Watkins v. Ford , 2013 UT 49 ( 2013 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2013 UT 31
304 P.3d 841
IN THE
SUPREME COURT OF THE STATE OF UTAH
TOM WATKINS,
Plaintiff and Respondent,
v.
HENRY DAY FORD,
Defendant and Petitioner.
No. 20100802
Filed May 31, 2013
On Certiorari to the Utah Court of Appeals
Third District, Salt Lake
The Honorable Tyrone E. Medley
No. 20090542
Attorneys:
P. Bryan Fishburn, Salt Lake City, for respondent
Robert W. Hughes, Salt Lake City, for petitioner
JUSTICE PARRISH authored the opinion of the Court, in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE NEHRING,
JUSTICE DURHAM, and JUSTICE LEE joined.
JUSTICE PARRISH, opinion of the Court:
INTRODUCTION
¶1 On certiorari, we are asked to decide whether Henry Day
Ford (Henry Day) and Tom Watkins abandoned Motor Vehicle Sales
Contracts (Vehicle Contracts or Contracts) for the sale of two Ford
GT40s; whether the Contracts contained a latent ambiguity
regarding the identity of the vehicles to be sold; and, in the event
that Henry Day breached the Contracts, whether Mr. Watkins
adequately mitigated his damages. The district court entered
judgment in favor of Henry Day, concluding that the Contracts were
not even applicable because they referred to different vehicles than
the ones in dispute and, alternatively, that both parties abandoned
the Contracts when they acted inconsistently with their continued
WATKINS v. FORD
Opinion of the Court
existence. It also held that Mr. Watkins had failed to mitigate his
damages.
¶2 The court of appeals reversed. While it held that there
was a latent ambiguity in the Contracts regarding the identity of the
vehicles to be sold, it concluded that the ambiguity was of no
moment because both parties intended that the Contracts cover the
vehicle that is now known as the Ford GT. It reversed the district
court on the abandonment issue, holding as a matter of law that
Mr. Watkins did not intend to abandon the Vehicle Contracts.
Finally, because the court of appeals determined that the district
court had made insufficient factual findings to support the
conclusion that Mr. Watkins had failed to mitigate his damages, it
remanded the case for a hearing on damages. We accepted Henry
Day’s Petition for Writ of Certiorari.
¶3 We first hold that although the Vehicle Contracts contain
a latent ambiguity, the latent ambiguity does not excuse either
party’s performance under the Contracts because the parties’ intent
aligned with respect to the vehicles to be bought and sold. We next
hold that Henry Day abandoned the Vehicle Contracts by refunding
Mr. Watkins’s deposit and by conveying its belief that the dealership
would not get an allotment of the vehicles. However, because Henry
Day’s representations regarding the possibility of receiving the
vehicles were ambiguous, the issue of whether Mr. Watkins
abandoned his rights under the Vehicle Contracts requires a remand
for additional factual findings. If the district court concludes that
Mr. Watkins did not abandon the Contracts, it must then consider
whether Mr. Watkins adequately mitigated his damages.
¶4 We accordingly affirm the court of appeals’ determination
that the latent ambiguity in the Vehicle Contracts did not absolve the
parties of their respective obligations and remand for a
determination as to whether Mr. Watkins abandoned his rights
under the Contracts and, if necessary, for a determination as to
whether Mr. Watkins mitigated his damages.
BACKGROUND
¶5 Ford Motor Company (Ford) introduced the GT40 concept
car at the 2002 North American Auto Show. Watkins v. Henry Day
Ford, 2010 UT App 243, ¶ 2, 239 P.3d 526. Because the car received
a positive public reception at the auto show, Ford announced it
would produce a limited number of street-legal GT40s. Id. The
limited number of GT40s were to be allocated to Ford dealers
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through a lottery or by receipt of either the Ford President’s Award
or Ford National Car and Truck Share Award (Share of the Nation
Award) (collectively, Allocation Awards).
¶6 Mr. Watkins, the owner of a Volkswagen dealership,
learned of Ford’s production plans for the GT40 and decided that he
wanted to preorder two GT40s before Ford completed production of
the vehicles and delivered them to dealerships. Mr. Watkins
contacted numerous Ford dealerships in Utah, including Henry Day,
to inquire whether he could preorder GT40s.
