Co-author Brittany Blakey
When the form contract says one thing and the addendum says another, which one would you expect to prevail?
The central issue in Tier 1 Resources Partners v. Delaware Basin Resources, LLC was whether one tract that was subject to several identical leases automatically terminated at the end of the primary term. The answer to the question turned on the aforementioned choice.
The Bush lessors leased Sections 6 and 2, in Reeves County, Texas, to DBR. The leases were made of two parts: a 10-paragraph “Producers 88” form and an 11-paragraph addendum. The interplay between the Producers 88 and the addendum caused disagreement among the parties.
Paragraph 1 defined the land covered by the lease as “said land,” which expressly included Section 6 and Section 2. The habendum clause established a three-year primary term. Upon lease expiration, DBR’s interest would automatically terminate as to all lands and depths except those designated to be within a production unit. DBR could save the lease from automatic termination by conducting a continuous drilling program per the lease specifications.
The lessee’s problem
Continue Reading Addendum Prevails over Form … Again