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    PROPERTY—ANTIASSIGNMENT CLAUSES: Provision in Oil and Gas Lease Enforceable Even Though Lessors Cashed Royalty Checks After Assignment

    Posted by Gale Burns on Thu, Jan 23, 2014 @ 15:01 PM

    The Lawletter Vol 38 No 11

    Alistair Edwards, Senior Attorney, National Legal Research Group

         Oil and gas leases often contain an antiassignment clause prohibiting the lessee from assigning the lease to a third party without the written consent of the lessor (or the lessor's heirs, executors, or assigns). For example, in Harding v. Viking International Resources Co., 2013‑Ohio‑5236, 2013 WL 6211985 (Ct. App.), the court examined an antiassignment clause in an oil and gas lease providing in pertinent part that "[t]he rights and responsibilities of the Lessee may not be assigned without the mutual agreement of the parties in writing." Id. at *4, ¶ 14.

         In the above case, the court held that the antiassignment clause was enforceable, and it affirmed the decision of the trial court voiding the assignments of the lease by the original lessee. The court reached this decision despite the uncontradicted fact that the plaintiffs/lessors (who were the successors to the original lessors) had accepted and cashed monthly royalty checks for approximately eight months before even objecting to the purported assignments. The court explained:

    The question presently before us is whether the assignments of three oil and gas leases from Carlton to Appellant are valid considering that the original leases between Carlton, as lessee, and Appellees, as lessors, contained an anti‑assignment clause which prohibited the assignment of the leases by the lessee without the lessors' consent. The trial court determined that the anti‑assignment clause in the oil and gas leases clearly prohibited assignments without Appellees' written consent and that the uncontroverted evidence established that the leases were assigned without the written consent of Appellees. . . .

         We find this approach to be correct considering the facts of this case, which involves an attempt to invalidate an assignment, rather than an attempt to declare a forfeiture, or assert a breach or the expiration of an original oil and gas lease. The fact is, the dispute here involves a written contract which clearly specified the rights and duties of the parties with respect to the issue of assignment. As set forth above, Ohio enforces anti‑assignment clauses where there is clear contractual language prohibiting an assignment. J.G. Wentworth, LLC[ v. Christian, 7th Dist. Mahoning No. 07MA113, 2008‑Ohio‑3089, 2008 WL 2486552]. Thus, we conclude that the clear and unambiguous anti‑assignment clauses contained in the original oil and gas leases should be enforced.

    Id. at *5, ¶¶ 19-20.

         The court refused to consider the assignee/lessee's argument that the lessors were estopped from denying the validity of the assignments, or the similar arguments that the lessors had waived their right to enforce the antiassignment clause and/or had ratified the assignments by their conduct—specifically their acceptance and cashing of monthly royalty checks for approximately eight months after the assignments. Rather, the court honored the clear and unambiguous language in the lease prohibiting an assignment without the lessors' written consent, which was never obtained. "The fact is, the dispute here involves a written contract which clearly specified the rights and duties of the parties with respect to the issue of assignment. . . . Ohio enforces anti‑assignment clauses where there is clear contractual language prohibiting an assignment." Id. & 20.

    Topics: legal research, Alistair Edwards, oil and gas lease, antiassignment clause, Harding v. Viking Int’l Res. Co., Ohio Ct. App., clear and unambiguous contract language controlled, The Lawletter Vol 38 No 11

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