10 Sep 2016

Why You Should Never Break A Contract

Ever signed a contract and now you want to back out? You may need to consider that a Court may hold you responsible for failing to complete the contract.

In a recent decision, our firm was successful at trial on a contract dispute involving the sale of the assets of a business in excess of over $100,000 and the transfer of the lease of that business.

The buyer essentially changed his mind about buying the business and utilized many legal arguments to find a way out.

As part of the agreement to sell the business, the seller agreed to provide the landlord’s permission to transfer the lease to the buyer before the buyer would be held responsible for payment of the business. The buyer, who already owned another business in the building, didn’t want to wait for permission from the landlord. He took the keys and started to renovate the seller’s unit and as a result we successfully argued that he didn’t really rely on that clause.

He never returned the keys. The landlord gave permission to transfer the lease later on.
Failing to show that you rely on a section in an agreement is called waiver. If you have entered into an agreement with someone where something has to be done, such as receive permission from the landlord, then wait for it. That may give you an out if you later change your mind.

Why? When courts review contracts, they examine them based on the contract as a whole, rather than reading parts of a contract separately. The court tries to find the intention of the parties when reading these contracts, and therefore read contracts in a practical, common-sense way. The court also looks at the circumstances when the parties form the contract. Courts also want that people fulfill their responsibilities under a contract in “good faith”, meaning that the parties should try to do what they promised.

The bottom line is that when you have an agreement, the contract binds you to what you promised. The court looks at your actions and whether they followed that agreement, and if so, the court will hold you to the agreement.

Click here to read a copy of the decision.

KJ Chong also contributed to this article.

Read 1729 times Last modified on Saturday, 10 September 2016 15:23
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