* The court has rewritten paragraph 45.

AMENDED OPINION*

This opinion is subject to revision before final

publication in the Pacific Reporter

2016 UT 6

IN THE

SUPREME COURT OF THE STATE OF UTAH

MIND & MOTION UTAH INVESTMENTS, LLC,

Appellee,

v.

CELTIC BANK CORPORATION,

Appellant.

No. 20131168

Filed January 27, 2016

Third District, Salt Lake

The Honorable Todd M. Shaughnessy

No. 110915222

Attorneys:

Steven W. Dougherty, Troy L. Booher, Leslie Kay Rinaldi, 

Beth E. Kennedy, Salt Lake City, for appellant

Marcy G. Glenn, Denver, Nathan R Runyan, 

Salt Lake City, for appellee

CHIEF JUSTICE DURRANT authored the opinion of the Court, in which 

ASSOCIATE CHIEF JUSTICE LEE, JUSTICE DURHAM, 

and JUDGE PEARCE joined.

Having recused himself, JUSTICE HIMONAS does not participate 

herein; COURT OF APPEALS JUDGE JOHN A. PEARCE sat.

JUSTICE PARRISH sat for oral argument. Due to her resignation from 

this court, she did not participate herein.
MIND & MOTION v. CELTIC BANK

Opinion of the Court

2

CHIEF JUSTICE DURRANT, opinion of the Court:

Introduction

¶1 Utah law recognizes two different kinds of promises parties 

make in a contract, covenants and conditions. Covenants are mutual 

obligations the parties bargain for in their agreement, and the failure 

to perform them generally gives rise to remedies for breach of 

contract. Conditions, on the other hand, are events not certain to 

occur, but which must occur before either party has a duty to 

perform under the contract. In contrast to covenants, the failure of a 

condition relieves the parties of any performance obligations, and 

neither may seek remedies for breach. 

¶2 In this case, Mind & Motion entered into a real estate 

purchase contract (REPC) with Celtic Bank to buy a large piece of 

property the bank had acquired from a developer through 

foreclosure. Although the county had approved plans to construct 

condominiums on the land, the developer had not recorded the plats 

for the first phase of development. Accordingly, the REPC required 

Celtic Bank to record the plats by a certain date, and it allowed Mind 

& Motion sole discretion to extend the recording deadline as 

necessary to allow Celtic Bank enough time to record. It further 

provided that any extension of the recording deadline automatically 

extended the deadline to complete the transaction.

¶3 After extending the recording deadline once, Mind & 

Motion declined to extend it a second time and sued Celtic Bank for 

breach of contract. The district court granted summary judgment in 

Mind & Motion‘s favor, concluding that the recording provision was 

unambiguously a covenant, not a condition. It then awarded Mind & 

Motion $100,000 in liquidated damages and more than $200,000 in 

attorney fees, as well as the return of Mind & Motion‘s $100,000 

earnest money deposit. On appeal, Celtic Bank argues that summary 

judgment was improper because the recording provision is 

unambiguously a condition. And in the alternative, it maintains that 

the agreement contains facial and latent ambiguities.

¶4 We agree with the district court that the language of the 

contract lends itself to just one plausible reading—that the recording 

provision is a covenant, not a condition. Under our caselaw, 

although it is true that the fulfillment of a condition often hinges on 

the action of a third party, conditions are also typically phrased 

using explicitly conditional terms. Here, Celtic Bank is correct that its 

ability to meet the recording deadline depended on when county 

officials decided to approve its application. But the parties employed 

explicitly mandatory language to characterize the recording 
Cite as: 2016 UT 6

Opinion of the Court

3

provision, while using explicitly conditional language elsewhere in 

the agreement. Based on these features of the REPC, we conclude 

that there is no plausible way to read the recording provision as 

anything other than a covenant.

¶5 We also conclude that there is no latent ambiguity in the 

REPC. Latent ambiguities arise only where unambiguous language 

mislabels a person or thing due to a collateral matter. And parties 

cannot make such a showing by merely submitting affidavits that set 

forth their own subjective understanding of particular terms. Here, 

Celtic Bank has not argued that any terms in the agreement fail to 

reflect the parties‘ intent due to some collateral matter. And even if it 

had, the only extrinsic evidence Celtic Bank submits are affidavits 

from bank officers describing their own subjective understanding of 

the recording provision. We therefore reject Celtic Bank‘s latent 

ambiguity argument and affirm the district court‘s summary 

judgment ruling. 

Background

¶6 On appeal from a motion for summary judgment, we view 

the facts and all reasonable inferences from them in the light most 

favorable to the nonmoving party, Celtic Bank.1 The following 

recitation of the facts is consistent with that standard.

¶7 Celtic Bank acquired fourteen acres of real estate in 

Huntsville, Utah, through a foreclosure sale. The prior owner had 

partially completed four condominium units and received approval 

to construct more than 160 additional units. But the prior owner had 

not recorded the plat for the next phase of development, and neither 

had Celtic Bank after assuming ownership of the property.

