Legal Updates

A contract that repeats a previous contract and may stand by itself may be deemed replacing the previous contract and not an addendum

January 31, 2021

A couple bought from a contractor an apartment that had not yet been built as part of the TAMA 38 project and was to be delivered after a year. After three months, a new contract was executed regarding the purchase and the new contract stipulated that it replaces the previous one. A third contract was executed with other terms and it was not recorded in it that it replaces the second contract.
The Court held that the third contract replaced the second contract. When an addition to a contract does not explicitly state that it replaces the previous contract, it must be examined what the parties intended and whether the change made in adding the addition is so substantial that the amended contract is in fact an alternative contract. Among other things, weight may be given to the extent of the change in the new contract; the possibility of the new contract to stand on its own; the materiality of the amended provisions; the conduct of the parties after the execution of the new contract - whether they continued to act in accordance with the earlier contract; and more. Here, the third contract is a complete contract for the purchase of the apartment, which includes all the essential conditions for such a contract and can stand on its own; the third contract does not imply that this is an addition and not a new contract and, in fact, the third contract repeated most of the contractual provisions in the previous sales contracts and changed a small part in accordance with the new understandings, such as changing the delivery date. Hence the third contract is a complete stand-alone contract that replaced the previous contracts and not just added to them.