We investigate the modulational instability of matter-wave condensates in a modified Gross-Pitaevskii equation which takes into account effects of the three-body interaction. This three-body interaction consists of a quintic term and an additional one representing the delayed nonlinear response of condensates which are trapped both in an attractive and a repulsive harmonic potentials. Our theoretical study uses a modified lens-type transformation and we obtain a modulational instability criterion, and an explicit growth rate. We show that the presence of the three-body interaction destabilizes the condensate, and enhances the appearance of instability in the condensate. Numerical experiments agree well with analytical predictions. Furthermore, our numerical simulations show that the three-body interaction modifies the symmetry of the trail of soliton chains created. The expulsive potential enhances the instability, while the attractive potential appears to soften the instability. [ABSTRACT FROM AUTHOR]