Does defending against rescission constitute litigation to enforce a contract? Chase v. Scott Explained

Background and Facts

Mark Chase entered into a real estate purchase contract for Lot 9 in a Salt Lake County subdivision. Despite warnings about the area being a “tough building situation,” Chase relied solely on plat maps without conducting a thorough physical inspection. When his contractor began removing overburden, Chase discovered that the slope extended beyond what he expected from the plat maps. Chase filed suit seeking rescission based on mutual mistake and asserting negligent misrepresentation claims. The trial court granted defendants’ motion for involuntary nonsuit and awarded attorney fees under the contract’s prevailing party provision.

Key Legal Issues

The central issue was whether defendants’ successful defense against rescission constituted “litigation to enforce” the contract under the attorney fee provision. Chase argued that rescission litigation was not enforcement litigation, and that since the contract was fully performed (land conveyed and paid for), there could be no enforcement action. Additionally, the court addressed whether contractual “costs” should be limited to Rule 54(d) costs.

Court’s Analysis and Holding

The Utah Court of Appeals held that defending against rescission constitutes litigation to enforce a contract. Drawing on Equitable Life & Cas. Ins. Co. v. Ross and the Eighth Circuit’s decision in First Colony Life Insurance Co. v. Berube, the court reasoned that when Chase sued to rescind the contract, defendants’ ensuing defense was “litigation to enforce” the contract’s terms. The court also held that contractual “costs” are not limited to Rule 54(d) costs, as such limitation would render the contractual provision superfluous.

Practice Implications

This decision provides important guidance for contract drafting and litigation strategy. Parties defending against rescission claims can recover attorney fees under prevailing party provisions that reference enforcement litigation. When drafting attorney fee clauses, practitioners should consider whether to limit “costs” to Rule 54(d) costs or allow broader litigation expenses. The decision also demonstrates the importance of Utah Code Ann. § 78-27-56.5’s reciprocal fee provision, ensuring both parties have equal rights to fee recovery.