Utah Settlement Agreement Disputes

General Information

Under Utah law, to invalidate or set aside a settlement agreement, there must be "illegality, fraud, duress, undue influence, or mistake." In re Estate of Chasel, 725 P.2d 1345, 1348 (Utah 1986), R & R Indus. Park, L.L.C. v. Utah Property and Cas. Ins. Guar. Ass'n, 199 P.3d 917, 927-28 (Utah,2008).

Rule 9(b) of the Utah Rules of Civil Procedure requires that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Utah R. Civ. P. 9(b).

“Once formally entered, [a settlement agreement] cannot be set aside merely because one party discovers new evidence which could make the outcome more favorable to that party.” In re Estate of Chasel, 725 P.2d 1345, 1348 (Utah 1986).

Additional discovery may be appropriate to determine whether to enforce or set aside the settlement agreement. " [T]he trial court . . . after the hearing, ordered discovery on the enforceability of the settlement agreement 'to be complete[d] within 90 days.'"

PDC Consulting, Inc. v. Porter, 196 P.3d 626, 629 (Utah Ct. App. 2008).

The burden is the plaintiff's to move a case forward. Where a settlement agreement bars further litigation, plaintiff's failure to advance the case by filing a motion to set aside the settlement agreement can result in dismissal for failure to prosecute.

PDC Consulting, Inc. v. Porter, 196 P.3d 626, 629 (Utah Ct. App. 2008).

One party's failure to perform under certain conditions precedent to a settlement agreement may be excused from enforcement of the settlement agreement.

Mascaro v. Davis, 741 P.2d 938, 942-43 (Utah,1987).

A settlement agreement is an executory accord.

Where there was no mistake of fact, but merely a lack of full knowledge of the facts, which was plainly due to failure to exercise due diligence to ascertain them, this did not constitute a ground for relief against a stipulation.

United Factors v. T. C. Associates, Inc., 21 Utah 2d 351, 354, 445 P.2d 766, 769 (Utah 1968).

In the case of a stipulation for settlement, the general rule is that it is to be regarded as removed from the sphere of ordinary stipulations, particularly procedural ones, which the court is free to set aside or not, in its broad discretion and for the sake of convenience alone, **768 and although there is some authority that it may be set aside upon a proper showing if no material change in the position of the parties has occurred, the rule is usually stated to require, for granting *353 relief, a showing equivalent to that necessary to set aside a contract in equity.

United Factors v. T. C. Associates, Inc., 21 Utah 2d 351, 352-53, 445 P.2d 766, 767-68 (Utah 1968).

The trial court has the power to enter a judgment enforcing a settlement agreement if it is an enforceable contract.It is a basic rule that the law favors the settlement of disputes. Such agreements under the proper circumstances may be summarily enforced. However, whether a court should enforce such an agreement does not turn merely on the character of the agreement. An agreement of compromise and settlement constitutes an executory accord. Since an executory accord “constitutes a valid enforceable contract,” basic contract principles affect the determination of when a settlement agreement should be so enforced.

Goodmansen v. Liberty Vending Systems, Inc., 866 P.2d 581, 584 (Utah App.,1993).

“Settlement agreements are governed by the rules applied to general contract actions.” Sackler v. Savin, 897 P.2d 1217, 1220 (Utah 1995). “It is fundamental that a meeting of the minds on the integral features of an agreement is essential to the formation of a contract.” Richard Barton Enters. v. Tsern, 928 P.2d 368, 373 (Utah 1996). Thus, a binding contract exists where it can be shown that the parties had a meeting of the minds as to the “integral features of [the] agreement” and that the terms are sufficiently definite as to be capable of being enforced. Prince, Yeates & Geldzahler v. Young, 2004 UT 26, ¶ 13, 94 P.3d 179 (Utah 2004). LD III, LLC v. BBRD, LC, 221 P.3d 867, 872 (Utah App. 2009).

“So long as there is any uncertainty or indefiniteness, or future negotiations or considerations to be had between the parties, there is not a completed contract. In fact, there is no contract at all.” Candland v. Oldroyd, 67 Utah 605, 608, 248 P. 1101, 1102 (1926).

