Opinion ID: 2642474
Heading Depth: 2
Heading Rank: 2

Heading: cuwcd’s refusal to replace the tcc diversion

Text: WAS NOT EXCUSED UNDER THE DOCTRINE OF IMPRACTICABILITY ¶27 CUWCD next argues that the district court erred by rejecting its claim that the doctrine of impracticability excused its failure to replace the TCC Diversion. Whether impracticability affords a party relief from its obligations under a contract is a question of law that we review for correctness. See Robinson v. Robinson, 2010 UT App 96, ¶ 6, 232 P.3d 1081 (noting that whether contract defenses can afford relief is a question of law reviewed for correctness). We hold that CUWCD’s failure to perform is not excused by the doctrine of impracticability for several independent reasons. First, CUWCD cannot establish that the event giving rise to the claim of impracticability was unforeseen. Second, CUWCD failed to show that performance was impracticable because it did not even attempt to obtain the required permits. Finally, even had it attempted to do so, CUWCD assumed the risk of failing to obtain the requisite permits. ¶28 The doctrine of impracticability excuses a party’s performance “if an unforeseen event occurs after formation of the contract and without fault of the obligated party, which event makes performance of the obligation impossible or highly impracticable.” W. Props. v. S. Utah Aviation, Inc., 776 P.2d 656, 658 (Utah Ct. App. 2 (...continued) substantial performance may excuse its omissions. 15 WILLISTON ON CONTRACTS, § 44:52 (4th ed. 2000); see also BLACK’S LAW DICTIONARY 1281 (5th ed. 1979) (noting that a party has substantially performed when “the only variance from the strict and literal performance consists of technical or unimportant omissions or defects”). But CUWCD’s complete failure to replace the TCC Diversion does not consist of “technical or unimportant omissions or defects.” Its failure strikes at the very heart of the Agreement. 8 Cite as: 2013 UT 67 Opinion of the Court 1989) (footnotes omitted); see also RESTATEMENT (SECOND) OF CONTRACTS § 266(1) (1981) (“Where, at the time a contract is made, a party’s performance under it is impracticable without his fault because of a fact of which he has no reason to know and the nonexistence of which is a basic assumption on which the contract is made, no duty to render that performance arises, unless the language or circumstances indicate the contrary.”). A party is not excused for impracticability, however, when the event leading to the impracticability was known to the parties prior to contracting. See W. Props., 776 P.2d at 658. Additionally, a party may not defend on grounds of impracticability when that party takes on the risk that a supervening event will occur and render performance impracticable or impossible. See RESTATEMENT (SECOND) OF CONTRACTS § 266 cmt. b (1981). ¶29 CUWCD argues that its obligation to replace the TCC Diversion should be excused because environmental and permitting constraints precluded it from completing the new diversion. Specifically, CUWCD asserts that the Rehabilitation or Replacement of Diversion Structures on the Lower Provo River project (LPRDS Project) was begun after the execution of the Agreement and that “[t]he contemplated design of the TCC Diversion was inconsistent with the[] state and federal objectives” of the LPRDS Project. ¶30 Though there appears to be a factual dispute as to if and when the LPRDS Project concluded, there is no dispute that the LPRDS project was funded pursuant to section 302(c) of the Canal Utah Project Completion Act, which was passed in 1992. Thus, at the time they entered the Agreement in 2003, the parties were on notice that the LPRDS Project may affect the agreed-to improvements, including replacement of the TCC Diversion. Because all of the parties were aware of the LPRDS Project at the time of contracting, CUWCD cannot meet the requirement of showing that the event giving rise to the impracticability was not known at the time of contracting. ¶31 Additionally, there is no dispute that CUWCD has not yet applied for or otherwise sought to obtain the permits necessary to undertake the replacement of the TCC Diversion. While CUWCD’s replacement of the TCC Diversion may be “inconsistent with evolving LPRDS objectives,” without a good faith attempt to obtain the necessary permits, CUWCD cannot establish that performance is impracticable. Thus, even assuming that CUWCD did not know of the LPRDS project prior to execution of the Agreement, had CUWCD sought to obtain permits and been denied, it might have a 9 CUWCD v. UEU et al. Opinion of the Court colorable claim for impracticability. But here, where CUWCD has not even attempted to obtain the necessary permits, it cannot reasonably make such a claim. ¶32 Finally, even had CUWCD applied for and been denied the required permits, that fact would not excuse its performance because CUWCD affirmatively assumed the risk that the permitting agencies may not provide them. Section 