Court Opinion

ID: 5138074
Source: CourtListenerOpinion
Date Created: 2021-12-21 14:53:31.614003+00
Date Added: 2024-06-11T08:24:05.948501
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2016 UT App 240

               THE UTAH COURT OF APPEALS

                    NEW YORK AVE. LLC,
                Appellee and Cross-appellant,
                             v.
           DAVID D. HARRISON AND JAN C. HARRISON,
               Appellants and Cross-appellees.

                           Opinion
                       No. 20140719-CA
                    Filed December 8, 2016

           Fourth District Court, Provo Department
             The Honorable David N. Mortensen
                        No. 090402295

          Jason D. Boren, Emily L. Wegener, and Jackie
              Bosshardt, Attorneys for Appellants
                      and Cross-appellees
         David D. Jeffs and Kevin D. Jeffs, Attorneys for
                Appellee and Cross-appellant

JUDGE STEPHEN L. ROTH authored this Opinion, in which SENIOR
 JUDGE PAMELA T. GREENWOOD concurred. 1 JUDGE GREGORY K.
         ORME concurred in the result, with opinion.

ROTH, Judge:

¶1    New York Ave. LLC (NYA) entered into a real estate
purchase contract to purchase twenty acres of undeveloped land
from Defendants David D. and Jan C. Harrison (the Harrisons).
The contract provided NYA sole discretion to extend the closing
by paying a monthly extension payment, which NYA paid

1. Senior Judge Pamela T. Greenwood sat by special assignment
as authorized by law. See generally Utah R. Jud. Admin. 11-
201(6).
                   New York Ave. v. Harrison

monthly for nearly two years beyond the agreed-upon
settlement deadline. Eventually, the Harrisons informed NYA
that it was in breach of contract for failing to close within a
reasonable time and proposed a firm closing date some months
later. NYA asserted that the Harrisons had breached the contract
by demanding that NYA close the purchase in derogation of its
right to extend. This case ensued, with the parties asking the
court, among other things, to interpret the contract and
determine whether either party had breached it. In addition,
during the litigation, the Harrisons refused to accept NYA’s
tender of an extension payment, claiming that it was conditional.
NYA then asserted that the Harrisons’ refusal of the tender was
itself a breach of the contract.

¶2     The district court granted partial summary judgment in
NYA’s favor, concluding that NYA had unlimited discretion
under the contract to extend the settlement deadline, that NYA
had not breached the contract by failing to close, and that the
Harrisons had breached the contract by failing to accept the
tendered extension payment. The court subsequently granted
partial summary judgment in the Harrisons’ favor on the issue
of damages, limiting NYA to actual rather than liquidated
damages, and limiting NYA’s recovery of attorney fees. Each
side appeals the district court’s ruling. We reverse and remand
for further proceedings.

                        BACKGROUND

¶3     The Harrisons own over twenty acres of undeveloped real
property (the Property) in Springville, Utah. Hoping to fund
their retirement, in November 2006 the Harrisons entered into a
real estate purchase contract with NYA, which planned a
residential development. NYA agreed to purchase the Property
for $3 million, with an earnest money deposit of $10,000. The
parties executed two addenda to the contract—Addendum 1,
signed along with the contract itself on November 10, 2006, and

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                    New York Ave. v. Harrison

Addendum 2, signed on November 22, 2006. The real estate
purchase contract and the two addenda form the complete
contract between the parties (together, the REPC), 2 which
became effective with the signing of Addendum 2.

¶4     Under the REPC, the Harrisons were required to provide
Seller Disclosures to NYA within fourteen days of the “fully
executed contract,” including a “property condition disclosure,”
“a copy of any leases affecting the Property,” and “evidence of
any water rights and/or water shares.” NYA then had the right
to cancel the REPC, in the event of any one of a number of
contingencies, no later than the “Due Diligence Deadline,”
specified as “90 days from date of the fully executed contract.” If
NYA did not cancel the contract or deliver written objections by
the deadline, NYA would “be deemed to have approved the
Property” and any contingencies to the enforceability of the
REPC would be “deemed waived.” The Harrisons agreed that
between acceptance of the REPC and closing they would not,
without the “prior written consent” of NYA, modify any existing
leases or enter into any new ones, make “substantial alterations
or improvements to the Property,” or further encumber the
Property financially. They also agreed to continue to cover any
costs or expenses associated with the Property during that time,
such as taxes, assessments, and utilities. The REPC provided that
“time is of the essence” and that “performance under each
Section . . . which references a date shall absolutely be required
by 5:00 PM Mountain Time on the stated date[s].”

¶5    Of particular importance to this appeal are the provisions
governing the Settlement Deadline, the date by which the parties
were to be prepared to complete the sale and finalize purchase of
the Property. Addendum 1 provided that the Settlement

2. Except where the context indicates otherwise, we refer to the
complete agreement as the REPC.

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Deadline was “to be 180 days from the date of the fully executed
contract” (i.e., 180 days from November 22, 2006). Central to this
appeal, the REPC also provided that NYA “may choose, at [its]
sole discretion, to pay an additional amount of non-refundable
earnest money to continue the contract monthly after the
settlement deadline” and that any such payment would “be a
credit towards the purchase price at closing.” Initially, the
monthly extension payment was set at $12,500. However,
Addendum 2 altered the details of the settlement extension
provision by lowering the monthly extension payment to $6,250
and moving the initial Settlement Deadline “until after the
harvest season 2007 which will be October 31, 2007.” The REPC
did not specify any limit on the number of times NYA could
extend the Settlement Deadline.

¶6      In January 2007, NYA informed the Harrisons that it had
encountered a problem connecting the Property to the
Springville City sewer system. As a result, NYA stated that it
would not “be able to develop the property until mid-2008 at the
earliest.” NYA also indicated that, in spite of the logistical
problem, it still “want[ed] to continue the contract as it [was]
currently written” and that on October 31, 2007, it would “start
making the monthly [settlement extension] payments . . . until
[it] close[d] on the property, which [would] be when the sewer
trunk line [was] installed and [it] [could] get the necessary
approvals from the city to develop.” In September 2007, NYA
sent another letter to the Harrisons, notifying them that it had
found a potential work-around to the sewer line issue and again
stating that it would begin making the settlement extension
payments in October, which it did.

