Stein Eriksen Lodge v. MX Technologies , 2022 UT App 30 ( 2022 )

2022 UT App 30THE UTAH COURT OF APPEALS
STEIN ERIKSEN LODGE OWNERS ASSOCIATION INC. AND
STEIN ERIKSEN LODGE MANAGEMENT CORP.,
Appellees,
v.
MX TECHNOLOGIES INC.,
Appellant.
Opinion
No. 20200256-CA
Filed March 10, 2022
Third District Court, Salt Lake Department
The Honorable Su Chon
No. 169903978
Alexander Dushku, Justin W. Starr, Robert E.
Mansfield, and Megan E. Garrett, Attorneys
for Appellant
Troy L. Booher, Taylor Webb, Joelle S. Kesler,
Jonathan W. Gold, Steven M. Rudner, and John C.
Josefsberg, Attorneys for Appellees
JUDGE RYAN M. HARRIS authored this Opinion, in which
JUDGES JILL M. POHLMAN and DIANA HAGEN concurred.
HARRIS, Judge:
¶1 After being asked by her superiors to help plan a major
corporate conference, the Events Manager of MX Technologies
Inc. (MX) signed contracts—totaling more than $350,000—for
rooms, food, and services at the Stein Eriksen Lodge (Stein). MX
later decided not to hold the conference, and claimed that the
contracts were invalid, in whole or in part, because Events
Manager did not have authority to sign them, and because the
contracts’ liquidated damages provisions were unconscionable.
Stein sued MX for breach of contract, and the district court
Stein Eriksen v. MX Technologies, Inc.
entered summary judgment in Stein’s favor, concluding that, as
a matter of law, Events Manager had authority to sign the
contracts and the liquidated damages provisions are not
unconscionable.
¶2 MX now appeals, and we affirm in part and reverse in
part. We agree with the district court that, as a matter of law, the
liquidated damages provisions are not unconscionable, and
affirm that portion of the court’s ruling. We also affirm the
court’s implied determination that MX did not cancel any
contractual relationship between the parties until just sixty days
before the event was to begin. But we conclude that questions of
fact preclude summary judgment on the other issues presented,
including whether Events Manager had authority to execute the
contracts, and whether MX ratified those contracts following
their execution. We therefore vacate that portion of the court’s
ruling and remand the case for further proceedings.
BACKGROUND1
¶3 In October 2015, MX began internal discussions about
hosting a major corporate conference, to which it planned to
invite current and prospective clients. In an attempt to “get
something on the calendar” for the event, the company’s
Director of Community and Client Advocacy sent an email
explaining the vision, goals, and potential agenda of the event.
Among the recipients of this email were—in order of placement
on the corporate organizational chart—the company’s Chief
Financial Officer (CFO), Marketing Director, Events Manager,
1. When reviewing a grant of summary judgment, we view “the
facts in a light most favorable to the losing party below.”
Goodnow v. Sullivan, 2002 UT 21, ¶ 7, 44 P.3d 704 (quotation
simplified).
20200256-CA 2 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
and Events Coordinator. At the time, Events Manager was
twenty-four years old, and had been hired by MX only a few
months earlier. Events Coordinator reported to Events Manager,
who reported to Marketing Director, who reported to the
company’s newly hired Chief Marketing Officer (CMO). Events
Manager and Events Coordinator were tasked with the
assignment of negotiating a prospective contract with Stein,
which had been tentatively selected as the site for the potential
event. The pair soon began correspondence with Stein, and in
November they participated in a site visit, during which they
toured Stein’s facilities.
¶4 After the site visit, Events Coordinator continued to
correspond with Stein, expressing continued interest in the
venue but noting that, because MX had just hired a new CMO,
she needed “to get approval from him before moving forward.”
Stein responded that other groups were also interested in
booking its facilities during the same time period and expressed
some sense of urgency, indicating that it needed a commitment
from MX in order to hold the rooms open.
¶5 The following week, MX’s marketing department—
including Marketing Director, Events Manager, and the new
CMO—met to discuss the event. At this meeting, the group
made the decision to move forward with the conference, and
CMO noted that they needed to “get cranking” to lock down the
venue by the end of the year.
¶6 Events Manager called Stein later that day to discuss
contract terms, including deposits, cancellation, and liquidated
damages. A few days later, Stein emailed proposed contracts to
both Events Manager and Events Coordinator. Events Manager
informed Stein that MX would need some time to review the
contracts “and have [its] legal team also glance over [them]”
before they could be executed.
20200256-CA 3 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
¶7 More than two weeks went by without a response. On
New Year’s Eve, Stein followed up with Events Manager,
alerting her that another group had submitted a proposal that
conflicted with MX’s proposed dates and asking to “confirm
everything and finalize the contract.” Apprehensive about the
possibility of losing the dates, Events Manager signed the
contracts2 on December 31, 2015. According to the contracts, the
conference was to begin on August 1, 2016.
¶8 Under the terms of the contracts, MX agreed to pay for
720 room nights (the room charges totaled $176,080) and for at
least $146,000 for food and drink charges, plus a 23% service
charge. In total, the contracts obligated MX to pay more than
$350,000 to Stein for services related to the conference. The
contracts also contained liquidated damages provisions
specifying the amount MX would pay if it cancelled the event. If
cancellation occurred between sixty-one and ninety days prior to
the event, MX would be required to pay 90% of the contracted
amount. But if cancellation occurred sixty or fewer days prior to
the event, MX would be required to pay the entire contracted
amount. During some of the back-and-forth prior to the
contracts being signed, Stein had told Events Manager that it
would be “flexible” with its deposit and cancellation policies.
¶9 Pursuant to MX company policy, any payment over
$20,000 had to be approved by the CFO. Prior to Events Manager
signing the contracts, however, no such approval was obtained.
During her deposition, Events Manager testified that she had
received approval from Marketing Director, if not from CFO, but
2. There were two contracts: one for rooms at the Stein Eriksen
Lodge itself and one for rooms at the Chateaux Deer Valley, a
related property. For ease of reference, we refer to both
properties simply as “Stein.”
20200256-CA 4 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
Marketing Director disputes this testimony.3 As Marketing
Director tells it, not only did she not provide approval for Events
Manager to sign the contracts, she did not even learn, until many
months later when MX received a demand for payment from
Stein, that the contracts had been signed.
¶10 A few months before signing the contracts at issue, Events
Manager had executed at least one other similar contract, this
one with Sundance Resort. The full details of the Sundance
contract are not contained in the appellate record; for example,
the record does not tell us whether Events Manager obtained
prior approval from MX executives to sign it, nor does it tell us
the total value of the contract. The record does, however,
indicate that the Sundance contract was for 105 room nights,
which likely would have been valued at more than $20,000, thus
triggering MX’s company approval policy described above.
¶11 The Stein contracts required two relatively small ($2,500)
deposits to be paid upon signing, with an additional larger
($75,000) deposit due a few weeks later. Events Manager paid
the $2,500 deposits on January 5, 2016, and did so using
Marketing Director’s company credit card. Marketing Director
testified, however, that her awareness of these small deposits did
not equate to awareness of executed contracts, because she
3. Events Manager also later attempted to dispute her own prior
testimony. About nine months after her deposition, in
connection with its motion for summary judgment, MX
submitted a sworn declaration from Events Manager in which
she expressly denied receiving any sort of permission from
Marketing Director to sign the contracts. Stein moved to strike
that declaration, in part because it contradicted Events
Manager’s deposition testimony, and the district court granted
that motion. MX does not appeal the court’s decision to strike
that declaration.
20200256-CA 5 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
thought these charges were merely for Stein to “hold” the dates.
The new CMO was apparently under the same impression.
