Martin v. Darcy
Texas Court of Civil Appeals
357 S.W.2d 457 (Tex. Civ. App. 1962)
Darcy (plaintiff) held mineral rights subject to a deadline to begin drilling and a requirement to get the assignors' consent before reassigning his interest. He signed a farmout agreement with Martin (defendant), under which Martin would drill in exchange for a royalty or a flat payment if the well was dry. When Darcy sought the required consents, Martin backed out, claiming Darcy hadn't gotten consent in time — even though Darcy obtained all four consents with time to spare before the drilling deadline. Martin refused to drill; another party drilled a dry hole for Darcy instead. Darcy sued for breach, and the trial court awarded him both the flat dry-hole payment specified in the contract and separate lost profits from a tentative deal to sell part of his royalty. Martin appealed.
Whether a party aggrieved by breach of a farmout agreement is entitled to damages that were not reasonably in the contemplation of both parties at the time they made the contract.