We seem to get a fair number of calls and website questions about lease and/or mineral sales deals that fall through.
Nearly all lease/sale deals have built into them time periods after the signing during which the buyer is supposed to be performing due diligence research.
At the end of that, due diligence you will be paid if you, in fact, own the mineral interest that’s been leased.
Can the company refuse to honor your deal even if you do own your rights? It depends. Most leases and sales agreements give the companies a fair amount of wiggle room to avoid the deal they signed, while locking you in.
The first place to look is where the contract outlines the payment obligations. Most attorneys will try to negotiate clauses for their landowner clients that allow the operators to back out of a deal only if it’s learned there is a problem with the title ownership of the minerals.
There are a few contracts written by companies that have been drafted in such a way that, by and large, the companies can decide they don’t want your minerals any longer or, if they don’t have the money, can back out of the deal.
Lack of cash is the reason for many more deals falling through than you would expect. Many smaller companies don’t have the cash on hand to honor all of their possible deals. They are often using their due diligence period attempting to obtain deals with other large entities that will pay them in exchange for your new lease.
Companies back out of deals even after recording your lease or mineral deed at the courthouse. When that happens the title to your mineral interest is clouded and might prevent new companies from reaching out to you to offer you a new deal. If an oil and gas company has backed out of a deal they promised to close with you, it might be worth your time to reach out to us to see if there are any remedies available.