¶7 On March 4, 2002, Mr. Watkins met with Steve Kersey,
fleet manager at Henry Day. At the time of the meeting, Henry Day
did not possess any GT40s and did not know whether Ford would
allocate any GT40s to the dealership. Nevertheless, Mr. Watkins and
Mr. Kersey executed two Vehicle Contracts for the “1st GT40” and
“2nd GT40” ordered by Henry Day (Motor Vehicle Sales Contracts
1 and 2). Mr. Watkins secured each contract with a $1,000 deposit.
Both parties understood that each Vehicle Contract was subject to
the condition precedent that Ford actually allocate GT40s to Henry
Day. Mr. Watkins understood that one avenue for Henry Day to
receive allocation of GT40s was if the dealership received the
President’s Award from Ford.
¶8 Initially, the parties executed the Contracts without
specifying a price for the vehicles. The following day, however,
Mr. Watkins contacted Mr. Kersey, and the parties agreed to modify
the contracts to specify a purchase price equivalent to
Manufacturer’s Suggested Retail Price (MSRP).
¶9 In December 2002, Henry Day’s general manager called
the dealership’s Ford representative to inquire whether Henry Day
would be allocated any GT40s via lottery. The Ford representative
informed the general manager that Henry Day, as a smaller
dealership, would not be awarded any GT40s unless it won an
Allocation Award—either the President’s Award or the Share of the
Nation Award. At the time of the call, Henry Day had operated for
approximately forty years and had never won an Allocation Award.
¶10 Based on the general manager’s conversation with Ford,
Henry Day sent Mr. Watkins a December 31, 2002 letter that stated,
“[w]e regret to inform you that our allocation is not going to allow
us to receive this vehicle.” The December 31st letter included a
$2,000 check refunding Mr. Watkins’s deposit for each Vehicle
Contract. Mr. Watkins received the check and deposited it on
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Opinion of the Court
February 19, 2003, without any objection or other communication to
Henry Day. Mr. Watkins then reinitiated his search for a Ford
dealership that would permit him to preorder GT40s, contacting
dealers throughout the western and midwestern United States.
¶11 At some point after Henry Day returned Mr. Watkins’s
deposit, Ford renamed the production version of the “GT40” concept
car the “GT.” Id. ¶ 5.
¶12 Over one year later, in February 2004, Henry Day learned
from Ford that it had won the Share of the Nation Award based on
its 2003 vehicle sales. As part of the award, Ford allocated one GT
to Henry Day. Then, in April 2004, Ford notified Henry Day that it
had won the President’s Award based on its 2003 vehicle sales and
allocated a second GT to Henry Day. And in February 2005, Henry
Day learned that it had won a second President’s Award based on
its 2004 vehicle sales and that it would receive a third GT.
¶13 On June 8, 2005, Mr. Watkins’s business manager learned
that Henry Day had been allocated GTs, and he informed
Mr. Watkins. Despite having had no contact with Henry Day since
receipt of the dealership’s December 31st letter, Mr. Watkins went
to the dealership and demanded that Henry Day sell him two GTs
at the MSRP of $156,945. Henry Day instead offered to sell
Mr. Watkins one GT for $250,000. Mr. Watkins refused the offer and
filed a complaint alleging breach of contract and unjust enrichment.
¶14 The district court conducted a bench trial, entered findings
of fact and conclusions of law, and ruled in favor of Henry Day. It
held that the Vehicle Contracts were “clear and unambiguous,”
finding that the Vehicle Contracts specified that Henry Day would
sell “GT40s” to Mr. Watkins, not the “GTs” that Ford ultimately
delivered to Henry Day. As a result, the district court held that the
Vehicle Contracts did not require Henry Day to sell GTs to
Mr. Watkins and that Henry Day did not breach the contracts.
Alternatively, the district court held that both parties abandoned the
Vehicle Contracts by engaging in conduct inconsistent with their
continued existence. Specifically, the district court found that Henry
Day acted inconsistently with the Vehicle Contracts by refunding
Mr. Watkins’s deposit, and Mr. Watkins acted inconsistently with
the contracts by accepting and depositing the refund check without
objection. While the district court did not enter a clear conclusion
regarding waiver, it implied that Mr. Watkins’s conduct also
resulted in a waiver of his rights under the Vehicle Contracts.