¶12 Aside from making the small deposit payments, MX took
other actions, after the contracts were signed, in preparation for
the conference. In February 2016, Marketing Director contacted
an audiovisual technician about potential needs for the event.
And in April, MX’s creative director spoke by phone with Stein
about video footage that MX might use in promoting the event.
Several MX representatives, including Events Manager, also
traveled to Stein for a planning visit. And MX recruited—and
signed a contract with—a keynote speaker for the event, and
began to promote the conference internally. Indeed, Events
Manager—at the direction of Marketing Director—sent a
company-wide email promoting the conference, stating as
follows:
We’re excited to announce we’ll be holding our
inaugural MX conference [during the first week of
August] at the Stein Eriksen in Deer Valley, UT.
This conference will be a mix of both current clients
and prospects and very similar to [previous
conferences] but on a larger scale. All prospects
and clients are welcome to attend . . . . Please start
reaching out to your clients now so they have these
dates on their schedules. We have created a save
the date [web]page with more details on it for you
to send along with your invitations . . . . You can
expect to receive more details in the coming weeks.
In the meantime let me know if you have any
questions.
The “save the date” webpage identified the location, date, and
speakers for the conference, including the aforementioned
keynote speaker.
20200256-CA 6 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
¶13 Both CFO and CMO testified that, at the time this email
went out, they were unaware of the existence of the signed
contracts. As CMO saw it, MX was still “testing the waters” at
this point, and the purpose of the email was to see if there were
enough interested and available clients to move forward. And
CFO reasoned that it was necessary to reach out to clients before
making a contractual commitment because, until the company
knew how many clients planned to attend, it would not know
how many rooms to reserve.
¶14 MX had not, however, paid the larger $75,000 deposit
which, pursuant to the contracts, was due in February. In March,
after Stein had contacted Events Manager to inquire about the
past-due deposit, Events Manager raised the issue with CMO
and Marketing Director. Both of them were under the
impression that payment of the $75,000 deposit is what would
formally commit MX to the event. At their instruction, Events
Manager asked Stein if MX could defer the deposit until “Q2,”
and Stein agreed.
¶15 In late April, Events Manager sent a $75,000 invoice—for
the Stein deposit—to MX’s accounting department. The
accounting department told Events Manager that the invoice,
along with any corresponding contract, needed to go through
MX’s accounting software for approval. Thereafter, the invoice
reached CFO, who responded that it was “not approved.”
¶16 When Stein inquired again about the late deposit, Events
Manager replied that CFO had been “road blocking this” and
was out of town, but that they were “planning on discussing this
with him first thing so we can get it paid ASAP.” Stein
responded by expressing its concern that CFO was “delaying a
contractual obligation” and—for the first time—taking the view
that MX was “in default” and had committed “a breach of
agreement.”
20200256-CA 7 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
¶17 This email exchange caught the attention of Marketing
Director, who emailed CFO and CMO, alerting them that she
was “atwitter regarding the news that [CFO] is considering
pulling the plug” on the conference and noting that MX had
“signed a contract with Stein Eriksen that we cannot get out of.”
According to CFO and CMO, this email—sent on May 13—was
how they first became aware of the existence of signed contracts.
¶18 Thereafter, on May 25, CFO attempted to negotiate a
resolution with Stein, explaining in an email that, in his view, the
contracts had not been approved per corporate policy, and had
been “executed by an employee who [was] not authorized to
sign on behalf of or legal[ly] bind MX.” He proposed, however,
that MX could hold a smaller conference on the August 2016
dates or, alternatively, could bump the larger conference to the
following summer. His email concluded by stating that,
“[a]lthough this is not an optimal start to a future partnership, I
am looking forward to a valuable relationship between MX” and
Stein. After learning, however, that Stein was not interested in
either of those options, CFO sent a follow-up letter stating that
MX did not intend to stage any conference at Stein in 2016 and
“providing notice that MX [did] not intend to do business with
[Stein] now or in the future.” That letter was dated June 2,
2016—exactly sixty days before August 1, the day the conference
was to begin.
¶19 A few weeks later, Stein filed suit for breach of contract,
seeking $350,660 in liquidated damages—or, in the alternative,
actual damages in an amount to be proved at trial—plus interest
and attorney fees. Eventually, both sides filed competing
motions for summary judgment. Stein asserted that, as a matter
of law and undisputed fact, Events Manager either had authority
to sign the contracts or, alternatively, that MX ratified the
contracts after execution. In addition, Stein asserted in a separate
motion that it was entitled to liquidated damages because the
relevant contractual provisions were enforceable and MX’s
20200256-CA 8 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
unconscionability defense failed as a matter of law. MX filed
memoranda opposing Stein’s motions, and in addition filed its
own motion, asserting that as a matter of law and undisputed
fact, Events Manager had no authority to bind MX and that MX
had not ratified the contracts. MX did not file a cross-motion
regarding the enforceability of the liquidated damages
provision. Both parties presented reports from expert witnesses
in support of their positions: Stein’s expert asserted that—within
the hospitality industry—it is reasonable to assume that an
employee who carries the title of “events manager” has
authority to sign large contracts on behalf of her company. MX’s
expert disagreed. The experts also disagreed as to whether the
liquidated damages provision was standard within the industry.
¶20 After full briefing and oral argument, the district court
granted Stein’s motions and denied MX’s. The court determined
that Events Manager had authority to sign the contracts and that,
even if she did not, her “actions were ratified by MX upper
management.” The court also determined that the liquidated
damages provisions were not unconscionable, concluding that
they “appear[] to be standard in the hospitality industry.”
¶21 Following its ruling, the court entered judgment in Stein’s
favor in the amount of $651,818.83, an amount that included
liquidated damages totaling $350,660 and prejudgment interest
totaling $301,158.83. The liquidated damages total was based on
the assumption that the contracts were cancelled on June 2,
2016—sixty days before the conference was to begin—and thus
represented 100% (rather than 90%) of the contracted amount.
The court later issued an award of attorney fees and costs to
Stein, augmenting the judgment not only in the amount of the
attorney fees award ($377,430.77) but also to account for
additional interest on the original award. The total judgment
amount against MX now exceeds $1 million.
20200256-CA 9 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
ISSUE AND STANDARD OF REVIEW
¶22 MX appeals from the district court’s summary judgment
order and the resulting judgment. Specifically, however, it does
not appeal the denial of its own motion, just the grant of Stein’s,
contending on appeal that “[n]umerous disputed issues of
material fact preclude summary judgment on the issues of
authority and ratification,” and that the court erred by deciding
the liquidated damages issue on summary judgment and “not
after a full and fair trial where witnesses could be assessed.”4
¶23 Summary judgment is appropriate only “if the moving
party shows that there is no genuine dispute as to any material
fact and the moving party is entitled to judgment as a matter of
law.” Utah R. Civ. P. 56(a). In determining whether a genuine
issue of material fact exists, we ask “whether reasonable jurors,
properly instructed, would be able to come to only one
conclusion, or if they might come to different conclusions,
thereby making summary judgment inappropriate.” Heslop v.
Bear River Mutual Ins. Co., 2017 UT 5, ¶ 20, 390 P.3d 314(quotation simplified). “We review a [district] court’s legal
conclusions and ultimate grant or denial of summary judgment
for correctness, viewing the facts and all reasonable inferences
drawn therefrom in the light most favorable to the nonmoving
4. It appears MX may be attempting to argue, here on appeal,
that issues relating to the unconscionability of the liquidated
damages provisions can be decided as a matter of law in its
favor. But MX did not make a summary judgment motion of its
own on this point below; instead, it merely resisted Stein’s,
asking the court to deny Stein’s motion “because there are
disputed issues of material fact.” Thus, any request for judgment
as a matter of law in MX’s favor on these issues is unpreserved.