¶7    In early 2008, Springville City denied NYA’s proposed
sewer line alternative. At that point, NYA deemed that it “had
exhausted all [its] options” and that it was “through working on
[developing the Property] until the sewer was available.” NYA

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continued to make settlement extension payments throughout
2008 and into the summer of 2009.

¶8     In the summer of 2008, however, the Harrisons informed
NYA that they did not want to wait any longer to close on the
Property, and in December the parties began discussions about
options for terminating the contract. They did not reach a
resolution, and in March 2009, the Harrisons’ attorney sent a
letter to NYA asserting that even though the REPC did not
contain an “outside Settlement Date,” it was “unreasonable to
interpret the extension provision in the REPC as allowing the
Buyer to extend the Settlement indefinitely.” Rather, according
to counsel, “when a contract fails to specify a time by which a
certain act must be performed, [the] law implies that the act
must be done within a reasonable time under the
circumstances,” and, as it had been over sixteen months “since
the original Settlement Deadline, . . . any reasonable time for
closing ha[d] already passed.” The letter explained that, while
the Harrisons viewed NYA’s “failure to close as a breach of the
implied covenant of good faith and fair dealing,” they were still
“willing to close on or before August 5, 2009.” The Harrisons
requested that NYA contact them to discuss a final Settlement
Deadline.

¶9     In June 2009, NYA sued the Harrisons for rescission,
breach of contract, and a declaratory judgment regarding the
obligations of both parties under the REPC. The Harrisons
counterclaimed for breach of contract and breach of the covenant
of good faith and fair dealing, claiming that NYA had failed to
close on the purchase of the Property within a reasonable time.
NYA continued to make extension payments in June and July
2009, which the Harrisons accepted.

¶10 On August 31, 2009, the last day of the then-current
extension, NYA’s counsel sent the Harrisons another extension
payment along with a letter that, among other things, explained

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in some detail NYA’s understanding of the REPC. Specifically,
NYA explained that the agreement to purchase the Property had
been “based on the assumption that it could be developed as
single family residential that would maximize the development
potential of the land” and stated that “[t]he ability to postpone
closing on the property until it could be developed to its
maximum potential was crucial to [NYA].” NYA asserted that
“[w]ith the lack of sewer capabilities, and through further
information . . . that showed insufficient storm drainage
capacity, the property could not (at the time) be developed to its
maximum potential.” And according to NYA, the Settlement
Deadline could be extended at its option “to allow for the
property to be developed to its full potential,” including “sewer
line extension installed to the property, storm drainage readily
available, and [the] property being economically feasible to
develop under zoning ordinances of Springville [C]ity and
existing market conditions.” The letter then stated,

      By negotiating this $6,250 check, you are agreeing
      with my client that it is entitled under the REPC to
      make these payments in order to postpone closing
      in accordance with the express terms of the REPC
      until it is economically feasible to move forward
      with a residential development of the property . . . .

¶11 The Harrisons refused to accept the August 2009
extension payment, informing NYA that they considered NYA’s
letter and the payment to be an “attempt to modify the terms of
the [REPC]” by conditioning the negotiation of the check on
NYA’s      “unilateral  and    unexpressed    intentions   and
‘understandings.’” Nonetheless, the Harrisons’ letter also
advised NYA that even though the tendered payment was being
returned, the Harrisons would “continue to accept monthly
payments so long as [NYA] withdr[ew] [its] inappropriate
conditions.” NYA made no further extension payments.

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¶12 Both parties moved for summary judgment on the issue
of liability for breach of contract. On June 14, 2012, the district
court granted partial summary judgment in NYA’s favor and
denied the Harrisons’ cross-motion. The court determined,
among other things, that the unambiguous terms of the contract
entitled NYA to extend the Settlement Deadline “so long as valid
tender of the extension payment was made” and that the August
31, 2009 letter and check constituted a valid tender that the
Harrisons were required to accept. The court concluded that the
Harrisons breached the REPC by refusing to accept NYA’s
tender of the extension payment. 3 NYA subsequently filed a
motion for summary judgment on the issues of damages and
attorney fees, which the district court partially granted. The
court determined that under the default provision of the REPC,
NYA had failed to elect liquidated damages and had instead,
“by virtue of litigating the matter up to the threshold of trial,”
elected to “pursue other remedies available at law,” namely,
actual damages. It also awarded NYA prejudgment interest from
the date of the Harrisons’ breach in 2009 and granted NYA’s
request for attorney fees, but it reduced the fee award on the
basis that some of the requested fees were unreasonable. The
total judgment awarded to NYA was $286,495.75, which
included damages, prejudgment interest, attorney fees, and
court costs.

¶13 The Harrisons appeal the district court’s summary
judgment ruling finding them in breach of contract, and NYA
cross-appeals the district court’s summary judgment ruling
regarding damages and fees.

3. The district court also determined that the Harrisons had not
anticipatorily breached when they had asserted in March 2009
that NYA was in default and demanded that closing occur on or
before August 5, 2009. Neither party appeals this ruling.

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                    New York Ave. v. Harrison

                             ISSUES

¶14 The Harrisons argue, in essence, that the district court
erred in two respects. First, the Harrisons assert that the court
wrongly interpreted the REPC to allow NYA to exercise its
discretion to extend the closing indefinitely rather than closing
the purchase within a reasonable time. 4 Second, they claim the
court erred when it determined that NYA’s August 31, 2009
payment was a valid tender and argue that NYA breached the
REPC by failing to close on the purchase of the Property after its
conditional attempt to extend the Settlement Deadline failed.

¶15 In the cross-appeal, NYA argues that while the district
court correctly ruled that the Harrisons breached the REPC by
failing to accept the August 2009 extension payment, the court
erred in determining that NYA elected to pursue actual damages
rather than liquidated damages, in reducing NYA’s attorney
fees, and in running prejudgment interest from the date of the
Harrisons’ breach in 2009 rather than from the date of each
extension payment.

¶16 Because resolution of NYA’s cross-appeal necessarily
depends on our resolution of the Harrisons’ appeal, we first
consider whether the district court erred in determining that the
Harrisons breached the REPC. We begin by addressing whether
the district court erred in concluding that the REPC permitted
NYA to indefinitely extend the closing date for purchase of the

4. The Harrisons also assert that NYA breached the covenant of
good faith and fair dealing through its repeated extensions of the
settlement, because by continuing to extend the settlement NYA
exercised its discretion in a way that deprived them of the
benefit of their bargain. However, as explained below, see infra
¶ 54, we do not reach this argument.

