Haymore v. Levinson

Supreme Court of Utah
8 Utah 2d 66, 328 P.2d 307 (1958)

ELI5:

Rule of Law:

When a contract for construction or mechanical utility requires performance to the 'satisfaction' of a party, that satisfaction is judged by an objective standard of reasonableness, not the party's subjective, personal taste or fancy.

Facts:

Contractor Arnold Haymore was building a house in Salt Lake County.
In November 1955, while the house was near completion, the Levinsons contracted to purchase it for $36,000.
The contract stipulated that $3,000 of the purchase price would be held in escrow pending the 'satisfactory completion' of a specified list of work items.
After the Levinsons moved in, Haymore completed the work on the initial list.
The Levinsons expressed they were not satisfied with certain items and refused to authorize the release of the escrow funds.
Haymore agreed to address a second list of items identified by the Levinsons.
When Haymore arrived to perform the work on the second list, the Levinsons demanded additional, unagreed-upon work.
Upon Haymore's refusal to perform the new demands, the Levinsons ordered him off the property and continued to refuse the release of the $3,000.

Procedural Posture:

The Haymores (plaintiffs) sued the Levinsons (defendants) in a Utah trial court to recover the money held in escrow.
The trial court entered a judgment in favor of the Haymores for $2,739, representing the escrow amount less an offset for minor deficiencies.
The Levinsons (appellants) appealed the trial court's judgment to the Supreme Court of Utah.

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Issue:

Does a contract provision requiring 'satisfactory completion' of a house require the buyer's personal, subjective satisfaction to be met before payment is due, or is an objective standard of reasonable performance sufficient?

Opinions:

Majority - Crockett, Justice

No, such a provision is judged by an objective standard of reasonableness. The court distinguishes two classes of 'satisfaction' contracts. The first, involving personal taste, fancy, or sensibility (e.g., a portrait), requires subjective satisfaction. The second, involving operative fitness, mechanical utility, or structural completion, is governed by an objective standard: what a reasonable person would find satisfactory. Building contracts fall into this second category to prevent unconscionable results where a party could refuse payment based on whim or caprice. The court found that Haymore's work met this objective standard of being reasonably skillful and workmanlike. Furthermore, because the Levinsons prevented Haymore from completing the second list of repairs by ordering him off the property, they cannot take advantage of that failure of performance.

Analysis:

This decision establishes a crucial distinction in contract law regarding 'satisfaction clauses.' By applying an objective 'reasonable person' standard to contracts involving mechanical utility and construction, the court provides protection for performers against the arbitrary whims of the other party. This ruling promotes fairness and predictability, ensuring that if work meets industry standards, payment cannot be withheld based on purely personal or unreasonable dissatisfaction. The case solidifies the principle that contract interpretation should avoid unconscionable outcomes and that a party cannot benefit from preventing the other party's performance.

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