(Chapter 29)U.S. OIL AND GAS IMPLIED COVENANTS AND THEIR FUNCTIONS: 'AS MUCH A PART OF THE CONTRACT-IS AS EFFECTUALLY ONE OF ITS TERMS-AS IF HAD BEEN PLAINLY EXPRESSED'

摘要

The members of the Rocky Mountain Mineral Law Foundation are no strangers to implied covenants. Such rights have long been inserted by courts into natural resource leases in which the economic mechanism is the exchange of an exclusive right to explore, develop, and produce in return for a signing bonus and royalty payment. This mechanism is the structure for almost all oil and gas and other mineral leases in the United States.Implied covenants should be important to landmen and all other oilfield participants because they are part of the framework within which leases are negotiated. What is reliably implied need not be stated in express lease terms. As all oilmen know, oil and gas implied covenants are legal rights that courts treat as if they are written into the lease. Courts imply these rights to carry out the purposes of the lease. Although lawyers still fight over whether the covenants exist as a matter of fact or law or, even worse, whether the covenants have an inherent nature as one or the other, the factual and legal approaches actually are two alternative, complementary ways in which courts have implied rights in American contracts. Close examination shows that courts generally imply oil and gas covenants as a matter of law even if courts sometimes use factual language. Whatever their terminology, they almost always focus on what can be deduced from the general nature of an oil and gas lease, not on ex post reconstruction of an original lease negotiation. And once a particular covenant gets established firmly, it will be implied unless negated by specific lease language.Implied covenants do have one weakness compared to express lease terms. If a lease term does fully cover an area, its written language will control. A covenant can be extinguished by lease language if it truly is on point (on point often is a big "if").