And in any event, as discussed below, we affirm the district
court’s grant of summary judgment to Stein on these issues.
20200256-CA 10 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
party.” Heartwood Home Health & Hospice LLC v. Huber, 2020 UT
App 13, ¶ 11, 459 P.3d 1060 (quotation simplified).
ANALYSIS
¶24 In challenging the district court’s summary judgment
order, MX asserts three distinct arguments. First, it contends that
the court erred by determining, as a matter of law, that the
contracts were valid. In particular, MX asserts that questions of
fact remain as to whether Events Manager had authority to sign
the contracts, and if not, whether MX ratified Events Manager’s
unauthorized act. Second, MX argues that, even if the contracts
were authorized, they contain liquidated damages provisions
that are unconscionable, and that the court erred by determining
otherwise. Finally, MX contends that the court erred by
assuming—and impliedly determining as a matter of law—that
the cancellation of any supposed contracts occurred on June 2,
and not on May 25. We discuss each of MX’s arguments, finding
merit in its first argument but rejecting the others.
I. The Validity of the Contracts
¶25 It is well established that, “[u]nder agency law, an agent
cannot make its principal responsible for the agent’s actions
unless the agent is acting pursuant to either actual or apparent
authority.” Zions First Nat’l Bank v. Clark Clinic Corp., 762 P.2d
1090, 1094 (Utah 1988). While it is clear that the district court
concluded, as a matter of law, that Events Manager had
authority to sign the contracts, it is unclear whether the court
determined that she had actual or apparent authority (or both).
And the court concluded, in the alternative, that MX ratified the
contracts in any event. On appeal, MX takes issue with these
rulings, asserting that genuine disputes of material fact exist
with regard to each one, rendering summary judgment
inappropriate. We discuss these topics, in turn.
20200256-CA 11 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
A. Actual Authority
¶26 In assessing whether Events Manager had actual
authority to sign the contracts, we must examine “the acts of the
principal from the agent’s perspective.” Diston v. EnviroPak Med.
Products, Inc., 893 P.2d 1071, 1076 (Utah Ct. App. 1995). At root,
this inquiry turns on the reasonableness of the agent’s belief that
she possessed sufficient authority. See Restatement (Third) of
Agency § 2.01 (Am. L. Inst. 2006) (“An agent acts with actual
authority when . . . the agent reasonably believes, in accordance
with the principal’s manifestations to the agent, that the
principal wishes the agent so to act.”); see also 1-800 Contacts, Inc.
v. Lens.com, Inc., 722 F.3d 1229, 1251 (10th Cir. 2013). The inquiry
contains both an objective and a subjective component: the agent
must subjectively hold the belief that she possesses authority,
and that belief must be objectively reasonable in light of the
principal’s actions. See Restatement (Third) of Agency § 2.02 cmt.
e (“This standard requires that the agent’s belief be reasonable,
an objective standard, and that the agent actually hold the belief,
a subjective standard.”). On appeal, MX does not argue that
Events Manager lacked a subjective belief that she was
authorized to sign the contracts, and we therefore assume for
purposes of our analysis that Events Manager—in accordance
with her deposition testimony—possessed such a belief. But we
agree with MX that questions of fact preclude summary
judgment on the question of whether Events Manager’s belief
was objectively reasonable.
¶27 In evaluating the objective part of the test, we examine
whether the agent’s belief was reasonable under the
circumstances, in light of the actions and manifestations of the
principal. See id. (“Whether an agent’s belief is reasonable is
determined from the viewpoint of a reasonable person in the
agent’s situation under all of the circumstances of which the
agent has notice.”). A principal may confer actual authority
expressly, or it may do so through other less overt actions that
20200256-CA 12 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
nevertheless imply a grant of authority. See Hussein v. UBS Bank
USA, 2019 UT App 100, ¶ 32, 446 P.3d 96 (“Actual authority may
either be express or implied.”). Express authority is present
when “the principal directly states that its agent has the
authority to perform a particular act on the principal’s behalf.”
Id. (quotation simplified). Implied authority stems “from the
words and conduct of the parties and the facts and
circumstances attending the transaction in question.” Id.(quotation simplified).
¶28 On the issue of express authority, there was evidence that,
pursuant to MX company policy, any payment over $20,000 had
to be run through company software and approved by CFO. But
CFO unequivocally testified that Events Manager “did not have
authority to sign” the Stein contracts on behalf of MX. Even
Events Manager, in her deposition testimony, did not assert that
CFO gave her authorization to sign; instead, she claimed only
that she received authority from Marketing Director. That claim
is not only contested by Marketing Director as a factual matter,
but it is also unclear whether—in light of the evidence regarding
MX company policy—Marketing Director herself had authority
to authorize Events Manager to sign the contracts, or whether
Events Manager might reasonably have so believed. We agree
with MX that, in light of these disputed factual issues, Events
Manager cannot be said to have possessed express actual
authority as a matter of law.
¶29 With regard to implied actual authority, we reach the
same conclusion. In defense of the district court’s summary
judgment ruling, Stein points principally to the Sundance
contract, and asserts that Events Manager had to have
reasonably believed that she had authority to sign the Stein
contracts because she had previously signed the similar
Sundance contract. But the presence of the Sundance contract—
while perhaps indicative of implied authority—is not enough to
establish the reasonableness of Events Manager’s belief as a
20200256-CA 13 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
matter of law. As noted, see supra ¶ 10, the record submitted to
us on appeal does not tell us enough about the Sundance
contract to warrant summary judgment. Indeed, we do not know
the total value of the Sundance contract, nor do we know
whether Events Manager received express approval from CFO to
sign it. For instance, in the event that she received the necessary
express approval to sign the Sundance contract, but not the Stein
contracts, and that she was aware of prevailing company policy
regarding contracts, a reasonable factfinder could conclude that
any belief she might have held that she actually had authority to
sign the Stein contracts was unreasonable.
¶30 In sum, we discern factual disputes that preclude
summary judgment on the issue of whether Events Manager
possessed actual authority from MX to sign the Stein contracts.
B. Apparent Authority
¶31 Next, we must examine whether Events Manager had
apparent authority—as a matter of law and undisputed fact—to
sign the Stein contracts. One key difference between actual and
apparent authority is the point of view from which these
doctrines are assessed. As noted above, actual authority is
evaluated “from the agent’s perspective.” See Diston, 893 P.2d at
1076. Proper analysis of apparent authority, by contrast, “focuses
on the acts of the principal from a third party’s perspective.” Id.¶32 Apparent authority exists “when a third party reasonably
believes the actor has authority to act on behalf of the principal
and that belief is traceable to the principal’s manifestation.”
Burdick v. Horner Townsend & Kent, Inc., 2015 UT 8, ¶ 21, 345 P.3d
531 (quotation simplified). The agent’s manifestations to the
third party are alone insufficient; that is, the principal must have
taken some action, known to the third party, that causes the
third party to reasonably believe that the agent had authority.
See id. ¶ 22 (“The authority of an agent is not apparent merely
20200256-CA 14 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
because it looks so to the person with whom he deals, but rather,
it is the principal who must cause third parties to believe that the
agent is clothed with apparent authority.” (quotation
simplified)); see also Grazer v. Jones, 2012 UT 58, ¶ 11, 289 P.3d 437(“Where the principal does something to support a third party’s
reasonable belief that the agent has the authority to act, that
agent is vested with apparent authority to bind the principal.”).
