Arata v. Shefco Ltd.
330 P.3d 115
Utah Ct. App.2014Background
- In 2005 Arata (buyer) contracted to buy a lot from Shefeo (seller) for $155,000; the contract was expressly conditioned on Buyer executing a construction contract with Keystone to build a home for a target package price of $550,000 and to be completed by April 2006.
- Arata paid the $155,000 but never executed the Keystone construction contract; he then demanded return of the payment when construction contract was not signed; Shefeo refused and instead conveyed title to Arata.
- Arata sued for return of the $155,000, arguing the condition precedent failed and thus excused performance by both parties.
- Defendants moved for summary judgment, arguing the condition benefitted only the seller and thus the seller could unilaterally waive it; the district court granted summary judgment for Defendants on that basis.
- The court of appeals reversed, holding as a matter of law that the construction-condition benefitted Arata as well as the seller and therefore could not be unilaterally waived by the seller; the case was remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the condition precedent (execution of a Keystone construction contract by Buyer before closing) benefitted Buyer and thus could not be unilaterally waived by Seller | Arata: condition protected him by guaranteeing Keystone as builder, setting a target completion date, and fixing a target total price — releasing him from purchase if construction contract terms could not be agreed | Defendants: condition benefited only Seller; Seller could unilaterally waive; Buyer could have contracted with any builder independently | Held: Condition benefitted Buyer (as a matter of law) as well as Seller; Seller could not unilaterally waive it; summary judgment for Defendants reversed and case remanded |
Key Cases Cited
- McArthur v. State Farm Mut. Auto. Ins. Co., 274 P.3d 981 (Utah 2012) (defines condition precedent and its effect on obligations)
- Foster v. Montgomery, 82 P.3d 191 (Utah Ct. App. 2003) (conditions precedent may be waived by the party in whose favor they are made)
- ASC Utah, Inc. v. Wolf Mountain Resorts, LC, 309 P.3d 201 (Utah 2013) (fulfillment of condition precedent generally presents a question of fact)
- Harper v. Great Salt Lake Council, Inc., 976 P.2d 1213 (Utah 1999) (failure of a material condition precedent relieves obligor of duty to perform)
- Eliason v. Watts, 615 P.2d 427 (Utah 1980) (condition in a real estate contract held to benefit buyers, not seller)
- Ahrendt v. Bobbitt, 229 P.2d 296 (Utah 1951) (discusses waiver of contractual conditions)