Broker Loses His Override

Explore:  Brokers Oil & Gas

You won’t get what you don’t ask for. That’s a given. But so is, You can’t always get what you want. That’s the end of most lawsuits for one side or the other. 

Take Wade Oil & Gas, Inc. v. Telesis Operating Company, Inc., et al, for example. Wade, an oil and gas properties broker, entered into a contract with Telesis in which Wade was granted “the exclusive right to solicit and seek offers” to purchase a property for three months in return for a sum of money and an overriding royalty interest. Telesis received an offer from the buyer during the three-month term, sold the property to the buyer with little to no involvement from Wade, and did not assign the override to Wade. Wade sued, arguing that it was owed the override because the offer was received during the exclusive listing period.

Unfortunately for Wade, the contract didn’t say what Wade thought it said (or at least, what he wanted it to say). The agreement read as follows:

“If any offers are received to purchase the Property by Telesis Operating Co., Inc. within 180 days after the [3 month term] that were identified by Wade to Telesis [. . . ] during the [ 3 month term] and a sale is consummated, then Telesis [. . . ] shall be obligated to compensate Wade”

Because Wade did not ‘identify’ the buyer to Telesis, Telesis was not obligated to compensate him with the override. Wade argued that he had an exclusive right to sell the property during the term, but he did not. Instead of Wade obtaining an exclusive right to receive offers and sell, Telesis “reserved its right to sell the property independent of Wade.”

Wade lost out on a large sum of money because his contract didn’t say what he intended it to say; instead it created ambiguity.

It might seem silly to reiterate so frequently the notion that your contract needs to clearly state what you want and expect to come from the agreement and the relationship, this case reminds us that contracts don’t always get written that way.

The takeaway: Negotiate for what you want and then verify that your agreement explicitly states what you intend. Ambiguity works pretty well for presidents and members of Congress, and in some religions (think Episcopalian, but not Baptist) 

The obvious musical interlude:

*Click here to view video.


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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