## Facts

- Landowners Matt and Ruth Schwartzenberger executed an oil and gas lease to the William Herbert Hunt Trust Estate covering their North Dakota land.
- The lease contained an “unless” delay-rental clause providing that if drilling did not begin within one year, the lease would terminate unless the lessee timely paid delay rentals calculated per acre.
- In negotiating the lease, the parties shared a mistaken belief about the tract’s acreage; the lease reflected the incorrect, lower acreage figure.
- The lessee did not commence drilling during the first year and instead paid delay rentals on time, but calculated them using the mistaken acreage, resulting in an underpayment relative to the land actually owned and intended to be leased.
- After discovering the error, the lessors demanded additional delay rentals and treated the lease as terminated when the lessee refused to pay the added amount.
- The lessors served notice of termination and demanded that the lessee file a release of the lease of record; the lessee did not release.
- The lessors sued for a declaration that the lease had terminated and for an order requiring a release.

## Issues

1. Whether a court may reform an oil and gas lease to correct a mutual mistake as to acreage and the resulting delay-rental amount.
2. Whether an “unless” delay-rental clause requires automatic termination despite timely payment based on the parties’ mutual mistake, or whether equity may prevent forfeiture and allow payment of the deficiency.

## Decision

- The North Dakota Supreme Court affirmed the trial court.
- The court upheld reformation of the lease to state the correct acreage and to adjust the delay-rental obligation accordingly.
- The court held the lease did not terminate under the “unless” clause where the underpayment resulted from mutual mistake and the lessee had timely paid the amount contemplated by both parties.
- The lessors were not entitled to a declaration of termination or to an order compelling a release, so long as the lessee paid the additional delay rental due under the reformed lease.

## Legal Principles

- A written instrument may be reformed in equity when, because of mutual mistake, it does not express the parties’ actual agreement.
- Mutual mistake as to acreage can justify reformation of both the land description and payment terms tied to acreage in an oil and gas lease.
- Although “unless” clauses are generally self-executing upon nonpayment, equity may prevent forfeiture where the payment defect is caused by mutual mistake and reformation can conform the lease to the parties’ shared understanding.
- A lessor cannot obtain forfeiture-based termination when the lessee timely performed in accordance with the parties’ mistaken, shared assumptions and stands obligated to pay the corrected amount once the mistake is established.

## Conclusion

The court affirmed equitable reformation of an oil and gas lease to correct a mutual mistake about acreage and delay rentals, holding that the lease was not automatically terminated under an “unless” clause where the lessee timely paid rentals as both parties understood them and could be required to pay the deficiency under the reformed lease.


Schwartzenberger v. William Herbert Hunt Tr. Estate, 244 N.W.2d 711 (N.D. 1976)