Texas law strongly endorses the concept of freedom to contract and our courts have frequently emphasized this by enforcing the intent of the contracting parties. Indeed, intent of the parties is enforced even if the parties use words erroneously. An example of this comes from the case of Thompson v. Taeda Investments, LLC, 2018 WL 3196628 (Tex. Civ.App.-Tyler 2018, pet. filed).
In that case, a mineral estate management agreement used the words “overriding royalty interest.” The Court of Appeals held that, while those words have “a generally accepted meaning,” the context of the agreement demonstrated that the parties used those words erroneously and that they intended something different than what is generally meant by those words. Despite the erroneous use of the words, because of the context, the parties could have only intended one thing — and that was different than the generally accepted meaning of “overriding royalty interest”. As a result, the management agreement was held to be unambiguous. Furthermore, the lack of ambiguity defeated one party’s claim that there had been a mutual mistake of fact in the use of the word “overriding royalty interest.”
Interpreting Texas Contracts: Language From the Management Agreement
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