Nielsen v. Gold's Gym, 78 P.3d 600, 602 (Utah,2003)

Oral Settlement Agreement

It is of no legal consequence that the parties have not signed a settlement agreement. Mascaro, 741 P.2d at 941 n. 2; accord *585 Murray v. State, 737 P.2d 1000, 1001 (Utah 1987). Likewise, “[i]f a written agreement is intended to memorialize an oral contract, a subsequent failure to execute the written document does not nullify the oral contract.” Lawrence Const. Co. v. Holmquist, 642 P. 2d 382, 384 (Utah 1982). “It is a basic and long-established principle of contract law that agreements are enforceable even though there is neither a written memoralization of that agreement nor the signatures of the parties, unless specifically required by the statute of frauds.” Murray, 737 P.2d at 1001. “Parties have no right to welch on a settlement deal during the sometimes substantial period between when the deal is struck and when all necessary signatures can be garnered on a stipulation.” Brown v. Brown, 744 P.2d 333, 336 (Utah App.1987) (Orme, J., dissenting).

Goodmansen v. Liberty Vending Systems, Inc., 866 P.2d 581, 584-85 (Utah App.,1993)

Consideration

There is respectable authority which holds that no consideration is required to give validity to a stipulation. United Factors v. T. C. Associates, Inc., 21 Utah 2d 351, 353, 445 P.2d 766, 768 (Utah 1968).

Duress

A party seeking to set aside a contract on the basis that it was executed under duress must show (1) that the other party committed a wrongful act, (2) which put the party seeking to set aside the contract in fear, (3) such as to compel him or her to act against his or her will. See Fox v. Piercey, 227 P.2d 763, 766 (Utah 1951). Munford v. Bienkowski, 2001 WL 1511834 (Utah App.), 1 (Utah App.,2001).

Mistake

See this article about MISTAKE

Conditions Precedent

Plaintiffs contend that the agreement reached at the settlement conference before Judge Sawaya was improperly enforced by Judge Dee due to a failure of conditions. It is a basic rule that the law favors the settlement of disputes.7 Such agreements under the proper circumstances may be summarily enforced.8 However, whether a court should enforce such an agreement does not turn merely on the character of the agreement. An agreement of compromise and settlement constitutes an executory accord.9 Since an executory accord “constitutes a valid enforceable contract,”10 basic contract principles affect the determination of when a settlement agreement should be so enforced.2 On appeal, plaintiffs do not dispute the validity of the agreement, but rather assert that their failure to perform thereunder was excused because certain conditions precedent to the agreement had not been met. Plaintiffs contend, therefore, that Judge Dee erred in granting the motion to enforce the settlement agreement.11 *943 345 Where one party to a settlement agreement fails to fulfill a substantial condition precedent thereto or therein, the other party(s) is excused from performance.12

Mascaro v. Davis, 741 P.2d 938, 942-43 (Utah,1987).

Once formally entered, it cannot be set aside merely because one party discovers new evidence which could make the outcome more favorable to that party. In re Estates of Thompson, 226 Kan. 437, 441-42, 601 P.2d 1105, 1110 (1979); Bohlman v. Big River Oil Co., 124 N.W.2d 835, 839 (N.D.1963). Rather, the agreement can be set aside only for the reasons generally available to set aside a compromise agreement, i.e., illegality, fraud, duress, undue influence, or mistake. 15A Am.Jur.2d Compromise and Settlement §§ 27-34 (1976).

Matter of Estate of Chasel, 725 P.2d 1345, 1348 (Utah,1986)

The following is an excerpt from the case R & R Indus. Park, L.L.C. v. Utah Property and Cas. Ins. Guar. Ass'n, 199 P.3d 917, 927-28 (Utah 2008)

II. INVALIDATION OF THE SETTLEMENT AGREEMENT

A. The Invalidation of the Settlement Agreement Was Not Properly Raised Before the District Court

The challenge to the validity of the Settlement Agreement was not properly raised before the district court. We have long held that a settlement agreement can only be set aside for “illegality, fraud, duress, undue influence, or mistake.” In re Estate of Chasel, 725 P.2d 1345, 1348 (Utah 1986). In addition, rule 9(b) of the Utah Rules of Civil Procedure is clear that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Utah R. Civ. P. 9(b). No motion to set aside the agreement was ever made before the district court, and no claims of illegality, fraud, duress, undue influence, or mistake were raised by UPCIGA.

The first mention of the invalidity of the Settlement Agreement in the record is found in UPCIGA's October 13, 2006 brief for the evidentiary hearing, where UPCIGA argued that the agreement was “no longer enforceable because it was based on less than accurate and complete representations from R & R and AlumaTek about their damages and insurance compensation.” During the subsequent hearing, there was no testimony offered, argument made, or indeed any discussion at all about the enforceability of the Settlement Agreement. As R & R correctly pointed out in its brief before this court, “[n]o cause of action or counterclaim for rescission based upon illegality, fraud, duress, undue influence or mistake was ever properly before the Court, or even properly pled as a defense for that matter.” UPCIGA failed to state in any context the basis for its challenge to the Settlement Agreement with sufficient particularity and merely mentioned “less than accurate and complete representations” as a basis for the invalidation of the agreement in its brief to the trial court. UPCIGA failed to lay out the claim with sufficient clarity and failed to even use the words fraud, mistake, or duress—let alone their required factual components—in its argument on the invalidity of the Settlement Agreement. Because of this, UPCIGA's assertion that the Settlement Agreement was unenforceable did not comport with rule 9(b), and thus it was not properly before the court.

