I Agreed to WHAT?

The Duty of Good Faith and Fair Dealing

Most people understand that when they sign a contract, they are bound by the agreements and obligations written in the contract. However, what most people don’t realize is that, in Utah, “all contracts contain a covenant of good faith and fair dealing.” Vander Veur v. Groove Entm’t Techs., 2019 UT 64, ¶ 9, 452 P.3d 1173, 1177. This is true, even if the contract does not include any text specifically referring to the covenant of good faith and fair dealing.

As explained by the Utah Supreme Court, the covenant operates by “inferring as a term of every contract a duty to perform in the good faith manner that the parties surely would have agreed to if they had foreseen and addressed the circumstance giving rise to their dispute.” Id. The inferred covenant provides that, “each party impliedly promises that he will not intentionally or purposely do anything which will destroy or injure the other party’s right to receive the fruits of the contract.” Id.

As an extreme example, suppose Betty signs a written contract with Sam to pay $1,500 for Sam’s mountain bike. The contract says Betty can take possession of the bike immediately, but doesn’t specifically state how or when Betty has to pay Sam. Betty, takes possession of the bike, but tells Sam she will pay him with $1,500 worth of potatoes from her garden after next harvest. Sam objects, but Betty claims she hasn’t breached the contract because the contract doesn’t specifically require her to immediately pay or to pay with cash.

Betty is wrong. She has violated the inferred duty of good faith and fair dealing that attaches to every contract in Utah. Under the circumstances, it is obvious that Sam expected to be paid in cash at the time Betty took possession of the mountain bike. It is extremely unlikely that he would have agreed to the contract if he knew he would be paid in potatoes a year from now.

Ultimately, the inferred duty of good faith and fair dealing is about equity and fairness. All parties to a contract must act in good faith and refrain from unreasonable, or unfair, practices in fulfilling the terms of a contract.

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What is “Probate?”

The LawMost people have heard the word “probate,” but may not be sure what, exactly, a probate is.

Probate refers to the court proceedings and processes required by state law to pass a person’s “estate” to those designated to receive it.  The word “estate” means all the property held in a person’s name when they die.  For example, most people have financial assets like bank accounts, brokerage accounts, or retirement savings accounts.  Many people own real estate such as a personal residence and may own vacation or investment real estate.  Other common assets include tangible personal property (i.e. clothes, cars, collectibles, electronics, etc.), life insurance policies, and safe deposit boxes.

In Utah probate is required when a person dies with an estate worth $100,000 or more, or if they own any real estate.  If probate is required, the estate assets will be inaccessible to the inheritors until the probate is commenced.

So, how does a person begin a probate in Utah.  The first step is to file an application for probate in the district court in the county were the person last resided.  The application must include specific information about the person who died (the “decedent”), the decedent’s currently living heirs, whether the decedent had a will, as well as other important information.  The application must also identify a person who is designated, or wishes to be, the “personal representative” of the estate.  Once appointed by the court, the personal representative will receive authority from the court to take control of the estate assets, contact heirs and creditors, pay estate debts, sell estate property, and ultimately distribute estate money and assets to the appropriate inheritors.

At first glance, probate may seem straight-forward.  However, it can be confusing, time consuming, and expensive to have to deal with the required court proceedings.  Also, because probate is conducted in the courts, it is a public process.  For these reasons, many people prefer to avoid probate, if possible.

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The Power of the “Power of Attorney”

Power of AttorneyA “Power of Attorney” is an important legal document that grants to another person the legal right and ability to act on your behalf.

Powers of attorney can be broad or narrow, depending on your needs.  A “general” power of attorney grants broad powers to another to do just about anything you can do for yourself, such as enter contracts, open bank accounts, or make other financial decisions.  A power of attorney can also be “limited” to specific actions, such as signing a single document on your behalf.

A “durable” power of attorney remains valid even if you become incapacitated and can’t make decisions for yourself.  A “Durable General Power of Attorney” is commonly used in estate planning for just such a circumstance; making it possible for your designated agent to make financial decisions on your behalf if you are incapacitated for any reason.

It’s important to remember, however, that the Durable General Power of Attorney allows your agent to act on your behalf even if you are not incapacitated, and you will bound by the actions of the agent.  Some people feel uncomfortable with this and choose to execute a “Springing General Power of Attorney,” which “springs” into effect upon a persons incapacity.  While the “springing” power of attorney grants no authority to act in your name until you become incapacitated, it has the negative feature of needing certain formalities to occur before your agent can act for you.  For example, many springing powers of attorney require that a physician issue a letter documenting your incapacity before the agent can act for you.

All powers of attorney become void upon your death.

It is advisable to have some form of power of attorney in place in case of your incapacity.  Otherwise important financial assets may become locked and actions delayed upon your incapacity.

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Know Before You Rent!

