When are contract modification provisions unenforceable agreements to agree? Bloom Master Inc. v. Bloom Master LLC Explained

The Utah Court of Appeals recently addressed when contractual provisions allowing for future modifications constitute unenforceable agreements to agree in Bloom Master Inc. v. Bloom Master LLC.

Background and Facts

Bloom Master Inc. sold manufacturing assets to Bloom Master LLC for $500,000, financed through a promissory note. The note contained a provision requiring annual review and modification of payment terms “in proportion to the reduced sales numbers” if the planter product failed to generate expected sales. For four years, the buyer made reduced payments based on this provision, comparing actual sales to a baseline year and reducing the annual payment proportionally. The seller eventually sued for breach of contract, claiming the buyer underpaid.

Key Legal Issues

The primary issue was whether the modification provision was an enforceable contract term or an unenforceable agreement to agree. The court also addressed whether such a provision could be severed from the contract under the severability doctrine.

Court’s Analysis and Holding

The Court of Appeals reversed the trial court’s grant of summary judgment to the buyer. The court held that the modification provision was an unenforceable agreement to agree because it failed to provide a definite mechanism for determining modifications. While the provision used mandatory “shall” language and generally agreed that terms would be modified under certain circumstances, it left the specifics to annual review and future agreement. The court emphasized that contractual terms must be “sufficiently definite” to be “capable of being enforced.”

However, the court denied the seller’s request for summary judgment because the seller failed to demonstrate that severing the unenforceable provision would still accomplish the contract’s primary purpose, a required element under Utah’s severability analysis.

Practice Implications

This decision reinforces that Utah courts will not enforce contractual provisions that leave essential terms for future negotiation, regardless of mandatory language used. Practitioners drafting contracts with modification provisions should include specific formulas, benchmarks, or mechanisms for calculating adjustments. The case also demonstrates the importance of addressing all elements of legal tests—here, both prongs of the severability analysis—when seeking summary judgment.