Legal Updates

When a contract includes a clause enabling termination upon on receipt of a third-party approval the party charged with retrieving the approval may also terminate it

August 6, 2017

An entrepreneur entered into an agreement with purchasers of apartments. Under the agreement it was set that the entrepreneur will act to obtain a building permit and if no building permit is retrieved within the set period, the parties to the agreement may terminate it. No building permit was received within the set period and the entrepreneur terminated the agreement.

The Court rejected the purchasers’ claim and held that construction of an agreement will be pursuant to the parties' intention at the time of entry into the agreement. In this case, the clear language of the contract leaves no room for doubt that the intent on the parties was that any party may terminate the agreement if ne building permit is retrieved, for any reason. Had the entrepreneur not acted to obtain the permit, the entrepreneur would have been deemed to have acted in bad faith. However, because the entrepreneur acted to retrieve the permit, even if without success, the entrepreneur was entitled to terminate the agreement.