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Finally, the district court determined that “[Mr. Watkins’s] refusal to
purchase the Ford GT constitute[d] a failure . . . to mitigate his
damages.” Based on these findings and the terms of the Vehicle
Contracts, the district court ruled in favor of Henry Day and
awarded the dealership its attorney fees and costs.
¶15 Mr. Watkins appealed and the Utah Court of Appeals
reversed. Id. ¶ 22. The court of appeals held that the Vehicle
Contracts contained a latent ambiguity regarding the identity of the
vehicles to be sold, but that the parties intended to sell and buy the
production model of the GT40—which Ford designated the “GT.”
Id. It therefore concluded that Henry Day breached the Contracts by
refusing to sell two GTs to Mr. Watkins for MSRP. Id. ¶ 16. Next,
the court of appeals treated waiver and abandonment as identical
legal theories, reasoning that both involve the “intentional
relinquishment of a known right.” Id. ¶ 17. It held that Henry Day’s
December 31st letter was an unequivocal representation that the
condition precedent to the Vehicle Contracts had failed, i.e., that the
dealership would not receive any of the contracted-for vehicles.
Id. ¶ 18. It then concluded that, at the time of the dealership’s
December 31st letter, Mr. Watkins did not know he still had rights
under the Vehicle Contracts and therefore could not have
relinquished a “known” right. Id. ¶¶ 18–19. The court of appeals
then determined that the district court’s findings of fact were
insufficient to support its conclusion that Mr. Watkins had failed to
mitigate his damages and it remanded that issue for additional
factual findings. Id. ¶ 20. Finally, the court of appeals instructed the
district court to award attorney fees and costs to Mr. Watkins. Id.
¶ 21.
¶16 Judge Thorne filed a separate opinion. He concurred in
the majority’s holding that Henry Day had breached the Vehicle
Contracts and that the district court had made insufficient factual
findings to determine whether Mr. Watkins had failed to mitigate his
damages. Id. ¶ 24. Judge Thorne dissented, however, from the
majority’s holding that the parties had not abandoned the Vehicle
Contracts. Id. ¶¶ 24–25. He would have affirmed the district court,
including the award of attorney fees to Henry Day. Id. Judge
Thorne reasoned that Henry Day had acted inconsistently with the
Vehicle Contracts by refunding Mr. Watkins’s deposit and
Mr. Watkins had acted inconsistently with the Contracts by
depositing the refund check without objection. Id. ¶ 26. Judge
Thorne disagreed with the majority’s contention that Mr. Watkins no
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longer knew he had rights under the Vehicle Contracts after
receiving Henry Day’s December 31st letter. Id. ¶ 28. He reasoned
that Mr. Watkins’s contingent right to purchase GT40s under the
Vehicle Contracts bore no relationship to the likelihood that Henry
Day would actually receive the GT40s from Ford. Id. Judge Thorne
also reasoned that Henry Day’s desire to abandon the Vehicle
Contracts did not affect Mr. Watkins’s contingent rights under the
contracts. Id.
¶17 Henry Day filed a Petition for Writ of Certiorari with this
court. We granted the petition and have jurisdiction pursuant to
sections 78A-3-102(3)(a) and 78A-3-102(5) of the Utah Code.
STANDARD OF REVIEW
¶18 “On a writ of certiorari, we review the decision of the
court of appeals, not that of the district court, and apply the same
standard[s] of review used by the court of appeals.” Coulter & Smith,
Ltd. v. Russell, 966 P.2d 852, 855 (Utah 1998). “We conduct that
review for correctness, ceding no deference to the court of appeals.”
State v. Brake, 2004 UT 95, ¶ 11, 103 P.3d 699.
¶19 The court of appeals held first that the Vehicle Contracts
were ambiguous. As a general proposition, questions regarding the
construction and interpretation of a contract are reviewed as a
matter of law and we afford no deference to a lower court’s ruling.
O’Hara v. Hall, 628 P.2d 1289, 1290–91 (Utah 1981). Similarly,
“[w]hether a contract is ambiguous is a question of law, which we
review for correctness.” Peterson v. Sunrider Corp., 2002 UT 43, ¶ 14,
48 P.3d 918. But where an appellate court finds that a contract is
ambiguous and looks to extrinsic evidence to determine the intent
of the parties, it must give deference to the lower court’s findings of
fact. Kimball v. Campbell, 699 P.2d 714, 716 (Utah 1985).
