Summary
The Utah Supreme Court affirmed the dismissal of Keith Carter's claim seeking to exercise an option to repurchase water shares from D. Stephen Sorensen. The court held that the purported option agreement was unenforceable because it lacked an ascertainable price term for purchasing less than the entire property. The court affirmed on that ground rather than the trial court's conclusion that Carter failed to timely exercise the option.
Topics
Practice areas
Questions Presented
- Whether the parties' purported option agreement was enforceable when it did not provide an ascertainable price for purchasing less than the entire property.
- Whether the trial court's dismissal should be affirmed on the ground that the option lacked an enforceable price term.
Holdings
- An option agreement is unenforceable when it lacks a definite and ascertainable option price, including a mechanism for determining the price of a discrete portion of the property.
- The appellate court may affirm the trial court's judgment on an alternative legal ground supported by the record when the judgment was correct, even though the trial court relied on a different rationale.
Key quotations
“A contract, such as an option, must have definite terms, including the option price, or else it cannot be enforced by a court.” (¶ 7)
“Because the parties' agreement contains no price term, it is unenforceable and Carter's claim was rightly dismissed by the trial court. Affirmed on other grounds.” (¶ 12)
Factual background
The Farmers Home Administration foreclosed on Carter's farm and water rights, and Sorensen later purchased the property for $355,000. Sorensen agreed that, if he purchased the property, Carter could repurchase all or part of it for the same price Sorensen paid to the FHA. After Carter repurchased part of the property, he sought to exercise the option for twenty-six remaining water shares, relying on an estimate of $800 per share. Sorensen refused, asserting that he had paid $47,000 for the shares, and Carter sued after depositing $20,800 into escrow.
Procedural history
Carter sued Sorensen after Sorensen refused to transfer twenty-six water shares at the price Carter claimed was required by an option agreement. The trial court refused to enforce the option, concluding that Carter had not timely tendered the correct price and that the price of the water shares could not be determined. The Utah Supreme Court affirmed on the alternative ground that the purported option agreement lacked an ascertainable price term.