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Property and then address the effect of NYA’s August 2009
tender of the extension payment.

                           ANALYSIS

              I. Reasonable Time for Performance

¶17 The central contention on appeal is whether the REPC’s
provision that allowed NYA to “choose, at [its] sole discretion,”
to extend the Settlement Deadline on a monthly basis permitted
NYA to extend the closing date indefinitely. If the REPC cannot
be interpreted to permit NYA to extend the closing date
indefinitely, then the question becomes whether a reasonable
time to close the purchase can be implied.

¶18 The district court concluded that the REPC “does not
expressly limit the number of extension payments . . . so long as
the $6,250 extension payment is timely made,” noting that “the
number of times that the extensions payment may be made . . . is
in NYA’s sole discretion.” The court also concluded that the
REPC included a specific time for performance; it noted that “the
parties explicitly agreed . . . that the settlement deadline would
be October 31, 2007” and that the parties had also agreed that
NYA could make a monthly payment to extend “the settlement
deadline to the end of the following month.” Thus, the court
reasoned that under the terms of the REPC, the settlement would
either be October 31, 2007, the baseline Settlement Deadline, or
at the end of the last month thereafter for which NYA paid an
extension fee. The court concluded that “[p]lacing a limit on the
number of extension payments allowed would be reforming the
contract and thereby rewriting the parties’ agreement.” On that
basis, it denied the Harrisons’ motion for summary judgment on
their claims of breach and instead concluded that the Harrisons
had breached the REPC.

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¶19 The Harrisons argue that the district court erred by
concluding that the REPC provided NYA the right to “extend
the closing deadline indefinitely by making an Extension
Payment,” because that interpretation permitted NYA to
“exercise its discretion in a way that deprived the Harrisons of
the benefit of the parties’ bargain—the sale of the Property.”
Specifically, the Harrisons contend that interpreting the REPC to
permit NYA absolute discretion to extend the closing
indefinitely would, taken to its logical conclusion, allow “NYA
to pay $6,250 per month interest-free until it pa[id] off the
Property in approximately forty years.” (Emphasis omitted.) In
essence, the Harrisons assert that it would turn the purchase
contract into an “indefinite-term option contract” or “interest-
free seller-financed purchase,” and that “such an interpretation
[was] far outside the contemplation of the parties when they
entered the REPC.”

¶20 The Harrisons also argue that the court erred in
concluding that the contract included a definite closing date.
According to the Harrisons, even though the REPC provided
that settlement would take place on October 31, 2007, or at the
end of the last month that NYA paid an extension fee, the REPC
did not “include the essential term of how many extensions are
permitted under the contract”; consequently, the contract
provided no definite time for closing. Thus, they assert, the court
should have implied a reasonable one.

A.     NYA’s Discretion To Extend the Closing

¶21 The “cardinal rule” in contract interpretation “is to give
effect to the intentions of the parties” as they are expressed in the
plain language of the “contract itself.” G.G.A., Inc. v. Leventis, 773
P.2d 841, 845 (Utah Ct. App. 1989); see also Equine Assisted Growth
& Learning Ass’n v. Carolina Cas. Ins. Co., 2011 UT 49, ¶ 13, 266
P.3d 733. In this regard, we construe a contract to give effect to
the “object and purpose of the parties in making the agreement.”

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Anderson v. Great E. Cas. Co., 168 P. 966, 968 (Utah 1917) (citation
and internal quotation marks omitted). “A construction which
contradicts the general purpose of the contract . . . is presumed
to be unintended by the parties.” Home Sav. & Loan v. Aetna Cas.
& Sur. Co., 817 P.2d 341, 366 (Utah Ct. App. 1991) (omission in
original) (citation and internal quotation marks omitted); see also
Restatement (Second) of Contracts § 202(1) (Am. Law Inst. 1981)
(stating that “if the principal purpose of the parties is
ascertainable it is given great weight”). And with the principal
purpose in mind, we also interpret the contract as a whole, see
Aetna, 817 P.2d at 367, “consider[ing] each contract provision . . .
in relation to all of the others, with a view toward giving effect to
all and ignoring none,” Green River Canal Co. v. Thayn, 2003 UT
50, ¶ 17, 84 P.3d 1134 (omission in original) (citation and internal
quotation marks omitted).

¶22 In this case, neither party disputes that the overarching
purpose of the REPC was the purchase of the Harrisons’
property by NYA. As NYA notes, “NYA, as buyer, and
Harrisons, as sellers, entered into [the REPC] to purchase 20.27
acres of real property located in Springville, Utah.”
Fundamentally, the REPC was designed to enable the Harrisons
to convey the Property to NYA in exchange for $3 million.
Indeed, even the title of the REPC—Real Estate Purchase
Contract For Land—clearly expresses this objective. To enable
that central goal, the REPC obligated NYA to timely settle and
close the purchase. To that end, the REPC provided deadlines for
the three major events tracing the path toward consummation of
the contract—Seller Disclosures, Due Diligence, and Settlement
Deadline. In particular, following the Seller Disclosures, the
REPC provided that the Property would “be deemed approved”
by NYA and “the contingencies referenced [earlier in the
agreement], including but not limited to any financing
contingency, shall be deemed waived by [NYA]” unless NYA
canceled or objected to the contract before the Due Diligence
Deadline. Thereafter, the purchase was to be completed “on the

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Settlement Deadline . . . or on a date upon which the Buyer and
Seller agree to in writing.” In other words, once the Due
Diligence Deadline passed, NYA became unconditionally
obligated to purchase the Property for the agreed-upon price, an
obligation that could only be fulfilled by proceeding to closing of
the purchase by paying $3 million to the Harrisons in exchange
for an appropriate conveyance. Thus, before the Due Diligence
Deadline, NYA’s obligation to purchase the Property was
essentially contingent, but once that deadline passed, the
obligation became contractually absolute.