¶8 Mind & Motion agreed to purchase the property from Celtic 

Bank in a real estate purchase contract executed May 25, 2010. The 

REPC described the property as including ―[a]pproximately 14 acres 

with recorded PRUD for 168 units‖ and stated that Celtic bank was 

selling the property ―AS RECORDED.‖ The agreement required 

Mind & Motion to deposit $100,000 in earnest money with an escrow 

agent, which was fully refundable if the property did not pass a 

buyer‘s inspection. Mind & Motion could complete its inspections 

anytime within fifteen days after receiving notice that the property 

was substantially complete and that Celtic Bank had recorded the 

plat. 

 

1 See Anderson Dev. Co. v. Tobias, 2005 UT 36, ¶ 31, 116 P.3d 323. 
MIND & MOTION v. CELTIC BANK

Opinion of the Court

4

¶9 The REPC also provided that Celtic Bank ―shall record 

Phase 1‖ and ―agrees to complete recording of Phase 1‖ of the 

development by June 15, 2010. It further provided that Celtic Bank 

―will accomplish any necessary construction or repairs required to 

complete recording of Phase 1.‖ But it granted Mind & Motion ―the 

sole discretion‖ to extend the deadline ―as necessary to allow‖ Celtic 

Bank to record. If Mind & Motion extended the deadline, ―the 

Evaluations and Inspection Deadline and the Settlement deadline‖ 

would be ―automatically extended by the same amount of time.‖

¶10 The recording process requires an applicant to obtain 

approval from a number of different entities. First, the Weber 

County Planning Commission requires ―an applicant to complete a 

required landscaping or infrastructure improvement prior to any 

plat recordation or development activity.‖2 After the planning 

commission approves a final plat, the commission submits it to the 

county surveyor, county health department, and county engineer for 

signatures.3 After the county engineer approves the plat, the 

engineer submits it to the county attorney and the board of county 

commissioners for their approval.4 An applicant who jumps through 

each hoop is entitled to record—county officials do not have 

discretion to decline an application that complies with the applicable 

zoning ordinances.5

¶11 The REPC also contained a ―time is of the essence clause,‖

which provided that ―[u]nless otherwise explicitly stated in this 

Contract,‖ performance must be completed ―by 5:00 PM Mountain 

Time‖ on the applicable deadline. The clause also stated that 

―[p]erformance dates and times referenced herein shall not be 

binding upon title companies, lenders, appraisers, and others not 

parties to this Contract, except as otherwise agreed to in writing by 

such non-party.‖

¶12 In the event Mind & Motion defaulted, the REPC allowed 

Celtic Bank to keep the earnest money as liquidated damages. If 

Celtic Bank defaulted, Mind & Motion would receive back its earnest 

money and could either sue to specifically enforce the contract or 

obtain $100,000 in liquidated damages.

 

2 See UTAH CODE §§ 17-27a-604(1)(b)(i), -604.5(2)(a). 

3 WEBER COUNTY, UTAH, ORDINANCES § 106-1-8(d)(1).

4 Id.

5 See Springville Citizens for a Better Cmty. v. City of Springville, 1999 

UT 25, ¶ 30, 979 P.2d 332. 
Cite as: 2016 UT 6

Opinion of the Court

5

¶13 The day the parties signed the REPC, the planning 

commission recommended final approval of recording the phase 1 

plat. But several entities still needed to approve various aspects of 

Celtic Bank‘s application. None of them approved the plat by the 

June 15 recording deadline, and Mind & Motion accordingly 

extended it to July 26.

¶14 That date came and went, however, without the application 

being approved, and rather than extend the deadline a second time, 

Mind & Motion claimed Celtic Bank had breached the contract and 

demanded the return of its earnest money as well as the payment of

liquidated damages. Celtic Bank refused to pay, so Mind & Motion 

filed a breach of contract action. The district court granted Mind & 

Motion partial summary judgment on its breach of contract claim, 

concluding that the recording provision was unambiguously a 

covenant, not a condition. It reasoned that because the REPC 

phrased Celtic Bank‘s recording obligation in mandatory terms—the 

bank ―shall record Phase 1‖—there was no plausible way to read the 

provision as anything other than a covenant. Celtic Bank appeals. 

We have jurisdiction under Utah Code section 78A-3-102(3)(j). 
MIND & MOTION v. CELTIC BANK

Opinion of the Court

6

Standard of Review

¶15 Celtic Bank argues that the REPC‘s recording provision is 

unambiguously a condition, not a covenant, and that the district 

court therefore erred in granting summary judgment in Mind & 

Motion‘s favor. In the alternative, the bank argues that the provision 

is at least reasonably susceptible to either reading and is therefore 

facially ambiguous. Additionally, Celtic Bank has urged us to 

consider affidavits from two of its officers that it argues show a 

latent ambiguity in the contract. We review a district court‘s decision 

granting summary judgment for correctness, viewing ―the facts and 

all reasonable inferences drawn therefrom in the light most favorable 

to the nonmoving party.‖6 Summary judgment is appropriate when 

―there is no genuine dispute as to any material fact and the movant 

is entitled to judgment as a matter of law.‖7 The interpretation of a 

contract is legal question, which we also review for correctness.8

Analysis

¶16 We conclude that the district court correctly granted 

summary judgment in Mind & Motion‘s favor. Although Celtic 

Bank‘s ability to meet the recording deadline hinged in large part on 

the approval of county officials, the parties couched the recording 

obligation in mandatory language while employing explicitly 

conditional language elsewhere in the REPC to describe other 

performance obligations. This shows that Celtic Bank and Mind & 

Motion, both sophisticated parties, knew how to draft a condition 

when they so desired. Accordingly, it is not plausible to read Celtic 

Bank‘s duty to record the phase 1 plat as anything other than a 

covenant, and the REPC is therefore not facially ambiguous.

