Opinion ID: 2064102
Heading Depth: 1
Heading Rank: 2

Heading: Contract Termination

Text: The Wests assert that the lease terminated by its own terms upon Alpar's failure to make royalty payments to the Wests prior to the commencement of their lawsuit. The language of the lease applicable to this issue provides as follows: It is agreed that this lease shall remain in force for a term of ten years from date, and as long thereafter as oil or gas, or either of them, is produced from said land by the lessee, its successors and assigns:       The lessee shall pay lessor, as royalty, one-eighth of the proceeds from the sale of the gas, as such, for gas from wells where gas only is found and where not sold shall pay Fifty ($50.00) Dollars per annum as royalty from each such well, and while such royalty is so paid such well shall be held to be a producing well. The lease was executed on September 30, 1969. By its own terms, the lease was to remain in force for a period of ten years from the date of execution and as long thereafter as oil or gas, or either of them, was produced. The Wests assert that after the ten-year period had expired on September 30, 1979, the lease terminated by Alpar's failure to make royalty payments on the sale of the gas because, in the Wests' view, the well was no longer a producing well under the terms of the lease upon Alpar's failure to make such payments. We do not believe that the Wests have correctly interpreted this portion of the lease. Properly interpreted, the lease provides that upon the expiration of the ten-year period the lease continues in force for so long as oil or gas is actually being produced from the well. It also provides that the lease continues in force after the ten-year period where gas only is found and where not sold providing the lessee pays the lessor fifty-dollars per year. As long as oil or gas was actually being produced the well was a producing well and the contract remained in force. Alpar's failure to make royalty payments from the proceeds of the sale of the gas may have constituted a breach of the lease, but such failure to make payments did not cause the lease to terminate.