Contracts Keyed to Calamari
Schlegal v. Moorhead
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The Defendant, Sherman Moorhead (the "Defendant"), is the owner of a federal oil and gas lease number covering certain acreage in Montana. The Plaintiff, Schlegal (the "Plaintiff"), learned from the public records that Union Oil had two wells "capable of producing oil and gas in commercial quantities" adjacent to the acreage covered by the Defendant's lease. On January 12, 1974, the Plaintiff called the Defendant to ascertain whether he wished to sell his lease. The Defendant said he would sell for $5,000. Subsequent conversations flushed out the details of the transaction. The Plaintiff agreed to the purchase price of $5,000, but he required a "90-day option to purchase for a $100 consideration." On January 19, 1974, the parties met and the Plaintiff brought a copy of the option agreement with him. While reading over the agreement, the Defendant asked the Plaintiff why he was interested in his lease. The Plaintiff told the Defendant he had a "general interest" in the area. The Plaintiff did not tell the Defendant about any of the information he learned from the public records. Both parties signed the option and the $100 consideration was paid. The Plaintiff on two occasions within the option period attempted to exercise the option, but the Defendant refused. The Plaintiff sued for specific performance. The district court sided with the Defendant. The court based its decision on the inadequacy of consideration and the failure of the Plaintiff to "fully and candidly" inform the Defendant about what he learned in the public records concerning adjacent oil wells.
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