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in the business option and choice of the lessee to mine a much larger amount, if under the existing circumstances it should think proper to do so." There was such a consideration, and a failure to comply with it was a breach of contract.

North Carolina.

Conrad v. Morehead, 89, 31 (1883). A lease for ninety-nine years contained a covenant by the lessor that the leesee might enter upon the land and dig for gold, silver, and other metals and minerals, use timber and crect machinery, and at any time he thought proper surrender the lease; and the lessee covenanted to pay one-tenth of the metal obtained. Held, there was an implied covenant by lessee to work the mine with reasonable diligence, and a failure to do so worked a forfeiture.1

Maxwell v. Todd, 112, 677 (1893). Conrad v. Morehead followed. Watson v. O'Hern, 6 Watts, 362 (1837). A lease to a Pennsylvania. stone-cutter of "the privilege of quarrying and hauling away all the stone that he may find use for," for a certain term, at a certain price per perch, gives the lessee an exclusive right; makes him owner during the term, and creates the relation of landlord and tenant. Such a lease is a contract on the part of the lessee that he will work the quarry; his failure to do so is a breach for which the lessor may recover damages.

Lyon v. Miller, 24, 392 (1855). In covenant on a lease, whereby the lessee was given the right to dig and mine coal south of a designated line, the lessee to pay a certain sum for every bushel he may mine or dig upon said land, the lessors could not recover for coal mined north of a designated line, and that they were owners of that land was immaterial. For that they have their remedy by trespass.

The lessors, however, could recover not only for coal mined on the described premises, but for coal which the lessee "reasonably would and should have mined" thereon. The measure of damage, therefore, was not the amount per bushel stipulated in the lease, but that amount less the value of the coal in the mine.

Chalfant v. Williams, 35, 212 (1860). A coal lease and fixtures were sold for $4,000, to be paid $600 down, $216.62 at thirty days, fifty cents for each ton mined until $815 was paid, and then twenty-five cents for each ton mined until the whole consideration was paid.

The fair interpretation of this is that the purchasers were to take out enough coal to pay at these rates the entire consideration. But parol evidence is admissible to show that at the time of the sale the seller said he would take the risk of the purchasers doing so, such testimony not being contradictory of anything expressed in the deed.

Koch's Ap., 93, 434 (1880). Where a right to mine ore or other mineral is granted, in consideration of the reservation of a certain portion of the product to the grantor, the law implies a covenant on the part of the grantee to work the mine in a proper manner, and with proper diligence, so that the grantor may receive the compensation or income which both parties must have had in contemplation when the agreement was entered into. For the breach of this covenant there is an adequate remedy at law, and a court of equity will not entertain a bill to compel the grantee to perform his contract.

1 See this case on p. 152.

Smith v. Munhall, 139, 253 (1890). A lessee of certain tracts for the purpose of operating thereon for oil and gas, assigned them, in consideration whereof the assignee agreed that if he or his assigns operated the leaseholds and found oil in paying quantities, he or they would pay $100 for the lease, upon which a paying well was found. The assignee surrendered these leases and took new ones from the land-owner which he assigned to innocent parties, whereupon the original lessee sued for breach of contract. Held, that there was no cause for action.

"There is no promise or agreement on the part of Munhall or his assigns to operate for oil. Under the agreement he may or may not bore on all or none of the leaseholds. It is not alleged that M. or any other person has obtained oil in any quantity on any one of the leaseholds."

"The surrender of the leases, and the taking of new leases in his own name, did not affect the legal rights of the plaintiff; possibly it may be of advantage to him. We can see no reason to doubt that if at any time during the period for which the leases run any person find oil in paying quantities on the land, the plaintiff can recover the stipulated conditional payment from Munhall."

McKnight v. Manufacturers' N. G. Co., 146, 185 (1892).