Our supreme court has articulated a “three-part test for apparent
authority,” all three parts of which must be met: (1) the principal
must have “manifested his or her consent to the exercise of such
authority or [have] knowingly permitted the agent to assume the
exercise of such authority”; (2) the third party must “kn[o]w of
the facts and, acting in good faith, ha[ve] reason to believe, and
did actually believe, that the agent possessed such authority”;
and (3) the third party must have “rel[ied] on [the agent’s]
appearance of authority” and must have “changed his or her
position and will be injured or suffer loss if the act done or
transaction executed by the agent does not bind the principal.”
Burdick, 2015 UT 8, ¶ 23 (quotation simplified).
¶33 In this case, Stein is the third party, and does not claim to
have had any communication, prior to the execution of the
contracts, with anyone at MX other than Events Manager and
her subordinate, Events Coordinator. And MX quite sensibly
points out that, if Events Manager cannot bind the company,
then neither can her subordinate, Events Coordinator.
¶34 In the absence of any direct manifestations or
communications from MX higher-ups, Stein asserts that
apparent authority can be inferred from the fact that MX
conferred the title “Events Manager” on its representative, and
claims that such a title, by itself, communicates to third parties
that Events Manager had authority to sign contracts on MX’s
behalf related to corporate events. A reasonable jury, after
hearing all the evidence, might well reach that conclusion. But
20200256-CA 15 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
we disagree with Stein that, on this record, such a conclusion is
compelled as a matter of law.
¶35 Stein correctly asserts that, where a third person “of
ordinary prudence,” and who is “conversant with business
usages and the nature of the particular business, is justified in
presuming” that the agent has the requisite authority, “the
principal is estopped,” by virtue of apparent authority, “from
denying the agent’s authority.” See Grazer, 2012 UT 58, ¶ 11
(quotation simplified). Thus, if Stein could establish, as a matter
of law, that in the hospitality industry the title “Events
Manager” is commonly believed to confer authority to sign
contracts related to events, then Stein would be entitled to
summary judgment. But Stein cannot establish that on this
record.
¶36 To be sure, Stein’s expert opines that “it is custom and
practice in the hospitality industry that Event Managers sign
contracts,” and that this is true “regardless of the size of the
event.” But MX’s expert disagrees with this opinion, and opines
that, in the industry, an “Event Manager” “generally does not
have authority to enter into large contracts for and on behalf of
the event manager’s employer,” and that reasonable actors
within the industry “do not accept that a person using the title
‘Event Manager’ is the person that can commit a company to a
meeting space.” Thus, on this record, the dueling experts have
created a classic question of fact as to the reasonableness of
Stein’s belief that an Events Manager could bind MX to contracts
of this size.
¶37 Finally, Stein asserts that it was entitled to infer authority
from the fact that Events Manager told Stein that the contracts
required legal and corporate review, and then two weeks later
signed the contracts. As Stein sees it, it was at that point entitled
to a reasonable belief “that the contracts had undergone internal
and legal review.” The district court accepted this argument,
20200256-CA 16 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
concluding that Stein could have “reasonably assume[d] that the
corporate hurdles had been satisfied.” But MX correctly points
out that any valid manifestation of apparent authority needs to
have come from the principal, not from the agent, and that no
evidence of any direct manifestation is present in this record. At
a minimum, inferring apparent authority from Events Manager’s
actions in executing the contracts cannot, on this record, be
appropriately accomplished as a matter of law.
¶38 In sum, we discern factual disputes that preclude
summary judgment on the issue of whether Events Manager
possessed apparent authority from MX to sign the Stein
contracts.
C. Ratification
¶39 Next, we must consider whether MX—as a matter of law
and undisputed fact—ratified the Stein contracts after Events
Manager executed them. Under our law, contracts that are
signed by an agent even in the absence of actual or apparent
authority may nevertheless be ratified after the fact by the
principal. See Bradshaw v. McBride, 649 P.2d 74, 78 (Utah 1982)
(“A principal may impliedly or expressly ratify an agreement
made by an unauthorized agent.”). Post-contract ratification, just
like pre-contract bestowal of authority, can occur expressly or be
implied from other actions. Id.; see also Bullock v. Utah Dep’t of
Transp., 966 P.2d 1215, 1218 (Utah Ct. App. 1998) (“Ratification,
like original authority, need not be express.” (quotation
simplified)). There is no indication, in this case, that MX
expressly ratified the Stein contracts after Events Manager
signed them. But Stein contends—and the district court ruled—
that MX impliedly ratified them through other actions.
¶40 Implied ratification occurs through “conduct which
indicates assent by the purported principal to become a party to
the transaction or which is justifiable only if there is ratification.”
20200256-CA 17 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
Bradshaw, 649 P.2d at 78 (quotation simplified). However, a court
cannot “infer ratification of a contract unless [it] conclude[s] that
the principal knowingly assented to the material terms of the
contract.” Bullock, 966 P.2d at 1218. Ratification thus “requires
the principal to have knowledge of all material facts and an
intent to ratify.” Dillon v. Southern Mgmt. Corp. Ret. Trust, 2014
UT 14, ¶ 28, 326 P.3d 656 (quotation simplified). “In essence, the
doctrine of implied ratification protects both a principal’s agent
and the co-parties to a contract by ensuring that the principal
cannot repudiate the contract after the fact if any reasonable
person would have concluded from the principal’s actions at the
time of the transaction that the principal endorsed the contract.”
Bullock, 966 P.2d at 1219.
¶41 In granting summary judgment in favor of Stein on the
issue of ratification, the district court set forth a bullet-point list
of apparently undisputed facts that it believed supported its
decision. Stein relies on many of those same facts in arguing,
here on appeal, that the court’s decision should be affirmed.
While we acknowledge that many of these facts may be helpful
to Stein when it argues its case to the factfinder on remand, we
do not agree that those listed facts—or any others brought to our
attention—compel the conclusion that MX, as a matter of law,
ratified the contracts. In our view, a reasonable jury could find
otherwise. More specifically, and as we explain below, the facts
in the district court’s list are either irrelevant to the ratification
inquiry or are the subject of a factual dispute.
¶42 The first fact listed by the district court was that
both CMO and Marketing Director were “involved” in selecting
Stein as the presumptive choice for the event from among its
list of potential venues. This fact sheds little, if any, light on
the ratification inquiry, because it describes events that took
place before Stein sent Events Manager copies of the draft
contracts, and several weeks before Events Manager signed
them. The fact that MX executives instructed Events Manager to
20200256-CA 18 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
attempt to negotiate the terms of a contract with Stein does not
tell us much, if anything, about whether those same executives
later ratified the terms of the contracts Events Manager
ultimately signed.
¶43 The next listed fact is that Marketing Director “directed
[Events Manager] to sign the contract and charge the initial
deposit.” But as previously noted, see supra ¶¶ 9, 28,
Events Manager’s testimony that Marketing Director instructed
her to sign the Stein contracts is the subject of a pointed factual
dispute. As for the $2,500 deposits paid in January 2016,
both Marketing Director and CMO—apparently the only MX
executives who knew about those payments—believed them
to serve merely as a “hold” for the dates at Stein, and not
indicative of the fact that binding contracts had already been
signed. A reasonable jury could elect to credit the MX
executives’ testimony, and on that basis could determine that the
deposits did not indicate corporate ratification of the
Stein contracts.
¶44 Next, the district court relied on the fact that several
employees of MX—including Events Coordinator, Marketing
Director, and an assistant controller—learned about the existence
of the signed contracts at an earlier point in time than did CFO
or CMO. The fact that Events Coordinator—Events Manager’s
subordinate—knew about the signed contracts is irrelevant to
ratification, because not even Stein contends that Events
Coordinator is the type of MX executive who could have bound
the company. And the same goes for an assistant controller from
MX’s accounting department: there exists at least a question of
fact about what level of authority she held in the company
hierarchy, as well as about whether her actions—helping Events
Manager submit an invoice request through company
software—are the sort of actions that would constitute
ratification.