¶20 The court of appeals next held that Mr. Watkins did not
abandon the Vehicle Contracts. What constitutes abandonment of
a contract is a question of law that we review for correctness. Rogier
v. Am. Testing & Eng’g Corp., 734 N.E.2d 606, 619 (Ind. Ct. App. 2000).
Whether a contract has been abandoned, however, presents a
question of fact. 17B C.J.S. Contracts § 586 (2013). Therefore, while
we review the court of appeals’ determination for correctness, we
afford the district court’s factual findings a high degree of deference.
Hughes v. Cafferty, 2004 UT 22, ¶ 24 n.2, 89 P.3d 148.
¶21 Finally, the court of appeals held that the district court
made insufficient findings to conclude that Mr. Watkins failed to
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mitigate his damages. We review the court of appeals’ legal
conclusion for correctness. Morse v. Packer, 2000 UT 86, ¶ 16, 15 P.3d
1021.
ANALYSIS
¶22 We granted Henry Day’s Petition for Writ of Certiorari to
consider three questions. First, “[w]hether a majority of the panel of
the court of appeals erred in reversing the district court’s
determination that the parties abandoned their contracts and that
[Mr. Watkins] waived his rights under the contracts.” Second,
“[w]hether the court of appeals erred in holding that there was a
latent ambiguity in the contracts and that [Henry Day] breached the
contracts.” Third, “[w]hether the court of appeals erred in reversing
the district court’s determination that [Mr. Watkins] failed to
mitigate his damages.”
¶23 Because both parties understood that the Vehicle
Contracts referred to the production version of Ford’s concept car,
the “GT40” (sold to the public as the Ford “GT”), we hold that the
latent ambiguity in the Contracts regarding the identity of the
vehicles to be sold did not absolve the parties of their contractual
obligations. We next hold that Henry Day abandoned the Vehicle
Contracts when it represented to Mr. Watkins that the dealership
would not be getting any of the contracted-for vehicles and refunded
his deposits. But there are insufficient factual findings to determine
whether Mr. Watkins abandoned his rights under the Contracts and,
in the event that he did not, whether he properly mitigated his
damages. We therefore remand this matter for further factual
findings on these issues.
I. BECAUSE THE PARTIES UNDERSTOOD THAT THEY
WERE CONTRACTING FOR THE PRODUCTION
VERSION OF THE FORD GT40, THE LATENT
AMBIGUITY IN THE VEHICLE CONTRACTS
DOES NOT EXCUSE THE PARTIES’
CONTRACTUAL OBLIGATIONS
¶24 Even though the Vehicle Contracts referred to the sale of
the Ford GT40, the court of appeals held that they should be
interpreted to embrace the sale of the Ford GTs that were actually
delivered to Henry Day. Despite the Contracts’ latent ambiguity, it
reasoned that there was no question that the parties intended to
contract for the sale and purchase of two Ford GTs—the moniker for
the production version of the Ford GT40. Henry Day argues that
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“[g]iven the sophisticated business parties involved in the[]
Contracts . . . the Contracts should be interpreted strictly on the[ir]
plain language.” In contrast, Mr. Watkins argues that the parties
used the term “GT40” to identify the vehicles he sought to purchase
only “because that was its name at the time,” and that “Henry Day
knew and understood that the GTs it received were the same model
that Ford . . . had initially introduced as the Ford GT40.”
¶25 We begin with Henry Day’s argument that the integration
clause of the Vehicle Contracts prevents the consideration of
extrinsic evidence regarding the alleged ambiguity. While we agree
that the Contracts contain integration clauses,1 the integration
clauses do not necessarily bar the introduction of extrinsic evidence.
Tangren Family Trust v. Tangren, 2008 UT 20, ¶ 11, 182 P.3d 326.
Despite a finding that an “agreement is integrated, . . . parol
evidence may be admitted . . . if . . . the language of the agreement
is ambiguous.” Id. (internal quotation marks omitted).
¶26 “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.” Ward v. Intermountain Farmers Ass’n, 907 P.2d 264,
268 (Utah 1995). We allow the introduction of relevant evidence
1
The Vehicle Contracts each contain an identical provision that
states,
[p]urchaser agrees that this contract includes all of the
terms, conditions and warranties on both the face and
reverse side hereof, that this agreement cancels and
supercedes any prior agreement and as of the date
hereof comprises the complete and exclusive state-
ment of the terms of the agreement relating to the
subject matter conveyed hereby.