¶23 Viewed in this light, NYA’s option to extend the
Settlement Deadline from month to month at its discretion must
be read as a grant of discretion subsidiary to, and not ultimately
in derogation of, NYA’s primary obligation to complete the
purchase of the Property by paying the purchase price to the
Harrisons. In other words, the extension provision necessarily
contemplates that closing of the purchase will occur, a purpose
that would at some point be essentially abrogated if the
Settlement Deadline could be postponed indefinitely based only
upon NYA’s shifting development timeline. At some point, as
that timeline extended month after month and year after year,
the core purpose of the REPC, which from the Harrisons’
perspective was to receive the purchase price in a lump sum in
return for conveyance of the Property, would have been
defeated and the contract would have transformed into a long-
term, interest-free seller financing arrangement.

¶24 And the provisions of the REPC read as a whole support
the conclusion that NYA’s discretion to extend the Settlement
Deadline was not unbounded. For example, the two addenda
addressed NYA’s fundamental obligation to close the Property
purchase by clarifying certain of the REPC’s provisions. As we
have discussed, Addendum 1, among other things, provided
specific deadlines for each of the three major contractual events
the REPC outlined—Seller Disclosure, Due Diligence, and

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Settlement Deadline. In particular, the Settlement Deadline was
“to be 180 days from the date of the fully executed contract,”
which was November 22, 2006. Addendum 2 likewise dealt with
contractually important dates; it extended the Settlement
Deadline to a different date certain, “until . . . October 31, 2007.”
And while Addendum 1 included the proviso that NYA, “at [its]
sole discretion, [may choose] to pay an additional amount of
non-refundable earnest money to continue the contract monthly
after the settlement deadline,” the language of the proviso
tethered the extension payments to the actual closing of the
purchase: the “additional money . . . will be a credit towards the
purchase price at closing.” (Emphasis added.) In other words, for
the extension payments to become what the language of the
contract affirms that they were meant to be—payments part and
parcel of and counted toward the ultimate purchase price—the
closing of the purchase needed to occur. Thus, while the
language of the extension provision itself was tied only to NYA’s
discretion and was therefore nominally open-ended, by
specifying one date certain after another as the Settlement
Deadline—with extensions limited to one month at a time—the
structure of the contract suggests that the parties did not
contemplate that the closing date would extend indefinitely.

¶25 In addition, the plain language of the extension provision
itself, when compared to other provisions of the contract,
suggests that the provision was intended to support the
transactional purpose of the REPC, not to permit NYA to
abrogate the contract’s purpose through endlessly repeated
postponements of the closing. Each of the three major events
along the timeline leading to closing—Seller Disclosures, Due
Diligence, and Settlement Deadline—is articulated in mandatory
language; each states that either the Buyer or the Seller “shall”
perform some action. For example, the REPC provides that “[n]o
later than the Seller Disclosure Deadline . . . , Seller shall provide
to Buyer . . . the ‘Seller Disclosures’”; that “[n]o later than the
Due Diligence Deadline . . . Buyer shall: (a) complete all of

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Buyer’s Due Diligence, and (b) determine if the results of Buyer’s
Due Diligence are acceptable to Buyer”; and that “Settlement
shall take place on the Settlement Deadline . . . or on a date upon
which Buyer and Seller agree in writing.” See Mind & Motion
Utah Invs., LLC v. Celtic Bank Corp., 2016 UT 6, ¶ 27, 367 P.3d 994
(noting in the context of interpreting the “plain and ordinary
meaning” of terms in a contract that the word “shall,” as defined
in Black’s Law Dictionary, means “‘a duty to,’ ‘is required to,’ or
‘mandatory’” (quoting Shall, Black’s Law Dictionary (9th ed.
2009)); see also Board of Educ. of Granite School Dist. v. Salt Lake
County, 659 P.2d 1030, 1035 (Utah 1983) (explaining that the
word “shall” is “usually presumed mandatory”); Kennecott
Copper Corp. v. Salt Lake County, 575 P.2d 705, 706 (Utah 1978)
(noting that mandatory directions involve “the essence of the
thing to be done”); cf. Southwick v. Southwick, 2011 UT App 222,
¶ 13, 259 P.3d 1071 (noting in the context of statutes that
“[f]actors to be considered in [the] determination [of whether a
provision is mandatory] include whether the provision affects
substantial rights and whether the provision is necessary to
effectuate the [legislature’s] intent”).

¶26 Here, each event—the Seller Disclosures, Due Diligence
Deadline, and Settlement Deadline—was designed to propel the
parties along a path that incrementally satisfied conditions of
performance. In contrast, the language of the extension provision
suggests that the occurrence of an extension is not part of the
“essence” of the contract. See Kennecott Copper Corp., 575 P.2d at
706 (“Generally those directions which are not of the essence of
the thing to be done, . . . and by the failure to obey no prejudice
will occur to those whose rights are protected . . . , are not
commonly considered mandatory.”). Rather than creating a
certain performance obligation for either party, the extension
provision merely provides that NYA “may choose, at [its] sole
discretion, to pay an additional amount of non-refundable
earnest money to continue the contract monthly after the
settlement deadline.” (Emphasis added.) See May, Black’s Law

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Dictionary (10th ed. 2014) (defining “may” as “[t]o be permitted
to” and “[t]o be a possibility”); cf. Neff v. Neff, 2011 UT 6, ¶ 67,
247 P.3d 380 (noting in a statutory context that the word “may”
connotes discretion). At the very least, the inclusion of the word
“may” suggests that neither party intended the extension
provision to override the contract’s mandatory obligations—that
is, if NYA never exercised its discretion to extend the settlement,
the core obligations contained in the REPC, consummating the
sale and purchase of the Property, would remain in force.

¶27 Thus, even though the parties disagree on the legal effect
of NYA’s discretion to extend the closing, it is clear from the
language of the contract as a whole that the REPC’s primary
purpose was to sell the Property to NYA and that NYA’s
obligation to complete the purchase of the Property became
unconditional once NYA allowed the Due Diligence Deadline to
pass without exercising its right to cancel. As a result, NYA was
obligated to close the purchase of the Property regardless of
whether it exercised its discretion to extend the closing or not.
See Home Sav. & Loan v. Aetna Cas. & Sur. Co., 817 P.2d 341, 366–
67 (Utah Ct. App. 1991) (explaining that “[a] construction which
contradicts the general purpose of the contract . . . is presumed
to be unintended by the parties” (omission in original) (citation
and internal quotation marks omitted)). It necessarily follows
that, while NYA could defer the closing on a month-to-month
basis, it could not do so indefinitely, because unlimited
extensions could ultimately permit NYA to defeat the primary
purpose of the REPC.