20200256-CA 19 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
¶45 Marketing Director’s knowledge and actions are
potentially helpful for Stein, but even these are not sufficient to
indicate ratification as a matter of law. As noted above, see supra
¶ 28, there exists a factual question as to what authority
Marketing Director had within the company—that is, whether
she was high enough up in the company hierarchy to be able to
confer authority on Events Manager to sign the contracts or to
ratify them after the fact. Moreover, Marketing Director testified
that she did not know of the existence of the signed contracts
until receiving Stein’s “demand for payment,” an apparent
reference to Stein’s May 13 email. At that point, she informed
CFO and CMO that Events Manager had actually signed the
contracts, and from that point forward MX took no actions that
could constitute ratification—indeed, after May 13, MX took the
position, in all its dealings with Stein, that the contracts were
invalid.
¶46 Next, the district court listed certain actions taken by
Events Manager, Events Coordinator, and other lower-level
company employees geared toward preparation for the August
conference. In particular, the court noted that Events Manager
and Events Coordinator visited Stein in April for a site visit, a
“creative director” called Stein to request video footage of the
property for MX’s marketing efforts, and MX updated its
website and sent internal emails discussing the event. These are
all helpful facts for Stein, but they fall short of establishing
ratification as a matter of law. As MX correctly points out, while
these actions certainly show that MX employees were “planning
for a possible event,” they do not necessarily compel the
conclusion that MX employees were ratifying the terms of
specific contracts. Any such conclusion requires certain
inferences to be drawn, and those kinds of inferences will need
to be made, if at all, by a factfinder.
¶47 Finally, the district court noted that MX, through its
CMO, signed an actual contract with a keynote speaker for the
20200256-CA 20 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
conference. This is another helpful fact for Stein, but it too is
subject to competing inferences. CMO apparently did not know
about the existence of the contracts until Stein demanded
payment, and he testified that the company’s planning and
marketing efforts, including internal emails and other actions,
were merely preparatory for a possible conference. Even Stein
appears to acknowledge that this fact—as with many of the facts
it advances in support of its ratification argument—is subject to
a credibility determination, asserting that “[i]t is impossible to
believe that MX could have contractually bound itself to have [a
keynote speaker] speak at [Stein] if MX did not know that it had
contracts with [Stein] for the conference.” This may be an
excellent point to make to a factfinder, but for present purposes
it is not quite enough. We cannot say that contracting for a
keynote speaker necessarily compels the conclusion, as a matter
of law, that MX ratified the Stein contracts Events Manager
signed.
¶48 Thus, the facts relied upon by Stein and the district court
in support of the court’s ratification conclusion are either
irrelevant to the ratification question or are, to one degree or
another, disputed by MX based on other evidence in the record.
Even taken together, these facts are not sufficient to support a
conclusion that, as a matter of law, MX ratified the Stein
contracts. See Best v. Daimler Chrysler Corp., 2006 UT App 304,
¶ 10, 141 P.3d 624 (“It is not the purpose of the summary
judgment procedure to judge the credibility . . . of the parties, or
witnesses, or the weight of the evidence, and it only takes one
sworn statement under oath to dispute the averments on the
other side of the controversy and create an issue of fact.”
(quotation simplified)). We certainly acknowledge the strength
of Stein’s arguments, but remain convinced that disputed
factual issues remain, and that a factfinder, in resolving
those disputes, could reasonably conclude that MX did not ratify
the contracts.
20200256-CA 21 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
¶49 Accordingly, because disputed factual issues prevent
summary judgment in Stein’s favor on issues related to authority
and ratification, the district court’s decision to grant Stein’s
motion for summary judgment as to liability was erroneous. We
therefore vacate that portion of the district court’s summary
judgment order, and remand the case for further proceedings
consistent with this opinion.
II. The Liquidated Damages Provisions
¶50 Our conclusion to vacate part of the district court’s
summary judgment order and remand for further proceedings is
technically dispositive of this appeal. The other two fully briefed
issues both concern the amount of damages to which Stein
would potentially be entitled in the event it prevails at trial on
issues related to contractual validity; these damages issues will
be moot if MX were to prevail at trial on the contractual validity
issues. However, in the event Stein prevails at trial on those
issues, the damages issues will become relevant, and therefore
we proceed to examine those issues, which stand before us fully
briefed and submitted. See Bair v. Axiom Design, LLC, 2001 UT 20,
¶ 22, 20 P.3d 388 (proceeding to decide certain submitted issues,
even though “resolution of [another] issue” had been
“dispositive” of the appeal, because “where an appellate court
finds that it is necessary to remand a case for further
proceedings, it has the duty of passing on matters which may
then become material” (quotation simplified)), abrogated on other
grounds by A.S. v. R.S., 2017 UT 77, 416 P.3d 465; see also Equine
Holdings LLC v. Auburn Woods LLC, 2021 UT App 14, ¶ 36, 482
P.3d 880 (continuing to discuss other issues, “in the hope that
such discussion might be useful on remand,” despite reversing a
summary judgment order and remanding for other reasons).
¶51 The first damages issue concerns whether the liquidated
damages provisions in the Stein contracts are unconscionable as
a matter of law and therefore unenforceable. Stein sought
20200256-CA 22 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
summary judgment on that point below, and the district court
granted that motion, concluding that the liquidated damages
provisions were neither procedurally nor substantively
unconscionable. MX appeals that decision, but we affirm it,
concluding that the court appropriately analyzed the matter.
¶52 Nearly a decade ago, our supreme court clarified Utah
law regarding the enforcement of liquidated damages clauses. In
Commercial Real Estate Investment, LC v. Comcast of Utah II, Inc.,
2012 UT 49, 285 P.3d 1193, the court held that liquidated
damages provisions “should be reviewed in the same manner as
other contractual provisions,” and are “not subject to any form
of heightened judicial scrutiny.” Id. ¶¶ 38, 40. In other words,
parties who wish to challenge a liquidated damages provision
must avail themselves of standard contractual concepts like
“mistake, fraud, duress, or unconscionability.”5 Id. ¶ 40. In
5. MX resists this reading of Commercial Real Estate Investment, LC
v. Comcast of Utah II, Inc., 2012 UT 49, 285 P.3d 1193, and asserts
that liquidated damages provisions can still be invalidated on
grounds that they constitute an impermissible “penalty.” In
Commercial Real Estate, the court disavowed a line of cases that
had focused “on whether a contractual provision providing for
liquidated damages constitutes a penalty,” referring to those
cases as having imposed “an unnecessary additional check on
the enforceability of” liquidated damages provisions. See id.¶¶ 22–23, 33–40. In doing so, however, it noted that most of the
“penalty” cases had deemed the liquidated damages clauses
unconscionable in any event, and on that basis stated that
“[r]eviewing liquidated damages clauses for unconscionability
still preserves challenges to penalty clauses.” Id. ¶ 39. The court
also noted that the penalty cases had engaged in essentially “the
same inquiry we engage in for claims of unconscionability.” Id.
After Commercial Real Estate, as we understand it, liquidated
(continued…)
20200256-CA 23 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
attacking the liquidated damages provisions found in the Stein
contracts, MX invokes the doctrine of unconscionability, a
doctrine that presents only legal issues for the court (rather than
factual issues for a jury). See Sosa v. Paulos, 924 P.2d 357, 360
(Utah 1996) (stating that “[t]he determination of whether a
contract is unconscionable is . . . a question of law for the court”
to decide).
¶53 MX, as the party claiming that a contractual provision is
unconscionable, “bears a heavy burden.” See Ryan v. Dan’s Food
Stores, Inc., 972 P.2d 395, 402 (Utah 1998); see also Resource Mgmt.
