Opinion ID: 873653
Heading Depth: 2
Heading Rank: 2

Heading: henry day’s conduct demonstrated its

Text: ABANDONMENT OF THE VEHICLE CONTRACTS, BUT MR. WATKINS’S ACQUIESCENCE MAY NOT NECESSARILY CONSTITUTE A SIMILAR ABANDONMENT ¶31 Henry Day argues that abandonment involves either “the intentional relinquishment of one’s rights in the contract,” “acts or conduct of the parties inconsistent with the continued existence of the contract,” or “mutual abandonment” of the contract through mutual assent of the parties. Henry Day then reasons that the parties abandoned the Vehicle Contracts because Henry Day returned Mr. Watkins’s deposit, and Mr. Watkins deposited the refund check without objection.4 ¶32 Mr. Watkins replies that waiver and abandonment of contract rights are substantially similar affirmative defenses and that both require the “intentional relinquishment of a known right.” He asserts that Henry Day’s December 31st letter unequivocally represented that the condition precedent to the Vehicle Contracts, the allocation of the contracted-for vehicles to Henry Day, had permanently failed. Mr. Watkins reasons that, because of the letter, 3 (...continued) latent ambiguity caused by a name change as a sword to improperly excuse its performance under an otherwise unambiguous contract. For instance, assume that two parties had contracted for the purchase of a house located at 123 Main Street and that, at some point between execution of the contract and transfer of title, the city renamed the street State Street. Under Henry Day’s reasoning, a party could use the latent ambiguity caused by the name change to escape its contractual obligations. Such an inequitable result is exactly what the doctrine of latent ambiguity is designed to address. 4 Mr. Watkins argues that Henry Day waived the affirmative defense of “mutual abandonment.” We disagree. Mr. Watkins concedes that Henry Day properly raised abandonment as an affirmative defense. And Henry Day repeatedly argued before the district court that both Henry Day and Mr. Watkins abandoned the Vehicle Contracts by acting inconsistently with them. 11 WATKINS v. FORD Opinion of the Court he did not know that he still had rights that he could assert under the Vehicle Contracts, and he therefore deposited the refund check without objection. Henry Day counters that its December 31st letter was accurate at the time it was written and Mr. Watkins understood there remained a possibility that Henry Day could receive an allocation of the vehicles if it won a future Allocation Award. ¶33 We set forth the rule governing abandonment of a contract in Wallace v. Build, Inc., 402 P.2d 699 (Utah 1965). In Wallace, we held that a contract is abandoned when one party “show[s] by unequivocal acts that he regard[s] the agreement as abandoned,” and the other party acquiesces. Id. at 701. Similarly, we have held that a contract may be abandoned by the parties’ express assent or through “acts or conduct of the parties inconsistent with the continued existence of the contract.” Parduhn v. Bennett, 2002 UT 93, ¶ 11, 61 P.3d 982 (internal quotation marks omitted); see also Harris v. IES Assocs., Inc., 2003 UT App 112, ¶ 37, 69 P.3d 297. In the latter circumstance, assent to abandon a contract need not be express. See Parduhn, 2002 UT 93, ¶ 11. Rather, “mutual assent to abandon . . . a contract may be inferred from the attendant circumstances and conduct of the parties.” Id. (internal quotation marks omitted). In all cases, abandonment must be “ascertained from all the facts and circumstances surrounding the transaction,” and the “proof of abandonment must be made by clear, unequivocal, and decisive evidence.”5 17B C.J.S. Contracts § 586 (2013). 5 Mr. Watkins argues that the legal test for abandonment is set forth in Timpanogos Highlands, Inc. v. Harper, 544 P.2d 481 (Utah 1975). In Timpanogos, we held that a party may unilaterally abandon a contract through “intentional relinquishment of [its] rights in the contract.” Id. at 484. Several subsequent Utah decisions have applied this rule. See, e.g., Adair v. Bracken, 745 P.2d 849, 851 (Utah Ct. App. 1987). While we characterized Timpanogos as an abandonment case, the “intentional relinquishment” language is actually the test for the related doctrine of waiver. Some eighteen years after Timpanogos, we decided Soter’s, Inc. v. Deseret Federal Savings & Loan Ass’n, 857 P.2d 935 (Utah 1993). In Soter’s, we clarified our waiver jurisprudence and held that “[a] waiver is the intentional relinquishment of a known right.” Id. at 942 (emphasis added) (internal quotation marks omitted). The imprecise language in Timpanogos blurred the lines between our waiver and abandonment jurispru- (continued...) 12 Cite as: 2013 UT 31 Opinion of the Court ¶34 Henry Day and Mr. Watkins signed the two Vehicle Contracts on March 4, 2002. Mr. Watkins provided a $1,000 deposit as consideration for each Vehicle Contract. Mr. Watkins’s consideration was essential to the formation of the Vehicle Contracts. Res. Mgmt. Co. v. Weston Ranch & Livestock Co., 706 P.2d 1028, 1036 (Utah 1985) (“For a promise to be legally enforceable, it must be supported by consideration.”). Mr. Watkins testified that he understood that the deposits were an essential part of the parties’ agreement when they entered the Vehicle Contracts. He also testified that he believed Henry Day would not have signed the Vehicle Contracts without the deposits. Similarly, Mr. Kersey testified that the dealership would not have entered the Vehicle Contracts without a deposit. ¶35 Henry Day acted inconsistently with the continued existence of the Vehicle Contracts when it returned Mr. Watkins’s deposit, which provided the consideration for the Vehicle Contracts. In December 2002, after holding Mr. Watkins’s deposit for several months, Henry Day’s general manager contacted a Ford representative to inquire whether Henry Day would be allocated any of the contracted-for vehicles. Ford indicated that, as a relatively small dealership, Henry Day would not receive any of the vehicles unless it won the President’s Award or the Share of the