» Disclosure requirements reach mailed, but not emailed, offers to purchase oil interests

Disclosure requirements reach mailed, but not emailed, offers to purchase oil interests

A Texas statute requiring that offers to purchase oil rights contain a conspicuous, large-print disclaimer does not apply to emailed offers, according to a recent ruling from the Texas Court of Appeals in El Paso.

The court turned back several arguments why an arbitration clause in an agreement to purchase mineral interests was unconscionable, among them the lack of the statutorily mandated large-print disclaimer.

Texas Property Code, § 5.151, provides in relevant part:

A person who mails to the owner of a mineral or royalty interest an offer to purchase only the mineral or royalty interest . . . and encloses an instrument of conveyance of only the mineral or royalty interest and a draft or other instrument, as defined in Section 3.104, Business & Commerce Code, providing for payment for that interest shall include in the offer a conspicuous statement printed in a type style that is approximately the same size as 14-point type style or larger and is in substantially the following form:

By executing and delivering this instrument you are selling all or a portion of your mineral or royalty interest in (description of property being conveyed).

By its terms, Section 5.151(a) applies only to “mailed offers, not emailed offers,” Justice Yvonne T. Rodriguez wrote for a unanimous court. The court gave this limiting interpretation to the statute without analysis, though it appears to be the first time a Texas court has considered the question.

State law regulating real estate transactions marched into the twenty-first century with the 2005 Uniform Electronic Real Property Recording Act (Real Property Code § 15.001 et seq.) and 2007 Uniform Electronic Transactions Act (Business and Commerce Code § 322.001 et seq.), the latter declaring that if a law requires a record to be in writing, an electronic record satisfies the law.

The court’s ruling, if widely adopted, means that consumer protections found in Section 5.151 will not be traveling along. By restricting the statute’s reach to mailed offers, the court appears to have confined the state legislature’s command that offers to purchase mineral interests include a conspicuous disclaimer to the rapidly receding era of mailed, ink-on-paper transactions.

Even if the statute did apply to emailed offers, the court continued, the remedy is not rescission or a finding of unconscionability.

“Nothing about the text of this statute indicates that the Legislature intended for transactions like this one to be voidable, and nothing in the text of the statute excuses a party from his general duty under Texas contractual common law to read whatever instrument it is he is signing,” the court said.

Justice Rodriguez said that the remedy for a violation of Section § 5.151 is an award of $100 statutory damages or the difference in value between the amount paid for the mineral interest and its fair market value.

Along the way, the court invalidated language in the arbitration agreement eliminating punitive damages, finding that this restriction on available remedies violates Texas public policy. The court’s ruling is consistent with other rulings in this area, cf., Amateur Athletic Union of the U.S., Inc. v. Bray, 499 S.W.3d 96, 108-09 (Texas Ct. App., 4th Dist.—San Antonio, 2016).

The case is Ridge Natural Resources LLC v. Double Eagle Royalty L.P., No. 08-17-00227, (Texas Ct. App., 8th Dist.—El Paso, Aug. 24, 2018).

Website by SEO | Law Firm™, an Adviatech Company