Co. v. Weston Ranch & Livestock Co., 706 P.2d 1028, 1043 (Utah
1985) (“A duly executed written contract should be overturned
[on unconscionability grounds] only by clear and convincing
evidence.”). “In determining whether a contract is
unconscionable, we use a two-pronged analysis.” Commercial
Real Estate, 2012 UT 49, ¶ 42 (quotation simplified). One prong,
geared toward assessment of “procedural unconscionability[,]
focuses on the negotiation of the contract and the circumstances
of the parties.” Id. ¶ 43 (quotation simplified). The other prong,
geared toward assessment of “substantive unconscionability[,]
focuses on the contents of an agreement, examining the relative
fairness of the obligations assumed.” Id. ¶ 44 (quotation
simplified). A determination that an agreement is substantively
(…continued)
damages provisions that previously were deemed “penalty”
clauses will often still be invalidated, but this will occur because
those clauses will also usually meet the criteria for
unconscionability. Put simply, now that our supreme court has
eliminated the “conflicting approaches” to assessing the validity
of liquidated damages provisions, there no longer exist valid
separate criteria—other than unconscionability standards—to
screen for “penalty” clauses. See id. ¶¶ 21, 33–40.
20200256-CA 24 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
unconscionable may, by itself, “support a finding of
unconscionability.” Id. ¶ 42 (quotation simplified).
A. Procedural Unconscionability
¶54 In assessing whether an agreement is procedurally
unconscionable, “the key inquiry is whether there was
overreaching by a contracting party occupying an unfairly
superior bargaining position.” Id. ¶ 43 (quotation simplified).
To assist with this inquiry, our supreme court has set forth
a non-exhaustive list of six factors that may “bear[] on
procedural unconscionability.” See Ryan, 972 P.2d at 403. These
factors are:
(1) whether each party had a reasonable
opportunity to understand the terms and
conditions of the agreement; (2) whether there was
a lack of opportunity for meaningful negotiation;
(3) whether the agreement was printed on a
duplicate or boilerplate form drafted solely by the
party in the strongest bargaining position; (4)
whether the terms of the agreement were
explained to the weaker party; (5) whether the
aggrieved party had a meaningful choice or instead
felt compelled to accept the terms of the
agreement; and (6) whether the stronger party
employed deceptive practices to obscure key
contractual provisions.
Id. (quotation simplified).
¶55 Applying these factors, we readily conclude that the
liquidated damages provisions in the Stein contracts are not
procedurally unconscionable. Frankly, none of the six factors
point toward procedural unconscionability in this case. Both
contracting parties are sophisticated corporate entities with
20200256-CA 25 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
experience negotiating these kinds of contracts.6 MX had a
reasonable opportunity to understand the terms and conditions
of the contracts; after all, MX was in possession of the drafts for
over two weeks after Events Manager told Stein that MX would
need some time to review the contracts “and have [its] legal
team also glance over [them]” before they could be executed. MX
also had an opportunity for meaningful negotiation; Events
Manager had pre-contract discussions with Stein about specific
contract terms, including dates, number of rooms, deposits and
liquidated damages. Even though the contracts were drafted by
Stein using a form template, Stein indicated a willingness to
negotiate the terms. And finally, MX certainly had a meaningful
choice about whether to stage its conference at Stein, as opposed
to elsewhere, and there is no indication that Stein was deceptive
about the presence of liquidated damages provisions in the
contracts.7
6. This statement assumes that questions regarding Events
Manager’s authority will be decided in favor of Stein. Indeed,
this entire section of our opinion, as noted above, becomes
relevant only if Stein prevails on the contractual validity
questions at trial. In that event, it will have been established that
Events Manager was authorized to sign the contracts or that MX
ratified them post-execution, and Events Manager’s own relative
inexperience or lack of sophistication will no longer matter. If
MX—unquestionably a sophisticated company—chooses a
relatively inexperienced representative to negotiate and sign a
contract, that choice cannot operate to transform MX from a
sophisticated company into something else.
7. Stein’s statement that it would “be flexible with” and would
“work with” MX regarding Stein’s “cancellation and payment
policies” does not appear to have been false; indeed, Stein was
(continued…)
20200256-CA 26 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
¶56 The best MX can do is point to the fact that Events
Manager was twenty-four years old and relatively new to the
job, and that Stein told her that other parties were interested in
the same dates for their events and that the contracts needed to
be signed soon to secure the desired dates. Aside from being
somewhat paternalistic—after all, twenty-four-year-olds are
adults, and many of them are capable of accomplishing difficult
and complex tasks—this argument describes nothing more than
the ordinary apprehension inherent in the negotiation and
consummation of almost any commercial transaction. On these
facts, MX falls well short of being able to establish procedural
unconscionability.
B. Substantive Unconscionability
¶57 Next, we consider whether the liquidated damages
provisions are substantively unconscionable. In making that
assessment, we consider “whether there exists an overall
imbalance in the obligations and rights imposed by the bargain
(…continued)
flexible with some of those policies, agreeing to allow MX to
postpone payment of a $75,000 deposit for more than two
months later than the contracts called for. Moreover, those
comments were made in the context of a general discussion
about Stein’s deposit, cancellation, and payment policies, and
not in the context of a specific discussion about liquidated
damages; in the absence of a more direct connection to the
liquidated damages provisions, we do not believe that a later
decision to enforce those provisions renders deceptive an earlier
general commitment to “work with” MX. And in any event, even
if we were to perceive some level of deception in Stein’s
comments, such deception would not outweigh the other five
factors of the procedural unconscionability test, all of which
point in the other direction.
20200256-CA 27 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
according to the mores and business practices of the time
and place.” Ryan, 972 P.2d at 402 (quotation simplified).
However, a contract whose terms are clearly better for one
side than the other is not necessarily unconscionable;
indeed, parties are generally free to negotiate the terms of their
own contracts, including unfavorable ones. See id. (“Even if a
contract term is unreasonable or more advantageous to one
party, the contract, without more, is not unconscionable. . . .”);
see also Park Valley Corp. v. Bagley, 635 P.2d 65, 67 (Utah 1981)
(stating that “sellers and buyers should be able to contract on
their own terms without the indulgence of paternalism by
the courts in the alleviation of one side or another from
the effects of a poor bargain,” and that parties “should be
permitted to enter into contracts that may actually be
unreasonable or which may lead to hardship on one side”). In
short, substantive unconscionability is present only where the
terms of the contract are “so one-sided as to oppress an innocent
party.” Ryan, 972 P.2d at 402 (quotation simplified). That is not
the case here.
¶58 MX’s chief argument to the contrary is that the liquidated
damages provisions were “purposely designed” to create a
“massive windfall” for Stein. In particular, MX asserts that these
provisions were set up to allow Stein to recover a sum of
liquidated damages greater—in two specific ways—than its
actual damages. First, MX asserts that, under these provisions,
Stein reserved for itself the ability to recover an amount of
liquidated damages that could, and would here, far exceed its
actual lost profits. Second, and relatedly, MX laments that
the liquidated damages provisions do not require Stein to
mitigate its damages. Without question, the liquidated
damages provisions in these contracts are favorable to Stein and
would in this case—if applied—allow Stein to recover an
amount of damages that is more than twice as high as its actual
20200256-CA 28 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
damages.8 But for the reasons discussed, these provisions are not
substantively unconscionable.
