139 Exxon Corp. v. Breezevale Limited

Richard F. Brown

 
The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
 
Exxon Corp. v. Breezevale Limited1 holds that an oral participation agreement for a 2 1/2% working interest is unenforceable under the statute of frauds. Breezevale assisted Exxon for eighteen months in Exxon’s pursuit of exploration rights in Nigeria. There was no formal agreement in place, and at the last meeting between Breezevale and Exxon to discuss their relationship, the parties discussed both a services contract and a participation agreement. The parties’ dispute as to whether an oral working interest agreement was reached at that meeting became the basis for Breezevale’s lawsuit against Exxon.2 The jury found the parties had entered into an oral agreement and valued the interest at $34.3 million.3
 
On appeal, Exxon defended by invoking the statute of frauds, which generally provides that a contract for the sale of real estate is not enforceable unless the promise or agreement, or a memorandum of it is in writing and signed by the person to be charged.4 Whether a contract falls within the statute of frauds is a question of law to be decided by the court.5 Breezevale contended that the nature of the interest it was to acquire was in the nature of a contractual right to a share of the production, and therefore it was not an interest in real estate and not subject to the statute of frauds.6
 
The court held that the relevant issue in determining whether the contract involves real estate is not whether title to minerals passes, but whether the interest is derived from rights to oil and gas in the ground, making the interest a realty interest subject to the statute of frauds. The profits of land, including a working interest, a royalty interest and an overriding royalty interest are subject to the statute of frauds.7 The court concluded that the interest in this case derived from rights to oil in the ground and that it was a property interest subject to the statute of frauds.8
 

1. 82 S.W.3d 429 (Tex. App.–Dallas 2002, pet. filed).
2. Id. at 434.
3. Id. at 435.
4. Bus. & Com. Code Ann. § 26.01 (Vernon 1987).
5. Exxon, 82 S.W.2d at 436.
6. Id.
7. Id. at 436-37.
8. Id. at 437.