¶28 In so concluding, we acknowledge that the parties
negotiated NYA’s discretion to extend the closing and that, by
agreeing to it, both parties undoubtedly contemplated that
extension of the closing for some period of time beyond the
October 31, 2007 Settlement Deadline was allowable. But while
NYA was provided “sole discretion” to decide whether to
extend the closing, interpreting the REPC to allow NYA to

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extend closing indefinitely improperly permits NYA to “use[] its
discretion for a reason . . . beyond the risks assumed by the party
claiming the breach.” See Markham v. Bradley, 2007 UT App 379,
¶ 34, 173 P.3d 865 (emphasis omitted) (citation and internal
quotation marks omitted). Nowhere in the contract did the
parties manifest an agreement that would permit NYA to
unilaterally alter the fundamental nature of the contract, not to
mention its actual value, by indefinitely postponing its
obligation to close on the purchase of the Property. Indeed, such
an interpretation could allow NYA to impose upon the
Harrisons what, in practical effect, would amount to an interest-
free, seller-financing obligation that could in theory extend for
up to forty years. Not only that, such a reading would also
significantly dilute the actual value over time of the $3 million
purchase price, during which time the Harrisons would also
remain obligated to pay taxes and other expenses associated
with the Property. Such a result seems very far from what the
parties could have intended under any reasonable reading of the
REPC as a whole. Cf. id. (“The good faith performance doctrine
. . . permit[s] the exercise of discretion for any purpose . . .
reasonably within the contemplation of the parties. A contract
thus would be breached . . . if a party uses its discretion for a
reason outside the contemplated range—a reason beyond the
risks assumed by the party claiming the breach.” (citation and
internal quotation marks omitted)); Ted R. Brown & Assocs., Inc.
v. Carnes Corp., 753 P.2d 964, 970 (Utah Ct. App. 1988) (“It is
fundamental that every contract imposes a duty on the parties to
exercise their contractual rights and perform their contractual
obligations reasonably and in good faith.”).

¶29 Accordingly, we conclude that the district court
incorrectly interpreted the contract to permit NYA to extend the
closing indefinitely. Because NYA may not extend the closing
indefinitely, we now consider whether, as the Harrisons
contend, the closing was required to occur within a reasonable
time.

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                    New York Ave. v. Harrison

B.    Closing Within a Reasonable Time

¶30 As a corollary to its conclusion that there was no limit to
the number of times NYA could exercise the option to extend the
Settlement Deadline, the district court determined that the REPC
included unambiguous language that provided a specific time
for settlement—the Settlement Deadline (October 31, 2007) plus
however many one-month extensions NYA chose to exercise.
Relying on Watson v. Hatch, 728 P.2d 989 (Utah 1986), which
states that a “court may allow a contract to be performed within
a reasonable time only when the contract is silent as to the time
for its performance,” id. at 990, the district court accordingly
concluded that the REPC could not be interpreted to require
closing of the purchase transaction to occur within a reasonable
time.

¶31 In limited situations, a court may read a term into a
contract that “is essential to a determination of [the parties’]
rights and duties” and that “is reasonable in the circumstances.”
Restatement (Second) of Contracts § 204 (Am. Law Inst. 1981).
But additional “terms are to be implied in contract, not because
they are reasonable—although it is clear that they must indeed
be reasonable—but because they are necessarily involved in the
contractual relationship” such that “it may be said that the
parties must have intended them and failed to express them only
because of sheer inadvertence or because they are too obvious to
have needed expression.” 11 Williston on Contracts § 31:7 (4th
ed. 2016). Accordingly, when a court reads terms into a contract,
it generally does so to “protect the express covenants or
promises of the contract,” Oakwood Village LLC v. Albertsons, Inc.,
2004 UT 101, ¶ 29, 104 P.3d 1226 (citation and internal quotation
marks omitted), and to “prevent a party’s promise from being
performable merely at the whim of the promisor,” Markham,
2007 UT App 379, ¶ 23 (citation and internal quotation marks
omitted).

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                    New York Ave. v. Harrison

¶32 Pertinent to the question here, “the settled rule is that if a
contract fails to specify a time of performance the law implies
that it shall be done within a reasonable time under the
circumstances.” Coulter & Smith, Ltd. v. Russell, 966 P.2d 852, 858
(Utah 1998). In contrast, as the district court recognized, “[w]hen
a contract specifically states the time for its performance, it is
plain error to allow it to be performed within a reasonable time.”
Watson, 728 P.2d at 990. Here, the REPC “fails to specify a time of
performance.” Coulter & Smith, 966 P.2d at 858.

¶33 We have already concluded that the parties expressly
covenanted to complete the Property purchase and that the
extension provision cannot fairly be read to subvert that
essential promise between the parties by permitting unlimited
extensions. See supra ¶¶ 21–28. We also acknowledge that the
REPC provided an explicit Settlement Deadline—October 31,
2007—and that it unambiguously provided that each extension
payment would extend the settlement to the end of the following
month. Thus, every time NYA made an extension payment, the
Settlement Deadline was extended to the end of the following
month. See Café Rio, Inc. v. Larkin-Gifford-Overton, LLC, 2009 UT
27, ¶ 25, 207 P.3d 1235 (explaining that “[w]here the language
within the four corners of the contract is unambiguous, the
parties’ intentions are determined from the plain meaning of the
contractual language” (citation and internal quotation marks
omitted)). But those terms do not limit the number of times NYA
may extend month-to-month. In other words, while the REPC
identifies the original Settlement Deadline and specifies that
each extension payment will extend the date thirty days, the end
date for the extensions—the date on which the purchase of the
Property must finally occur—is not specified.

¶34 Thus, we agree with the Harrisons that even if the REPC
provides that the Settlement Deadline will be at the end of the
month following the latest extension payment, because it does
not limit the number of extension payments, the REPC does not

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                    New York Ave. v. Harrison

specify a particular closing date. Instead, once NYA exercised its
discretion to extend the Settlement Deadline for the first time,
there was no explicit language in the REPC to prevent NYA from
continuing to extend the closing on a month-to-month basis for
however long it chose to do so, something we have decided the
REPC does not permit without limitation. As a consequence,
while the express terms of the contract may relate to the time for
NYA’s performance, and while they may even be unambiguous
and explicit as far as they go, the REPC does not provide a date
by which NYA must perform its core obligation to complete the
purchase of the Property. See Coulter & Smith, 966 P.2d at 858.