¶59 First, the fact that the liquidated damages provisions may
allow Stein to recover an amount greater than its actual lost
profits does not necessarily render the provisions
unconscionable. After all, “the purpose of a liquidated damages
provision is to obviate the need for the nonbreaching party to
prove actual damages.” Commercial Real Estate Inv., LC v. Comcast
of Utah II, Inc., 2012 UT 49, ¶ 41, 285 P.3d 1193 (quotation
simplified). Liquidated damages provisions are often used by
parties in situations “where the damages are likely to be
uncertain and not easily proven.” See 22 Am. Jur. 2d Damages
§ 506. The relationship between potential liquidated damages
and estimated actual damages, as measured at the time of
contracting, is certainly a factor courts may consider when
assessing the unconscionability of a liquidated damages
provision. See Commercial Real Estate, 2012 UT 49, ¶ 45
(examining, among other things, whether “the contractual
amount of liquidated damages” was “unreasonable as
compensation for breach” of the contract); see also 22 Am. Jur. 2d
Damages § 528 (stating that courts may consider “whether the
amount stipulated is reasonably proportionate or bears a rational
relationship to the damages that have actually been caused by
the breach”). But a liquidated damages clause is not
unconscionable simply because it may allow, if developments
play out a certain way, for recovery of an amount of damages
8. In this case, because MX cancelled the contracts a full sixty
days prior to the date the conference was scheduled to begin,
Stein was able to mitigate some of its damages. For purposes of
the dueling summary judgment motions, it was undisputed that
Stein’s actual damages were just over $170,000, approximately
half of the roughly $350,000 liquidated damages award.
20200256-CA 29 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
greater than a party’s actual damages. See Commercial Real Estate,
2012 UT 49, ¶ 45 (rejecting the argument that a liquidated
damages provision was unconscionable because it allowed for
recovery of an amount allegedly “grossly disproportionate” to
actual damages, and stating that “this type of post-hoc weighing
does not bear on the question of substantive unconscionability,
which focuses on the relative fairness of the obligations assumed
at the time of contracting” (quotation simplified)).
¶60 In this case, the liquidated damages figure is not pulled
out of thin air; it is specifically tied to the amount MX was
obligated to pay under the contracts, with the percentage
varying according to the date of cancellation. That amount is the
sum of the room charges, the food charges, and a service fee,
amounts that are relatively easy to compute. Stein correctly
points out that this amount does not include all the profit centers
associated with a full hotel, and specifically excludes profits
anticipated from the provision of ancillary services, including
things like gift shops, coffee stations, sandwich shops, bars, and
equipment rental facilities. These ancillary profits are more
difficult to compute, and Stein asserts that its liquidated
damages figure—by including full room costs and food charges
but excluding ancillary charges—is meant to be a rough but by
no means precise prediction of its total lost profits. We agree
with Stein that, on this record, its liquidated damages figure
bears a reasonable relationship to its estimated potential lost
profits.
¶61 Moreover, as applicable here, Stein is entitled to recover,
as liquidated damages, 100% of that total if the contracts are
cancelled sixty or fewer days before the conference. The parties’
respective experts, though they disagree on many things, both
agree that using a sixty-day window for “cancellation provisions
on the highest scale” is appropriate and common in the
20200256-CA 30 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
industry.9 And once this fact is acknowledged, it becomes
evident that these particular liquidated damages provisions
cannot have been designed, from the outset,10 to necessarily
create a windfall for Stein in every instance.
¶62 At the time the contracts were signed, neither party knew
whether the contracts would ever be cancelled, and certainly did
not know when any such cancellation would take place.
Generally speaking, the earlier a cancellation occurs, the better
equipped a hotel will be to manage its costs—for instance, by not
purchasing food or employing staff for meals that will not be
served, or not employing staff to manage rooms that will not be
occupied—and to rent the rooms to someone else. If a party
cancels on Day 60 (as MX did here), Stein will generally be (and
was here) well-positioned to end up in a “windfall” position, in
which it is able to utilize the advance notice to manage its costs,
and in which it receives (from MX) 100% of the amount MX
9. Indeed, the Sundance contract signed by Events Manager
contained a liquidated damages provision that—although in
other material respects is less onerous than the ones in the Stein
contracts—also used a sixty-day window for cancellation
purposes and specified that a cancellation within that window
would result in the highest amount of liquidated damages.
10. The propriety of liquidated damages provisions must be
assessed at the time of contract formation, and not at the time of
breach. See Commercial Real Estate, 2012 UT 49, ¶¶ 35–36
(criticizing certain approaches to assessing liquidated damages
provisions as faulty because they “tended to evaluate the
enforceability” of such provisions “with the benefit of hindsight,
rather than as of the time of contract formation”); see also id. ¶ 52
(Lee, J., concurring) (agreeing with the majority that “post-hoc
review” of liquidated damages provisions “is problematic”).
20200256-CA 31 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
agreed to pay, plus additional revenue (from other customers)
related to its re-letting of the rooms. But if a party cancels on Day
1—the day before the conference—Stein will be poorly
positioned to avoid incurring unnecessary costs or to recoup its
losses by re-letting the rooms. Under these circumstances, it is
certainly not evident that the liquidated damages provisions in
the Stein contracts will always result in a windfall for Stein.
¶63 Second, with regard to mitigation of damages, the general
rule is that mitigation is not required in situations where the
parties have agreed to a stipulated amount of damages. See 24
Williston on Contracts § 65:31 (4th ed. 2020) (explaining that
because a liquidated damages provision substitutes a
predetermined amount for actual damages, “the existence of an
enforceable liquidated damages provision has the effect of
making the mitigation of damages irrelevant”); see also 22 Am.
Jur. 2d Damages § 541 (“If a liquidated damages clause is valid,
the nonbreaching party does not have a duty to mitigate
damages following breach.”).11 MX asserts, as part of its
argument, that the liquidated damages provisions are
unconscionable precisely because they allow Stein to recover
100% of the room and food costs without any duty to mitigate.
11. Our supreme court’s decision in Commercial Real Estate is not
to the contrary. See 2012 UT 49, ¶¶ 46–48. Although the court did
include in its opinion a discussion of the duty to mitigate
damages, it did so only because, in that particular case, the
parties had agreed—by contract—to a mitigation-of-damages
clause in addition to their liquidated damages clause. Id. ¶ 5.
Certainly, parties are free to vary the general rule—that
mitigation of damages is not required where a valid liquidated
damages provision exists—by including in their contract, along
with a liquidated damages provision, a clause requiring
mitigation of damages. In this case, the parties did not do so.
20200256-CA 32 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
But this can’t be right: in the liquidated damages context, parties
generally do not have a duty to mitigate. If a liquidated damages
provision were considered unconscionable simply because it
relieved a party of its duty to mitigate, many liquidated damages
provisions would be invalid. Accordingly, we conclude that a
liquidated damages provision is not unconscionable merely
because that provision allows a party to recover more in
damages than it would have if it were subject to a duty to
mitigate.
¶64 Without doubt, these liquidated damages provisions are
advantageous for Stein. They allow Stein to recover 100% of the
room and food charges, without accounting for unincurred costs,
and without the necessity of mitigating damages, if the contracts
are cancelled inside sixty days prior to the conference date. In
many situations, depending on when the cancellation occurs,
such liquidated damages provisions will allow Stein to recover
more than its actual lost profits. But that fact does not render
these provisions substantively unconscionable. The liquidated
damages amounts are directly linked to the contractual room
and food charges, and are based on a sixty-day cancellation
window that is apparently standard in the industry. Under the
circumstances presented here, the liquidated damages
provisions are not “so one-sided as to oppress or unfairly
surprise” MX. See Commercial Real Estate, 2012 UT 49, ¶ 44.
Accordingly, we affirm that portion of the district court’s
summary judgment order in which it concluded that the
liquidated damages provisions in the Stein contracts were valid
and enforceable.
