## Facts

- The Johnsons agreed to sell the Utiles a 160-acre parcel in Lyon County, Nevada.
- The written sale agreement required the Johnsons to drill a new 16-inch irrigation well, in the same area and depth as the existing well, and to test it for 24 hours at 1,000–1,200 gallons per minute (GPM) before close of escrow.
- Escrow instructions reiterated the obligation to drill and test the new well prior to closing.
- The Johnsons later told the Utiles that the existing irrigation well (Well No. 1) was no longer operative and would not be included in the sale.
- The parties reached an oral compromise memorialized in a May 12, 1967 attorney letter: the Utiles would relinquish claims to Well No. 1 if the Johnsons left a test pump and gasoline-powered motor on the new well (Well No. 2) and if the new well and equipment performed to the GPM requirements stated in the prior agreements.
- Mr. Johnson drilled Well No. 2 and claimed it met the required GPM on a 24-hour test.
- The Utiles claimed Well No. 2 never produced more than about 300 GPM and went dry in September 1967, requiring them to drill a replacement well (Well No. 3) at their expense.
- After a bench trial, the district court awarded the Utiles damages including amounts attributed to the loss of Well No. 1, efforts to improve Well No. 2, and drilling Well No. 3, plus incidental items and attorney’s fees.
- The Johnsons appealed, disputing the effect of the May 12 compromise and the damage award.

## Issues

1. Whether the May 12 compromise regarding Well No. 1, Well No. 2, and the equipment was an executory accord or a substituted contract that discharged the original well-performance obligations.
2. If the compromise failed, whether the Utiles could pursue remedies under the original contract terms and what damages were recoverable.

## Decision

- The Nevada Supreme Court held the May 12 compromise was an executory accord, not a substituted contract.
- Because the accord was conditioned on satisfactory future performance and was not satisfied, the Utiles could elect to sue on the original contractual obligations rather than being confined to the compromise alone.
- The court modified the trial court’s damages to conform to the proper remedial framework and the proof, and affirmed the judgment as modified.

## Legal Principles

- A substituted contract discharges the original duty immediately and replaces it; remedies for breach are limited to the substituted contract.
- An executory accord is an agreement to accept future performance in satisfaction of an existing duty; the original duty is suspended but not discharged until the accord is performed.
- If an executory accord is not performed, the injured party may elect to enforce either the original duty or the accord.
- Damages for failure to provide contractually required performance may include reasonable costs of obtaining substitute performance, but awards must be supported by the record and limited to recoverable categories under applicable law.

## Conclusion

The court treated the parties’ conditional well-related compromise as an executory accord, preserving the buyers’ right to enforce the original well-performance promise when the new well failed, while reducing or adjusting the trial court’s damage award to match the proper measure of recovery and the evidence.


Johnson v. Utile, 472 P.2d 335 (Nev. 1970)