7 of the Agreement, entitled “Permits for Construction,” states that ”CUWCD and/or its contractor shall obtain all construction permits required by all local jurisdictions and any Stream Alteration/§ 404 permits required for the reconstruction of the TCC diversion.” (Emphasis added). CUWCD thus affirmatively contracted to obtain all necessary permits and assumed the risk that such permits may be difficult, or even impossible, to obtain. See Kilgore Pavement Maint., LLC v. W. Jordan City, 2011 UT App 165, ¶¶ 7–8, 257 P.3d 460 (holding that where a party agreed that it “shall furnish and assume full responsibility for all materials,” it implicitly assumed the risk that the materials may have been more expensive or more difficult to obtain than originally anticipated (emphasis added)). While CUWCD explicitly undertook the obligation of obtaining the necessary permits, its performance under the Agreement was not contingent on its ability to do so. And because CUWCD never even attempted to obtain the necessary permits, it cannot establish that it would have been unable to do so. Its protestations to the contrary are mere conjecture. We thus hold that the doctrine of impracticability does not excuse its breach. III. CUWCD’S OFFER OF $75,000 IN LIEU OF PERFORMANCE WAS NOT A VALID TENDER ¶33 CUWCD next asserts that the district court erred when it ruled that CUWCD’s offer of payment in lieu of performance did not constitute a valid tender that excused its failure to perform. CUWCD argues that its offer of payment in lieu of its promise to replace the TCC Diversion was a valid tender offer and that the Canal Companies waived any objection to the tender by failing to timely object. The district court concluded that CUWCD’s purported tender was invalid, in part, because it was “inappropriate for [CUWCD] to tender money instead of its agreed-upon performance obligations.” We review the district court’s ruling for “correctness, giving no deference to [its] decision,” Bahr v. Imus, 2011 UT 19, ¶ 16, 250 P.3d 56, and agree that CUWCD could not “tender” substitute performance for its original contractual obligations. 10 Cite as: 2013 UT 67 Opinion of the Court ¶34 CUWCD relies on PDQ Lube Center, Inc. v. Huber to argue that its offer of substitute performance constituted a valid tender. 949 P.2d 792 (Utah Ct. App. 1997). The court in PDQ Lube Center stated that, “[i]n order to be valid, tender of payment on a contract must be (1) timely, (2) made to the person entitled to payment, (3) unconditional, (4) an offer to pay the amount of money due, and (5) coupled with an actual production of the money or its equivalent.” Id. at 800 (internal quotation marks omitted). ¶35 CUWCD’s invocation of PDQ Lube Center is misplaced because, “[b]y definition, [a valid] tender requires the holding out of that which is to be delivered or performed before the condition is satisfied.” 13 CORBIN ON CONTRACTS § 67.5 (Rev. ed. 2003). In other words, “[t]he tender must be made in accordance with the terms of the contract, or it is no tender at all.” 17B C.J.S. Contracts § 735 (2013) (footnotes omitted). For an offer to constitute a tender (valid or otherwise), “[t]he tenderer must do and offer everything that is necessary on his or her part to complete the transaction.” Id. ¶36 Before CUWCD can establish that the Canal Companies waived any objections to CUWCD’s purported tender, “[CUWCD] must [have made] an unconditional tender of the performance required by the agreement.” Kelley v. Leucadia Fin. Corp., 846 P.2d 1238, 1243 (Utah 1992) (emphasis added). “In other words, a party must make a tender of his own agreed performance in order to put the other party in default.” Id. (internal quotation marks omitted); see also Collard v. Nagle Constr., Inc., 2002 UT App 306, ¶ 19, 57 P.3d 603 (concluding that a party is entitled to an equitable remedy under the tender doctrine only if it has “fully tendered, or stood ready to fully tender, [its] own performance under the contract”). ¶37 Here, CUWCD agreed to “remove and replace at its sole expense TCC’s existing diversion structure and replace it with a new radial gate and other appurtenant facilities.” It did not agree to pay a sum to the Canal Companies so that the Canal Companies could replace the TCC Diversion themselves. CUWCD did not, therefore, tender the performance due under the Agreement. Rather, CUWCD tendered a cash payment as an alternative. In the face of the explicit requirements of performance under the Agreement, CUWCD’s cash offer was not a tender at all. Rather, it is more appropriately characterized as a settlement offer. And there is no authority to support the novel proposition that a party’s failure to object to a settlement offer can be deemed an acceptance of that offer. ¶38 In summary, the Canal Companies were not obligated to 11 CUWCD v. UEU et al. Opinion of the Court object to CUWCD’s settlement offer. The district court correctly ruled that CUWCD’s purported tender was ineffectual.