¶35 We therefore conclude that the REPC does not contain a
specific time for performance and, consequently, “the law
implies that it shall be done within a reasonable time under the
circumstances.” See id.; see also Markham v. Bradley, 2007 UT App
379, ¶ 24, 173 P.3d 865 (stating that “because no standard has
been expressly set forth in the REPC, the imposition of a
standard of objective reasonableness does not run afoul of the
express contract terms”). And because “[w]hat constitutes a
reasonable time” is necessarily a fact-intensive question that
“depends upon the subject-matter, the nature of the act to be
performed, and the situation of the parties,” Salt Lake City v.
State, 125 P.2d 790, 793 (Utah 1942), we accordingly conclude
that the district court erred in granting summary judgment to
NYA on this issue, see Cook Assocs., Inc. v. Utah School &
Institutional Trust Lands Admin., 2010 UT App 284, ¶ 28, 243 P.3d
888 (noting that factual issues are “generally inappropriate for
decision as a matter of law”).

¶36 Having determined that the district court erred when it
determined that the REPC included a specific time for
performance of closing the purchase of the Property, we now
consider the court’s ruling on the legal effect of the Harrisons’
rejection of NYA’s August 2009 tender of an extension payment.

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                    New York Ave. v. Harrison

        II. Tender of the August 2009 Extension Payment

¶37 The district court ruled that NYA’s August 31, 2009
extension payment was a valid tender and that the Harrisons
breached the REPC by refusing to accept it. In particular, the
court reasoned that the tender was not conditional because the
letter accompanying the payment “only contained conditions
that NYA already had a right to insist upon based on the REPC”
provision for extensions of the Settlement Deadline at NYA’s
sole discretion. The court concluded that “NYA’s letter to the
Harrisons noting its reasons for making the Extension Payments
was a display of its discretion.” And because the letter
accompanying NYA’s August 2009 extension payment merely
“required the Harrisons to acknowledge rights that the contract
had already granted to NYA,” the court determined that the
tender was not improperly conditional and that the “Harrisons
therefore breached the contract by refusing the valid tender.”

A.    The Tender Payment

¶38 The Harrisons argue that the August 31, 2009 extension
payment was not a valid tender because it “was conditioned on
the Harrisons’ acceptance of NYA’s interpretation of the REPC.”
We agree.

¶39 The letter that accompanied the August 31, 2009 extension
payment stated NYA’s position that Addendum 2 had extended
the Settlement Deadline and reduced the amount of the
extension payments “based on the understanding that it could
take several years before this deal could be closed.” It then went
on to state other reasons for NYA’s position that the REPC gave
it the ability to extend the Settlement Deadline beyond what the
Harrisons had asserted was reasonable, including, in essence,
that (1) the price to be paid for the Property “was based on the
assumption that it could be developed as single family
residential that would maximize development potential of the
land” and “the ability to postpone closing until it could be

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                    New York Ave. v. Harrison

developed to its maximum potential was crucial to [NYA]”; (2)
the parties had agreed in Addendum 2 to extend the Settlement
Deadline and reduce the amount of the extension payments “in
part to account for the fact that . . . it might be some time before
the property could be developed”; and (3) developing the
Property “to its full potential” included the extension of
Springville City’s sewer line to the Property and ensuring “storm
drainage readily available,” neither of which had been
accomplished, as well as reaching a point where the “property
[was] economically feasible to develop under zoning ordinances
. . . and existing market conditions,” which was not yet the case. 5
The letter then specifically stated,

       By negotiating this $6,250 check, you are agreeing
       with my client that it is entitled under the REPC to
       make these payments in order to postpone closing
       in accordance with the express terms of the REPC
       until it is economically feasible to move forward
       with a residential development of the property . . . .

(Emphasis added.)

¶40 “A tender, to be good, must be free from any condition
which the tenderer does not have a right to insist upon.” Sieverts
v. White, 273 P.2d 974, 976 (Utah 1954); see also 74 Am. Jur. 2d
Tender § 22 (2016) (explaining that “to be valid as a tender, an
offer to pay to satisfy an obligation must be unconditional” and
that an unconditional tender is one “that is coupled either with
no conditions or only with conditions upon which the tendering

5. We note that the letter does not make any claim that NYA was
entitled to extend the Settlement Deadline indefinitely. Rather, it
seems to describe what it considers to be a reasonable basis for
exercising its discretion to continue to extend the time for
closing.

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                    New York Ave. v. Harrison

party has a right to insist”). In other words, “[t]he tender cannot
impose on the other party a new condition or requirement not
already imposed by the contract. If the law were otherwise, one
could use a tender to compel the other party to comply with new
contractual terms.” Kelley v. Leucadia Fin. Corp., 846 P.2d 1238,
1243 (Utah 1992) (citations and internal quotation marks
omitted); accord PDQ Lube Center, Inc. v. Huber, 949 P.2d 792, 800
n.13 (Utah Ct. App. 1997) (“The prohibition against conditional
tender forbids the tendering party from adding new
noncontractual conditions or requirements for receiving the
tender.”).

¶41 Here, the REPC does not expressly incorporate any of the
“understandings” that NYA asserted in its August 31, 2009
letter. In particular, there is no mention in the REPC (1) that the
purchase price was based on valuing the Property as though it
could be developed as single family residential; (2) that the
parties had agreed to reduce payments for extension of the
Settlement Deadline because it was understood “it might be
some time before the property could be developed”; or (3) that
there was no obligation on NYA’s part to close on the purchase
until it was “economically feasible” to develop the Property in
light of the availability of utilities, NYA’s ability to comply with
zoning ordinances, or “existing market conditions” favorable to
development. Certainly, the “economic feasibility” of NYA’s
development plans was nowhere incorporated into the REPC as
a condition of closing. And given the express language of the
REPC that unequivocally obligates NYA to purchase the
Property once the Due Diligence Deadline has passed, NYA’s
requirement that the Harrisons acknowledge such a condition
requires them to cede their ability to realize the full economic
benefit of their bargain under the REPC to NYA’s “sole
discretion.” Cf. Hepburn & Dundas v. Auld, 5 U.S. (1 Cranch) 321,
332 (1803) (suggesting that plaintiffs’ demands that the
defendant release all claims and demands before accepting
plaintiffs’ performance under an agreement was not acceptable

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                    New York Ave. v. Harrison

where the agreement did not contain a stipulation that the
release of defendant’s claims against plaintiffs was a condition
precedent to plaintiffs’ performance).

