Monday, November 12, 2018
I always tell my students that if you want people to promise to do something, you'd better make sure you don't phrase it as a condition in your contract, and a recent case out of the Middle District of Pennsylvania, Allen v. SWEPI, LP, No. 4:18-CV-01179 (behind paywall), carries just that lesson.
The contract was for the purposes of exploring for oil and gas on the Allens' land and read that the agreement was "made on the condition that within sixty (60) days from the Effective Date of this lease, [the defendant] shall pay to the [Allens] the sum of Two Thousand Dollars ($2000.00) per acre for the first year." The defendant never paid the Allens this sum, and the Allens sued. However, the defendant argued that this was nothing but an option contract. It had the right to rent the land for oil and gas exploration if it paid the required sum. However, it was not required to pay that sum. Instead, the payment was a condition that had to be fulfilled before the contract would come into operation. The court agreed and dismissed the Allens' breach of contract causes of action.
The court then also dismissed the Allens' promissory estoppel claim, because it found that there had been a valid and enforceable contract between the parties -- it was just an option contract that the defendant chose not to exercise.
The Allens seem to have thought they had rented this land to the defendant. I think that what they wanted to accomplish (or thought they were getting) with the quoted clause was to make sure they were paid within 60 days. However, in phrasing it as a condition, what they got was no commitment from the defendant at all.