The Utah Supreme Court was asked to determine whether the recording provision was a condition or a covenant. The court stated that because conditions and covenants create qualitatively different obligations under the contract, the distinction between the two would be dispositive of the case.
"A covenant," the court stated, "is a promise between the parties to the contract about their mutual obligations. In essence, covenants are the core bargained-for exchange of an agreement. They create specific legal duties, the violation of which gives rise to remedies for breach of contract." On the other hand, “A condition is an event, not certain to occur, which must occur before performance under a contract becomes due."
The court then provided three principle differences between conditions and covenants:
1) The parties to the contract have no duty to perform until a condition is fulfilled, so the failure of a condition relieves the parties of all of their contractual duties.
2) The parties have no remedy for breach of contract if a condition is not fulfilled, because at that point there is simply no contract to breach.
3) Conditions typically fall outside the control of the parties to the contract, often requiring some environmental trigger (such as "weather permitting") or action by a third party (such as "upon the lender's approval") for the contract to begin.
"Stated differently, even if one of the parties has some influence over the fulfillment of a condition, its incidence usually is a matter of fate or of the decision of one or more third parties. Covenants, by contrast, are almost always within the control of the contracting parties."
By applying this analysis to the case, the Utah Supreme Court held that Celtic Bank's recording obligation was a covenant, not a condition. As a result, the court found that Celtic Bank breached the contract by failing to timely record. Because a covenant, and not a condition, was violated, Mind & Motion was able to recover damages because the contract was still in force.