Restrictions on Disposition in the Oil and Gas Industry: The Extinction of the Species?


  • Gordon L. Tarnowsky Fraser Milner Casgrain LLP, Calgary.
  • Miles F. Pittman Fraser Milner Casgrain LLP, Calgary.
  • Carolyn Wilton Fraser Milner Casgrain LLP, Calgary.



Restrictions on disposition in the oil and gas industry, predominantly rights of first refusal, can create significant uncertainties in oil and gas transactions, particularly complex ones. In an effort to discern trends in judicial approaches, the authors review Canadian jurisprudence dealing with difficult rights of

first refusal issues against the backdrop of academic and professional commentary in the 1990s, which promoted the establishment of judicially developed "default rules" to ensure interpretive certainty. The authors postulate that parlies ought not to presume the existence or application of "default rules" in the interpretation and application of restrictions on disposition, based on the jurisprudence. Rather. parties ought to focus on considered drafting when preparing agreements and. where uncertainties arise defaut in the application of provisions, ought to contemplate the reasonable expectations of the parties to the agreement.