Nation Award. After this conversation, Henry Day sent the December 31st letter to Mr. Watkins, which stated, “[e]nclosed please find a check for the refund of deposit on your vehicle order. We regret to inform you that our allocation is not going to allow us to receive this vehicle.” Henry Day’s general manager testified that he thought the refund of Mr. Watkins’s deposit terminated the Vehicle Contracts. After considering this evidence, the district court correctly concluded that “[Henry Day’s] return of [Mr. Watkins’s] deposit represented conduct inconsistent with the continued existence of the [Vehicle Contracts].” ¶36 Mr. Watkins testified that when he received Henry Day’s letter, he was “[d]isappointed, but not surprised[,] because from the outset [the parties] knew that there was the possibility that [Henry Day] wouldn’t get any cars.” He then testified that he deposited the 5 (...continued) dence. Today we clarify that Timpanogos applied the waiver rule and, as such, is more properly characterized as a waiver case. 13 WATKINS v. FORD Opinion of the Court refund check because he “didn’t know what else to do with it.” Mr. Watkins testified that if the letter had indicated that Henry Day might still receive vehicles based on its receipt of an Allocation Award, “[he] would have gone down there and written them another check and asked them to keep it, [because he] was willing to wait to see if they got [any of the vehicles].” He therefore argues that, because of misinformation in Henry Day’s December 31st letter, “he had no reason . . . to believe that Ford might nonetheless allocate one or more GT40s . . . to Henry Day” or that he still had contingent rights he could assert under the Vehicle Contracts. ¶37 At the time the parties entered the Vehicle Contracts, they both understood that the Contracts were contingent on Ford’s allocation of vehicles to Henry Day. Indeed, Mr. Kersey and Mr. Watkins discussed that the President’s Award played a role in Ford’s allocation of vehicles. In December 2002, when Henry Day inquired with Ford regarding allocation of the vehicles, Ford confirmed that Henry Day would not be allocated any vehicles unless the dealership won the President’s Award or the Share of the Nation Award. At that time, Henry Day had not received either Allocation Award in its forty year history. Based on this information, Henry Day decided to return Mr. Watkins’s deposit and terminate the Vehicle Contracts. It then sent the December 31st letter, in which it informed Mr. Watkins that Henry Day would not be getting an allocation of vehicles. ¶38 The December 31st letter is ambiguous. It could have been interpreted as an unequivocal representation that the contingency had failed and Henry Day would never receive the contracted-for vehicles. Alternatively, it could have been interpreted as a representation that Henry Day would not receive any allocation of vehicles unless it did so pursuant to an Allocation Award that was yet to be made. Or, it could have been interpreted as a representation of Henry Day’s belief that Ford would not allocate any vehicles to the dealership. ¶39 Mr. Watkins’s actions in response to the letter can only be evaluated based on his understanding of what the letter meant in light of the information that he had at the time. But the district court did not make any factual findings in this regard. We therefore remand for a determination of Mr. Watkins’s understanding of Henry Day’s December 31st letter. If Mr. Watkins acquiesced in Henry Day’s abandonment understanding that Henry Day could never receive any vehicles, Mr. Watkins’s actions do not constitute 14 Cite as: 2013 UT 31 Opinion of the Court the intentional abandonment of his rights under the Contracts. See McIrvin v. W. Side Unlimited Corp., No. 08-CV-127-LRR, 2010 WL 605651, at  (N.D. Iowa Feb. 18, 2010) (“Knowledge is an element of acquiescence: Acquiescence is where a person knows or ought to know that he is entitled to enforce his right or to impeach a transaction, and neglects to do so.” (emphasis added) (internal quotation marks omitted)). If, however, Mr. Watkins acted with the knowledge that there remained a possibility that Henry Day could still potentially receive a vehicle through a future allocation award or, if he understood the letter merely as a statement of Henry Day’s belief at the time, his deposit of the check and renewed search for another dealer would constitute acts or conduct inconsistent with the continued existence of the Vehicle Contracts. See Parduhn, 2002 UT 93, ¶ 11. ¶40 On remand, the appropriate analysis is analogous to that in a case of contract reformation. In such cases, “[i]f a mistake on the part of one of the parties to an agreement is caused by the other, it may entitle him or her to avoid the [reformed] contract.” 17A C.J.S. Contracts § 183 (2013). Even “[a]n innocent misrepresentation on which one rightly relies may invalidate a contract [reformation] where it relates to a material matter.” Id. § 199. ¶41 Were we to evaluate the question of the viability of Mr. Watkins’s acquiescence as one of contract reformation, a unilateral mistake resulting from a misstatement by one contracting party would be sufficient to render the contract unenforceable. See Briggs v. Liddell, 699 P.2d 770, 772 (Utah 1985) (“[I]f one party is laboring under a mistake about a contract term and that mistake . . . has been induced by the other party[,] . . . then the inequitable nature of the other party’s conduct will have the same operable effect as a mistake, and reformation is permissible.”). If Mr. Watkins can prove that he reasonably understood Henry Day’s letter as an unequivocal representation that the dealership would not ever receive an allotment of vehicles, Mr. Watkins would be entitled to rescind the reformation. See Guardian State Bank v. Stangl, 778 P.2d 1, 5 (Utah 1989) (Utah law accords with the “practically universal agreement that, if the material mistake of one party was caused by the other, either purposely or innocently, . . . the mistaken party has a right to rescission.” (internal quotation marks omitted)).