## Facts

- Preston Exploration Company, L.P., PEC Partnership, T.S.C. Oil & Gas, Inc., and Frank Willis III (collectively Preston) owned certain oil and gas leases and negotiated their sale to GSF, L.L.C. and Chesapeake Energy Corporation (collectively Chesapeake). ()  
- In June 2008, the parties began discussions and eventually signed a letter of intent for Chesapeake to purchase Preston’s leases, with an initial closing date of August 20, 2008, later postponed several times. ()  
- To move the transaction forward, the parties executed three written purchase and sale agreements (PSAs) on October 7–8, 2008, which expressly incorporated by reference attached exhibits. ()  
- One set of exhibits identified the leases to be conveyed and another set provided the form of assignments to be used at closing; the PSAs also contained provisions addressing title defects and price adjustments if defects could not be cured. ()  
- The PSAs stated that the leases to be conveyed were those with marketable title that would continue for at least one year after the effective date. ()  
- Chesapeake ultimately refused to close, asserting that the exhibits listing leases were not finalized and that the PSAs therefore failed to satisfy the statute of frauds because the property description was insufficient. ()  
- Preston sued in federal district court (S.D. Tex.) seeking specific performance of the PSAs. Chesapeake defended on statute-of-frauds grounds. ()  
- After a bench trial, the district court held the PSAs unenforceable under the statute of frauds, finding that neither the PSAs nor their exhibits provided a legally sufficient description or the means to identify the leases with reasonable certainty, and entered judgment for Chesapeake. ()  
- Preston appealed to the United States Court of Appeals for the Fifth Circuit. ()  

## Issues

1. Whether, under the applicable statute of frauds for interests in real property (including oil and gas leases), the PSAs’ written terms and incorporated exhibits furnished a sufficient description—or the means of identification—of the leases to be conveyed to render the agreements enforceable. ()  
2. Whether Chesapeake could avoid specific performance by arguing that the exhibits identifying the leases were “unfinalized,” despite the PSAs’ express incorporation of those exhibits and the parties’ conduct in negotiating and executing the transaction documents. ()  

## Decision

- The Fifth Circuit held that the PSAs, together with the incorporated exhibits and surrounding transaction documents, satisfied the statute of frauds by providing a sufficient description and means to identify the leases with reasonable certainty. ()  
- The court rejected Chesapeake’s contention that the exhibits could not be considered because they were allegedly unfinalized, emphasizing that the PSAs expressly incorporated those exhibits and that the parties had exchanged and relied on them in the contracting process. ()  
- The Fifth Circuit vacated the district court’s judgment in favor of Chesapeake on the statute-of-frauds defense. ()  
- The case was remanded to the district court for further proceedings consistent with the appellate court’s opinion, including consideration of Preston’s request for specific performance on the merits. ()  

## Legal Principles

- A contract for the transfer of an interest in real property must satisfy the statute of frauds by containing either: (a) a description of the land itself with reasonable certainty, or (b) a written reference to another existing writing that, when read together with the contract, provides a sufficient means of identification. ()  
- Multiple writings can be read together to satisfy the statute of frauds when they are clearly related—such as where a primary agreement expressly incorporates or refers to exhibits or schedules that describe the property. ()  
- The sufficiency of a property description is judged by whether a person familiar with the locality, aided by the writing and any referenced documents, can identify the property with reasonable certainty, not by whether the description is perfect or exhaustive. ()  
- A party cannot generally evade an otherwise valid written agreement by later characterizing incorporated exhibits or schedules as “drafts” or “unfinalized” where the contract, as executed, manifests an intent to be bound and relies on those exhibits to define performance. ()  
- Courts favor enforcing commercial agreements where the writings, construed together and in light of transaction context, demonstrate the parties’ intent and provide practical means to determine the subject matter and essential terms. ()  

## Conclusion

The Fifth Circuit concluded that the three oil-and-gas PSAs between Preston and Chesapeake met the statute-of-frauds requirement because the agreements and their incorporated exhibits collectively provided a reasonably certain method for identifying the leases to be conveyed. It therefore vacated the district court’s judgment for Chesapeake on statute-of-frauds grounds and remanded for further proceedings on Preston’s claim for specific performance. ()


Preston Exploration Co. v. GSF, L.L.C., 669 F.3d 518 (5th Cir. 2012)