¶17 We also conclude that Celtic Bank has failed to establish a 

latent ambiguity in the contract. Latent ambiguities arise only when 

a collateral matter—such as trade usage, course of dealing, or 

linguistic context—shows that a contract‘s terms mislabel a person or 

thing or otherwise fail to reflect the parties‘ intentions. And extrinsic 

evidence is only relevant to such a determination if it is objective. 

Here, because Celtic Bank has submitted affidavits from its officers 

setting forth their own subjective understanding of the agreement, it 

 

6 Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600 (internal quotation 

marks omitted).

7 UTAH R. CIV. P. 56(a); see also Orvis, 2008 UT 2, ¶ 13.

8 Encon Utah, LLC v. Fluor Ames Kraemer, LLC, 2009 UT 7, ¶ 11, 210 

P.3d 263. 
Cite as: 2016 UT 6

Opinion of the Court

7

has failed to submit any credible evidence relevant to establishing a 

latent ambiguity. For these reasons, we affirm the district court‘s 

decision.

I. The REPC Is Unambiguous as to the Nature of Celtic Bank‘s 

Recording Obligation

¶18 Because resolving the parties‘ dispute hinges on whether the 

recording obligation is a covenant or a condition, we first discuss the 

key differences between these types of obligations. We then analyze 

the relevant provisions of the REPC and conclude that the only 

plausible way to read Celtic Bank‘s recording obligation is as a 

covenant. As we explain in more detail below, this is primarily 

because the obligation is phrased in explicitly mandatory terms 

despite the parties‘ use of conditional language to characterize other 

performance obligations. For that reason, even though Celtic Bank

could not control the precise timing of recordation, the language the 

parties‘ employed cannot plausibly be read as creating a conditional 

obligation. Rather, the plain language of the agreement shows that 

Celtic Bank agreed to shoulder the same type of regulatory risk 

businesses routinely assume in such contracts.

A. Covenants and Conditions

¶19 The distinction between covenants and conditions is an 

important one because each imposes qualitatively different kinds of

obligations. A covenant is a ―promise[] between the parties to the 

contract about their mutual obligations.‖9 In essence, covenants are 

the core bargained-for exchange of an agreement. They create 

specific legal duties, the violation of which gives rise to remedies for 

breach of contract.10

¶20 Conditions are different. ―A condition is  ̳an event, not 

certain to occur, which must occur . . . before performance under a 

contract becomes due.‘‖11 We have noted three principal differences 

between conditions and covenants. First, the parties to the contract 

have no duty to perform until the condition is fulfilled, so the failure 

 

9 McArthur v. State Farm Mut. Auto. Ins. Co., 2012 UT 22, ¶ 28, 274 

P.3d 981 (alteration in original) (quoting HOWARD O. HUNTER,

MODERN LAW OF CONTRACTS § 10:1 (2012)).

10 Id. 

11 Id. ¶ 29 (alteration in original) (quoting RESTATEMENT (SECOND)

OF CONTRACTS § 224 (AM. LAW INST. 1981)). 
MIND & MOTION v. CELTIC BANK

Opinion of the Court

8

of a condition relieves the parties of all of their contractual duties.12

Second, the parties have no remedy for breach of contract if a 

condition is not fulfilled, because at that point there is simply no 

contract to breach.13

¶21 Third, conditions ―typically fall outside the control of the 

parties to the contract, often requiring some environmental trigger 

(such as  ̳weather permitting‘) or action by a third party (such as 

 ̳upon the lender‘s approval‘) for the contract to begin.‖14 Stated 

differently, even if one of the parties has some influence over the 

fulfillment of a condition, ―its incidence usually is a matter of fate or 

of the decision of one or more third parties.‖15 Covenants, by 

contrast, ―are almost always within the control of the contracting 

parties.‖16

¶22 To determine whether a contractual obligation is a covenant 

or a condition, we examine the language of the provision in question 

and the nature of the agreement itself.17 In McArthur v. State Farm 

Mutual Automobile Insurance Co., for example, we held that an 

exhaustion clause in an insurance policy was a condition, not a 

covenant, for two reasons: (1) its fulfillment was outside the control 

of the contracting parties, and (2) the parties employed conditional 

language to characterize the exhaustion requirement in the 

agreement.18 The clause provided in part that the insured would 

have ―NO COVERAGE UNTIL‖ coverage limits on a separate bodily 

injury insurance policy had been ―USED UP.‖19 We noted that the 

―word  ̳until‘ exemplifies a word[] of condition‖20 and that satisfying 

the exhaustion condition was ―dependent on the actions of a non-

 

12 Id. 

13 Id. ¶ 30.

14 Id. ¶ 31 (citing HUNTER, supra note 9, § 10:1). 

15 Id. (quoting HUNTER, supra note 9, § 10:1).

16 Id. (quoting HUNTER, supra note 9, § 10:1).

17 See RESTATEMENT (SECOND) OF CONTRACTS § 226 cmt. a (AM.

LAW INST. 1981) (―An intention to make a duty conditional may be 

manifested by the general nature of the agreement, as well as by 

specific language.‖). 

