My family signed a lease and the company singed lease and sent it to us. Now it is time for bonus payment and they say they can't pay or honor contract because another company has a shallow well on the property. I am understanding that this is a legal binding contract. Can someone please give me some advise on how to handle this?
There's probably a clause in the contract that you signed that says the property has to pass a title check. If another company has a shallow well, that shallow well most likely holds all depths of the property under a lease. If that is the case, you, as the property owner, shouldn't have signed a lease if you were aware of it. Whether you are/were aware of the existing lease with shallow well and/or if you are receiving royalties from it is a whole different story.
There is no contract. You were unable to fulfill your part of the deal - conveying oil and gas rights.
It was never a valid lease because there is an existing lease associated with the shallow well. Also, operators can back out on a lease for basically any reason they want. All you can do is hope they make a deal with whoever owns the shallow well lease (to drill the deep rock). What county is your property?