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Choosing between An Honest Bargain and No Bargain: Information Disclosure to Potential Lessors

Kenneth E. Barnhill, Jr., Rodrick J. Enns, Mining Agreements II (1981)


Mineral exploration companies regularly attempt to obtain mineral rights from landowners who know much less about their property than the parties seeking to acquire it. The land may have been obtained by the owner for an entirely different purpose, such as farming or grazing, without thought for its mineral potential, or the owner may simply lack the expertise or financial resources intelligently to evaluate the mineral value of his property. In these situations, even if the company makes no representations as to mineral values whatsoever, it may have an affirmative duty to disclose its information or the fact that such information exists to the uninformed landowner. The mineral exploration company may thus find itself in the uncomfortable position of deciding whether the sensitive mineral information which it has acquired should be disclosed to protect the future enforceability of its agreement with the landowner, even though such disclosure could surrender its most significant bargaining advantage.

This paper is intended as a guide to assist mining companies and others in determining whether and to what extent information should be disclosed to the prospective lessee or seller of mineral interests during negotiation of the lease or purchase. Specifically, we will consider whether a company must volunteer information to an uninformed landowner even in the absence