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Ohio Appeals Court Finds Forfeiture Is Not Appropriate Remedy for Breach of Oil and Gas Lease

In Hoop v. Kimble, the Seventh District Court of Appeals upheld a trial court ruling that forfeiture was not an appropriate remedy for the breach of an anti-assignment provision in an oil and gas lease. In the case, the original lessee of the lease died and left his entire estate, including the family business, to his wife. She in turn assigned the subject oil and gas lease to herself and then formed a new legal entity. The lease contained a “trade-sale clause” which provided that the lease shall not be traded or sold without the permission of the lessor.

The property owners sought forfeiture and cancellation of the lease and argued that the assignment of the lease breached the trade-sale clause. The trial court found that the trade-sale clause was breached by the assignment, but did not order forfeiture. The appeals’ court agreed and noted that forfeiture is an appropriate remedy only in certain, limited circumstances. To establish that forfeiture is appropriate the lease must specifically so provide and the legal damages resulting from the breach must be inadequate. Neither of these elements were present in the case, so the appeals court did not order forfeiture of the lease.