18 McArthur, 2012 UT 22, ¶¶ 33–34.

19 Id. ¶ 33.

20 Id. (alteration in original) (internal quotation marks omitted).
Cite as: 2016 UT 6

Opinion of the Court

9

contracting third party—the liability insurer.‖21 Accordingly, we 

concluded that exhaustion of the other policy‘s limits was ―the very 

event, not certain to occur, which must occur . . . before performance 

under a contract becomes due.‖22

¶23 Our analysis in McArthur indicates that express terms like 

―unless,‖ ―on condition that,‖ ―provided that,‖ and ―if,‖ often create 

conditions.23 This implies that more mandatory terms, such as 

―shall,‖ ―must,‖ or ―agree,‖ will often create covenants. That is not to 

say that such terms are talismans—regardless of the precise terms 

used in the contract, the parties‘ degree of control over the 

fulfillment of an obligation remains ―a significant indication‖ of 

whether the parties intended a performance obligation to be a 

condition or a covenant.24 But when parties employ mandatory 

terms to characterize an obligation whose fulfillment hinges on the 

action of a third party, this may indicate an express assumption by 

one party of the risk that the condition will remain unfulfilled.25

B. The Recording Obligation Is Unambiguously a Covenant

¶24 Having set forth the key distinctions between covenants and 

conditions, we now discuss whether the district court correctly 

interpreted the REPC‘s recording provision as a covenant. When 

interpreting a contract, our task is to ascertain the parties‘ intent.26

And the best indication of the parties‘ intent is the ordinary meaning 

of the contract‘s terms.27 Accordingly, ―[i]f the language within the 

four corners of the contract is unambiguous, the parties‘ intentions 

 

21 Id.

22 Id. (alteration in original) (internal quotation marks omitted).

23 Id. ¶ 32; see also RESTATEMENT (SECOND) OF CONTRACTS § 226 

cmt. a (1981).

24 See McArthur, 2012 UT 22, ¶ 37; see also RESTATEMENT (SECOND)

OF CONTRACTS § 226 cmt. a (1981).

25 See RESTATEMENT (SECOND) OF CONTRACTS § 227 cmt. b (AM.

LAW INST. 1981) (noting that ―even without clear language‖ 

indicating whether an obligation outside of the parties‘ control is a 

covenant or a condition, ―circumstances may show that [one party] 

assumed the risk of its non-occurrence‖). 

26 See Strohm v. ClearOne Commc’ns, Inc., 2013 UT 21, ¶ 34, 308 

P.3d 424.

27 See Glenn v. Reese, 2009 UT 80, ¶ 10, 225 P.3d 185.
MIND & MOTION v. CELTIC BANK

Opinion of the Court

10

are determined from the plain meaning of the contractual language, 

and the contract may be interpreted as a matter of law.‖28 A contract 

is facially ambiguous if its terms are ―capable of more than one 

reasonable interpretation because of uncertain meanings of terms, 

missing terms, or other facial deficiencies.‖29 But terms are not 

ambiguous ―simply because one party seeks to endow them with a 

different interpretation according to his or her own interests.‖30

Rather, the proffered alternative interpretations ―must be plausible 

and reasonable in light of the language used.‖31 If the parties‘ 

intentions cannot be determined from the face of the contract, 

―extrinsic evidence must be looked to in order to determine the 

intentions of the parties.‖32

¶25 Applying these principles, we conclude that the REPC is 

facially unambiguous. While Mind & Motion‘s preferred reading of 

the agreement is strongly supported by the REPC‘s plain terms, 

Celtic Bank‘s interpretation finds no such support in the language of 

the contract. Below, we examine each party‘s proffered 

interpretation of the REPC in turn.

1. Mind & Motion‘s Reading of the REPC Is Strongly Supported 

by the Language of the Agreement

¶26 Mind & Motion urges us to affirm the district court‘s 

conclusion that the recording provision is unambiguously a 

covenant, citing the mandatory language in the agreement. For 

several reasons, we agree that this reading of the REPC receives 

strong support from the language of the contract. 

¶27 First, the recording provision states that Celtic Bank ―shall 

record [the] Phase 1‖ plat ―no later than 90 calendar days from 

accepted offer.‖ The next paragraph also states that Celtic Bank 

―agrees to record‖ the plat. As we have discussed, when interpreting 

a contract, we generally give each term its plain and ordinary 

 

28 WebBank v. Am. Gen. Annuity Serv. Corp., 2002 UT 88, ¶ 19, 54 

P.3d 1139 (internal quotation marks omitted).

29 Id. ¶ 20 (internal quotation marks omitted). 

30 Saleh v. Farmers Ins. Exch., 2006 UT 20, ¶ 17, 133 P.3d 428.

31 First Am. Title Ins. Co. v. J.B. Ranch, Inc., 966 P.2d 834, 837 (Utah 

1998). 