III. The Date of Cancellation
¶65 Finally, we address the parties’ dispute regarding the date
on which MX cancelled the contracts. This dispute matters,
because under the terms of the contracts, Stein is entitled to
liquidated damages equal to 90% of the contracted amounts if
20200256-CA 33 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
cancellation occurred between sixty-one and ninety days prior to
the event, but is entitled to 100% of the contracted amounts if
cancellation occurred sixty or fewer days prior to the event. MX
contends that it officially cancelled the contracts on May 25
(sixty-eight days prior to the event), when CFO sent an email to
Stein offering two potential compromises in an apparent effort to
resolve the parties’ dispute. Stein contends that the May 25 email
was an attempt to renegotiate, not a cancellation, and that the
actual cancellation did not occur until June 2, exactly sixty days
prior to the event. The district court made no explicit ruling on
the matter, but resolved the matter impliedly by awarding Stein,
as damages, 100% of the contracted amounts. MX takes issue
with that implied decision, contending that questions of fact
preclude a resolution of the matter in the summary judgment
setting.
¶66 As a general matter, “a notice of termination of
cancellation of a contract must be clear and unequivocal.” Glenn
v. Reese, 2009 UT 80, ¶ 19, 225 P.3d 185. Stein asserts that the May
25 email was not clearly and unequivocally a cancellation, and
that summary judgment in its favor on the issue is therefore
appropriate. Stein’s interpretation of the email is certainly a
reasonable one, given that CFO never actually said that MX was
terminating any contractual relationship between the parties,
and even used the email as an attempt to negotiate the terms of a
future contractual relationship. Indeed, CFO stated that
“[a]lthough the contract was executed by an employee who is
not authorized,” he understood that “one of our employees has
set expectations” with Stein and that he “want[ed] to reach an
equitable resolution.” Even MX does not assert that Stein’s
interpretation of the email is unreasonable.
¶67 Instead, it asserts that it can proffer a reasonable
alternative interpretation of the email, and that under its
interpretation, the email represents a cancellation of the
contracts. In particular, MX points to CFO’s description of the
20200256-CA 34 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
contracts as having been executed by an employee without
authorization to sign such contracts, and who had not been
given authority to sign these specific contracts. It asserts that
CFO therefore at least implied that the contracts were
unenforceable. It thus contends that its interpretation is a
reasonable one, that “a reasonable juror could have concluded”
that the email “constituted ‘cancellation’” of the contracts, and
that the email is therefore ambiguous on that point.
¶68 We agree with MX that its interpretation of the May 25
email is a reasonable one, and agree that this fact renders the
email ambiguous. See Mind & Motion Utah Invs., LLC v. Celtic
Bank Corp., 2016 UT 6, ¶ 24, 367 P.3d 994 (stating that ambiguity
exists where a document’s “terms are capable of more than one
reasonable interpretation because of uncertain meanings of
terms, missing terms, or other facial deficiencies” (quotation
simplified)). In many instances, a court’s legal determination
that ambiguity exists will lead to the conclusion that summary
judgment cannot be granted regarding the meaning of a
document, and that a factfinder will need to weigh in on the
matter. See, e.g., Ocean 18 LLC v. Overage Refund Specialists LLC
(In re Excess Proceeds from Foreclosure of 1107 Snowberry St.), 2020
UT App 54, ¶ 29, 474 P.3d 481 (“If a court determines, as a legal
matter, that a contract is ambiguous, then a question of fact
exists as to the parties’ intentions.”). But in this particular
context, our determination that the email is ambiguous does not
carry the day for MX.
¶69 There are some areas of the law in which clarity is so
important that ambiguity itself results in judgment as a matter of
law in one side’s favor. See, e.g., Geisdorf v. Doughty, 972 P.2d 67,
70 (Utah 1998) (stating that when an “optionee decides to
exercise his option [to renew a contract] he must act
unconditionally and precisely according to the terms of the
option,” and that actions constituting mere substantial
compliance—as opposed to strict compliance—will not suffice
20200256-CA 35 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
(quotation simplified)); Brady v. Park, 2013 UT App 97, ¶¶ 17–20,
302 P.2d 1220 (noting that compound interest “is not favored by
the law” and that such interest will be awarded only where the
parties “expressly agreed to compound interest,” and holding
that an agreement that was unclear and left the matter to
“inference and implication” had to be construed as providing for
simple interest). Our supreme court has declared cancellation of
contracts to be one of those areas. See Glenn, 2009 UT 80, ¶ 19
(“Ambiguous conduct and language intended to signal contract
termination will be deemed not to have terminated the contract.”
(quotation simplified)). In this specific context, a communication
that only ambiguously communicates intent to cancel a contract
will be deemed, as a matter of law, insufficient to cancel that
contract. “[N]otice of termination or cancellation of a contract
must be clear and unequivocal,” and if it isn’t, it doesn’t operate
to cancel the contract. Id. In particular, a communication that
“commingl[es] . . . a wish to cancel with a desire to negotiate and
save the contract cannot be seen as an unequivocal notice of
cancellation.” Id. ¶ 20.
¶70 The May 25 email is ambiguous. It might have been an
attempt to cancel any contractual relationship the parties might
have had,12 and can even be reasonably so interpreted, but it
12. We recognize that MX’s position, both in the May 25 email
and throughout this litigation, is that no valid contracts ever
existed between MX and Stein. But we have determined, see
supra Part I, that questions of fact remain to be adjudicated on
this point. Of course, if the factfinder later determines that no
contracts existed, then cancellation was never necessary, Stein
will not be entitled to contractual damages, and this issue will be
rendered moot. But if the factfinder sides with Stein, and
determines that valid contracts were in effect as of May 25, the
date of cancellation of the contract will become relevant to the
(continued…)
20200256-CA 36 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
does not clearly and unequivocally set forth that intention. In
this specific area of the law, ambiguity is not sufficient to stave
off summary judgment. Because the May 25 email was
ambiguous, and did not serve as a clear and unequivocal
cancellation of the contracts, the district court correctly (if
impliedly) determined that, as a matter of law, MX cancelled the
contracts on June 2, just sixty days before the conference was to
begin. Thus, in the event that Stein prevails on the contractual
validity issues, it will be entitled to 100% of the contractual
amount as liquidated damages.
CONCLUSION
¶71 The presence of disputed factual issues prevents entry of
summary judgment in Stein’s favor on issues related to validity
of the contracts. In particular, a reasonable factfinder could
conclude, on this record, that Events Manager did not have
actual or apparent authority to sign the contracts, and that MX
did not ratify them after the fact. Thus, the part of the district
court’s summary judgment order granting Stein’s motion for
summary judgment as to liability is erroneous. We vacate that
portion of the order, and remand for further proceedings.
(…continued)
damages inquiry. We acknowledge MX’s point that it is not
obligated to cancel contracts that did not exist, but a party who
puts all its eggs in the contractual-nonexistence basket takes a
risk that a factfinder may later disagree with it on that point. A
prudent party in MX’s position would be well-advised to craft a
notice that both maintains the position that no contract exists but
also, in the alternative, clearly and unequivocally cancels any
contractual relationship that might later be determined to exist.
20200256-CA 37 2022 UT App 30Stein Eriksen v. MX Technologies, Inc.
¶72 With regard to damages, the court’s summary judgment
order is correct. The liquidated damages provisions in the
contracts are, as a matter of law, not unconscionable, and MX
did not clearly and unequivocally cancel the contracts until June
2, just sixty days before the conference was to begin. We
therefore affirm the remainder of the court’s summary judgment
order, and remand with instructions that Stein, if it prevails at
trial on the disputed issues regarding contractual validity, will
be entitled to recover, as liquidated damages, 100% of the
contractual amount.
20200256-CA 38 2022 UT App 30