Interpreting Oil and Gas Instruments
Texas Journal of Oil, Gas, and Energy Law, Vol. 1, pp. 1-34, 2006
34 Pages Posted: 25 Aug 2007
This article evaluates Texas jurisprudence governing the process by which courts purport to ascertain the intent of parties to contracts and conveyances. Although this article focuses on examples from the oil and gas industry, the same observations can be made regarding the interpretation of any contract or conveyance. The false analytical tool of "ambiguity" is examined as one of the many tautological platitudes that masquerade as analysis in the interpretive process. The use of "surrounding circumstances" evidence, as it relates to the historical context of the transaction in which the instrument was created, is examined as a frequently overlooked, but potentially determinative, adjunct to any interpretive process. The goal of this article is to demonstrate why parties and the courts should move beyond the tautological platitudes traditionally used to evaluate interpretive issues and consider "surrounding circumstances" and "historical context" evidence to properly interpret even "unambiguous" contracts and conveyances.
Recognition of free will to enter into contracts and conveyances means little if the rights of the parties under the instruments they adopt are defined by processes that fail to seek their objective intent. Too often traditional interpretive processes, which rely upon the document's ambiguity to control what a court can consider to ascertain intent, excludes relevant and reliable evidence that could assist in accurately identifying the likely intent of the parties. When interpreting contracts and conveyances courts should focus on any objective evidence that can assist the court in determining what a reasonable person would have thought upon learning of the evidence being offered.
The ultimate jurisprudential goal is to ascertain the intent of the parties to the instrument. "Intent" in this context means objective intent. Frequently, this objective intent can be ascertained only by taking a trip back in history and placing the court in the shoes of the parties at the time the instrument was made. Unless this is done, the court will often be allowing the rights of the parties to change with the mere passage of time, or with the substitution of the original parties.
Keywords: Alford v. Krum, ambiguity, ambiguous, ascertain intent, concord oil, contract interpretation, deed interpretation, extrinsic evidence, four corners rule, freedom of contract, free will, oil and gas, merger doctrine, plain meaning rule, two-grant theory, intent of the parties, predictability
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