2016 Regular Session ENROLLED
SENATE BILL NO. 404
BY SENATOR PEACOCK (On Recommendation of the Louisiana State Law Institute)
1 AN ACT
2 To enact Part VI of Chapter 2 of Code Title VII of Code Book III Title 9 of the Louisiana
3 Revised Statutes of 1950, to be comprised of R.S. 9:2991.1 through 2991.11, relative
4 to the sale of mineral rights by mail solicitation; to create the Sale of Mineral Rights
5 by Mail Solicitation Act; to define sale of mineral rights by mail solicitation; to
6 require sales of mineral rights by mail solicitation to be in proper form; to provide
7 for required disclosures; to provide for rescission of sales of mineral rights by mail
8 solicitation; to provide for the mechanics and effects of rescission; to provide for
9 prohibited terms; to provide terms, conditions, and requirements; and to provide for
10 related matters.
11 Be it enacted by the Legislature of Louisiana:
12 Section 1. Part VI of Chapter 2 of Code Title VII of Code Book III Title 9 of the
13 Louisiana Revised Statutes of 1950, comprised of R.S. 9:2991.1 through 2991.11, is hereby
14 enacted to read as follows:
15 PART VI. SALE OF MINERAL RIGHTS BY MAIL SOLICITATION
16 §2991.1. Title
17 This Part shall be known and may be cited as the "Sale of Mineral
18 Rights by Mail Solicitation Act".
19 2016 Louisiana Comments
20 This Part, which is new, is designed to regulate certain transfers of mineral
21 rights that place landowners and other persons with rights to minerals at risk of
22 exploitation. As defined in R.S. 9:2991.2, a sale of mineral rights by mail solicitation
23 is the creation or transfer of a mineral servitude or mineral royalty, or contract
24 preparatory to such a transfer, that is initiated by an offer transmitted through the
25 mail by the transferee and accompanied by a form of payment, such as a check or
26 draft. An offer of this type may induce an owner to sell mineral rights without
27 understanding the consequences of the transaction or at a price far below market
28 value. Because the doctrine of lesion does not apply to transfers of mineral rights,
29 owners have relatively little protection under existing law. This Part therefore
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1 permits a transferor of mineral rights in a sale of mineral rights by mail solicitation
2 to rescind the transfer within sixty days after signing the instrument evidencing the
3 agreement. This Part also requires that any instrument evidencing a sale of mineral
4 rights contracted in this manner contain a disclosure statement describing this right
5 of rescission. When the required disclosure is not included in the instrument, the
6 transferor has the right to rescind the contract for three years after the date of signing
7 the instrument. In such a case, the transferee is liable for attorney fees and court costs
8 and may also be liable for additional damages at the discretion of the court.
9 §2991.2. Sale of mineral rights by mail solicitation defined
10 For purposes of this Part, a sale of mineral rights by mail solicitation is
11 the creation or transfer of a mineral servitude or mineral royalty, or the
12 granting of an option, right of first refusal, or contract to create or to transfer
13 a mineral servitude or mineral royalty, that is contracted pursuant to an offer
14 that is received by the transferor through the mail or by common carrier and
15 is accompanied by any form of payment. As used in this Part, the term "mineral
16 rights" does not include a mineral lease.
17 2016 Louisiana Comments
18 (a) This Section narrowly defines the term "sale of mineral rights by mail
19 solicitation" so as to affect only those transactions that are likely to place a
20 landowner or other person with rights to minerals at risk of selling without
21 understanding the consequences of the transaction or for a price far below market
22 value. The risk of bargaining inequality is most significant when a transfer of
23 mineral rights is initiated by an offer that is transmitted through the mail by the
24 transferee and accompanied by a form of payment, such as a check or draft. In other
25 circumstances, such as when the transferee makes an offer in person, or when a form
26 of payment does not accompany a written offer, the risk of a hasty or misinformed
27 acceptance is less pronounced.