“[W]e have explained that when parties have reduced to writing
what appears to be a complete and certain agreement, it will be
conclusively presumed, in the absence of fraud, that the writing
contains the whole of the agreement between the parties.” Tangren
Family Trust v. Tangren, 2008 UT 20, ¶ 12, 182 P.3d 326 (internal
quotation marks omitted). Because the language of the Vehicle
Contracts states that it is “complete and exclusive” of other agree-
ments and there is no assertion of fraud, the Contracts are inte-
grated.
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regarding the existence of a potential ambiguity to prevent an
“inherently one-sided [analysis] . . . based solely on the extrinsic
evidence of the judge’s own linguistic education and experience.”
Id. (internal quotation marks omitted). In this way, we can interpret
a contract and any potential ambiguity in light of the parties’
intentions. See WebBank v. Am. Gen. Annuity Serv. Corp., 2002 UT 88,
¶ 17, 54 P.3d 1139 (“The underlying purpose in construing or
interpreting a contract is to ascertain the intentions of the parties to
the contract.”).
¶27 We first evaluate the Contracts for facial ambiguity. Facial
ambiguity exists “if [a contractual term or provision] is capable of
more than one reasonable interpretation because of uncertain
meanings of terms, missing terms, or other facial deficiencies.” Id.
¶ 20 (internal quotation marks omitted). The court of appeals held
that there was no facial ambiguity in the Vehicle Contracts because
“[w]hen the parties chose the term GT40, it was unambiguous and
meant just that—the parties were contracting for the sale of what
was then known as the GT40.” Watkins v. Ford, 2010 UT App 243,
¶ 14, 239 P.3d 526. We agree.
¶28 But this does not end our inquiry. “Utah’s rules of
contract interpretation allow courts to consider any relevant
evidence to determine whether a latent ambiguity exists in contract
terms that otherwise appear to be [facially] unambiguous.“ Gillmor
v. Macey, 2005 UT App 351, ¶ 35, 121 P.3d 57 (emphasis in original);
see also 32A C.J.S. Evidence § 1514 (2013) (“Thus, a contract
apparently unambiguous on its face may still contain a latent
ambiguity that can only be exposed by extrinsic evidence.”). While
a “[facial] ambiguity arises solely from the terms of the
instrument, . . . a latent ambiguity is one not appearing upon the
face of the instrument, but is developed by extrinsic evidence.”
Conlam v. Doull, 9 P. 568, 569 (Utah Terr. 1886). A latent ambiguity
“arises from a collateral matter when the document’s terms are
applied or executed.” BLACK’S LAW DICTIONARY 93 (9th ed. 2009).
By 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.2
2
The introduction of “any relevant evidence,” Gillmor v. Macey,
2005 UT App 351, ¶ 35, 121 P.3d 57 (emphasis in original), does not,
(continued...)
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¶29 The court of appeals reasoned that a latent ambiguity was
“created by Ford’s later decision to name the anticipated car the GT
instead of the GT40” and it then assessed “evidence of surrounding
circumstances . . . to determine what car the parties intended to buy
and sell.” Watkins, 2010 UT App 243, ¶¶ 14, 16. We agree with the
court of appeals’ approach and its holding that the extrinsic evidence
demonstrated the parties’ intent to contract for the sale and purchase
of “two of the cars that Ford announced and produced on the heels
of the GT40 concept car that was unveiled at the 2002 auto show.”
Id. Mr. Watkins testified that he went to Henry Day with the intent
to purchase the production version of a concept car unveiled by Ford
as the “GT40.” Both Mr. Watkins and Steve Kersey, Henry Day’s
fleet manager, used the term “GT40” to describe the car “because
that was [the vehicle’s] name at the time.” Mr. Kersey testified that
when he created the Vehicle Contracts, “[he] understood that the
automobiles that were the subject of [the Contracts were] the yet to
be produced Ford GT concept car or the GT40 as it was called at that
time.”
¶30 At some point after the parties executed the Vehicle
Contracts, Ford shortened the name of the production version of its
concept car from “GT40” to “GT.” Henry Day argues that the names
“GT40” and “GT” may refer to different vehicles. But that
proposition is simply not supported by the undisputed evidence.