32 WebBank, 2002 UT 88, ¶ 19 (internal quotation marks omitted). 
Cite as: 2016 UT 6

Opinion of the Court

11

meaning.33 And here, Black‘s Law Dictionary defines ―shall‖ as ―a 

duty to,‖ ―is required to,‖ or ―mandatory.‖34 We have also held that 

the legislature‘s use of the word ―shall‖ in statutes creates 

mandatory obligations.35 And while it is true, as Celtic Bank argues, 

that ―shall‖ can be directory or express a future expectation, it is ―the 

mandatory sense that drafters typically intend and that courts 

typically uphold.‖36 The word ―agree‖ similarly means to ―exchange 

promises‖ or ―to unite in an engagement to do or not do 

something.‖37 Our court of appeals has also interpreted the word 

―agree‖ to create a covenant rather than a condition.38

¶28 These mandatory terms contrast sharply with the explicitly 

conditional language in McArthur that we held created a condition.39

There, as we have discussed, the contract provided that no insurance 

coverage would be provided ―until‖ other coverage had been 

exhausted. And we noted that the ―word  ̳until‘ exemplifies a word[] 

of condition.‖40 The recording provision, of course, contains no such 

language.

¶29 Second, not only is the recording obligation phrased in 

mandatory terms, but the parties used explicitly conditional 

language in other provisions of the REPC. For instance, paragraph 

eight provides, ―Buyer‘s obligation to purchase under this Contract 

is conditioned upon Buyer‘s approval of the content of each of the 

 

33 Glenn, 2009 UT 80, ¶ 10 (―[T]he parties‘ intentions are 

determined from the plain meaning of the contractual 

language . . . .‖ (internal quotation marks omitted)).

34 Shall, BLACK‘S LAW DICTIONARY (9th ed. 2009).

35 See Ramsay v. Kane Cty. Human Res. Special Serv. Dist., 2014 UT 

5, ¶ 10, 322 P.3d 1163.

36 Shall, BLACK‘S LAW DICTIONARY (9th ed. 2009).

37 Agree, BLACK‘S LAW DICTIONARY (9th ed. 2009).

38 See, e.g., Baxter v. Saunders Outdoor Advert., Inc., 2007 UT App 

340, ¶¶ 11–12, 171 P.3d 469 (interpreting an obligation as a covenant 

in a contract that stated, ―It is agreed that the terms of this lease shall 

commence upon completion of the installation of the structure which 

is the subject matter of this lease agreement‖ (emphasis added)).

39 2012 UT 22, ¶ 32, 274 P.3d 981.

40 Id. ¶ 34 (alteration in original) (internal quotation marks 

omitted).
MIND & MOTION v. CELTIC BANK

Opinion of the Court

12

Seller Disclosures referenced in Section 7 [and] is conditioned upon 

Buyer‘s approval of the following tests and evaluations.‖ (Emphasis 

added). This shows that Mind & Motion and Celtic Bank, both 

sophisticated parties, understood how to consciously identify a 

condition precedent when they so desired.41

¶30 Finally, the recording provision also must be satisfied by a 

specific date. The REPC contains a ―time is of the essence clause,‖ 

stating that ―performance under each Section of this Contract which 

references a date shall absolutely be required by 5:00 PM Mountain 

Time on the stated date.‖ While it is true that deadlines can be 

coupled with conditions,42 the REPC explicitly makes all deadlines 

―absolute . . . require[ments].‖

¶31 Standing alone, language of this kind could conceivably be 

found to be a conditional obligation, depending on a particular 

contract‘s operation and surrounding terms. But together, these 

features of the REPC—mandatory language, a hard deadline for 

performance, and other provisions that employ conditional 

language—strongly suggest that the parties intended the recording 

provision to operate as covenant, not a condition. 

¶32 We therefore conclude that Mind & Motion‘s reading of the 

contract is strongly supported by the language of the agreement. 

Consequently, in order for the contract to be facially ambiguous, 

Celtic Bank‘s alternative reading must also be reasonably supported 

by the language of the agreement. For a variety of reasons, however, 

we conclude that it is not. 

2. Celtic Bank‘s Reading of the REPC Receives No Support from the 

Agreement‘s Plain Terms

¶33 In arguing that the recording provision is a condition, Celtic 

Bank relies heavily on the fact that the county ultimately controlled 

the timing of recordation. It argues that ―parties may manifest their 

intent to create a condition  ̳by clear implication‘‖ and cites McArthur 

for the proposition that conditions generally fall outside the control 

 

41 See Bakowski v. Mountain States Steel, Inc., 2002 UT 62, ¶ 19, 52 

P.3d 1179 (―We will not make a better contract for the parties than 

they have made for themselves. Nor will we avoid the contract‘s 

plain language to achieve an  ̳equitable‘ result.‖ (citation omitted)). 

