and prevail on a force majeure defense to prevent termination of the lease due to expiration of the primary term, failure to comply with the continuous development clause etc. In the author’s opinion, clearly such leases whose force majeure clause expressly identifies a market downturn as a covered event could be maintained without necessarily having to comply with payment/time constrained provisions in the lease. Prudence would dictate that the payment of delay rentals may still be a well reasoned decision since the lease could be maintained without having to resort to the force majeure provision. Continuous drilling provisions as well as minimum royalty provisions, necessitating the expenditures of large sums of money which may or may not ultimately pay out, are much better candidates for a force majeure defense. Each lease must be analyzed separately and a decision on the efficacy of a force majeure defense made independent of any other lease in the play or general area.
asserted by its lessors. Regardless of whether an assertion of the happening of a force majeure event is all that a lessee has left to it to maintain all or part of its lease, it is far better to have a court agree with that assertion or achieve a settlement with the lessor early in the process rather than wait for the lessor to sue to terminate the lease. FOOTNOTE: There is a Texas case which deals with the issue of whether a lessee must, for example, tender shut-in royalties, even if a force majeure event has taken place. In general, the case appears to hold, where the use of language such as “anything in the lease to the contrary notwithstanding…” is found in the force majeure clause, that if a force majeure defense is successfully asserted then other provisions in the lease do not “trump” the force majeure clause. In this case, during the pendency of the force majeure event, shut-in royalties were found not to have been due.
General
There is no such thing as a customary or usual force majeure provision. In this time of computer generated oil and gas lease forms, attorneys for both lessors and lessees are drafting provisions helpful to their clients. It may well be that, absent specific language addressing an economic downturn as a force majeure event, a lessee is left with general language such as “or other similar causes or events outside of the control of lessee”. Can this language be used to successfully urge a force majeure defense by the lessee? As long as the force majeure event is and remains outside of the control of the lessee, in the author’s opinion, the absence of an express provision defining a market downturn as a covered event coupled with general force majeure language will not prohibit a successful defense to a breach of contract suit by interposing a force majeure event.
© Terry E. Hogwood 2020
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Declaratory Judgment
So, how to proceed. In the author’s opinion, whether specific force majeure language addressing an economic downturn exists or not, reliance on the provision should be coupled with an immediate declaratory judgment filing against the lessor(s). The lessee must temporarily forsake landowner relations in favor of a court approved defense to any existing or potential loss of lease/damage claims that could be
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