¶42 Further, NYA has failed to persuade us that its
interpretation of the extension provision as permitting it
limitless discretion to extend the settlement is reasonable. In
particular, NYA has failed to persuade us that the discretion
afforded it under the extension provision permitted it to extend
the settlement for any reason and for an unlimited number of
times. At some point in time, regardless of the reasons, further
postponement of closing would become inimical to the REPC’s
fundamental purpose of accomplishing the sale and purchase of
the Property. And the understandings that NYA stated in its
tender letter required the Harrisons to accept a premise that the
plain language of the REPC does not support—that under the
REPC the feasibility of the Property’s economic development
was an absolute condition precedent to NYA’s obligation to
consummate the purchase.

¶43 Moreover, we have also determined that NYA was
required to close the sale within a reasonable time under the
circumstances. However, NYA’s letter attempted to impose
upon the Harrisons its unilateral view of what constituted a
reasonable time for closing. Indeed, the letter required the
Harrisons to concede that NYA alone had the authority to
determine when the state of economic feasibility had been
reached, based on a number of conditions not expressly
addressed in the REPC. But the determination of what point in
time NYA was required to close is a factually intensive
determination that takes into account the circumstances of both
parties. See Salt Lake City v. State, 125 P.2d 790, 793 (Utah 1942)
(“What constitutes a reasonable time depends upon the subject-
matter, the nature of the act to be performed, and the situation of
the parties.”). While the understandings expressed by NYA in its
letter might ultimately be relevant to the determination of a

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                     New York Ave. v. Harrison

reasonable time to close the purchase, those understandings
cannot conclusively define a reasonable time in the context of the
yet unresolved competing interests of both parties. Regardless of
the discretion the extension provision afforded NYA, the
determination of a reasonable time must take into account not
just NYA’s concerns, but also the Harrisons’. See id.

¶44 And importantly, at the time of the disputed tender, the
interpretation of the extension provision was a matter of
legitimate dispute between the parties, one that had yet to be
adjudicated. By the end of August 2009, the parties were already
several months into litigation about the interpretation of the
extension provision and whether NYA had breached by failing
to close within a reasonable time. In June 2009, NYA had filed a
complaint asking for rescission of the contract because there had
not been a meeting of the minds about “whether the [Harrisons]
can limit the number of times that [NYA] extends the settlement
deadline,” and the Harrisons had countered in July 2009 with
claims that NYA had already breached the REPC by not closing
on the purchase of the Property within a reasonable time.
Certainly, at the time NYA tendered the payment, its
interpretation of the extension provision amounted to essentially
a litigation position, however meritorious it might prove to be in
the future. Thus, there is merit to the Harrisons’ contention that,
had they accepted the payment, conditioned as it was, they
would have essentially capitulated mid-litigation to NYA’s
interpretation of a disputed provision of the contract. Cf. 86 C.J.S.
Tender § 26 (2016) (“[A] tender, the acceptance of which requires
the abandonment of the creditor’s position, is not a valid
tender.”). And this is especially true where the Harrisons
countered NYA’s invalid tender with a written undertaking to
continue accepting the extension payments (presumably until
the dispute was resolved in court) so long as the payments were
offered unconditionally, as they had been up to the time of
NYA’s August tender.

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                   New York Ave. v. Harrison

¶45 For these reasons, NYA’s demand that the Harrisons
agree that NYA was not obligated to close until it determined
that the zoning ordinances, market conditions, and other
circumstances aligned to produce “economic feasibility” made
NYA’s tender of the extension payment conditional and
therefore invalid. Accordingly, we conclude that the district
court erred when it determined that the August 31, 2009 tender
was valid and that the Harrisons breached the REPC by refusing
to accept it.

B.    The Legal Effect of the Invalid Tender Payment

¶46 Because NYA’s August 31, 2009 tender was invalid and
NYA chose not to make an unconditional tender in response to
the Harrisons’ invitation, the REPC’s Settlement Deadline
became fixed. The REPC explicitly stated that each extension
payment extended the Settlement Deadline by only one month.
Thus, because the August 31, 2009 tender was invalid, the last
legally effective extension payment was made in July 2009,
which extended the Settlement Deadline to the end of August
2009.

¶47 The Harrisons argue that to continue the REPC past
August 2009, “NYA was required to continue to make Extension
Payments under the REPC” after the August 2009 payment was
rejected and that their failure to accept the disputed extension
payment “did not excuse NYA’s subsequent non-performance”
in light of their continued willingness to accept unconditional
extension payments. As a result, the Harrisons ask us to
determine that NYA has breached the REPC “by failing to
purchase the Property or make Extension payments” once the
Settlement Deadline became fixed.

¶48 But NYA’s failure to make an additional valid extension
payment after the failed August 31, 2009 tender does not on its
face appear to breach the contract—after all, NYA had a choice
under the REPC whether to extend the deadline and was not

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                    New York Ave. v. Harrison

required to do so. Instead, as we have discussed, the result of
failing to make further extension payments was simply to
establish a fixed date for the Settlement Deadline.

¶49 And in this regard, the REPC allocated to each party
certain tasks to be completed by the Settlement Deadline in
order for closing of the purchase to occur. For example, the
REPC provides that “‘[s]ettlement’ shall occur only when all” of
certain specified events have occurred; among them, “(a) Buyer
and Seller have signed and delivered to each other . . . all
documents required by this Contract”; (b) “any monies required
to be paid by Buyer . . . have been delivered by Buyer to Seller or
to the escrow/closing office”; and (c) “any monies required to be
paid by Seller under these documents have been delivered by
Seller to Buyer or to the escrow/closing office.” The REPC also
provides that the purchase will be “considered closed when
Settlement has been completed, and when all of the following
have been completed: (i) the proceeds of any new loan have been
delivered by the Lender to Seller . . . [, and] (ii) the applicable
Closing documents have been recorded in the office of the
county recorder.” Because the district court determined that the
Harrisons were in breach for failure to accept NYA’s tender, it
did not determine whether any of the required settlement events
had occurred by the August 2009 Settlement Deadline. Rather, it
seems likely that the day had come and gone without the
accomplishment of the tasks the REPC required and that the sale
and purchase of the Property did not close as the contract
contemplated.