42 See RESTATEMENT (SECOND) OF CONTRACTS § 225 cmt. a (1981) 

(―The time within which the condition can occur in order for the 

performance of the duty to become due may be fixed by a term of 

the agreement . . . .‖). 
Cite as: 2016 UT 6

Opinion of the Court

13

of the contracting parties, ―often requiring some environmental 

trigger . . . or action by a third party . . . for the contract to begin.‖43

And here, Celtic Bank maintains, there is no dispute that it needed 

approval from the planning commission, engineers, and other 

county officials before the phase 1 plat could be recorded.44 So even 

though Celtic Bank ―controlled whether it completed the 

various . . . lists of tasks that were prerequisite to the county‘s 

approval and recordation process,‖ no ordinance required the 

county to ―approve the Phase 1 plat‖ by the recording deadline. As a 

result, Celtic Bank argues, ―whether the county approved the Phase 

1 plat before the deadline was beyond [its] control.‖ Celtic Bank also 

argues that none of Mind & Motion‘s performance obligations 

became due until the phase 1 plat was recorded, which is consistent 

with one of the touchstones of conditions precedent we outlined in 

McArthur.

45

¶34 We have no quarrel with Celtic Bank‘s description of the 

recording process. It seems clear that even if Celtic Bank complied 

with the county‘s every demand, the county officials ultimately 

controlled the timing of the recordation—not Celtic Bank. Celtic Bank 

is also correct that the deadline for performing many of its 

obligations under the REPC was automatically extended whenever 

Mind & Motion extended the recording deadline. But we do not 

agree that these aspects of the agreement are sufficient to override 

the explicit mandatory language in the REPC. 

¶35 It is a basic principle of contract law that parties are 

generally ―free to contract according to their desires in whatever 

terms they can agree upon.‖46 This includes assuming risks that third 

parties or external environmental circumstances will fail to conform 

to the parties‘ expectations.47 And absent language in the contract to 

 

43 McArthur, 2012 UT 22, ¶ 31; accord Cheever v. Schramm, 577 P.2d 

951, 953 (Utah 1978) (―The intention to create a condition in a 

contract must appear expressly or by clear implication.‖).

44 See supra ¶ 10.

45 McArthur, 2012 UT 22, ¶ 29.

46 Russell v. Park City Utah Corp., 548 P.2d 889, 891 (Utah 1976). 

47 See Bitzes v. Sunset Oaks, Inc., 649 P.2d 66, 69–70 (Utah 1982) 

(enforcing the unambiguous language of a real estate purchase 

contract even though ―delays in final approval of Plat  ̳B‘ caused by 

neighborhood opposition and governmental review‖ rendered 

―performance of the agreement . . . a substantially less profitable 

(Continued)
MIND & MOTION v. CELTIC BANK

Opinion of the Court

14

the contrary, ―[a] party who contracts knowing that governmental 

permission or license will be required ordinarily assumes the 

obligation of assuring that permission will be granted.‖48

¶36 For example, in Central Utah Water Conservancy District v. 

Upper East Union Irrigation Co., a water district entered into a contract 

with several irrigation companies to make specific improvements to 

its irrigation systems in exchange for rights to the increased water 

flow.49 The water district failed to complete the promised 

improvements to its irrigation systems, however, citing 

―environment[al] and permitting concerns.‖50 The irrigation 

companies sued for breach of contract, and the district court 

eventually granted summary judgment in their favor.51 On appeal, 

the water district argued that it was impossible to secure state and 

federal permits because ―[t]he contemplated design‖ of the irrigation 

improvements ―was inconsistent‖ with federal and state 

regulations.52 We affirmed the district court, holding that the water 

district ―explicitly undertook the obligation of obtaining the 

necessary permits,‖ so ―its performance under the Agreement was 

not contingent on its ability to do so.‖53 In so holding, we noted that 

by signing a contract providing that the water district ―shall obtain all 

construction permits required by‖ state and federal law, the water 

district ―assumed the risk that such permits may be difficult, or even 

impossible, to obtain.‖54

¶37 Like the water district in Central Utah Water, Celtic Bank 

signed an agreement that phrased its recording obligation in 

mandatory terms even though fulfilling that obligation required 

third-party approval. And as even Celtic Bank concedes, so long as 

its application complied with the applicable zoning ordinances, ―the 

 

transaction than originally anticipated,‖ and noting that these events 

were ―contingencies the respondent, as an experienced real estate 

developer, could have foreseen and covered in the contract‖). 

48 14 JAMES P. NEHF, CORBIN ON CONTRACTS § 76.5 (2001). 

49 2013 UT 67, ¶ 1, 321 P.3d 1113. 

50 Id. ¶ 7 (alteration in original).

51 Id. ¶¶ 8–12. 

52 Id. ¶ 29 (alteration in original).

53 Id. ¶ 32.

54 Id. 
Cite as: 2016 UT 6

Opinion of the Court

15

county‘s eventual approval was nearly guaranteed.‖ So this is not a 

case where government permits are ―difficult, or even impossible, to 

obtain,‖ and even if it were, the language of the agreement strongly 

indicates that Celtic Bank ―assumed the risk‖ that its application 

would not be approved before the recording deadline.55 We 

therefore conclude that it is simply not plausible to read the 

recording provision as a condition, and therefore the REPC is not 

facially ambiguous.

II. There Is No Latent Ambiguity in the REPC

¶38 Having concluded that the REPC is not facially ambiguous, 

we now turn to Celtic Bank‘s argument that there is a latent 

ambiguity in the REPC. Celtic Bank relies on language from Ward v. 

