get paid while they decide if they will even want to pay. Of coarse they don't want to sign the lease, then they couldn't back out of the agreement and would legally have to pay you. Without signing they can just not honor their worthless piece of paper and walk away leaving you to deal with trying to get a release. If a company ever fails to keep their word and honor their draft then that company for what ever reason has proven they can not be trusted as their word to pay should be the same as your signature on the lease they filed and there should be no way to back out.
Dear Mr. Thack,
To answer your question, the oil and gas lease is not a lease at all. It is a mineral conveyance in the nature of a determinable fee, subject to the possibility of reverter. In conveyances of property, the Grantee, Lessee, Vendee, is not required to sign, since they have nothing to convey.
On my private lease form, I do require that the Lessee execute the lease, as well as initialing each page for identification. It has actually helped in some cases, such as when the Lessee said that "we were not aware of that clause" and my response is that you "initialed the page where the clause was located and executed the lease. Did you not read what you were signing?"
In order to have a valid contract, several conditions must be met. One of those conditions is an offer and an acceptance. In the case of an oil and gas lease, the lease is accepted by the actions of the lessee, without execution.
I agree with Mr. Cotten’s reply in regards to the lease agreement. There is no standard lease form involved in the oil and gas industry. Each company predrafts a lease that has proven suitable for them in the past. Keep in mind that that the lease agreement may not be in the best interest of the landowner. All areas in the lease is negotiable to some degree so be sure and read and understand what you are signing and don’t take a bank draft. Also, remember if your lease is in a “hot” area, the negotiating power will be greater than unproven or “wildcat” areas. Finally, if you are unsure about the contents of a lease, it might be money well spent to hire an oil and gas attorney.
Buddy Cotten said:
Dear Mr. Thack,
To answer your question, the oil and gas lease is not a lease at all. It is a mineral conveyance in the nature of a determinable fee, subject to the possibility of reverter. In conveyances of property, the Grantee, Lessee, Vendee, is not required to sign, since they have nothing to convey.
On my private lease form, I do require that the Lessee execute the lease, as well as initialing each page for identification. It has actually helped in some cases, such as when the Lessee said that "we were not aware of that clause" and my response is that you "initialed the page where the clause was located and executed the lease. Did you not read what you were signing?"
In order to have a valid contract, several conditions must be met. One of those conditions is an offer and an acceptance. In the case of an oil and gas lease, the lease is accepted by the actions of the lessee, without execution.
Hope that this helps.
Best,
Buddy Cotten
B
Saying drafts are worthless is like saying that onions are worthless. There is more than one type of draft. A draft is a negotiable instrument and as such, is a contract. If you accept the contract offered without reading or understanding its terms, well you get what you deserve, I suppose.
I have prepared and accepted drafts that are not conditional in nature, but rather an obligation to pay at a time specific, with liquidated damages for non payment.
One of the better protections against a bounced check is the criminal statues of theft by check.
There is more than one way to skin the cat, if you know what you are doing.
r w kennedy said:
Be very cautious. Drafts are worthless. Also look up DAP56 in the thread NORTH DAKOTA- UNLEASED ACRES IN SPACING UNIT WITH WELL BEING DRILLED. They obviously don't know what they are talking about or deliberately not telling the truth. Weigh carefully anything a landman or oil company says or you may get .....consumated....RWK
I did make a mistake, I said all drafts are worthless and I should have stated most all. As for drafts being a negotiable instrument and as such, is a contract, the negotiable instrument I received from one of the majors states " No Protest and no liability for payment shall be attached, not much of a contract there. Pretty much states send whomever this piece of paper and we might, if we want to, send you the money we promised you. I know a lot of people who got cold drafts wish it were more of a binding contract as it was like dealing with onions, it left tears in their eyes. Most would love to have the non-conditional obligatory drafts mentioned here but few if any are offered such and rely on trust of ones word, which many times can be worth about as much as the paper the draft is written on. To think perfection or lack of to be ones fault, may just be that but many are left to what is offered in hopes as they either have too small interest to hire someone and many times negotiations go nowhere when they can just pool your interest. Drafts, most drafts anyway, are to make the lessor fell all warm and fuzzy inside but really are only for the benefit of the lessee, he got you to sign a lease and didn't even have to give you a dime.