¶50 Neither party has addressed on appeal the potential legal
implications of the Settlement Deadline having passed without
the required events having been performed. Nor did the district
court consider the implications of this outcome, because it
resolved the parties’ competing claims by deciding that the
Harrisons had breached by not accepting the tendered extension
payment. But we are not in a position to determine on appeal the

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                    New York Ave. v. Harrison

consequences for either party under the REPC of the Settlement
Deadline having passed without the tasks required by the REPC
having been accomplished and, ultimately, without the sale and
purchase of the Property having closed.

¶51 In addition, as the Harrisons point out, it is significant
that at the time the Settlement Deadline became fixed, the parties
were embroiled in litigation involving competing claims that the
REPC was unenforceable or had already been breached. For
example, NYA had requested in its complaint that the REPC be
rescinded entirely because the parties did not have a meeting of
the minds regarding the legal effect of the extension provision; it
had also asserted that the Harrisons had “anticipatorily or
actually breached the REPC by, among other things, demanding
that [NYA] close on the Property on or before August 5, 2009.”
The Harrisons, for their part, had counterclaimed that NYA had
breached the REPC and the covenant of good faith and fair
dealing by failing to close in a reasonable time. These claims as
well as the rights and liabilities of each party pertaining to the
extension provision had yet to be adjudicated as of August 31,
2009.

¶52 Moreover, the conclusions we have reached earlier in this
decision have undone the major premise undergirding the
district court’s summary judgment ruling—namely, that the
REPC gave NYA the right to extend the Settlement Deadline an
unlimited number of times for any reason it chose and the
corollary that the Harrisons were obligated to accept any timely
proffer of a tender payment NYA made. On remand, the district
court will therefore be required to substantially reevaluate the
legal effect of the parties’ actions in light of our decision.

¶53 For these reasons, although the Harrisons have requested
that we find NYA in breach of the REPC for failing to purchase
the Property once the Settlement Deadline became fixed and
then passed, we conclude that it is premature for us to address

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                   New York Ave. v. Harrison

whether the passing of the Settlement Deadline after NYA’s
failed August 2009 tender had the effect of putting NYA in
breach of the REPC, leaving that question for the parties and the
court on remand.

                 III. The Parties’ Other Claims

¶54 Because we conclude that the district court erred when it
determined that (1) NYA was entitled to extend the closing
indefinitely; (2) the REPC included a specific time for closing;
and (3) the August 31, 2009 tender was valid and the Harrisons
breached by not accepting it, we do not reach the parties’ other
claims on appeal. We also do not reach NYA’s cross-appeal
arguments regarding election of damages, additional attorney
fees, and prejudgment interest; those claims are necessarily
dependent on the resolution of the case below on remand. And
because the district court will be required to reevaluate the
parties’ claims of breach, we do not reach the Harrisons’ other
claims—namely that NYA itself breached the REPC by violating
the covenant of good faith and fair dealing and by not making
additional unconditional extension payments or closing on the
Property.

                        CONCLUSION

¶55 For the reasons discussed above, we reverse the district
court’s summary judgment rulings and vacate the final
judgment awarding damages and fees to NYA. We remand this
case for further proceedings consistent with this opinion.

ORME, Judge (concurring in the result):

¶56 I agree with my colleagues’ bottom line, but I disagree
with much of their analysis. Thus, I join in the mandate of

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                     New York Ave. v. Harrison

reversal with remand, but I get there from a quite different
perspective.

¶57 While my colleagues’ urge to rescue the Harrisons from
their bad bargain is understandable, the district court was
absolutely correct in interpreting the contract in accordance with
its plain meaning: NYA had the contractual right to extend the
closing date from month-to-month, without limits other than
those resulting from the exercise of its own business judgment
about when would be the best time to close the sale and
commence development, upon payment of a stated amount. At
least in retrospect, this was not a great arrangement from the
standpoint of the Harrisons, who would have been better off
with a provision limiting the number of times that NYA could
extend the time for closing by paying that amount, or providing
that it was a convenience fee only and would not be credited to
the purchase price, or having the amount go up by $1000 per
month. But they insisted upon none of those provisions in the
course of negotiation and thus are stuck with their bargain. And
the bargain itself is, perhaps, not all that unreasonable. After all,
they wanted to sell the land to fund their retirement, and the
monthly closing-postponement fee provided a reliable source of
income pending NYA’s eventual purchase, even as they
continued to reap the benefits of the land’s traditional
agricultural use. (Clearly, they would have been better off with
the larger stream of income that would have been available had
they not agreed to reduce the monthly payments by half. Again,
though, that was their decision.)

¶58 Turning to the next principal issue, I part ways with the
district court and essentially agree with the position ultimately
taken by my colleagues, although not all of their analysis. While
in my view NYA was free to keep paying the monthly amount to
extend the closing date, it had no right to condition the last
payment it tendered on the Harrisons’ acceptance of the self-
serving points made in the letter accompanying its check. Thus,

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                    New York Ave. v. Harrison

the Harrisons were free to reject the conditional tender. When
NYA did not follow up with unconditional payment of the
monthly amount, NYA became obligated to close by a date
certain, as specified in the REPC.

¶59 It seems to me that when that date came and went
without NYA tendering the purchase price, NYA breached. But I
recognize the case may well be more complicated than that, so I
have no problem with remanding to let the district court sort out
what, exactly, should happen now. See Halladay v. Cluff, 739 P.2d
643, 645 n.5 (Utah Ct. App. 1987) (“Trial courts are in a much
better position to evaluate an entire case, including its nuances
and undisclosed pitfalls, than an appellate court. It is for this
reason that where, as in this case, all possible ramifications of a
decision on appeal may not be readily apparent, a case will be
remanded for such proceedings as are appropriate in view of the
guidance offered in the opinion.”). But at a big picture level, it
seems to me that while NYA won a battle—it is right that it had
the option of extending the closing date from month to month—
it loses the war. Why? Because it failed to continue making those
payments after its improperly conditioned tender was
appropriately rejected by the Harrisons, following which it failed
to tender the balance due, thereby materially breaching the
contract.

20140719-CA                    30               2016 UT App 240