Oil and gas leases are governed by contract law, thus an assignment of oil and gas leases in Ohio is treated like the assignment of a contract. Rights and remedies of the parties to an oil and gas lease must be determined by the terms of the written instrument, and the law applicable to one form of lease may not be applicable to another.
In a lease assignment, one party hands off the contract’s obligations and benefits to another party. How the assignment plays out depends on many factors, especially the language in the oil and gas lease. Some leases may contain an anti-assignment clause prohibiting assignment. Others may require the other party consent to the assignment or it will be void.
An assignment doesn’t always relieve the assignor (the person transferring the lease’s obligations) of liability. Some lease contracts may include a guarantee that regardless of an assignment, the original parties guarantee performance.
In other cases, a landowner may maintain the right to deny an assignment if the company receiving the assignment is not satisfactory. It is becoming more and more common in Ohio to challenge provisions in leases that restrict the land owner’s ability to assign or otherwise transfer their interests.
Anti-Assignment Provision in Oil and Gas Leases
Anti-assignment provisions usually come in three forms:
1) a complete bar on assignment of a lease interest.
2) a bar on assignment without the written consent of the land owner and
3) a bar on assignment without the consent of the lessor, where such consent cannot be unreasonably withheld.
Of course, the exact language of a particular lease and the underlying factual situation will determine what defenses can be raised if it is claimed an anti-assignment provision has been breached.
All contract rights may be assigned unless there is clear contractual language prohibiting assignment; or an assignment materially changes the duty, burden or risk of the obligor (one who is bound by a legal obligation). The assignment will not be valid if it is forbidden by statute or public policy.
If you as a land owner have dealings with an oil or gas company and have questions about assignment or anti-assignment clauses in an oil or gas lease, please consider contacting one of the experienced oil and gas attorneys at Slater & Zurz LLP. Call them at 1-888-534-4850. The attorneys will review the language of your lease and determine if it is adequate to safeguard your interests.
Oil and gas leasing in Ohio is a very complex legal field and you do not want to sign anything without being aware of its content and possible future repercussions.