28 (b) This Section specifically excludes a contract creating or transferring a
29 mineral lease from the term "sale of mineral rights by mail solicitation." Unlike a
30 sale or other transfer of mineral rights, a mineral lease does not completely divest the
31 owner of an interest in the minerals. See, e.g., Wall v. Leger, 402 So. 2d 704, 709
32 (La. App. 1st Cir. 1981)("The grantor of a mineral servitude ceases to be the owner
33 of the mineral rights; the lessor of a mineral lease continues to be the owner of the
34 mineral rights."). Moreover, the obligations imposed on mineral lessees by the
35 Mineral Code provide significant protection against exploitation. See La. Rev. Stat.
36 Ann. § 31:122. The importance of security of title to a mineral lessee who has
37 expended or intends to expend significant amounts of capital in developing the
38 leased premises also justifies the exemption of mineral leases from the ambit of this
39 legislation.
40 §2991.3. Exclusion of contracts initiated through personal contact
41 This Part does not apply to a sale of mineral rights by mail solicitation
42 contracted subsequent to a prior personal contact that included a meaningful
43 exchange between the transferor and the transferee.
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1 2016 Louisiana Comments
2 This Part does not apply to a transfer of mineral rights that is contracted
3 following prior personal contact that included a meaningful exchange between the
4 transferor and the transferee, even if the transfer otherwise meets the definition of
5 a "sale of mineral rights by mail solicitation" set forth in R.S. 9:2991.2. Contracts
6 that are preceded by negotiations-whether in person, by telephone, or by written or
7 electronic communication-do not involve the same potential for abuse associated
8 with transfers initiated by unsolicited mail communications. The term "prior personal
9 contact" does not require in-person negotiations or even significant negotiations
10 between the parties or their representatives. However, it does require that a
11 meaningful exchange take place between the transferor and transferee. Therefore,
12 mass-mailings, automated telephone calls, and other communications that do not
13 involve a meaningful exchange are not excluded under this Section.
14 §2991.4. Form
15 A sale of mineral rights by mail solicitation shall be made by authentic
16 act or by act under private signature signed by the transferor. The acceptance
17 of any form of payment by the transferor or any action whereby the transferor
18 otherwise manifests assent to the sale shall not satisfy the requirement of the
19 transferor's signature.
20 2016 Louisiana Comments
21 According to Louisiana jurisprudence, an act under private signature may be
22 valid even when signed by one party alone, provided that the party who did not sign
23 the act otherwise exhibited some outward manifestation of acceptance beyond oral
24 assent. See, e.g., Milliman v. Peterman, 519 So. 2d 238 (La. App. 5 Cir. 1988); see
25 also La. Civ. Code art. 1837 cmt. (b) (1984) and the citations contained therein. In
26 contrast, this Section requires that in a sale of mineral rights by mail solicitation the
27 transferor must sign the instrument evidencing the agreement. The transferor's
28 acceptance of any form of payment or performance of any action otherwise
29 manifesting assent to the contract shall not suffice to satisfy the signature
30 requirement.
31 §2991.5. Required disclosure; form notice of rescission
32 An instrument evidencing a sale of mineral rights by mail solicitation
33 shall contain on the first page, under the caption "The Seller's Right to Cancel",
34 the following disclosure, or one substantially similar, in conspicuous and legible
35 type that is not smaller than fourteen-point font and is in contrast by
36 typography, layout, or color with any other printing on the instrument, with all
37 relevant information provided by the transferee:
38 "THIS IS A [SALE] [CONTRACT REQUIRING THE SALE] OF
39 YOUR VALUABLE MINERAL RIGHTS. If you sign and return this
40 agreement, you may cancel it by mailing a notice to the buyer. You may
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1 use any written statement that indicates your intention to cancel, or you
2 may sign and return the notice provided below.
3 Your notice must be mailed, no later than 60 days after you signed the
4 agreement, to the following: [insert name and mailing address of the
5 transferee]. Within 60 days after mailing your notice, you must return
6 any payment you have received from the buyer, and the buyer must
7 return your mineral rights and any royalties and other payments
8 received since the sale. You may lose important rights if you do not file
9 your notice in the conveyance records of the parish where the property
10 is located within 90 days after this agreement is filed in the conveyance
11 records.
12 NOTICE OF CANCELLATION
13 I, [insert name of transferor], wish to cancel the sale or contract
14 requiring the sale of my mineral rights to [insert name of transferee].
15 The affected mineral rights are all mineral rights that I transferred to
16 the transferee in the following lands: [insert legal description of land].
