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Tacit resolutive condition may dissolve agreement only in grave circumstances

By July 24, 2022December 1st, 2023No Comments

The Court will dissolve an agreement containing a tacit resolutive condition when there are grave reasons substantiating the claim. This was held by the Court of Magistrates on the 13th July 2022 in Mark Anthony Portelli vs Jean Claude Micallef. The Court was presided over by Magistrate Marse-Ann Farrugia.

In 2010, the parties engaged in a partnership to operate a Bar and Restaurant in Hal Safi. Following the dispute, the plaintiff decided to sell his share to the defendant for €8,000. They entered into an agreement whereby the defendant was bound to pay the plaintiff in three instalments, with the first €3,000 being paid on the date of the agreement, the second payment of €2,500 to take place on the 13th August 2010 and the last payment of €2,500 due on the 1st September 2010.

Whilst the first payment of €3,000 was successful, the second and third payments did not occur. The plaintiff filed an application in Court to recover the sum of €5,000 which he alleged was owed to him by the defendant. The defendant explained that he had cancelled the cheques because the plaintiff did not honour his part of the agreement, where he was bound to pay 50% of the creditors up until the date of the agreement and provide the defendant with all the receipts of works carried out in the establishment.

The defendant was of the view that the agreement was never enforceable because he alleged that he only became aware of pending payments to third parties, after signing such agreement. However, the Court noticed that the alleged obligation of the plaintiff to provide the defendant with all the receipts of works carried out in the establishment, was indeed included in the contract. Therefore, the defendant was aware of this when signing the agreement.

From a legal point of view, Article 992 of the Civil Code provides that contracts legally entered into shall have the force of law for the contracting parties and they may only be revoked by mutual consent of the parties, or on grounds established by law. One of these grounds is the express resolutive condition outlined in Article 1067 of the Civil Code. It states that when the condition is accomplished, the agreement will dissolve, and the Court shall not grant any time to the defendant.

Furthermore, Article 1068 of the Civil Code outlines that a resolutive condition is in all cases, implied in bilateral agreements in the event of one of the contracting parties failing to fulfil his engagement. This is provided that in such a case, the agreement will not be dissolved, and it will be lawful for the court, according to circumstances, to grant a reasonable amount of time to the defendant to remedy his shortcomings.

An exception to this rule can be found in Article 117 of the Commercial Code. In commercial contracts, the implied resolutive condition referred to in Article 1068 of the Civil Code produces the dissolution of the contract ipso jure, and it shall not be lawful for the court to grant to the defendant a time for clearing the delay.

The Court held that case law showed that if the defendant believed that the plaintiff failed to honour his obligations, he should have filed an application before the Court, for the resolution of the same contract, and not unilaterally decide not to honour the payments he was obliged to make. The Court quoted from St Andrew’s Farm and Building Company Limited vs Henry Sultana decided on the 26th April 2022 which held that the defendant has the option to either request that the agreement is dissolved, or may ask the other party to fulfil his obligation. In both cases, the defendant may be ordered to pay damages. However, it is always for the Court to decide whether an agreement should be dissolved or not.

The Court has maintained that when there is a tacit resolutive condition, it will only dissolve the agreement when there are grave and conclusive reasons that substantiate such a claim. There were no grave reasons given in this case. The defendant failed to present a list of the outstanding creditors and the Court observed that he also failed to file a request for the refusal of the first payment of €3,000 which he paid to the plaintiff.

On these grounds, the Court accepted the plaintiff’s request and ordered the defendant to pay him €5,000 on the basis of the agreement they had entered into in 2010.

Av Malcolm Mifsud


Mifsud & Mifsud Advocates

The article is available on MaltaToday