Mandell v. Hamman Oil and Refining Co.

OPINION

SAM BASS, Justice.

This appeal stems from a royalty suit to recover on a take or pay contract. The issue in this case is whether royalty owners are entitled to take or pay proceeds from a gas purchase contract. We hold that royalty owners are entitled to royalties for take or pay provisions, only if the parties expressly so provide in the lease.

Summary of Facts

In 1978, appellants and Hamman Oil and Refining Company (“Hamman”) executed three leases for 260 acres of land for oil and gas exploration. Paragraph 3(a) of the leases provided for royalties, as follows:(2) On gas, including…