17 _________________________ ______________________
18 Transferor's Signature Date"
19 2016 Louisiana Comments
20 (a) The disclosure statement required by this Section is intended primarily to
21 notify the transferor in a sale of mineral rights by mail solicitation that the
22 transaction is a sale rather than another type of contract, such as a mineral lease. The
23 required disclosure is intended also to inform the transferor of the right to rescind the
24 sale within sixty days after the date on which the transferor signed the agreement. To
25 comply with this Section, the instrument evidencing a sale of mineral rights by mail
26 solicitation must contain the disclosure statement provided by this Section or one
27 substantially similar. De minimis variations from the required disclosure, such as
28 typographical errors or slight deviations in wording, should not invalidate the
29 disclosure, provided that the substance of the required disclosure is made. When a
30 sale of mineral rights by mail solicitation is an option, right of first refusal, or
31 contract to sell, the preparatory contract must contain the required disclosure.
32 (b) This Section requires that the transferee include in the disclosure
33 statement a form notice of rescission that may be signed and returned by the
34 transferor and also filed in the conveyance records of the parish in which the
35 property is located. The transferee must include in the notice of rescission the names
36 of the transferor and the transferee and a legal property description of the land that
37 is subject to the affected mineral rights.
38 §2991.6. Right to rescind; time for rescission
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1 A. When an instrument evidencing a sale of mineral rights by mail
2 solicitation contains the disclosure required by this Part, the transferor may
3 rescind the agreement within a period of sixty days after the date on which the
4 transferor signs it.
5 B. When an instrument evidencing a sale of mineral rights by mail
6 solicitation does not contain the disclosure required by this Part, the transferor
7 may rescind the agreement within a peremptive period of three years after the
8 date on which the transferor signs it.
9 C. The timely rescission of a sale of mineral rights by mail solicitation
10 that is an option, right of first refusal, or contract to sell also rescinds any act
11 of transfer subsequently executed pursuant to such contract.
12 2016 Louisiana Comments
13 The transferor in a sale of mineral rights by mail solicitation may rescind the
14 contract for any reason within sixty days after the date on which the contract is
15 signed. By virtue of this rule, all sales of mineral rights by mail solicitation are
16 subject to a minimum "cooling-off" period of sixty days. When an instrument
17 evidencing a sale of mineral rights by mail solicitation does not contain the
18 disclosure statement required by this Part, the period within which the transferor may
19 rescind the sale is extended to three years. When the sale of mineral rights by mail
20 solicitation is an option, right of first refusal, or contract to sell, the transferor's
21 timely exercise of the right to rescind the preparatory contract also rescinds any
22 subsequent act of transfer that is executed pursuant to the preparatory contract.
23 §2991.7. Rescission; method of making; effects as to third persons
24 A. Rescission of a sale of mineral rights by mail solicitation must be
25 made by written notice to the transferee and is effective between the parties
26 when the notice of rescission is transmitted.
27 B. If the instrument evidencing a sale of mineral rights by mail
28 solicitation contains the disclosure required by this Part, a third person
29 acquiring an interest in mineral rights from the transferee is subject to the
30 effect of a notice of rescission filed within ninety days after the date of the filing
31 of the instrument. In all other cases, rescission may not impair the rights of any
32 third person who acquired an interest in the mineral rights prior to the time
33 that the notice of rescission was filed for registry.
34 C. A notice of rescission is without effect as to third persons unless it
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1 contains the name of the transferee and the transferor.
2 2016 Louisiana Comments
3 (a) Between the parties, rescission takes place of right immediately upon
4 transmission of the notice of rescission. Rescission does not have to be judicially
5 demanded or declared, nor is rescission delayed until the transferor has restored the
6 price paid to him. See R.S. 9:2991.9.
7 (b) Under this Section, when the instrument evidencing a sale of mineral
8 rights by mail solicitation contains the required disclosure, a third person acquiring
9 an interest in the mineral rights from the transferee does so subject to the right of the
10 original transferor to rescind the agreement, provided that the notice of rescission is
11 filed within ninety days after the date of the filing of the instrument. For all other
12 cases, this Section states an exception to Louisiana Civil Code Article 3339, under
13 which a termination of rights that depends upon the occurrence of a condition is
14 generally effective as to third persons although not evidenced of record. Thus, when
15 the instrument evidencing a sale of mineral rights by mail solicitation contains the
16 required disclosure but a notice of rescission is not filed within ninety days after the
17 date of the filing of the instrument, or when the instrument evidencing a sale of
18 mineral rights by mail solicitation does not contain the required disclosure, third
19 persons who acquire an interest in the mineral rights prior to the recordation of the
20 notice of rescission are protected from the effects of rescission.
