I just received a lease and find it unbelievable that they would blatantly direct me to sign a legal document, notarize it and return it back to them without any compensation at all until, 30 days from the return of their lease which, in no doubt puts them in the best of positions! Then, if that's not enough to ruffle your feathers, they purport to add clauses to give themselves a way out of not paying you if they so choose or worse, can record the lease that you signed and make you fight for your money while they proceed to whatever they want.
After you sign the lease, you are not given the same leeway (as they give themselves) to get out of anything, but they will hold your feet to the fire because, its a legal binding contract that you, not them, signed. This is outrageous and I can't believe this actually goes on!
Furthermore, they have had ample time to verify that I am the actual owner of the mineral rights, but feel this is used as an excuse to hold your money and buy them time while holding your lease!
I would never consider conveying any deed over before being fully compensated at the same time.
Google Michigan to read about what happened with the mineral leases there!
Unfortunately, this method is very common in the lease world. In order to protect yourself, you can add a bonus agreement to the lease whereas you state that by a specified date, you will have money in hand or the lease will be null and void. This should be worded in legal terms. By taking this additional action, in writing, you have some protection from being "cold drafted". A statement would also be needed to address the matter if a title failure occurred by the lessee during record research.
Kaye,
I too am very upset with a Canadian oil company. I have been trying to get my option money for 9 months. I am a non executive mineral owner. The executive mineral owner got their money but not me. I keep getting the brush off from Greg in Canada.
Charles, I don't think this approach will protect a mineral owner (MO). Simply because if the gasco wanted out of the lease they simply would let the payment date lapse and "happily" be out of the lease. Meanwhile, the MO has been pulled of the leasing market and then returned to the market after the lease voided due to non-payment but the play has died and there are no lessee.
I was part of the MI masses that Kaye is referring to that signed leases and were given OFP that were not honored because CHK wanted out of the play. To have included the clause as you suggest would have given them a legal means to get out of the lease agreement simply by not paying.
I agree with Kaye, as far as not providing a lease to any gasco until they have paid - and paid by company check and cashiers check. As I said in my own recent and similar post, to use an escrow arrangement where the signed lease would only be forwarded to the gasco after the check has cleared and the "cash is in hand".
This is why I posted the question; can a deal be made that is fool proof - where a gasco must honor the deal as signed and can't get out.
hahahaha. I don't mean to be disrespectful Dillon. But when you sign a gas lease, you indeed are committing legally to the lease to THAT gasco. You are not permitted to get out of that lease. You can only get out of that lease if they breach the lease. However, it isn't that simple. You would have to take the gasco to court in many scenarios and frankly, if they are fighting to retain the lease, their legal budget will far outlast yours!
So indeed, when you sign a gas lease, you are stuck and you will not get out of it without a fight and perhaps not even then. On the other hand, as Kaye notes, there are many ways the gascos DO get out of the leases and these reasons are often hidden in "wiggle words" in the leases. This is why I strongly suggest that all Lessors have experienced attys helping them with negotiations and contract refinement. It takes a ton of work to get a contract that is fair - it is not something that the gascos simply offer to MOs at the start.
Dillon, I guess I don't know what you mean by "consideration"...
You originally said: What would make you think you wouldn't have the same leeway as the oil company to get out of the contract if they've given you no consideration?
and my counterpoint was essentially that a lessor has no leeway to get out of a contract once signed whether paid or not paid. The lessee on the other hand can simply not pay and legal action might be required to either get payment or get the lease returned or get a recorded lease withdrawn - etc.
Since a gasco may not honor the contract, I am trying to establish the best strategy so ensure a signed lease is honored. Getting "cash" upon delivery of signed lease for one, but then my question is "can a gasco get out of a lease that has been signed and paid and if so, how to protect against that scenario?"
Dillon, cash does not have to change hands. The courts have declared that the mere possibility of future royalty is enough consideration to sustain a lease. The fact that you were not paid the cash bonus is simply a business dispute, it is not against the law to owe someone money, your lease will remain in force. I am involved in a suit against a lessor who never informed me we had a deal or paid me and recorded the lease after the draft went stale dated (the deal had expired before the lease was recorded). I think that had they recorded the lease before the draft went stale, I would not have a leg to stand on. I used you and your as generic terms in this post. I am sure though that the lease will not be recinded just for the lack of bonus payment unless your lease contained language such that it would, and if you didn't put it in there, it won't be in there.