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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



Opinion No. 6068

May 21, 1982


Oil and gas leases negotiated at home are not subject to act

Oil and gas leases negotiated at home are not subject to cancellation by the owner within three business days as provided in the home solicitation sales act, 1971 PA 227.

Honorable Mitch Irwin

State Senator

State Capitol

Lansing, Michigan

You have requested my opinion on the following question:

Does the home solicitation sales act, 1971 PA 227, as amended; MCLA 445.111 et seq; MSA 19.416(201) et seq 'cooling off period' apply to oil and gas leases negotiated on a door-to-door basis?

Your question speaks to the situation where an agent of an organization seeking the right to explore on and remove oil and gas from the property of another contacts property owners at their homes and attempts to negotiate a lease.

A transaction of the nature last described is not subject to 1971 PA 227, supra, as:

(a) the roles of buyer and seller are reversed from that contemplated by the act; and,

(b) the transaction does not involve a sale of goods or services.

A 'home solicitation sale' is defined in 1971 PA 227, supra, Sec. 1(a) to mean:

'[a] sale of goods or services of more than $25.00 in which the seller or a person acting for the seller engages in a personal or telephonic solicitation of the sale at a residence of the buyer and the buyer's agreement or offer to purchase is there given to the seller or a person acting for the seller. Home solicitation sale does not include a sale made pursuant to a preexisting revolving charge account, a sale made pursuant to prior negotiations between the parties at a business establishment at a fixed location where goods or services are offered or exhibited for sale, a sale of insurance by an insurance agency licensed by the commissioner of insurance, or a sale of services by a real estate broker or salesperson licensed by the department of licensing and regulation. Home solicitation sales does not include a sale of agricultural or horticultural equipment and machinery which is demonstrated to the consumer by the vendor at the request of either or both of the parties.

In a 'home solicitation sale', pursuant to 1971 PA 227, supra, Sec. 2(1), the buyer has the right,

'[t]o cancel a home solicitation sale until midnight of the third business day after the day on which the buyer signs an agreement or offer to purchase which complies with the act.'

1971 PA 227, supra, contemplates the seller soliciting the buyer at the buyer's place of residence. Since the buyer cannot avoid the transaction by leaving and may be subjected to unwanted demonstrations and high pressure sales techniques, the Legislature has provided a three business day period for the buyer to reflect on the wisdom of the transaction and cancel it without penalty.

In the 'door-to-door' solicitation of oil and gas leases, the roles of the parties are reversed from that contemplated by 1971 PA 227, supra. It must, therefore, be concluded that 1971 PA 227, supra, is not applicable to the 'door-to-door' solicitation of oil and gas leases and the property owner does not have a three business day period in which to cancel the transaction.

While the Legislature has not defined the term 'goods' in 1971 PA 227, supra, its commonly understood meaning is personal property which is visible, tangible and has intrinsic value as distinguished from real estate or freehold property. Webster's Third New International Dictionary. The Michigan Supreme Court in Curtis v Phillips, 5 Mich 112 (1858), has defined the term 'goods' to include all kinds of personal property.

Thus, transactions of the nature described do not provide for the sale of goods, but rather, the sale and conveyance of an interest in real property.

In Jaenick v Davidson, 290 Mich 298, 302-303; 287 NW 472 (1939), the court states:

'[i]t must be held that a lease of oil and gas rights in a tract of land constitutes an interest in real property, not a mere option. . . . We have held that oil and gas are a part of the realty until severed therefrom. Eadus v Hunter, 249 Mich 190; Attorney General v Railway Co., 263 Mich 431 (94 A.L.R. 520). And it follows that a transfer of title or of a right in the unsevered oil and gas, together with the right to go upon the land for the purpose of taking the oil and gas therefrom involves a granting of rights in real estate; and the instruments granting such rights are appropriately denominated 'leases'.'

In leasing lands for exploration development and production of oil and gas, the lessor does not contract to sever the oil and gas, such right being granted the lessee. An oil and gas lease is not, therefore, a contract for the sale of goods.

In the usual transaction for lease of real property to locate and extract minerals, the lease contract contemplates a property interest in the premises flowing to the lessee and not a contract for the provision of services to the property owner. No opinion is expressed as to whether an agreement for locating mineral rights which are retained by the property owner is an agreement for services subject to 1971 PA 277, supra.

It should also be noted that while research reveals no statutes in force which would provide for a 'cooling off' period in conjunction with the leasing of mineral interests, appropriate legislation may be adopted by the Legislature. In 1979, HB 5326 was introduced by Representative Burkhalter entitled:

'A bill to require the disclosure of certain information by land agents; to prohibit certain methods, acts, and practices in the acquisition of an interest in and for the purpose of drilling, storing, or transmitting oil and gas, to provide for certain remedies; and to prescribe penalites.'

The bill was read a first time by its title and referred to the Committee on Agriculture. 4HJ p 3074. Among its terms were the following:

'Sec. 1 (d) 'Purchaser' means a person who acquires or attempts to acquire an interest in land for the purpose of drilling, storing or transmitting oil and gas.

Sec. 3. In negotiating the acquisition of land rights and in acquiring land rights, a land agent or purchaser shall not engage in an unfair, unconscionable, or deceptive method, act or practice as defined by 3(l), (m), (n), (s), (t), (u), (x), (y), (aa), (bb), and (cc) of Act No. 331 of the Public Acts of 1976, being section 445.903 of the Michigan Compiled Laws.

Sec. 4(2). A landowner has an unconditional right to rescind a contract or agreement for the acquisition of an interest in land within 5 days from the date the landowner receives a legible copy of the signed contract or agreement. . . .'

The bill was never reported out of committee.

It is my opinion, therefore, that the home solicitation sale act, 1971 PA 227, supra, does not apply to an oil and gas lease negotiated on a door-to-door basis.

Frank J. Kelley

Attorney General

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