Room for RentWith the advent of the sharing economy and websites such as airbnb.com and vrbo.com, many people have considered renting their primary or second residences to supplement income or defray maintenance expenses.  This practice can lead to disputes with neighbors and local governing authorities.  While renting is typically a “property right” that inures to the owner of real estate, it can be limited by restrictive covenants, home owners association agreements, and/or local zoning ordinances.

Most modern subdivisions include “covenants, conditions, and restrictions,” or CCRs, that run with the land.  CCRs often restrict an owners ability to rent the property or, in the alternative, set certain conditions that must be met before rental can occur.  Similarly, some properties are part of a home owners association, or HOA.  HOAs impose, by contract, certain restrictions on the use of member properties.

Local zoning ordinances may also restrict or prohibit renting of a residence.  In some cases, the zoning ordinance will only allow rental as a “conditional use.”  As the term implies, in these instances, rental is allowed so long as certain “conditions” are met.  Establishing that a property meets the imposed conditions can be a complicated process that typically requires notice to surrounding property owners, interaction with local fire, building, and other authorities, and public meetings.

Renting prior to fully understanding restrictions that may apply to the property can lead to disputes and imposition of fines.  We are often asked to assist homeowners to determine if they have the right to rent out their residence or to assist in the “conditional use” process.  We would be happy to assist you in the event you are contemplating renting out your residence (or are already doing so).

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Co-Owners and Property Rights

property-disputeWe are often contacted by clients who find themselves in difficult situations because they purchased real property with a non-spouse third party such as a boyfriend, girlfriend, in-law, or child. The reasons for doing so are varied and usually good-intentioned. For example, a parent might want to help their child or a child’s spouse build a credit rating. An unmarried couple may be engaged and purchased the property together in anticipation of marriage. In the most difficult cases, while both parties take title to the home, only one is obligated under the mortgage loan. If these relationships deteriorate, it leaves the parties in a very difficult situation. Especially the person who is liable for the loan. It is important to understand that when people take title to property together, they each have an undivided right to occupy or otherwise enjoy the property. If the relationship sours or one party finds themselves paying all of the bills related to the real estate, there are very limited measures that can be taken to unwind the transaction if the other party does not cooperate. The property cannot be placed on the market without the consent of both parties and the parties cannot charge each other rent, even if only one is living in the property. Short of litigation, there is no way to force a co-owner to vacate the property or to pay their fair share of expenses. Litigation, in these case, typically takes the form of a Complaint for Sale in Lieu of Partition, in which the Plaintiff asks the Court to force the real estate to be sold and any equity split among the owners. This litigation is time consuming, expensive, and often leads to a sale for less than market value. If you are considering purchasing real property with someone who is not your spouse, consult with a competent attorney to discuss measures to protect your interest and avoid costly litigation if the relationship deteriorates.

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Will the Real Property Line Please Stand Up?

OldFenceThe advent of satellite and GPS technology has unexpectedly increased property line disputes.  Now that we can map property line descriptions with incredible accuracy, many land owners are discovering that the “old fence line” is not on the “real property line.”  This has led to neighbors, and even whole neighborhoods, fighting over who owns what and where the real property lines are.

One Utah legal doctrine that helps resolve these issues is the doctrine of “boundary by acquiescence.”  Under this legal doctrine if you can show that a fence, monument, building, or other visible marker has been accepted as the boundary for a period of at least 20 years, that marker becomes the property line as a matter of law.  In fact the Utah Supreme Court recently ruled that title to disputed property automatically vests, based on the marker, once all of the elements of boundary by acquiescence are met.  In other words, no document need be drafted or filed to memorialize the “new” property line.  Once the 20 year period and other elements are met, the fence, building, or monument automatically becomes the property line, as a mater of law, regardless of what a prior legal description or other document says.  See Q-2 L.L.C. v. Hughes, 2016 UT 8, ¶ 24, 368 P.3d 86, 96, holding modified by Anderson v. Fautin, 2016 UT 22, ¶ 24, 379 P.3d 1186.

The idea behind this legal principle is that if everyone has accepted the marker as the property line for at least two decades, then there is no cause of action because the parties have established the property line by agreement.  So before you tell you neighbor that his fence is on your property, be sure to do a little historical research!


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Preparation – It’s Easier Than You Think!

As with many new undertakings in life, when you’ve decided to begin planning your estate, it’s easy to be left feeling overwhelmed, intimidated, and wondering where to start. Aside from finding an estate planning attorney, knowing what information you’ll need can help to ease these feelings.

The following is a list of information you can expect an attorney to request when you begin planning your estate:

  • Most recent personal tax returns
  • A list of any real estate you own
  • A list of any businesses you hold an interest in
  • A list of all bank/brokerage/retirement accounts
  • A list of any other large items of personal property (boats, trailers, etc.)

In addition to providing the above information, giving some thought to some pertinent topics is beneficial. The following is a list of questions to think about before beginning to plan your estate:

  • Who do you want to pass various parts of your estate to?
  • What are your wishes in regards to life saving measures?
  • What are your wishes in regards to the disposition of your body after the time of passing?
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The State of Your Estate!

