pjc-oil-and-gas-2022-lib

L ESSOR -L ESSEE I SSUES

PJC 303.1

PJC 303.1 Claims for Breach of Lease Provisions (Comment) An oil and gas lease, in addition to being a conveyance of real property, contains covenants and conditions that must be interpreted under the same rules that apply to other contracts. Hitzelberger v. Samedan Oil Corp. , 948 S.W.2d 497, 503 (Tex. App.— Waco 1997, writ denied). If the oil and gas lease is unambiguous, courts seek to deter mine and enforce the intention of the parties as expressed in the lease. Heritage Resources, Inc. v. NationsBank , 939 S.W.2d 118, 121 (Tex. 1996). Disputes concerning breach of express and implied lease covenants are covered in PJC 303.1 through 303.12, and disputes concerning breach of lease conditions are cov ered in PJC 303.13 through 303.25. The appropriate remedy for breach of covenants generally is damages, whereas the remedy for breach of lease conditions is termina tion. See Shell Oil Co. v. Stansbury , 401 S.W.2d 623 (Tex. App.—Beaumont), writ ref’d n.r.e. , 410 S.W.2d 187 (Tex. 1966); see also Texas Oil & Gas Corp. v. Vela , 429 S.W.2d 866, 875 (Tex. 1968). Furthermore, because an oil and gas lease is a contract as well as a conveyance, an action for breach of either an express or implied covenant sounds in contract rather than in tort. Therefore, punitive damages are not recoverable. Amoco Production Co. v. Alexander , 622 S.W.2d 563, 571 (Tex. 1981). The pattern jury charges in this chapter focus on two common claims for breach of express lease covenants: (1) failure to properly pool and (2) failure to properly pay royalty. Both claims are considered breaches of the lease, because the right to pool and the method for calculating royalty are terms provided in the lease. For disputes involv ing the breach of other express or implied covenants, the jury charges should conform to the lease language or implied duty at issue. Additionally, disputes concerning breach of express and implied lease covenants could be affected by division orders and the Texas Division Order Statute. Tex. Nat. Res. Code § 91.402; Exxon Corp. v. Mid dleton , 613 S.W.2d 240 (Tex. 1981); Ohrt v. Union Gas Corp. , 398 S.W.3d 315 (Tex. App.—Corpus Christi–Edinburg 2012, pet. denied). For additional questions and instructions regarding contract claims and defenses that may be applicable to disputes involving the breach of the lease, see chapters 305 and 312 of this volume.

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