Intermountain Farmers Ass’n for the proposition that ―any relevant 

evidence must be considered‖ when ―determining whether a contract 

is ambiguous.‖56 Accordingly, it urges us to consider affidavits 

submitted by its chief lending officer and chief executive officer 

stating that they understood the recording provision as a conditional 

obligation when they negotiated and signed the REPC.

¶39 We decline to consider the affidavits and conclude that there 

is no latent ambiguity in the REPC. Latent ambiguities arise only 

where a collateral matter arising after the contract is executed 

renders otherwise clear terms ambiguous. And affidavits setting 

forth the parties‘ subjective understanding of contractual terms are 

insufficient to make this showing. Here, Celtic Bank does not argue 

that a collateral matter rendered the REPC‘s terms ambiguous, nor 

does it offer the type of extrinsic evidence relevant to such a 

determination. We therefore reject its argument that the REPC 

contains a latent ambiguity.

¶40 Before addressing Celtic Bank‘s latent ambiguity argument, 

we first take the opportunity to clarify the conditions under which 

latent ambiguities arise and the evidence relevant to establishing 

them. Unlike facial ambiguities, a ―latent ambiguity  ̳arises from a 

collateral matter when the document‘s terms are applied or

 

55 Id.

56 907 P.2d 264, 268 (Utah 1995) (emphasis added); accord Watkins 

v. Ford, 2013 UT 31, ¶ 26, 304 P.3d 841 (― ̳When determining whether 

a contract is ambiguous, any relevant evidence must be considered‘ 

and  ̳the better-reasoned approach is to consider the writing in light 

of the surrounding circumstances.‘‖ (quoting Ward, 907 P.2d at 268)).
MIND & MOTION v. CELTIC BANK

Opinion of the Court

16

executed,‘‖ not from any facial deficiency in the contract‘s terms.57

So, ―[b]y its very nature, a latent ambiguity is one that cannot be 

found within the four corners of the document but is only 

discoverable through the introduction of extrinsic evidence.‖58 But 

we have also recognized that instances where extrinsic evidence is 

allowed to ―uncover‖ a latent ambiguity ―will prove to be the 

exception and not the rule.‖59 Parties may not simply proffer 

subjective affidavits setting forth their favored interpretation of 

otherwise clear terms to create an ambiguity. Rather, the extrinsic 

evidence must show that due to some collateral matter—trade usage, 

course of dealing, or some other linguistic particularity that arises in 

the context of extrinsic collateral matters—the contract‘s terms 

mislabel a person or thing, or otherwise fail to reflect the parties‘ 

intentions.60

¶41 For example, in Watkins v. Ford, a buyer contracted with a 

car dealership to preorder a Ford concept car, the ―GT40.‖61 Before 

Ford made the cars available for sale, however, it shortened the 

name to ―GT.‖62 When the dealership refused to sell the buyer a GT 

at the price mentioned in their agreement, the buyer filed suit for 

breach of contract.63 The district court granted summary judgment in 

the dealership‘s favor, holding that the contract unambiguously 

required the dealership to sell ―GT40s to [the buyer], not the GTs.‖64

 

57 Watkins, 2013 UT 31, ¶ 28 (quoting Ambiguity, BLACK‘S LAW 

DICTIONARY (9th ed. 2009)). 

58 Id. 

59 Daines v. Vincent, 2008 UT 51, ¶ 30 n.5, 190 P.3d 1269.

60 See id.; see also Watkins, 2013 UT 31, ¶ 30; Barraford v. T & N Ltd., 

778 F.3d 258, 266 (1st. Cir. 2015) (noting that the latent ambiguity 

rule ―typically applies only in a narrow set of circumstances in 

which  ̳a word, thought to have only a single meaning, actually has 

two or more meanings,‘ RICHARD A. LORD 11 WILLISTON ON 

CONTRACTS § 33:43 (4th ed.), such as when a word  ̳denotes more 

than one actual thing‘ or  ̳designates something particular within the 

industry‘s jargon.‘ Coffin v. Bowater Inc., 501 F.3d 80, 97 (1st Cir. 

2007).‖).

61 Watkins, 2013 UT 31, ¶¶ 7, 30.

62 Id. ¶ 11.

63 Id. ¶ 13.

64 Id. ¶ 14 (internal quotation marks omitted).
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Opinion of the Court

17

We reversed, holding that there was a latent ambiguity in the 

contract.65 We so held because undisputed extrinsic evidence 

showed ―that when the [contract was] executed, both parties were in 

agreement regarding the particular car for which they were 

contracting—the production version (eventually designated the Ford 

 ̳GT‘) of Ford‘s concept car, the  ̳GT40.‘‖66 So there was ―no dispute 

as to the identity of the vehicles for which the parties contracted,‖ 

even though the terms of the agreement failed to correctly reflect 

their intentions.67

¶42 As illustrated by Watkins, latent ambiguities do not arise 

unless matters collateral to the contract cast doubt on the 

interpretation of terms that otherwise appear clear and 

unambiguous. Such matters may include trade usage, the 

mislabeling of a person or thing, or linguistic context.68 Parties 

cannot create a latent ambiguity by simply ―seek[ing] to endow‖ 

clear terms ―with a different interpretation according to his or her 

own interests.‖69 That is, latent ambiguities are objectively verifiable 

and ordinarily cannot be proven based on the parties‘ subjective

understanding of contractual terms.70 Therefore, affidavits and other 

evidence that fails to identify a collateral matter are not ―relevant‖ to 

showing a latent ambiguity. As the Seventh Circuit observed in an 

opinion authored by Judge Posner, when considering extrinsic 

evidence of a latent ambiguity,

 