EstateAn “estate”, what’s that?  An estate is the sum of a particular person’s assets. This includes legal rights, interests in property, and money, minus all liabilities. The term “estate” is commonly used in reference to what a person owns when they pass away and subsequently, what happens to those things.

If a person does not have anything in place designating where their estate is to go upon death, that person is considered to have died intestate and a court will determine who your estate will go to. Estate planning allows you to designate the person(s) your estate will go to after your death. If a person dies with an estate plan, that person is said to have died testate. Regardless of whether a person dies testate or intestate, the personal representative or administrator (the person in charge of distributing the estate) will necessarily have to go through probate to ultimately distribute the estate.

Each state has intestacy laws that designate the distribution of an intestate estate when such an estate goes through probate. However, as mentioned above, it is not necessary to leave the fate of your estate up to laws that don’t take into account the intricacies of your life. There are many different ways to approach estate planning based on the size of the estate, the particular wishes of the person, and family circumstances.  However, for a small estate, a basic estate plan should include, at the minimum, three important components:

1. Will. A will allows you to ensure that your belongings will go to the desired beneficiaries. Additionally, if you have minor children or are considering having children, you are able to choose a person to act as guardian over your children in the event of your death. A note that probate is still required to validate the will, but the presence of a will often speeds up the probate process considerably.

2. Durable Power of Attorney. A durable power of attorney allows you to assign a person to act on your behalf in the event of your disability. This person, as your agent, would have the power to make legal decisions as if he/she were you.

3. Advanced Healthcare Directive. In an Advanced Healthcare Directive, you are able to designate the person that you wish to make your healthcare decisions for you when you are unable to make those decisions for yourself. Additionally, you are able to record your healthcare wishes.

A basic estate plan will not be adequate for some estates. For instance, larger estates may benefit from a trust,  of which benefits have been written about in earlier blog posts.

If you would like to discuss the benefits of planning your estate in more detail, please contact us. We can assist you in deciding how to best effectuate your wishes!


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You’re a Trustee. . . good luck with that!

Okay, it mighresponsibility-750t not be quite that bad.  But, if you have accepted or inherited the responsibility of “trustee” of a trust, you have very specific responsibilities.  By definition, trustees are people “entrusted” with the ownership of assets that they must protect and distribute based on a trust contract document.  Additionally, Utah law establishes specific duties that every trustee must fulfill. For example, a trustee must be impartial to the beneficiaries, must be loyal in complying with the trust document, and must not do anything that would improperly benefit himself. If the trustee does not diligently and competently protect the assets, distribute the assets as required, and fulfill his or her statutory duties, the trustee may have personal liability to the beneficiaries of the trust for any resulting loss. If you find yourself acting as trustee you must understand what the trust document and state law require of you. At Hastings Law we can help you understand, navigate, and successful fulfill your trusteeship responsibilities.

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Small Business . . . Not Small Potatoes

potatoesMany people dream of owning their own business . . . and it’s a good thing.  According to to the Bureau of Labor and Statistics small businesses (defined as those with 1-49 employees) typically accounts for just as much U.S. job growth as large business (those with 5o0 or more employees).

The challenge for most would-be entrepreneurs is that they have no idea where to begin when it comes to starting a new business.  If you are thinking of starting your own business, here are five basic topics you should consider:

  1. Business Idea.  Of course, you need to have an idea about what business you want to be engaged in.  The idea doesn’t need to be earth-shattering or absolutely original, most ideas aren’t.  However, you do need to understand what product or service you want to offer and who your target market is.  Additionally, you need to develop an understanding of the cost to provide the product or service and whether your model can produce a profit.  Try putting your idea on paper.  If you struggle explaining your idea in writing, you need to develop it further.
  2. Entity.  Choosing how you want to organize your company is an important initial step.   Two common entity types are the corporation or the limited liability company.  Both provide liability protection and an organized structure for your company.
  3. Funding.  Acquiring funding is always a concern when starting a new business.  You will need to identify what the up front costs are and where the funding will come from.  Typical sources include personal savings, loans from family members, bank loans, or contributions from limited partners or preferred stockholders.
  4. Company Accounts.  When you set up an entity you will need to acquire a Taxpayer Identification Number.  Use this number to set up company bank accounts and have a strict policy that all company revenues and expenses be paid out of company accounts.  Nothing leads to business failure faster than failing to control the revenues as they start rolling in.
  5. Payroll.  If your business plan requires employees, you must bone up on the basic rules and regulations relating to employers.  In general, you must treat employees fairly, pay them on a regular basis, pay workers compensation insurance premiums, pay unemployment taxes, and remit payroll taxes and withholding to both the state and federal governments.  If you are new to payroll, it is advisable to hire a payroll processing company or other expert to assist you.  Making mistakes with payroll can create large liabilities for your new company.

Being a business owner is challenging and exhilarating.  By offering the right product, utilizing the right procedures, and hiring the right people your chances of success will greatly improve.  Good luck!

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