Face Challenges Confidently

625 Hardwick v. Smith Energy Co. , 500 S.W.3d 474 (Tex. App.—Amarillo 2016, pet. filed)

Friday, February 10th, 2017

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.

Hardwick v. Smith Energy Co. , 500 S.W.3d 474 (Tex. App.—Amarillo 2016, pet. filed) (Statute of Frauds and prospect agreement)held that a landman’s contract violated the Statute of Frauds by failing to adequately describe the prospect area. In a written agreement, Landman agreed to provide Operator with land services on a particular prospect for an overriding royalty and a day-work brokerage fee. Landman provided those services for over three years, but then a conflict arose, and Landman refused to continue. Operator sued Landman for replacement landman costs as damages for breach of contract. Landman contended that the agreement was unenforceable because it violated the Statute of Frauds.

There was no written description of the property covered by the agreement, but the agreement referenced a map that described the prospect area and an excluded area. From the map, it appeared that the boundary of the area included in the prospect on three sides followed county or section lines. The fourth side was on the diagonal and cut through three counties and did not follow county or section lines. There was no description on the map as to which lines were being used as the area of exclusion. While the excluded area appeared to follow section lines, those section lines were in no way described or identified.

The court held that the agreement violated the Statute of Frauds and was unenforceable. “An overriding royalty interest in an oil and gas lease is considered an interest in real estate that falls within the Statute of Frauds.” In order to comply with the Statute of Frauds, the contract must describe the land, or reference some other existing writing that describes the land, with reasonable certainty. “[I]t is sufficient if the contract includes enough of a description of the property that a person familiar with the locality can identify the premises with reasonable certainty.” “[W]hen location, course, and distance is not written in the contract or on the map, it ‘would do violence to the Statute of Frauds to permit extrinsic evidence to furnish these essential descriptive elements.’” Thus, the court held that it could not consider other agreements between the parties for the purpose of determining the location of the excluded area. Nevertheless, a review of the other agreements also failed to show the necessary courses and distances. Therefore, the court held that the agreement was unenforceable as to future performance and would not justify an award for replacement landman costs.

The significance of this case is that it is another of a long line of cases in which the common industry practice of using a map to describe real property fails to satisfy the Statute of Frauds. Although a map is frequently sufficient, the location of the land depicted on the map and courses and distances must be clear.