65 Id. ¶¶ 28–30.

66 Id. ¶ 30.

67 Id. 

68 See AM Int’l, Inc. v. Graphic Mgmt. Assocs., Inc., 44 F.3d 572, 575 

(7th Cir. 1995) (―Suppose the parties to [a] contract . . . had been 

members of a trade in which the term  ̳cotton‘ was used to refer to 

guncotton rather than to the cotton used in textiles. The ordinary 

reader of English would not know about this special trade usage, 

and so would suppose the contract unambiguous. Again, the [latent] 

ambiguity is in the reference, that is, the connection between the 

word and the object that it denotes.‖).

69 See Saleh v. Farmers Ins. Exch., 2006 UT 20, ¶ 17, 133 P.3d 428.

70 Of course, where parties stipulate that a term in their 

agreement adopted ―an idiosyncratic meaning, the court will honor 

their agreement.‖ See AM Int’l, 44 F.3d at 576. 
MIND & MOTION v. CELTIC BANK

Opinion of the Court

18

the key is the distinction between what might be called 

―objective‖ and ―subjective‖ evidence of ambiguity. . . . 

By ―objective‖ evidence we mean evidence of 

ambiguity that can be supplied by disinterested third 

parties: evidence that there was more than one ship 

called Peerless, or that a particular trade uses ―cotton‖ 

in a nonstandard sense. The ability of one of the 

contracting parties to ―fake‖ such evidence, and fool a 

judge or jury, is limited. By ―subjective‖ evidence we 

mean the testimony of the parties themselves as to 

what they believe the contract means. Such testimony 

is invariably self-serving, being made by a party to the 

lawsuit, and is inherently difficult to verify. 

―Objective‖ evidence is admissible to demonstrate that 

apparently clear contract language means something 

different from what it seems to mean; ―subjective‖ 

evidence is inadmissible for this purpose.71

¶43 Here, Celtic Bank has not identified any particular term in 

the REPC as latently ambiguous, nor has it offered any objective 

evidence that a collateral matter rendered a term in the recording 

provision ambiguous. Instead, the bank offers sworn testimony from 

its chief lending officer asserting generally that he ―understood that 

Mind & Motion had a right . . . to terminate the transaction if the 

Phase 1 plat were not recorded by the deadline,‖ and that ―[i]t was 

never Celtic Bank‘s intention to, in effect, gamble that it could record 

a plat on the Property.‖ Celtic Bank‘s chief executive officer also 

makes general assertions in an affidavit that he believed if the plat 

were not recorded by the deadline, the parties simply ―would no 

longer have a viable transaction to proceed with.‖

¶44 Celtic Bank argues that we can consider these affidavits 

because ―this litigation is [a]  ̳collateral matter‘ that shed[s] light on 

the latent ambiguity.‖ But accepting this assertion would broaden 

the latent ambiguity rule beyond all recognition. If litigation 

qualified as a collateral matter, any party to a contract dispute could 

create an ambiguity by going to court and submitting affidavits 

setting forth their subjective understanding of otherwise 

unambiguous terms. Contrary to our precedent, this would allow 

 

71 Id. at 575; see also Coffin v. Bowater Inc., 501 F.3d 80, 98–99 (1st 

Cir. 2007) (adopting standard in AM Int’l); Evergreen Invs., LLC v. 

FCL Graphics, Inc., 334 F.3d 750, 757 (8th Cir. 2003) (same); Kerin v. 

U.S. Postal Serv., 116 F.3d 988, 992 n.2 (2d Cir. 1997) (same).
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Opinion of the Court

19

parties ―to create ambiguity out of whole cloth,‖72 swallowing the 

general rule prohibiting consideration of extrinsic evidence absent a 

facial ambiguity. We therefore reject it and decline to consider the 

affidavits Celtic Bank has submitted. For all these reasons, we 

conclude that there is no latent ambiguity in the REPC.

Conclusion

¶45 We conclude that Celtic Bank‘s recording obligation 

outlined in the REPC is unambiguously a covenant. Even though 

Celtic Bank could not ultimately control when the county issued its 

final approval to record the phase 1 development, the recording 

obligation is framed in mandatory language, and the REPC employs 

explicitly conditional language elsewhere in the agreement. We also 

conclude that Celtic Bank has failed to establish a latent ambiguity in 

the contract. Affidavits that seek to endow otherwise clear language 

with an alternative meaning are insufficient. We therefore affirm the 

district court‘s ruling in its entirety. As a final matter, Mind & 

Motion has requested it be awarded attorney fees and costs incurred 

on appeal, and the parties have stipulated to such an award. We 

accordingly remand for the calculation of reasonable fees and costs.

 

72 Watkins, 2013 UT 31, ¶ 28 n.2.