In Sims v. Anderson (June 30, 2015), the Fourth District Court of Appeals ruled that an oil and gas lease terminated when the lessee failed to pay a $400 annual royalty (the lessee only paid $391.45 during the year at issue). The lessee argued that it was inequitable to forfeit the lease for his failure to pay a mere $8.55. The lease at issue had an express forfeiture clause providing that the lease terminated for failure to make annual royalty payments.
The Court of Appeals, reversing the trial court, held that equity does not prevent the termination of a lease with an express forfeiture clause:
Here, the trial court should not have weighed equitable considerations to determine if forfeiture is the appropriate remedy because under the express terms of the lease the parties contractually agreed that it is. If Anderson fails to make $400 minimum royalty payments per year, the lease terminates. Thus, the trial court erred in deciding that it, rather than the parties through their freedom to contract, could decide whether equitable considerations justified forfeiture in this instance.
Click here to read the decision.