21 (c) This Section does not address the situation in which the transferee sells
22 or grants a right in the mineral rights to another person who, under the law of
23 corporate veil-piercing and other similar theories, is a mere alter ego of the original
24 transferee. See, e.g., Warriner v. Russo, 308 So. 2d 499, 501 n.2 (La. App. 4th Cir.
25 1975).
26 §2991.8. Rescission; parties obligated to make payments
27 Rescission shall not be effective against a party obligated to make or in
28 fact making royalty or other payments until sixty days after that party is
29 furnished with a certified copy of the notice of rescission.
30 2016 Louisiana Comments
31 This Section protects mineral lessees and other parties who are either
32 obligated to make or are in fact making royalty or other payments to an owner. The
33 mere recordation of a notice of rescission, in the absence of actual notice, to the party
34 making such payments, does not obligate that party to begin making payments to a
35 transferor who has rescinded a sale of mineral rights by mail solicitation.
36 §2991.9. Effects of rescission
37 A. A transferor who exercises the right to rescind under this Part shall
38 return to the transferee within sixty days after rescission any payments made
39 by the transferee. A transferor's failure to return such payments gives rise to
40 a cause of action for return of the payments but does not prevent rescission.
41 B. A transferee against whom the right to rescind is exercised under this
42 Part shall pay to the transferor within sixty days after rescission any royalties
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1 and other payments received by the transferee plus interest on those royalties
2 and other payments from the date received by the transferee.
3 C. When an instrument evidencing a sale of mineral rights by mail
4 solicitation does not contain the disclosure required by this Part, a transferee
5 against whom the right to rescind is exercised shall be liable for attorney fees
6 and court costs. In such a case, in addition to restoring any royalties or other
7 payments due to the transferor, a court may further award as damages an
8 amount up to twice the sum of royalties and other payments received by the
9 transferee.
10 2016 Louisiana Comments
11 (a) When the transferor exercises the right to rescind, the parties must be
12 restored to the situation that existed before the contract was made. See La. Civ. Code
13 art. 2033.
14 (b) Failure to include the required disclosure in the instrument evidencing a
15 sale of mineral rights by mail solicitation subjects the transferee to liability for
16 attorney fees and court costs. In addition to restoring any royalties or other payments
17 due to the transferor plus interest on that sum, the court has discretion, based on the
18 nature of the transferee's conduct, to award damages in an amount up to double the
19 amount of royalties or other payments received by the transferee. For example, if the
20 amount of royalties due to the transferor is $1,000, the court may award up to an
21 additional $2,000 as damages.
22 §2991.10. Prohibited terms
23 The following provisions, if included in or accompanying an instrument
24 evidencing a sale of mineral rights by mail solicitation, are absolutely null:
25 (1) A provision requiring the agreement to be governed or interpreted
26 by the laws of another jurisdiction or requiring a suit to be brought in a forum
27 or jurisdiction outside of this state.
28 (2) A provision stipulating any venue to the extent inconsistent with the
29 applicable provisions of the Code of Civil Procedure.
30 (3) A provision requiring the transferor to indemnify the transferee for
31 any loss related to the transferor's right to rescind.
32 (4) A provision authorizing the transferee to act as a mandatary of the
33 transferor.
34 (5) A provision that excludes, limits, waives, or otherwise modifies the
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1 obligations of the transferee described in this Part.
2 §2991.11. Reservation
3 Nothing in this Part shall be construed to limit any other remedies or
4 grounds for rescission provided by law.
5 Section 2. This Act shall become effective upon signature by the governor or, if not
6 signed by the governor, upon expiration of the time for bills to become law without signature
7 by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If
8 vetoed by the governor and subsequently approved by the legislature, this Act shall become
9 effective on the day following such approval.
PRESIDENT OF THE SENATE
SPEAKER OF THE HOUSE OF REPRESENTATIVES
GOVERNOR OF THE STATE OF LOUISIANA
APPROVED:
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