general principles of law are identified in these early cases (pre-1993) which relate to the applicability of the force majeure clause to oil and gas lease/oil and gas sales contract disputes: Control and Foreseeability. As will be seen from the following analysis, Control over the claimed force majeure event by the asserting party is still very much a part of the legal analysis that must be undertaken prior to asserting a force majeure defense to required contractual actions under an oil and gas lease. Foreseeability, while not specifically eliminated as a requirement to enforcement of the Clause, appears to have been severely limited in later cases, especially where the claimed force majeure event is specifically identified in the Clause. “…A ‘ force-majeure clause’ is generally defined as a “ contractual provision allocating the risk if performance becomes impossible or impracticable, esp. as a result of an event or effect that the parties could not have anticipated or controlled.” BLACK’S LAW DICTIONARY 674 (8 th Ed. 2004)… In the oil and gas context, the purpose of a force-majeure clause ‘ is to excuse the lessee from non-performance of lease obligations when the non-performance is caused by circumstances beyond the reasonable control of the lessee ... or when non-performance is caused by an event which is unforeseeable at the time the parties entered the contract.’ ….” Generally, the occurrence of a force majeure event suspends the lessee’s duty to perform under the terms of the oil and gas lease. That is, after the occurrence of a force majeure event, the failure of the lessee to satisfy the oil and gas lease covenants and conditions is not considered to be a breach of oil and gas lease. Rather, the lessee’s performance thereunder is suspended until the conclusion of the force majeure event . Care must be taken to resume compliance with the oil and gas lease provisions once the force majeure event has ceased.
Control and Foreseeability were the common law foundations for determining if the Clause could be asserted and enforced. One case clearly states that the lessee must clearly negate both control over the event by it and the lack of foreseeability of the occurrence of the event. Stated another way, absent a specific provision to the contrary in the oil and gas lease(s), even if an event, such as an extreme market downturn, was foreseeable by the lessee, if the lessee was unable to individually affect the outcome of the event (control), such event could still be considered to be a force majeure event under the Clause.
Beyond Control of Lessee
Generally, if the event alleged to trigger the Clause is within the control of the lessee (either caused by the lessee or can be avoided/eliminated by the lessee), compliance by the lessee with the actions/operations in accordance the associated lease time constraints, such as payment of delay rentals, expiration of the primary term etc. is required, thus removing the force majeure event from the general coverage of the Clause. That is, a prerequisite to the imposition of the Clause upon a given set of facts requires that the lessee have no control over such events. If the force majeure event is within the control of the lessee, compliance with the express terms of the oil and gas lease is not prevented as the result of the alleged event. The courts appear to be defining “control” in a very limited context ie whether or not the lessee asserting the applicability of the Clause to the factual situation at issue caused the event or could individually affect its impact on oil and gas operations. Thus, before an event will qualify as a force majeure event, the lessee must first establish that it lacked reasonable control over the occurrence of the event. For example, where a prior operator overproduced a well, and the Texas Railroad Commission entered a shut-in order for the lease, the Clause was triggered since the force majeure event was beyond the control of the present lessee. As set out earlier in this paper, the lessee asserting the applicability of the Clause has the burden of proof to show its applicability. As a prerequisite to legally applying the Clause, the lessee must first obtain a fact finding to the effect that the force majeure event was beyond its control, even if the Clause itself does not
Burden of Proof
The assertion of the occurrence of a force majeure event by the lessee is an affirmative defense. As such, the lessee has the burden of proof to allege and establish that defense.
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G r o w t h T h r o u g h E d u c a t i o n - A p r i l / M a y / J u n e 2 0 2 0
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