a future document nor does it purport to c article ondition his acceptance on the execution of such a document…We do not view the absence of the contemplated ‘more formal and recordable document’ as fatal to Concho’s ratification defense.” [emphasis added] The foregoing finding by this Court, whether one of fact or law, does not accurately reflect the true meaning of the above quoted language nor the status of Texas law on its interpretation.As members of the oil and gas industry, Mr. Ellison and Samson had both been parties to numerous instruments such as this and were aware that the parties to: (i) complete or partial sales/assignments of oil and gas leases; (ii) farm-ins and (iii) farmouts usually, but not always, initially signified their intent to further negotiate via a written letter of intent. This letter of intent contained a commitment to furnish a more complete (and fully negotiated) legally enforceable document.The letter of intent, within the context of the oil and gas industry, is typically NOT viewed as a legally enforceable agreement as to the terms contained within that document. Rather, it is merely a limited (and legally unenforceable) commitment to further negotiate the sale, assignment, farm-in or farmout of oil and gas leases. If no further negotiations take place or if negotiations for the final, complete legally enforceable document stall and go no further, the oil and gas industry, and specifically the landman profession, treats a letter of intent as an unenforceable ‘agreement to agree’ and the proposed sale/assignment etc. is no longer pursued with no further legal repercussions to either party. Surely Mr. Ellison contemplated further negotiations for at least how much money he would be paid for giving up approximately one-half of his leasehold working interest since no consideration was mentioned in the letter of intent! The following cases all agree that: 1. An agreement to agree (letter of intent) is an unenforceable agreement. 2. Writings couched in futuristic language in a preliminary agreement where a second, complete document is to be negotiated by and between the parties fails as an enforceable agreement standing by itself. 3. The first document (here the October 16, 2008 Letter (of Intent)) contains a condition precedent – a second “more formal and recordable document” had to be provided by Samson and executed by Ellison to have to have an enforceable agreement.
4. Equally as significant, there was a fact issue raised on the intent of the parties to the October 16, 2008 Letter (of Intent) concerning whether the furnishing of the called for “second document” was a condition precedent to the formation of an enforceable contract. Whether the furnishing of a second, more complete document was a condition precedent is usually a factual matter of intent to be decided by a jury. See Chalker Energy Partners III, LLC v. Le Norman Operating LLC, 595 S.W.3d 668 (Tex. 2020); Copano Energy, LLC v. Bujnoch, 593 S.W.3d 721 (Tex. 2020); Foreca, S.A. v. GRD Development Co., Inc. , 758 S.W.2d 744 (Tex. 1988) and Railroad Commission of Texas v. Gulf Energy Exploration Corp., 482 S.W.3d 559 (Tex. 2016) Obviously, no such fact issue was ever submitted or ruled on since no trial was had on this specific matter in the original action.The issue of intent is not a factual matter to be decided by the Texas Supreme Court. 5. Therefore, the October 16, 2008 Letter (of Intent) was no more than an unenforceable letter of intent. This case changes all of the oil and gas industry’s understanding of letters of intent , including the 2008 Samson Letter specifically, and their legal effect. Due to the Court’s ruling, attorneys and landmen will no longer know if their specific words in what is and has been heretofore denominated a letter of intent is now, by itself, an enforceable agreement or an equitable ratification. How do we educate our profession on the potential legal effect of any letter of intent in light of decades of industry practice to the contrary? More significantly, how does the oil and gas industry know if this ruling is absolute and all letters of intent will be similarly interpreted? Constant and protracted litigation on this issue is not the path forward; legal certainty in the treatment of letters of intent must be clear and uniform. It is not clear and uniform based on the ruling of this case. © Terry E. Hogwood 2021 This article was prepared by Terry E. Hogwood for use by his clients and prospective clients as a reference tool only.Any comments and/or legal conclusions contained in this are solely those of the author and reliance thereon by any reader of this article is at the reader’s sole risk.
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