Opinion ID: 1125702
Heading Depth: 1
Heading Rank: 2

Heading: The Compromise Agreement.

Text: The principal issue in this case will be resolved by our interpretation of counsel's letter to the Johnsons of May 12, 1967, supra; i.e.: Was the proposed compromise agreement, which the Johnsons accepted, an executory accord or a substituted contract? A compromise agreement is a contract whereby the parties, in an effort to resolve their differences over a claim, agree to an amicable settlement based upon mutual concessions. Compromise agreements are usually divided into two principal categories: One may be called an executory accord; the other may be called a substituted contract. If the compromise provides for the acceptance in the future of a stated performance in satisfaction of the claim, the contract is an executory accord. [1] If, on the other hand, the compromise agreement itself is accepted as a substitution for and extinguishment of the existing claim, then the compromise is a substituted contract. [2] Or, to state it another way, an agreement that operates as a satisfaction of an antecedent claim only when performed is an executory accord, and an agreement that operates as an immediate substitution for and extinguishment of an antecedent claim is a substituted contract. The distinction becomes vital in relation to the remedies available to the nonbreaching party if and when the compromise agreement is broken. If an executory accord is breached, the nonbreaching party may sue either upon the original obligation or upon the compromise agreement. As stated in Restatement of Contracts § 417(c) (1932): If the debtor breaks such a contract the creditor has alternative rights. He can enforce either the original duty or the subsequent contract. This is the prevailing view throughout the American jurisdictions. See Owens v. Hunter, 91 Ariz. 7, 368 P.2d 753 (1962); Silvers v. Grossman, 183 Cal. 696, 192 P. 534 (1920); Hinkle v. Basic Chem. Corp., 163 Colo. 408, 431 P.2d 14 (1967); Wilson v. Bogert, 81 Idaho 535, 347 P.2d 341 (1959); Daly v. Chicago & N.W. Ry. Co., 262 Minn. 351, 114 N.W.2d 682 (1962); Ladd v. General Ins. Co., 236 Or. 260, 387 P.2d 572 (1963); Nash v. Atlantic White Tower System, Inc., 404 Pa. 83, 170 A.2d 341 (1961); Stratton v. West States Constr., 21 Utah 2d 60, 440 P.2d 117 (1968); Annot., 94 A.L.R.2d 504 (1964); 6 A. Corbin, Contracts § 1275 (1962).
The determination of whether the compromise agreement is an executory accord or a substituted contract turns on the intent of the parties to it. As stated by Corbin, supra, § 1293, at 190: It is frequently difficult to determine whether a new agreement is a substituted contract operating as an immediate discharge, or is an accord executory, the performance of which it is agreed shall operate as a future discharge. It is wholly a question of intention to be determined by the usual processes of interpretation, implication or construction. (Footnotes omitted.) In the instant case, the record shows that counsel's letter of May 12 and the Johnsons' acceptance by their subsequent conduct constituted an executory accord. Admittedly, the language of the Deposit Receipt and Agreement of Sale and the escrow instructions lacks clarity. Because of the ambiguity in the written documents, the district judge heard and considered the oral testimony of the parties, and he concluded as a result thereof that their initial agreement included not only an operating well (Well No. 1), but also the drilling of Well No. 2. A fair reading of counsel's May 12 letter supports the court's conclusion that the letter referred to an antecedent obligation, where the proposed compromise stated that the Utiles agreed to relinquish their claim to operating Well No. 1,  provided that the equipment [on Well No. 1] is in satisfactory operating condition, and, further, assuming that the new well [Well No. 2] has been tested and is capable of producing the amount of gallonage set out in the agreements    (Emphasis added.) Such language supports the district judge's decision, in that the Utiles agreed to relinquish their right to Well No. 1 only after Well No. 2 had been drilled and had produced and operated satisfactorily.
The Utiles may recover damages for the loss of Well No. 1 only if the record supports the district judge's finding that the Johnsons breached the parties' compromise agreement by failing to produce Well No. 2, in that it was not capable of producing the amount of gallonage set out in the agreements    Appellants argue on this point that their only duty with respect to Well No. 2 was to produce a well on the property that would test between 1,000 and 1,200 gallons of water per minute. Mr. Johnson testified that he conducted such a test, with satisfactory results. The Utiles, however, produced evidence that the well production never exceeded 300 gallons per minute and that in a comparatively short period of time it went dry. While there is a conflict in the record, there is sufficient evidence to support the district judge's finding that the parties bargained for something more than a mere test and truly intended that the well to be drilled, Well No. 2, should be capable of producing the specified gallonage over a reasonable period of time, if the well were to be of any value to the purchasers. This court may not disturb the finding of the lower court where there is evidence in the record to support it. See Kellar v. Eighth Judicial District Court, 86 Nev. ___, 470 P.2d 434 (1970); Utley v. Airoso, 86 Nev. 116, 464 P.2d 778 (1970); Havas v. Alger, 85 Nev. 627, 461 P.2d 857 (1969); Richfield Oil Corp. v. Harbor Ins. Co., 85 Nev. 185, 452 P.2d 462 (1969).