Legal Updates

Demand of material changes to the terms of an agreement as a condition to continuing its consummation may be deemed breach of agreement

June 26, 2018

A party to an ultra-sound system development agreement sent a notice to the other party demanding payment of an advance payment and an increase in the quantity of products ordered on the first order, clarifying that, to the extent that the commercial conditions did not change, the project would be abandoned.

The Court held that the demand for changes constitutes a breach of an agreement. When a contract is entered into, the parties to it are bound and are not permitted to withdraw from their obligations unless there are circumstances that justify terminating the contract and subject to the manner of termination prescribed by law. As a general principal, the notice of termination must be clear and unequivocal, and should unequivocally state that the injured party intends to terminate the contract in light of the breach. When the injured party enumerated the ground for termination in the notice, it is not entitled to rely on grounds that did not appear in the reasoned notice, unless duly given a new notice of termination. Here, the ultimatum constitutes in effect a conditional termination of the agreement. In the absence of a legal cause for termination - by contract or law - a party that repudiates a valid contract and informs the other of its "termination" breaches the contract, even if acted in good faith and in the belief that the termination was duly made.