Dillion I have been following your discussion with rwk. The progression is very similiar to the maize of opinions on what constitutes considerationin for an OGL. The exchange of promises is hard for most people to accept. The lessor when he executes an OGL takes his property off the market and in some states conveys an immediate easment to the surface estate. The lessee promises to pay a royalty and a bonus payment on confirmation of title. The courts do not look at the magnitude of the consideration only that there was some exchanged. Underlaying all this is the concept of good faith performance by both parties. As you can see from this forum there appears to be a shortage of that right now. Remember if the lease is drafted correctly you can protect yourself.....just know what questions to ask .
I agree with you if they promised in the lease that they would pay the "bonus payment on confirmation of title" as you indicated.
But the lady who started this discussion objected to signing control of her minerals away & the company indicating they would pay her the bonus payment "if we feel like it."
In the 2nd case, I see no consideration.
And in the 2nd case they may not even get a confirmation of title until division orders.
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bill rolinski said:
Dillion I have been following your discussion with rwk. The progression is very similiar to the maize of opinions on what constitutes considerationin for an OGL. The exchange of promises is hard for most people to accept. The lessor when he executes an OGL takes his property off the market and in some states conveys an immediate easment to the surface estate. The lessee promises to pay a royalty and a bonus payment on confirmation of title. The courts do not look at the magnitude of the consideration only that there was some exchanged. Underlaying all this is the concept of good faith performance by both parties. As you can see from this forum there appears to be a shortage of that right now. Remember if the lease is drafted correctly you can protect yourself.....just know what questions to ask .
Dillon, the division order may not be the end of it either. An interest can be attributed to you but they may still refuse to pay until all blemishes of title are cleared up, including probates and quiet title if necessary. Just because they know you own it doesn't mean they will automatically pay.
Of course I have no proplem if it states that, too.
Some advice from an attorney on the Internet which I agree with:
Generally, a 30 day draft is payable within 30 business days from the date of the contract execution.
The payment of the draft in accordance with its terms constitutes the consideration for the lease, and if the draft is not timely paid the lease fails for consideration. In other words, no lease ever comes into effect and you are free to deal with or lease the property again. Some people feel that once the lease is executed it is a valid lease even if the land owner is "cold drafted"(not paid). The courts have held that thiis is not the case.
If your draft is not paid send the oil company a notification that the lease has failed for lack of consideration and ask for a return of any executed copies of the lease that might be in possession of the oil company. If for some reaon the lease has been recorded, file an affidavit in the deed records that the lease was never paid for and that it is void.
Dillon said:
Of course I have no proplem if it states that, too.
Dillon, Thanks for all the information! It would be interesting to read the ruling that was handed down.
Did the attorney mention what jurisdiction this case was heard in?
Understand this I believe is the general rule.
But I couldnt tell if you were from Texas or Michigan or ?, & understand the oil & gas industry has considerable influence in Texas so on leases here I'd make the payment of the bonus in exchange for the execution and delivery of the lease a condition to the instrument becoming effective, or the courts may look for a way to make it effective
Kaye said:
Dillon, Thanks for all the information! It would be interesting to read the ruling that was handed down.
Did the attorney mention what jurisdiction this case was heard in?
Dillon, your information seems predicatedon the lease not being recorded within the time frame of the draft. Some courts have said that the draft is as good as cash for consideration.....until it is not honored. The simple way to avoid the situation of being locked into a lease you did not receive bonus for, is to not let go of the executed lease until you have cash, period. People I respect in the industry have told me the lease is on life supportwhile the draft has not expired. Expiration of the draft is like pulling the plug, if nothing is there to act as consideration other than the expired draft, the deal is dead. From what I understand if the lease was recorded berore the draft expired, the conditions and covenants of the lease act as new life support /consideration and the lessor and lessee merely have a dispute over partial consideration at that time. As I said, your position seems predicated on a lease not being recorded in a timely manner, and if that is so I agree with you. Once again I strongly suggest that anyone should not let an executed lease out of their hands before they have cash.
Dillon said:
Some advice from an attorney on the Internet which I agree with:
Generally, a 30 day draft is payable within 30 business days from the date of the contract execution.
The payment of the draft in accordance with its terms constitutes the consideration for the lease, and if the draft is not timely paid the lease fails for consideration. In other words, no lease ever comes into effect and you are free to deal with or lease the property again. Some people feel that once the lease is executed it is a valid lease even if the land owner is "cold drafted"(not paid). The courts have held that thiis is not the case.
If your draft is not paid send the oil company a notification that the lease has failed for lack of consideration and ask for a return of any executed copies of the lease that might be in possession of the oil company. If for some reaon the lease has been recorded, file an affidavit in the deed records that the lease was never paid for and that it is void.
Dillon said:
Of course I have no proplem if it states that, too.
You state:
Dillon, your information seems predicatedon the lease not being recorded within the time frame of the draft. Some courts have said that the draft is as good as cash for consideration.....until it is not honored.
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No such predication for I believe you'll agree with me that if you or I drafted a contract & if we then tried to argue that our having drafted the contract, whether we recorded it or not, serves as consideration, we'd find ourselves laughed out of court.
Now I dont know if Kaye is in Michigan or Texas, nor do I know your state.
But Michigan has adopted the Michigan Plan to help keep their judicial system fair -- which a # of other states have also adopted.
Texas, the other hand, is one of only a handful of states that not only elects Texas Supreme Justices, but elects them by political party.
Most of their big campaign contributions come from the big law firms which represent the oil & gas industry.
You might hear one of their attys say, "Your Honor, may I approach the bench......(in a whisper) I hope you're satisfied with the Law Clerk working for you now & who'll help you write the opinion & whose salary we're helping to pay & here is a check for $5K from one of our partners we failed to mail in."
Thus, although I've been through law school I've never practiced law & dont keep up with recent Texas decisions, so I'd not be surprised if, despite what Texas State law states, a used toothpick left behind was considered consideration by an oil company in Texas.
I dont blame the oil companies for taking advantage of a corrupt judicial system, but the Texas citizens for allowing it to happen.
And so I probably do agree w/ you that in regard to oil companies anything might be considered consideration -- which would never work in other states.
Dillon, I know what I describe is the law presently in ND. The irish Oil againt the Riemers is a recent case you could find online. I would also like to point out that if one side can make a contention and can afford representation and the other side can not afford representation, it may not be good law but the side that can afford representation will very likely win. Best to not put oneself in a position of needing representation, don't give up an executed lease until you have cash.
Who won the Reimers case when it went to the SC?