Under the Ellison Decision, Are Letters of Intent NOW Enforceable Contracts? OR A SECOND LOOK AT Concho Resources, Inc. et al v. Ellison, 627 S.W.3d 226 (Tex. 2021) (“ Ellison” )
CAVEAT:This article examines only one part of the above identified Texas Supreme Court case.The following analysis is not to be construed as a review of all of the issues raised in the case and addressed by the Court. This article was written to alert oil and gas attorneys, landmen, division order analysts and lease/ title analysts – parties who regularly prepare and/or review/execute letters of intent to third parties that, despite any language to the contrary found in any such letter of intent, one or both parties to an otherwise unenforceable letter of intent may find, based on the Texas Supreme Court’s opinion in this case, that the letter of intent is legally enforceable as a contract. There were two significant instruments involved in the Ellison case:The October 16, 2008 Letter (of Intent) and a Boundary Stipulation of Ownership of Mineral Interest. The Ellison Decision article published in the NADOA third quarter 2022 issue focused on the Boundary Stipulation of Ownership of Mineral Interest and whether it was a valid legal conveyance (the court held it was not; the author believes it was). This article will analyze the October 16, 2008 Letter (of Intent) sent to Ellison Operating by Samson. The letter stated that the mineral owners under separate tracts of land (part of which was covered by Ellison Operating’s oil and gas lease) had agreed to a boundary line that was different from that which the parties (mineral owners and their lessees) had recognized since 1927.This letter (of intent) asked Ellison to accept the description of its leasehold estate premised on the agreed to boundary line found in the Boundary Stipulation . Significantly, (i) Ellison was not a party to the Boundary Stipulation and (ii) the letter requested Ellison to give up approximately one-half of his lease acreage and in return he obtained … nothing. No mutuality of consideration, no agreements to be kept and performed by the parties, no consideration whatsoever. Notably, in the Concho counterclaim trial three (3) years after the summary judgment rulings in the case, the jury/trial court found that the October 16,
2008 Letter (of Intent) was an enforceable contract between Ellison and Samson and that Ellison failed to comply with it. Damages were awarded for the supposed breach of the “contract”. No showing in the record was made by Samson that this “contract” was supported by consideration. This document cannot be a valid contract unless there is some evidence in the record which clearly indicates that the contract is supported by adequate consideration. Gaynier v. Ginsberg, 715 S.W.2d 749 (Tex.App.—Dallas 1986, writ ref’d n.r.e.) There apparently is no such evidence available, thus rendering, as a matter of law, the October 16, 2008 Letter (of Intent) NOT a contract by and between Samson and Mr. Ellison. If the October 16, 2008 Letter (of Intent) is NOT a contract between the parties, and lacks any words of grant within its four corners, and as a matter of law it cannot be a deed, then what is it? Before answering the question, it is necessary to review another provision from the October 16, 2008 Letter (of Intent). The October 16, 2008 Letter (of Intent) further contains the following significant language quoted in pertinent part:
“ Upon your acceptance, a more formal and recordable document will be provided .” [emphasis added] The October 16, 2008 Letter (of Intent)
was apparently signed by Mr. Ellison but the second, recordable document was never furnished by Samson. The Supreme Court’s opinion addressed this significant language and held: “…However, we agree with Concho
that this reading is inconsistent with the letter’s text, which requests that Ellison ‘signify your acceptance of the description of the Richey 147 acre tract as set out in the Stipulation (your leasehold’)’ by countersigning the letter . It does not ask Ellison to accept the stipulation by signing
G rowth T hrough E ducat i on - O c tober / N ov ember / D e c ember 2022 17
Made with FlippingBook Digital Proposal Creator