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Oil/Gas/Due Diligence Clause (Period)


Hello Mr. Williams.

The clause reads - Lessee shall have 120 days after Lessor's execution of this Agreement (the "Diligence Period") to execute this Agreement, otherwise this Agreement shall be of no effect and the parties shall have no obligations or rights hereunder (including no payment obligations, including any signing bonus); during the Diligence Period: (i) Lessee may record a memorandum of this Agreement, (ii) Lessor shall not sell, lease, transfer, grant, convey, assign, encumber, or mortgage the Leased Premises or any interest therein; and (iii) Lessor shall be bound to the terms hereof and shall have no right whatsoever to claim that this Agreement is not effective or ca be released or withdrawn by Lessor.

I am looking for the proper language to either attempt to eliminate this clause entirely, or limit the due diligence period to say 30 days with non-refundable "consideration" in the bank. Thanks if you can help.

To eliminate this clause completely on a lease form you should put one single line through it and initial in the margin of the document.

I would argue that if you are going to be bound by (ii) then you should insert the following:

"Lessor shall be paid 10% of the agreed upon bonus upon execution as a non-refundable good faith consideration in contemplation for agreeing to not sell, lease, transfer, grant, convey, assign, encumber, or mortgage the Leased Premises or any interest therein.  Said 10% consideration shall be in the form of a corporate check.  Upon termination of the 30 day period this lease shall terminate immediately unless the balance of the bonus consideration is tendered prior to the execution of the 30 days."

Cross out each and every one of the 120 day notations and insert 30 days.

If they ask for more time then you increase the non-refundable amount required for the agreement by 25%.  

Send any follow-up questions you might have and be firm but polite with the company.



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Cliff Williams


I will try to answer any question you have. Even if I reject a question, I still will give a shot at what I would do in your position. The only questions I will not take a shot at would be a highly technical engineering or geological question. I am beginning to see quite a few questions from land men and other oil companies and that doesn't matter to me either. I will attempt to help.


I am an oil and gas attorney that has been in the business for more than 20 years. I have held a series 22 and 63 securities license, been in oil and gas operations, land man, division order analyst all prior to obtaining my law degree. Today, I typically write title opinions verifying ownership of oil and gas minerals, assist landowners in negotiations on oil, gas and mineral leases, easements and conveyances. I also assist oil and gas companies with the sale of working interest ownership as well as common business law issues.

State Bar of Texas, Member of the Tarrant County Bar and the Dallas County Bar Associations.

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I have a B.S. degree which I rely upon more than my Business Mgmt degree or Law degree...

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