We enter into contracts all the time without putting the agreement in writing; we form contracts when we buy a cup of coffee, when we shop online, etc. Some types of contracts, however, are required by law to be in writing. Kevin and Monica Schmidt (the Schmidts) learned this the hard way when they could not enforce an oral agreement to frack oil wells in Beauregard Parish.
The Schmidts’ complaint alleged that they entered into an oral agreement with J-Lu Company Limited, L.L.C. (J-Lu) to fracture oil wells in which J-Lu owned an interest. Under their agreement, the Schmidts, in return for their fracking services, would split J-Lu’s interest in the wells. Thus, the split interests meant that both the Schmidts and J-Lu would share profits from the oil produced from the wells. Despite its agreement with the Schmidts, J-Lu subsequently made a deal with Will-Drill Operating Company (Will-Drill) to fracture the same oil wells.
The Schmidts subsequently filed a lawsuit to enforce their contract with J-Lu, claiming their injury was the lost profits they would be entitled to under the agreement. J-Lu filed a motion to dismiss the Schmidts’ lawsuit, and the district court granted it because Louisiana law requires a written contract when transferring interests in mineral (i.e. oil and gas) rights. La. C.C. Art. 1839; La. R.S. 31:18. The Schmidts appealed the District Court’s decision.