Page 23 - John Hundley 2014

Focus on Contract Law

Sharp Thinking

No. 118 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. July 2014

“Mutual Agreement To Terminate” Clause Unenforceable

A sales representative contract which was terminable only by the mutual agreement of the parties
was a contract of indefinite duration and hence terminable at will, a panel of the Appellate Court in
Chicago has ruled.

In Rico Ind., Inc. v. TLC Group, Inc., 2014 IL App (1st) 131522, the court relied
on Supreme Court precedent that perpetual contracts are contrary to public policy.
“[A] contract terminable only upon the written agreement of the parties is indefinite
because you cannot foresee when that will happen and it may never happen, and
therefore it is of an indefinite duration”, the court said.

Anticipatory Repudiation Must Be Specifically Pleaded

“[A]nticipatory repudiation of a contract involves a distinct theory of relief” and is not covered by a
party’s general breach-of-contract pleading, according to a panel in the Appellate Court’s Second
District.

Ruling in Kelly v. Orrico, 2014 IL App (2d) 130002, the panel said that “[b]ecause
plaintiffs’ pleadings failed to allege that defendants had anticipatorily repudiated the
contract by exhibiting a clear manifestation not to perform, any proof submitted to
support an anticipatory repudiation was defective, and plaintiffs cannot succeed on
such proof.”

Reversing judgment for the plaintiffs, the court noted plaintiffs had not sought
leave to amend the pleadings to conform to the proof. Alternatively, the panel ruled
that the proof on the anticipatory repudiation issue was ambiguous and was
insufficient to “reveal a clear manifestation of an intention to defeat the contract.”

Missing “Exhibit A” Issue Addressed

It's a problem that surfaces more frequently than it should: The parties to a transaction structure
their contemplated agreement with a host of narrative terms set forth in the text of the agreement but
with a list of assets or other aspects to be set forth on “Exhibit A attached hereto”. They then finalize
the text of the agreement, and execute it, but with no Exhibit A attached. The terms of Exhibit A are
typically material. Have they made an enforceable agreement?

A recent case from the Appellate Court's First District provides guidance on how to handle this
problem. It suggests:

1. The submission of a signed contract with an Exhibit A referenced but not attached makes the

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