Contract Law for Land Professionals Flashcards

In oil and gas contract law, 'force majeure' clauses typically excuse non-performance when the event causing delay is:

Answer: Unforeseeable, beyond the party's control, and renders performance impossible or impracticable

Force majeure clauses excuse performance for unforeseen events beyond a party's control that make performance impossible or impracticable, and the event must not have been caused by the party invoking the clause.

What is 'ratification' of an oil and gas lease, and when is it typically used?

Answer: A written confirmation by a party affirming a previously defective or unauthorized lease

Ratification is a written instrument by which a party—often a mineral interest owner not originally a party to the lease—acknowledges and affirms the lease's validity, curing defects such as a missing signature.

Under the doctrine of 'equitable conversion,' when a contract for the sale of mineral rights is signed but closing has not yet occurred, the buyer holds:

Answer: Equitable title to the property, with the seller holding bare legal title as trustee

Under equitable conversion, once a real property sales contract is signed, the buyer acquires equitable title and the seller retains only bare legal title as a trustee until closing.

A landman is negotiating an AAPL Model Form 610 Joint Operating Agreement (JOA). The 'non-consent' provision allows a non-consenting party to:

Answer: Decline to participate in an operation but risk forfeiture of a share of production until consenting parties recover a risk penalty

Under a JOA non-consent provision, the non-consenting party's share of production is withheld until consenting parties recover their costs plus a contractual risk penalty, after which the non-consenting party receives its share.

A mineral deed conveys 'all minerals in and under' a tract of land. A dispute arises over whether this conveyance includes subsurface salt caverns used for storage. Courts generally resolve such disputes by:

Answer: Applying the jurisdiction's definition of 'minerals' and considering whether the parties intended to include storage formations

Courts look to the jurisdiction's applicable definition of 'minerals' and interpret the deed language in light of the parties' intent and the surrounding circumstances to determine what was conveyed.

In a contract for the purchase and sale of oil and gas properties, 'representations and warranties' differ primarily in that:

Answer: Representations concern past and present facts while warranties are forward-looking promises that conditions will remain true

Representations are statements of existing or past facts whose falsity may give rise to rescission or fraud claims, while warranties are promises that facts are or will be true, whose breach triggers contract damages.

A landman discovers that an oil and gas lease was signed by a grantor who was legally incompetent at the time of execution. The lease is best characterized as:

Answer: Voidable—it may be disaffirmed by the incompetent party or their legal representative, or ratified upon restoration of competency

Contracts executed by mentally incompetent persons are generally voidable, not void, meaning the incompetent party or their guardian may elect to affirm or disaffirm the agreement.