Nature and Validity of Contract Extension Agreement

Extension agreement is a type of commitment where a party (or parties) to a contract undertake(s) to extend the contract for another term. These commitments are positive  conditions as they are implied in another contract the subject of which is the conclusion of a legal deed. In addition, they are Contract promise as the parties undertake to conclude a contract in future. In practice, these commitments take different forms with varying validity. In the event the extension is subject to the parties’ consent, or they are obligated to extend the contract without setting a consideration or a standard for it, extension shall be ineffective due to lack of intention and a clear object of contract. On the other hand, the duty implied by the parties as a condition identifies the consideration and counts as a validity condition. However, the validity of such duty which is set solely to determine a standard for consideration is the subject of much debate in Iranian Law, because the consideration is not specified at contract conclusion. The present paper proved that jurisprudential and legal foundations of the annulment of risky and uncertain transactions validate these conditions. Article 8 under Lessor-Lessee Act adopted in 1998 put an end to the debate and acknowledged their validity. The author believes that judgment of the said article is among the general conditions of contracts.