## Facts

- A landowner in Caddo Parish, Louisiana, executed an oil-and-gas lease in which the stated consideration included the lessee’s obligation to drill four wells.
- The lease term was 60 days and continued thereafter only so long as the lessee both (a) complied with lease obligations and (b) produced oil, gas, or minerals in paying quantities from the premises.
- The lease required drilling of an initial well within 60 days and then three additional wells in succession within 60-day intervals following completion of the preceding well.
- The original lessee assigned the leasehold interest to the defendants.
- An initial well was drilled within the 60-day term, but it was a dry hole and no production in paying quantities was obtained.
- The assignees did not drill the remaining three wells, concluding further drilling would be unprofitable.
- The lessor sued the assignees for damages, alleging breach of the obligation to drill the additional wells.
- The district court dismissed for failure to state a claim, ruling the lease terminated by its terms and no duty to drill remained; the lessor appealed.

## Issues

1. Whether the lease continued beyond the 60-day primary term when no oil or gas was produced in paying quantities.
2. Whether, after expiration of the primary term without production in paying quantities, the assignees remained liable in damages for failing to drill the three additional wells.

## Decision

- The Sixth Circuit affirmed the dismissal.
- The court held the lease terminated automatically at the end of the 60-day term because the condition for continuation—production in paying quantities—was not met.
- Because the lease had terminated, the assignees had no enforceable obligation to drill the remaining three wells and were not liable for damages.

## Legal Principles

- A habendum clause providing a fixed primary term and continuation “as long thereafter as” production in paying quantities exists is construed to terminate upon expiration of the primary term if such production is not obtained.
- When continuation beyond the primary term is conditioned on production in paying quantities, production operates as a condition precedent to any “thereafter” term.
- Drilling obligations stated in the lease do not survive termination absent clear language making them independent covenants enforceable after the lease ends.
- Post-termination rights and duties are limited to those expressly preserved by the lease’s termination provisions.

## Conclusion

The court ruled that the lease ended by its own terms when the 60-day period expired without production in paying quantities, extinguishing any obligation to drill additional wells and defeating the lessor’s damages claim.


Joyce v. Wyant, 202 F.2d 863 (6th Cir. 1953)