The Texas Supreme Court in Roxo Energy Company, LLC v. Baxsto, LLC reinforced a fundamental contract principle: when fully integrated agreements plainly conflict with prior oral representations, reliance on those inconsistent prior oral statements is unjustifiable as a matter of law. In other words, a party to a contract cannot justifiably rely on prior oral representations contradicted by written terms.
The Facts
During mineral lease negotiations, Roxo and its backer Vortus assured Baxsto that Roxo would develop the acreage “at the bit”, was not in the business of “flipping” leases, and had committed hundreds of millions to the project—promises Baxsto said induced it to sign. For all we know both Roso’s statements and Baxsto’s reliance are true, but it doesn’t matter.
The transaction documents included a paid‑up lease, an agreement granting Roxo an option to purchase the lease, and a lease memorandum to be recorded only after a $5,000‑per‑acre bonus was paid. Despite this condition, Roxo prematurely recorded the memorandum without Baxsto’s knowledge.
After receiving two option extensions—the first adding a six-month “most-favored nations” clause guaranteeing Baxsto any higher bonus Roxo might pay others—Roxo disclosed that Vortus had scaled back development funding. Roxo then paid the bonus, exercised its option, but declined to drill. Instead, Roxo negotiated to purchase Baxsto’s mineral interests before ultimately flipping the lease to another operator for $11,000 per acre.
Baxsto sued for fraudulent inducement. The trial court granted summary judgment for Roxo; the Eastland Court of Appeals reversed, finding justifiable reliance because the written agreements didn’t “plainly contradict” the oral representations nor contain sufficient “red flags.”
The Analysis
The Supreme Court thought otherwise, and analyzed the representations in three categories, applying a straightforward principle: oral representations directly contradicted by written terms cannot support a fraud claim.
Development and Assignment Promises.
Despite extensive oral assurances about drilling and avoiding lease transfers, the fully integrated written agreements gave Roso the unqualified right to assign. Roxo could transfer the lease at will, and no drilling obligations were imposed. These written terms directly contradicted any oral development promises. Because Baxsto freely agreed to a lease that expressly permitted transfers and omitted drilling requirements, any reliance on contradictory oral assurances was unjustifiable as a matter of law.
Bonus Payment Representations.
Baxsto claimed Roxo fraudulently misrepresented bonus payments by stating the competing operator received only a $3,500 per acre bonus, that Baxsto’s $5,000 per acre bonus was the area high, and that Roxo’s purchase offer constituted a “great deal.” However, the only bonus-related written term was the six-month “most favored nations” clause, which Baxsto did not allege was breached. The absence of a written promise comparing bonuses “should make it obvious to a reasonably sophisticated party like Baxsto that the previous discussions may no longer be part of the deal.”
Non-Disclosure
These claims failed on two grounds. First, Roxo and Baxsto were commercial counterparties, not fiduciaries, creating no duty by Roso to disclose premature recording of public documents that Baxsto could have independently discovered through routine title searches. Second, Baxsto offered nothing more than conjecture that Roxo’s promise to delay recording induced the ultimate sale of Baxsto’s minerals. The Court found this connection too attenuated to support the claim. Accordingly, summary judgment was proper.
What does it mean?
This decision reversed a lower court that found issues of fact sufficient to deny summary judgment for the defendants. With this decision and several others of recent vintage, litigants should now understand that the Texas Supreme Court as it is now constituted will be strongly inclined to disfavor efforts by a party to deviate from the plain meaning of a written contract, including claims that the contract was tainted by false representations during negotiations.
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