For the benefited party to enforce a covenant, there must be either actual notice or constructive notice. Typically, one has constructive notice if a recorded deed in the chain of title contains the specific restriction. However, this is not always necessary. In Westland Oil Development Corporation v. Gulf Oil Corporation, the Texas Supreme Court addressed to what extent a reference to an unrecorded instrument within the chain of title could impart constructive notice to a subsequent assignee. Westland Oil Dev. Corp. v. Gulf Oil Corp., 637 S.W.2d 903, 911 (Tex. 1982).
On August 1966, Mobil owned leases in the Rojo Caballos Field in Pecos County, Texas. Mobil entered into a farmout agreement with Westland Development Corp for these leases. Id. …show more content…
In order to have an enforceable covenant the party that the covenant is being enforced against must have either actual or constructive notice. The party which enforcement is brought against does not have actual notice. Therefore, if there is notice, it must be constructive. The Settlement Agreement is not in the chain of title. However, the Assignment of Overriding Interest within the chain of title contains an explicit mention of the Settlement Agreement. A subsequent assignee is charged with knowledge of every reference within a chain of title, and a reference creates a duty to inquire about potential restrictions. Id at 908. Therefore, the mention of this agreement within the chain of title creates a duty for a subsequent assignee to conduct a diligent inquiry. A diligent inquiry, in this case, would most likely include contacting ABC and Energy as to the contents of the Settlement Agreement. If the subsequent assignee conducts a diligent inquiry and is unable to find the document it may not be binding. However, they must conduct a diligent inquiry otherwise they are imputed with
On August 1966, Mobil owned leases in the Rojo Caballos Field in Pecos County, Texas. Mobil entered into a farmout agreement with Westland Development Corp for these leases. Id. …show more content…
In order to have an enforceable covenant the party that the covenant is being enforced against must have either actual or constructive notice. The party which enforcement is brought against does not have actual notice. Therefore, if there is notice, it must be constructive. The Settlement Agreement is not in the chain of title. However, the Assignment of Overriding Interest within the chain of title contains an explicit mention of the Settlement Agreement. A subsequent assignee is charged with knowledge of every reference within a chain of title, and a reference creates a duty to inquire about potential restrictions. Id at 908. Therefore, the mention of this agreement within the chain of title creates a duty for a subsequent assignee to conduct a diligent inquiry. A diligent inquiry, in this case, would most likely include contacting ABC and Energy as to the contents of the Settlement Agreement. If the subsequent assignee conducts a diligent inquiry and is unable to find the document it may not be binding. However, they must conduct a diligent inquiry otherwise they are imputed with