B. The Invalidation of the Settlement Agreement Was Improper

Settlement agreements “are encouraged to promote harmony and to prevent the waste of assets.” In re Estate of Chasel, 725 P.2d 1345, 1348 (Utah 1986). We have upheld the importance of settlement *928 agreements and have ruled that “[o]nce formally entered, [a settlement agreement] cannot be set aside merely because one party discovers new evidence which could make the outcome more favorable to that party.” Id.; see also Bohlman v. Big River Oil Co., 124 N.W.2d 835, 839 (N.D.1963). UPCIGA entered into the Settlement Agreement in May 2003; however, it cites interactions with R & R after the agreement was entered into as providing a basis for the invalidation of the agreement. UPCIGA's first discovery request regarding compensation to R & R from other insurers occurred more than three years after the Settlement Agreement was signed.8 The receipt of information after the fact cannot be used to invalidate the agreement. It was the responsibility of UPCIGA to ascertain information relevant to its decision to settle before entering into the agreement, and there is no evidence that it attempted to do so. UPCIGA cannot invalidate the Settlement Agreement merely because damages did not end up where it expected they would. “Rather, the agreement can be set aside only for reasons generally available to set aside a [settlement] agreement, i.e., illegality, fraud, duress, undue influence, or mistake.” In re Estate of Chasel, 725 P.2d at 1348.

The district court cited Quinn v. City of Kansas City, for the principle that “[t]he Court has discretion to either enforce or reject a settlement agreement entered into by the parties while the litigation is pending.” 64 F.Supp.2d 1084, 1091 (D.Kan.1999). While this is true, the invalidation of the contract must still be based upon one of the required factual bases for setting aside a contract. In addition, Quinn is distinguishable because it involved fraud and deception told by the plaintiff in a deposition. No such claims have been made in this case. Id. at 1093. UPCIGA did not claim fraud and the district court did not rely on fraud or any other provision of Rule 9(b) to invalidate the Settlement Agreement. UPCIGA's brief references the word fraud only once in relation to R & R when UPCIGA states that it “does not contend the representations by R & R and AlumaTek were as malicious or fraudulent as the plaintiff in Quinn.” The trial court's finding of “less than accurate representations regarding insurance proceeds” does not meet the standard for setting aside a settlement agreement.¶ 48 In summary, UPCIGA failed to allege or prove a factual basis for setting aside the Settlement Agreement under Rule 9(b). We therefore reverse the trial court's grant of summary judgment on that issue.

R & R Indus. Park, L.L.C. v. Utah Property and Cas. Ins. Guar. Ass'n, 199 P.3d 917, 927-28 (Utah 2008)

Mutual Mistake, Voidability, Recission

Mutual mistake of fact makes a contract voidable, see Tanner v. District Judges, 649 P.2d 5, 6 (Utah 1982), and is a basis for equitable rescission. Tarrant v. Monson, 96 Nev. 844, 619 P.2d 1210, 1211 (Nev.1980). We find the trial court was acting within its discretion to rescind the sale agreement in view of its adequately supported findings concerning mutual mistake.6 See 12A C.J.S. Cancellation of Instruments § 7 (1980) (allowance or denial of rescission remedy rests in the sound discretion of the trial court). See also Horton v. Horton, 695 P.2d 102, 105 (Utah 1984).5 However, once the trial court rescinded the contract, it was, as it recognized, obligated to return the parties to their pre-contract position, if possible. Busch v. Nervik, 38 Wash.App. 541, 687 P.2d 872, 876 (1984). See Perry v. Woodall, 20 Utah 2d 399, 401, 438 P.2d 813, 815 (1968) (one electing to rescind a contract must tender back to other contracting party whatever property of value he has received); Horton v. Horton, 695 P.2d 102, 107 (Utah 1984) (“The purpose of an equity action is to restore the parties to the status quo to the extent possible.”). Accordingly, to complete the restitution which properly accompanies rescission, Langston is required to reimburse McQuarrie for the $10,000 earnest money fee and the grazing fees McQuarrie paid.

Robert Langston, Ltd. v. McQuarrie, 741 P.2d 554, 557 (Utah App.,1987)