Contract law 101: To have a binding contract there must be an offer and an acceptance. And so it is in oil and gas leasing in Louisiana. Thus, in Ballard v. XTO there was no binding agreement to take a lease.
A landowner representing an unknown number of potential lessors and an XTO landman exchanged a series of emails. XTO made an offer. The landowner said “we have collectively agreed to accept your proposal; however …” followed by a request that four terms be confirmed. The landman confirmed the details. He then informed the landowner that only “upper management” had the authority for a lease package of that size, which was north of $3,000,000.
More Negotiating after “Acceptance” Means No Binding Contract
The landowner asserted that landman had accepted the offer. But the email then asked the landman to send a formal commitment letter on which the landowner would fill in the blanks. There would be an addendum to be approved by XTO. The court determined that this was not an acceptance of XTO’s offer. According to the court, the parties understood that they would execute additional documents before they would form a binding contract. The landowner’s claims were denied.
The court’s ability to ferret out the facts was made much easier with emails that if the conversations had been oral. When it comes to who-said-what and what they really meant, writings offer less wiggle room than oral testimony of feuding witnesses in a trial.
Can Emails Make a Contract?
In Louisiana, who knows? The court did not determine whether in Louisiana an email exchange is sufficient to form a lease or a contract to lease. About that question, the court said “we are not sure”. That issue remains for another lawsuit on another day.
How About in Texas?
Yes … sometimes … if you do it right. Thanks to my Looper Reed partners Jamie Ribman and Cleve Clinton, that question was addressed in another of our firm blogs, “Tilting the Scales”.
The Purity of the Civil Law is Preserved
As surely as Louisianians prefer a bowl of spicy seafood gumbo and an ice-cold Abita Turbo Dog to a slab of well-done brisket and a glass of sweet tea, the court revealed disdain for the common law by rejecting the plaintiff’s claim of promissory estoppel. According to the court, this theory is “relatively disfavored under Louisiana law because it developed in Common Law jurisdictions as a substitute for consideration, to make gratuitous promises binding despite their lack of consideration.”
There was a also fraud claim. Given the language of the email communications, the court determined that the plaintiff’s reliance on the landman’s promises was not reasonable.
I can imagine other defenses. Was the speaker actuallly the agent for all of the prospective lessors, did the emails sufficiently describe the land to be leased?