The proportionate-reduction clause, also referred to as a lesser-interest clause in the oil and gas sector, is a stipulation in a lease contract that permits the lessee to decrease payments if the lessor holds less than 100% of the mineral interest. In other words, if the lessor does not have complete ownership of the minerals being leased, the lessee has the option to adjust their payments accordingly.
The proportionate-reduction clause, also referred to as a lesser-interest clause, is a provision in an oil-and-gas lease that permits the lessee to decrease payments proportionately if the lessor possesses less than 100% of the mineral interest. To illustrate, if the lessor only owns 50% of the mineral interest, the lessee would only need to pay 50% of the agreed-upon payments. This clause safeguards the lessee from paying an excessive amount for a lease when the lessor lacks full ownership of the mineral interest. Another example would be if the lessor possesses 75% of the mineral interest, the lessee would only be obligated to pay 75% of the agreed-upon payments. The proportionate-reduction clause plays a crucial role in ensuring equitable and just payments between the lessee and lessor in oil-and-gas leases.
A proportionate-reduction clause is a provision in a contract that allows for the reduction of benefits or payments in proportion to a specified event or circumstance.
This clause is often used in insurance policies, lease agreements, and other contracts where the parties want to account for potential changes in circumstances that could affect the benefits or payments under the contract.
In an insurance policy, a proportionate-reduction clause may allow for the reduction of benefits if the insured fails to maintain the property in a certain condition, or if the insured fails to disclose certain information that could affect coverage.
The enforceability of a proportionate-reduction clause will depend on the specific language of the clause and the laws of the jurisdiction. In some cases, courts may find these clauses to be unenforceable if they are found to be unfair or unconscionable.
Before including a proportionate-reduction clause in a contract, it is important to carefully consider the potential impact on the parties involved and to ensure that the language of the clause is clear and unambiguous.
Yes, like any other provision in a contract, a proportionate-reduction clause can be negotiated and modified by the parties involved to better reflect their intentions and expectations.
Some jurisdictions may have specific laws or regulations that limit the use of proportionate-reduction clauses in certain types of contracts, so it is important to be aware of any legal restrictions that may apply.
If a party fails to comply with the requirements of a proportionate-reduction clause, they may be subject to the reduction of benefits or payments as specified in the clause.
In some cases, a proportionate-reduction clause may be waived or overridden by the parties through a separate agreement or by mutual consent.
It is always advisable to seek legal advice before including any important provision in a contract, including a proportionate-reduction clause, to ensure that it is properly drafted and reflects the intentions of the parties involved.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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