## Facts

- Union Gas System, Inc. (Union) assigned L. B. Fisher oil-and-gas rights on a tract of land, conditioned on commencement of drilling a well by August 16, 1972.
- The Union–Fisher assignment provided that if the first well was a dry hole, Fisher would have an additional year to explore and drill.
- Fisher agreed to assign his drilling rights to Tomlinson Oil Co., Inc. (Tomlinson) in exchange for Tomlinson’s promise to commence drilling a well by August 16, 1972.
- Tomlinson did not commence drilling by the deadline, and no well was drilled.
- Fisher sued Tomlinson for breach of contract.
- The trial court granted Fisher summary judgment and awarded \$8,500, representing the cost of drilling a well on the property.
- Tomlinson appealed, arguing Fisher suffered no damages because geological evidence showed the tract contained no oil (or no oil of commercial value), making the cost-of-drilling award improper.

## Issues

1. When a party breaches a contract promise to commence drilling an oil-and-gas test well by a specified date, may damages be measured by the reasonable cost of drilling the promised well?
2. Does evidence that the tract likely would not produce oil or gas bar or reduce recovery of drilling-cost damages for failure to drill?

## Decision

- The Kansas Supreme Court affirmed the trial court.
- The court upheld summary judgment for Fisher and the \$8,500 award measured by the cost of drilling the promised well.
- The court rejected Tomlinson’s argument that Fisher had no damages merely because later geological evidence suggested the well would have been nonproductive.

## Legal Principles

- Contract damages generally seek to give the nonbreaching party the benefit of the bargain by awarding the value of the promised performance.
- When the bargained-for performance is the drilling of a test well by a date certain, a proper measure of expectation damages may be the reasonable cost to obtain that drilling performance.
- A promisor who agreed to drill is not excused from paying damages because the well, if drilled, might have been a dry hole; the contract was for drilling (and the related contractual benefits), not for a guarantee of production.
- Evidence offered to show the property was unlikely to produce does not, by itself, eliminate legally recognized damages where the breach deprived the promisee of the contracted-for well and the contractual consequences tied to drilling (including rights triggered by drilling a dry hole).
- Summary judgment is appropriate when the defendant’s “no oil” showing does not create a material fact dispute over whether the plaintiff is entitled to a cost-of-performance measure as a matter of law, and the reasonable drilling cost is established.

## Conclusion

Fisher held rights conditioned on timely drilling and transferred those rights to Tomlinson in return for Tomlinson’s promise to commence drilling by August 16, 1972; when Tomlinson failed to drill, Fisher could recover the reasonable cost of drilling the promised well as expectation damages, and Tomlinson could not avoid that measure by presenting geological evidence that the well likely would have been dry.


Fisher v. Tomlinson Oil Co., 215 Kan. 616, 527 P.2d 999, 51 O. & G.R. 28 (1974)