5.005 Ambiguous Shut-In Royalty

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Requirement 5.005

Ambiguous Shut-In Royalty


 Oil and Gas Lease:  Sam Houston and Margaret Moffette Lea Houston granted Lease 1, which is dated May 22, 2010, and recorded in Deed Book 1, page 55, to Guadalupe Oil, Inc.  The shut in royalty clause of this lease provides for monthly payments equal to 1/12th of the amount of the annual rental payable in lieu of drilling. The lease, however, does not provide for an annual rental payable in lieu of drilling, because the rental clause was deleted and a special type-written clause was inserted in the lease specifying that all delay rentals were paid in advance. The lease is therefore ambiguous regarding the shut in royalty clause.

 Requirement:  Amend Lease 1 so that the conflict between the shut-in clause and the missing delay rental clause is resolved.  Alternatively, accept the risk of title failure associated with the failure to pay shut-in royalties.

Copyright 2011 by Edward G, Hawkins. All rights reserved.