"A lease

of a mine or a quarry, at a rental to be fixed by reference to the quantity of material removed therefrom, implies an agreement on the part of the lessee to work the mine or quarry. The reason is that, while: the lessor does not lose his material out of the mine or quarry, he loses his income therefrom. Watson v. O'Hern, 6 W, 362; Koch's Ap., 93 Pa. 434. A lease of land for oil purposes imposes a somewhat different obligation upon the lessee. The oil is of such a nature that, if not removed through wells upon the surface of the leasehold, it may be wholly lost to the owner of the land by reason of operations on lands adjoining. The duty to develop the land, that is, to test thoroughly the existence of oil in the rocks that should bear it, and if oil be found, to sink so many wells as may be reasonably necessary in view of surrounding operations to secure so much of the oil underlying the land as may be obtained with profit, grows out of the nature of oil, and the methods by which the oil is reached and brought to the surface. An oil lease must be construed, therefore, with a due regard to the known characteristics of the business. Brown v. Vandergrift, 80 Pa. 142.

"Oil and gas leases are ordinarily combined in the same instrument, and are classed together. For many purposes such classification is natural and appropriate; but this case brings us to consider an im portant difference between oil and gas, which makes it necessary to distinguish for some purposes between an oil and a gas lease.

"Oil, when brought to the surface, is gathered into a receiving tank or tanks at or near the well. When necessary or desirable, it is removed by gravity or by pumping into the pipe lines that serve the district in which the well is located, and conveyed to storage tanks, where it remains until delivered to a purchaser, It is a matter of no consequence what the pressure may be at the well, for there can be none in the tanks except that of gravity. The well that throws off violently its five thousand barrels per day and that which reluctantly gives up four or five barrels under the persuasive power of the pump

will have their product gathered into the same lines of transportation, or resting in the same storage tanks. Gas cannot be gathered, stored, or transported in this manner. If found in sufficient quantity, it is turned from the well into the line, and the pressure at the mouth of the well is the motive power by which it is driven through the line to the consumer miles away. If the pressure at a given well is much below that in the line with which it is connected, the gas from that well cannot enter the line, but will be driven back by the superior force it encounters at the point of connection. For this reason, a well producing gas in sufficient quantity to be profitably utilized if there was a market for it near at hand, may be entirely valueless if its product must find a market at a distance too great to justify its transportation by a line of its own. In an oil district, each well, no matter how large or how small its product may be, is separately operated, and a well may be profitably operated so long as its yield pays more than the cost of producing the oil. In a gas district this is impracticable. The product of many wells is gathered into one line so long as the pressure is sufficient. When the pressure in any one falls below the standard necessary for purposes of transportation, that well must be turned off. Its product cannot be transported separately, and, unless it can be used near by, it is valueless. These well-known facts peculiar to the production of gas must be taken into account in the construction of leases for gas purposes."

The lease provided that lessor should receive one-eighth of the oil produced; that lessee should commence operations within eighteen months, and, if he failed to get oil in paying quantities, but a sufficient quantity of gas to justify him in utilizing it at some point not on the premises, he should pay lessor a certain royalty so long as the well was so utilized. A gas-producing well was completed, and, after being operated for two years, was destroyed by an accident, and no further operations were conducted by the lessee. In an action for not putting down other wells to protect the territory against the effect of operations on adjoining lands, it was error to charge that a failure to drill such wells was a breach of an implied covenant, imposing a liability in damages, in the absence of a reasonable excuse therefor.

"As we have already seen, every barrel of oil brought to the surface may be utilized in the same way. Whether the well that produces it is a strong one, yielding many barrels per day, or a weak one, yielding but few, is a matter that in no way affects the ability of the producer to market his oil, or the prices to be obtained for it. In gas territory, the lessee may sink many wells and find gas in them all, but the can utilize only such of them as have a volume and pressure sufficient to enable him to transport the gas through his line and deliver it to the purchaser. If no one of them has the requisite pressure, then no one of them can be utilized; the gas must be wasted, the cost of the wells will be lost, and the lessor entitled to no royalty. What is the proper way to develop and operate a gas lease is, therefore, a question beset with some difficulty. Its settlement requires some general knowledge of the business, and some knowledge of the local field. The lessee may have a good well, from which he can utilize the gas with profit. He may put down another on the same farm, and

thereby so reduce the pressure in the first as wholly to destroy its value, without getting a sufficient pressure at the second to enable him to utilize that. The gas, if coming from one well, would be of great value. Divided in such manner that the volume and pressure at each is below the necessary standard, the whole is lost. Thus the application of the rule laid down by the court below, as the jury must have understood it, might result in this, that the effort of the lessee to discharge the implied obligation of his contract for the common benefit, should end in the total destruction of the leasehold, and a common misfortune. The mistake of the court below was in failing to take account of and to read into the contract between the parties, the peculiar nature and characteristics of the business of producing and transporting gas, which the parties themselves well understood, and which their contract shows were before their minds when it was entered into."

