Legal Updates

Failure to perform actions not included in the agreement may still be considered breach if required in order to perform the agreement in good faith

June 16, 2021

Sellers sought to terminate a land sale agreement, contending that the purchaser breached the agreement as she did not make the final payment, even though they refused to give the purchaser a power of attorney so that she would be able to handle the land betterment tax.

The Court held that the sellers are the ones who breached the agreement and they do not hold the right to terminate it. Agreements are to be consummated in good faith (pacta sunt servanda), even if one is required to perform actions that are not included in the original agreement. Under circumstance of a lack in the agreement, the purpose of the agreement and the intention of the parties is to be reviewed. Here, even if the parties did not anticipate the need for a power of attorney for the purpose of paying betterment tax, they had to perform the agreement in good faith. When the parties agreed to assign the payment of the betterment tax to the purchaser, they had to act in a manner that enabled the consummation of the agreement and their refusal to do so frustrated the consummation of the agreement and constituted a performance in lack of good faith. Hence, the sellers breached the agreement and have no justification to terminate it.