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Recent Oil and Gas Law Court Decisions

Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A.

Assignment of Lease in Violation of Lease Terms Held to be Void
In Harding v. Viking Int’l Resources, Case No. 12 OT 259 (C.P.2013), the Washington County Court of Common Pleas ruled that a violation of a provision prohibiting assignment contained within an oil and gas lease rendered any purported assignments void, absent the requisite consent of the Lessor.  However, the Court went on to hold the underlying leases were not terminated by virtue of the improper assignment, and thus remained binding on the Lessor. 

The consent to assignment provision in the oil and gas lease at issue provided:  “[t]he rights of the Lessor may be assigned in whole or part as shall be binding upon the heirs, executors and assigns.  The rights and responsibilities of the Lessee may not be assigned without the mutual agreement of the parties in writing.”

Slight variations in the facts or contractual language may lead to a different result.  It is anticipated assignability issues will be the subject of additional disputes and analysis by Ohio courts. 

Any parties who have or intend to assign their interests in oil and gas leases should carefully review the terms of the leases at issue to ensure compliance prior to assignment.
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Lessor’s Alleged Breach of Implied Covenant to Develop Held Subject to Lease Notice Requirement
In Carges LLC v. EnerVest Operating LLC, et al., Case No. 2012 CV 03 0215, the Tuscarawas County Court of Common Pleas dismissed a lessor’s claim for breach of the lease’s implied covenant to develop.  The subject lease required 30 days advance written notice prior to filing suit, and provided that “service of such said notice shall be precedent to the bringing of any action by Lessor on said lease for any cause, and no such action shall be brought until the lapse of thirty (30) days after service of such notice on Lessee.” 

The court found that the Lessor’s complaint did not allege compliance with the notice provision of the lease.  The court held that provision to be a condition precedent to bringing an action under the lease.  The court therefore granted the producer’s motion to dismiss the lawsuit. 

If you have any questions about the above, don’t hesitate to contact Attorney Gregory W. Watts at 330-497-0700.

NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.

 
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