Legal Updates

Changing an agreement by behavior requires the same contractual agreement as concluding a new agreement

May 30, 2024

Parties entered into a contract, for the provision of a bank guarantee for several years in exchange for a monthly consideration for the entire period of the guarantee. The contract also stipulates that it will end upon the return of the guarantee. Prior to the expiration of the guarantee, the parties extended the period of the guarantee and added another guaranteed to the guarantee letter.

The Court rejected the guaranteed parties’ contention that the contract had been changed by their behavior. While parties can change a written contract through their behavior alone, changing or canceling a provision in a contract requires a contractual agreement by both parties to deviate from the provisions of the existing contract at a level that is no less than that required for the actual creation of the contract itself. Here, the guarantee was not returned or assigned but instead was extended and the name of another guaranteed was added to it. Therefore, the guaranteed parties must pay the guarantor in accordance with the provisions of the contract until the end of the term specified therein.