Moreover, when a lease provides that all wells shall be located by the lessor, he may not maintain an action against the lessee for not drilling additional wells, if he never fixed upon a location for any additional well, or called upon the lessee to locate one for him, the lessee having no right to drill except at points indicated by the lessor.1

Hill v. Joy, 149, 243 (1892). Recovery on an oil lease of the royalties provided for therein is a bar to a subsequent suit for damages for breach, during the same period, of the implied covenant for proper and sufficient operation.

Jamestown & Franklin R. R. Co. v. Egbert, 152, 53 (1892). It was not a good defence to an action for rent that defendant had operated in all directions around the land, testing the general character of the land, and found that there was no oil or gas in the neighborhood.

"It does not follow that because there was no oil on adjoining property, oil might not have been found on this tract of one thousand acres."

Lehigh & Wilkes-Barre C. Co. v. Wright, 15 C. C. R. 433 (1894). "All contracts which require action do by implication of law mean that the thing to be done shall be accomplished within a reasonable time. It cannot be doubted that one purpose of the annual minimum payment of royalty provided for by our mining leases is to induce the lessee to mine and remove the coal with reasonable speed."

"In the case before us, under a mining lease dated Nov. 29, 1879, it appears that up to July 1, 1888, or for a period of nearly ten years, when the lessees decline to make further payments, the coal mined did not in any one year equal the minimum of $4,000 specified in the lease. In view of the circumstances of the case, it would seem that the mining of the coal was not prosecuted with that diligence which is the implied obligation in every similar contract, and which the lessors had the right to look for in this one."

B. Covenants to work Mines.

Most often the lease itself contains a covenant to mine, by the terms of which the lessee is in that case governed.

1 See also Kleppner v. Lemon, 176 Pa. 502 (1896).

2 Affirmed in 177 Pa. 387.

(a.) This may simply be a covenant to mine, or to mine in a certain manner.

(b.) When a royalty is reserved there is generally a covenant to mine a certain amount, with an additional covenant, in case of failure, to pay royalty upon that amount.

(c.) Oil and gas leases generally contain a covenant for the sinking of wells within specified times, or for their drilling to a certain depth, and often also for the prosecution of the business of exploring for and producing oil.

Cases which have arisen from actions for damages for breach of this covenant are collected below. The nature of these covenants will be discussed at length under the title of "Forfeiture," as the usual method of enforcing them is by forfeiture.

(a.) Covenants simply to mine.

Here the general rule is that the lessee is bound by the terms of his lease, and that the mine had become unprofitable is not a valid reason why operations should be suspended. If, however, it is shown that the mine has been wholly exhausted, and it appears from the nature.of the covenant that the parties contracted on the basis of its continued existence, the condition is implied. that, if the performance became impossible from the perishing of the person or thing that shall excuse the performance. Whether a mine is exhausted is a question of fact, and evidence of known custom and usage relating to the business of mining is admissible to show when a mine is deemed exhausted.

Generally it may be said that one who covenants to mine the premises which he has leased must do so with reasonable diligence. Each contract, however, must be interpreted in accordance with its terms.

Illinois.

Iowa.

Walker v. Tucker, 70, 527 (1873). See this case on p. 91. Peters v. Philipps, 63, 550 (1884). Plaintiff leased to defendant certain lands for the purpose of mining coal, and defendant agreed to have the mine opened and in operation within nine months, and not to allow the mine to stand idle for more than sixty days at one time, and to pay plaintiff a royalty upon the coal taken out, that being the only consideration. Held, plaintiff had a right to demand that defendant prosecute the mining of coal on his land with reasonable diligence, and to an injunction restraining defendant from using the shaft sunk on his land for the purpose of

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