Jeremy Day, a co-owner and general manager of Henry Day,
testified that “[t]he GT had earlier been introduced as the GT40.”
Thus, the testimony supports the conclusion that when the Vehicle
Contracts were 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,
2
(...continued)
however, allow a litigant to create ambiguity out of whole cloth or
to advocate for an interpretation that is in no way supported by the
language of the underlying contract. “[W]ords and phrases do not
qualify as ambiguous simply because one party seeks to endow
them with a different interpretation according to his or her own
interests.” Saleh v. Farmers Ins. Exch., 2006 UT 20, ¶ 17, 133 P.3d 428.
Thus, “a finding of ambiguity after a review of relevant, extrinsic
evidence is appropriate only when reasonably supported by the
language of the contract.” Daines v. Vincent, 2008 UT 51, ¶ 27, 190
P.3d 1269 (internal quotation marks omitted).
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the “GT40.”3 Because there is no dispute as to the identity of the
vehicles for which the parties contracted, the latent ambiguity
created by Ford’s subsequent name change does not excuse either
party’s obligations under the Vehicle Contracts.
II. HENRY DAY’S CONDUCT DEMONSTRATED ITS
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
3
Were we to accept Henry Day’s argument, a party could use the
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.
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permanently failed. Mr. Watkins reasons that, because of the letter,
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 (emphasis in original) (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. (emphasis in original)
(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
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 abandon-
ment 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 relinquish-
ment of a known right.” Id. at 942 (emphasis added) (internal
quotation marks omitted). The imprecise language in Timpanogos
(continued...)
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§ 586 (2013).
¶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
5
(...continued)
blurred the lines between our waiver and abandonment jurispru-
dence. Today we clarify that Timpanogos applied the waiver rule
and, as such, is more properly characterized as a waiver case.
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outset [the parties] knew that there was the possibility that [Henry
Day] wouldn’t get any cars.” He then testified that he deposited the
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
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Cite as: 2013 UT 31
Opinion of the Court
Henry Day’s abandonment understanding that Henry Day could
never receive any vehicles, Mr. Watkins’s actions do not constitute
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 *13 (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)).
15
WATKINS v. FORD
Opinion of the Court
III. THE DISTRICT COURT’S FINDINGS OF
FACTS ARE INSUFFICIENT TO DETERMINE
WHETHER MR. WATKINS PROPERLY
MITIGATED HIS DAMAGES
¶42 In the event that the court on remand finds that
Mr. Watkins did not abandon the Vehicle Contracts, it must then
assess the issue of damages. “[U]nder the doctrine of avoidable
consequences the nonbreaching party has an active duty to mitigate
his damages, and he may not, either by action or inaction, aggravate
the injury occasioned by the breach.” Mahmood v. Ross (In re Estate
of Ross), 1999 UT 104, ¶ 31, 990 P.2d 933 (internal quotation marks
omitted).
¶43 The court of appeals determined that the district court had
made insufficient factual findings to conclude that Mr. Watkins
failed to mitigate his damages. We agree. The district court made
only a passing and conclusory reference to the issue of mitigation in
its findings of fact. We are therefore unable to determine whether
Mr. Watkins appropriately mitigated his damages.
CONCLUSION
¶44 The Vehicle Contracts contain a latent ambiguity created
by Ford’s decision to rename the production version of the “GT40”
the “GT.” This latent ambiguity, however, does not excuse the
parties’ obligations under the Contracts because the parties were in
agreement regarding the identity of the cars to be bought and sold.
¶45 Parties abandon a contract when their conduct is
inconsistent with the continued existence of the contract. Henry Day
acted inconsistently with the continued existence of the Vehicle
Contracts by refunding Mr. Watkins’s deposit. While Mr. Watkins’s
actions were likewise inconsistent with the existence of the
Contracts, we remand for a determination of his understanding of
the December 31st letter at the time he took these actions. Finally, in
the event the district court finds that Mr. Watkins’s actions did not
constitute abandonment of the Vehicle Contracts, it must then
determine whether Mr. Watkins properly mitigated his damages.
¶46 Because we remand for further proceedings on the issues
of Mr. Watkins’s abandonment and mitigation of damages, we
vacate the court of appeals’ award of damages and attorney fees in
favor of Mr. Watkins.
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