## Facts

- Whiting Oil and Gas Corporation and Atlantic Richfield Company (ARCO) had a long-term business relationship involving oil and gas properties.
- In 1968, the parties entered a research and development agreement under which ARCO acquired an interest in certain lands owned by Whiting.
- In 1983, the parties executed an option contract giving Whiting the right to repurchase ARCO’s acquired interest.
- The option stated it would expire in 2008 and gave ARCO the exclusive right to revoke the option at any time before Whiting exercised it.
- Whiting later sought to exercise the option; ARCO asserted the option was void under the common-law rule against perpetuities (RAP) applicable to pre–May 31, 1991 nonvested interests.
- The trial court held the option violated the common-law RAP, reformed it under a statutory reformation provision by adding a savings clause, and ordered specific performance of the reformed option.
- The court of appeals affirmed.
- The Colorado Supreme Court reviewed whether the option violated the common-law RAP and, if so, whether statutory reformation applied to this commercial option.

## Issues

1. Whether a commercial option to repurchase that is fully revocable by the grantor prior to exercise violates Colorado’s common-law rule against perpetuities for pre–May 31, 1991 interests.
2. If the option violated the common-law RAP, whether the statutory reformation provision authorizes judicial reformation of a pre-1991, nondonative commercial option.

## Decision

- The Colorado Supreme Court reversed the judgment of the court of appeals.
- The Court held the 1983 option did not violate the common-law RAP as applied in Colorado.
- Because there was no common-law RAP violation, the statutory reformation provision was not triggered and the trial court’s savings clause was improper.
- The case was remanded with directions to enforce the option as written and enter judgment consistent with the opinion.

## Legal Principles

- Under Colorado precedent, common-law RAP analysis of commercial arrangements focuses on whether the challenged interest creates a practical, unreasonable restraint on alienation, not solely on formal vesting possibilities.
- A commercial option that the property holder may revoke at any time before exercise does not impose a meaningful restraint on alienation because the holder can terminate the option to facilitate a transfer.
- A statutory RAP reformation provision applicable to pre-1991 interests applies only after a judicial determination that the interest violates the common-law RAP; absent a violation, reformation is unauthorized.

## Conclusion

The Colorado Supreme Court held that a fully revocable, arms-length commercial option to repurchase did not violate the common-law rule against perpetuities because it created no practical restraint on alienation; therefore, courts could not reform the option under the statutory reformation provision and had to enforce it as written.


Atlantic Richfield Co. v. Whiting Oil & Gas Corp., 320 P.3d 1179 (Colo. 2014)