Breach of contract claims often deal with oil and gas leases

Contract disputes in California over oil and gas leases are common. These types of disputes often concern the payment of royalties and claims of failure to pay the amounts due. There may be other types of breach of contract claims dealing with the terms and/or conditions involved in the leases. An example of this is taking place in another jurisdiction where two owners of land, in separate lawsuits, have sued the Stone Energy Corporation for failing to pay to them the royalties promised under alleged contracts.

The two landowners filed their suits in state court, claiming that the company contracted with each of them in 2009 to extract natural gas from the Marcellus Shale running on their land. The plaintiffs claim that the leases are vague on the terms of payment and do not describe how to compute the royalties after deduction of approved deductions. Despite the lack of details, the company withheld substantial sums from both landowners’ payments and labeled them for “post-production” costs.

The plaintiffs are claiming that the failure to specifically describe the method of computing the royalties and the failure to identify costs to be withheld makes the agreements invalid. They allege both fraud and breach of contract. The withholding of post-production costs by the defendant was so egregious that the defendant paid no royalties in some instances, instead demanding that plaintiffs owed a balance for the costs, according to the complaints.

The plaintiffs are seeking damages not just for breach of contract but also for fraud. They claim that the defendant intentionally and knowingly tried to take the full amount of their royalty interests away from them. Damages claimed in the case include for the full payment of all royalties and reimbursement for all withheld post-production costs. Compensatory and punitive damages are also requested. In California and elsewhere, these are damages that can be requested in a typical contract dispute, although it should be noted that punitive damages are rarely granted in contractual disputes.

Source:, “Two lawsuits filed against Stone Energy Corporation for fraud, breach of contract“, Kyla Asbury, Dec. 1, 2016

Tags: Contract Disputes

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