## Facts

- Dennard owned mineral rights to a tract in Wilkinson County, Georgia, and Freeport Minerals Company held the lessee’s rights under a mineral lease through assignment from the original lessee.
- The lease covered kaolin clay and bauxite and required Freeport to pay (1) annual rent of $300 and (2) royalties of 12.5 cents per ton (2,240 pounds) of “refined clay and bauxite (railroad weight) removed” from the land.
- The lease granted the lessee the right to “search for, mine and remove such kaolin and bauxite, as tenant deems to be commercially profitable, at any time and from time to time during the continuance of this contract in force.”
- The lease term was long-term (an initial term with an exercised renewal option).
- For decades, no mining occurred on the tract, but the lessee and its successors paid the yearly rent.
- In 1979, Freeport notified Dennard it intended to begin mining operations.
- Dennard responded that she would accept only strict compliance with the lease’s royalty clause, meaning royalties should be measured by refined-product tonnage.
- Freeport stated it intended to pay the 12.5-cent royalty based on each ton of crude ore removed rather than on each ton of refined kaolin or bauxite produced from that crude.
- Evidence showed that paying on crude-ore tonnage would result in Dennard receiving more total royalty payments than payment based only on refined tonnage.
- Freeport mined and paid royalties using its crude-ore method.
- Dennard sued, claiming Freeport violated the lease by departing from the refined-tonnage royalty language and also contending that Freeport’s long delay and its interpretation of “commercially profitable” amounted to breach.
- The trial court ruled for Freeport, and Dennard appealed.

## Issues

1. Whether a lessee breaches a mineral lease that sets royalties per ton of “refined” clay and bauxite by paying the same rate per ton of crude ore removed when that method yields higher royalties to the lessor.
2. Whether a lease clause allowing mining of such minerals as the tenant “deems to be commercially profitable,” “at any time and from time to time,” permits decades of nonproduction so long as rent is paid and the lessee acts in good faith.
3. Whether Dennard was entitled to cancellation/forfeiture or other relief based on the alleged royalty and development breaches.

## Decision

- The Supreme Court of Georgia affirmed the judgment for Freeport.
- The court held that Freeport did not breach the lease by paying royalties on crude ore removed where that approach resulted in Dennard receiving greater compensation than she would have received under a strict refined-tonnage calculation.
- The court also held that the lease’s “commercially profitable” language gave the lessee discretion regarding when to mine, and the long period without mining—combined with continued payment of the agreed rent—did not establish breach on this record.
- Because Dennard failed to show a material contract violation causing her loss of the benefit of the bargain, the court declined to grant cancellation/forfeiture or similar relief.

## Legal Principles

- Courts construe mineral leases according to their written terms; when the lease gives the lessee discretion to mine minerals it “deems to be commercially profitable,” the lessee generally may choose timing and extent of development, subject to good faith.
- A claimed breach based on a nonliteral method of measuring performance is unlikely to warrant relief where the method provides the lessor at least as much compensation as the lease formula would provide and does not defeat the lease’s purpose.
- Long delay in mineral development does not by itself establish breach where the contract allocates development timing to the lessee and the lessee continues paying the fixed consideration required during nonproduction.
- Forfeiture/cancellation is disfavored and generally requires a clear, material breach, not a technical dispute that produces no loss to the complaining party.

## Conclusion

Dennard v. Freeport Minerals Co. affirms that, under a mineral lease giving the lessee discretion to mine when it deems extraction commercially profitable, decades of nonmining with continued rent payments did not establish breach, and that paying royalties on crude-ore tonnage—shown to pay the lessor more than the lease’s refined-tonnage measure—did not violate the lease or justify forfeiture or other relief.


Dennard v. Freeport Minerals Co., 297 S.E.2d 222 (1982)