Thank you for correcting my oversimplification Buddy. The drafts I have recieved for signing a lease have never been honored, even though I’ve had no problem recording my deeds of ownership to the minerals. All the ones I’ve recieved haven’t said that they were conditional on title search, or stated any conditions at all outside of a 30 to 45 day expiration date. A lease was filed for all the drafts I have presented for payment, and yet I’ve never been paid. I now recommend all people shun drafts and require checks. I hope you will admit than in such situations that a check affords more, and or different, avenues of recourse . RWK
Buddy Cotten said:
Saying drafts are worthless is like saying that onions are worthless. There is more than one type of draft. A draft is a negotiable instrument and as such, is a contract. If you accept the contract offered without reading or understanding its terms, well you get what you deserve, I suppose.
I have prepared and accepted drafts that are not conditional in nature, but rather an obligation to pay at a time specific, with liquidated damages for non payment.
One of the better protections against a bounced check is the criminal statues of theft by check.
There is more than one way to skin the cat, if you know what you are doing.
Best,
Buddy Cotten
r w kennedy said:
Be very cautious. Drafts are worthless. Also look up DAP56 in the thread NORTH DAKOTA- UNLEASED ACRES IN SPACING UNIT WITH WELL BEING DRILLED. They obviously don't know what they are talking about or deliberately not telling the truth. Weigh carefully anything a landman or oil company says or you may get .....consumated....RWK
My complete admissions on Bank Drafts are in my blog post here:
http://www.mineralrightsforum.com/profiles/blogs/oil-and-gas-bank-draft
When a draft has in (generally) in the upper left hand corner:
Upon approval of title and lease form and contents
and in no even later than XXX days after site...
or words to that effect, it is a conditional contract.
As a matter of fact, the landmark Texas case, which I cannot remember the citation of, the landowner was given a draft and prior to the bank paying it off, the landowner leased his land for more money and he got a check which he deposited. The court held that paying by check was like paying by cash (if the check did not bounce) and if done before the draft was paid, superseded the draft since the draft could have been not honored, it being conditional in nature.
The law of negotiable instruments can be somewhat tricky.
r w kennedy said:
Thank you for correcting my oversimplification Buddy. I hope you will admit than in such situations that a check affords more, and or different, avenues of recourse . RWK
And now I have to correct myself. They may have stipulated, Subject to approval of title. I doubt that would be the reason they were not honored as they did record leases. I also had no trouble recording my mineral deeds. I actually owned a little more than they thought I did. They tell me now it was all a great mixup involving a person with a similar name. They say they paid his once and declined to pay both of mine by mistake. One would think they were aware of the situation after doing the title searchs. RWK
r w kennedy said:
Thank you for correcting my oversimplification Buddy. The drafts I have recieved for signing a lease have never been honored, even though I've had no problem recording my deeds of ownership to the minerals. All the ones I've recieved haven't said that they were conditional on title search, or stated any conditions at all outside of a 30 to 45 day expiration date. A lease was filed for all the drafts I have presented for payment, and yet I've never been paid. I now recommend all people shun drafts and require checks. I hope you will admit than in such situations that a check affords more, and or different, avenues of recourse . RWK
Buddy Cotten said:Saying drafts are worthless is like saying that onions are worthless. There is more than one type of draft. A draft is a negotiable instrument and as such, is a contract. If you accept the contract offered without reading or understanding its terms, well you get what you deserve, I suppose.
I have prepared and accepted drafts that are not conditional in nature, but rather an obligation to pay at a time specific, with liquidated damages for non payment.
One of the better protections against a bounced check is the criminal statues of theft by check.
There is more than one way to skin the cat, if you know what you are doing.
Best,
Buddy Cotten
r w kennedy said:
Be very cautious. Drafts are worthless. Also look up DAP56 in the thread NORTH DAKOTA- UNLEASED ACRES IN SPACING UNIT WITH WELL BEING DRILLED. They obviously don't know what they are talking about or deliberately not telling the truth. Weigh carefully anything a landman or oil company says or you may get .....consumated....RWK