57-8-42. Fair and reasonable notice

(1) Notice that an association of unit owners provides by a method allowed under Title 16, Chapter 6a, Utah Revised Nonprofit Corporation Act, constitutes fair and reasonable notice, whether or not the association of unit owners is a nonprofit corporation.

(2) Notice that an association of unit owners provides by a method not referred to in Subsection (1), including a method described in Subsection (3), constitutes fair and reasonable notice if:
     (a) the method is authorized in the declaration, articles, bylaws, or rules; and
     (b) considering all the circumstances, the notice is fair and reasonable.fn1

(3) (a) If provided in the declaration, articles, bylaws, or rules, an association of unit owners may provide notice by electronic means, including text message, email, or the website of the association of unit owners.fn2
     (b) Notwithstanding Subsection (3)(a), a unit owner may, by written demand, require an association of unit owners to provide notice to the unit owner by mail.

Enacted by Chapter 355, 2011 General Session


FN 1.   It is odd that subsections (1) and (2) describe what constitutes fair and reasonable notice considering that nowhere does the act require notice to be fair and reasonable in the first placea or grant de facto validity to notice that is fair and reasonable.  One would expect this statute to begin by requiring notice that an association provides to be fair and reasonable.  Or stating that notice an association provides that is fair and reasonable is effective for all purposes. 

But, it doesn't.  Thus, it's not clear whether the intent of subsections (1) and (2) is to require that notice that isn't both fair and reasonable is invalid, or if the intent is to grant validity to notice that is fair and reasonable, or if they serve some other purpose.

It may seem the implication is notice that is fair and reasonable is always valid.  But, if that is the case, then subsection (1) directly conficts with subsection (3).  That is, if subsection (1) is saying an association may provide notice as allowed by the Nonprofit Act, then subsection (1) contradicts with subsection (3) because the Nonprofit Act specifically authorizes notice by electronic means even if the governing documents say otherwise, and subsection (3) only allows notice by electronic means if allowed in the governing documents.

As to incorporated associations, the Nonprofit Act already applies regardless of subsection (1).  As to unincorporated associations, since only the Nonprofit Act contains a requirement that certain notice be fair and reasonable in the first place, it accomplishes nothing to say notice under the Nonprofit Act is fair and reasonable for unincorporated associations.  Again, subsection (1) states what is fair and reasonable notice but doesn't state how that matters, which alone would mean this subsection has no real effect.  Thus, subsection (1) either contradicts subsection (3) as to electronic means or appears to have no actual effect.  

Authorizing two contradicting ways to provide notice seems unlikely, but since we are required to "give effect to each word, phrase, clause, and sentence where reasonably possible," because "we presume that the Legislature uses statutory terms advisedly,"b the most logical conclusion is that notice given pursuant to the Nonprofit Act is valid, except as otherwise stated in subsection (3) regarding notice by electronic means (which is true in any event for incorporated associations).  Whether notice that isn't both fair and reasonable is invalid is simply unclear, but it would be a stretch to argue that this statute goes that far.

Perhaps subsections (1) and (2) go to what is required to fulfill the implied covenant of good faith and fair dealing that is inherent in every contract (including an association's governing documents).  All contracts contain an unwritten or implied promise that the parties will deal with each other fairly and in good faith.  This means that an association (and its board) and its members have promised not to intentionally do anything to injure each other’s right to receive the benefits of the contract.c 

But, this unwritten promise does not establish new, independent rights or duties not agreed to, or create rights and duties that are inconsistent with the actual terms of the contract.  Importantly, private contracts are free to contain terms that are not necessarily "fair" or "reasonable" (the implied covenant only applies to how the parties deal with each other under the contract, not to the contract terms themselves, thus you are free to sell me your home at an unreasonably and unfairly high price and I am free to agree to buy it, and the implied covenant of good faith and fair dealing only deals with how you and I carry out the terms of the agreement).

Subsection (2) requires notice to not only comply with the terms of an association's governing documents, but to also be fair and reasonable considering all the circumstances.  Thus, subsection (2) establishes new, independent rights or duties.  As such, subsection (2) does not speak to what is required by the implied covenant of good faith and fair dealing.

Conclusion.  Accordingly, in the end, subsections (1) and (2) have no actual effect and are of no consequence as to incorporated associations.  Unincorporated associations may rely on the Nonprofit Act when giving notice, except as otherwise stated in subsection (3) as to notice by electronic means.

a.  In contrast, the Nonprofit Act requires notice to be fair and reasonable as to meetings and action by written ballot without a meeting.  See 16-6a-704 and 709.
b.  See Whitaker v. Utah State Retirement Bd., 2008 UT App 282, 191 P. 3d 814.

FN 2.   But see Section 16-6a-103(2) and (9)(b) authorizing notice to be communicated by electronic means regardless of what an association's governing documents say.  But, as to that, see Section 57-8-40 stating if there is a conflict, the Condo Act governs over the Nonprofit Act.  Thus, subsection (3) governs and an association's governing documents must authorize notice by electronic means in order to use electronic means to provide notice.

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