Menachem Altshuler is the right holder in a lot situated in the industrial zone in the city of Nesher.

Whereas Altshuler intended to sell the lot, he published an ad in the newspaper titled “Request for Proposal” in which he asked from the public to present its bids for the purchase of the lot.

Yaniv and Menashe Shalom (“Shalom”) submitted a number of bids to purchase the lot, and their last bid totaled an amount of ILS 5,000,000.

After a competitive procedure was held between different bidders, Shalom were elected as the winning bidders in the competitive procedure, in light of the fact that their bid was the highest bid.

The parties started negotiations for the purpose of formulating the terms of the transaction, in which Altshuler would sell the lot to Shalom for the amount of ILS 5,000,000.

The negotiations were conducted by the attorneys representing the parties and included many contract drafts.

After the parties agreed on most of the details of the transaction, and after a few months of negotiations, Altshuler announced surprisingly that he discontinued the negotiations and that he did not intend to sell the lot to Shalom.

Shalom filed a claim in court, in which they argued that a binding sale agreement that is enforceable was signed between the parties, i.e., that it is necessary to compel Altshuler to sell to Shalom the lot for the price of ILS 5,000,000, in the manner that was agreed between the parties.

In addition, Shalom argued that Altshuler conducted in bad faith, and caused them serious financial losses.

At the same time, Altshuler argued that no binding agreement was concluded between the parties because no agreement was signed between the parties, and therefore it was impossible to infer that the parties agreed on the entire particulars of the transaction.

Altshuler further argued that material details, such as the delivery of possession date in the lot and the dates for payment of the consideration – were not agreed, and therefore it is impossible to argue that the parties agreed on the entire particulars of the transaction.

Altshuler further argued that the demand for a written document that is specified in the Land Law that states that a real estate transaction must be executed in a written document – was not fulfilled.

After the court examined the evidence of the parties and heard the different witnesses, the court concluded that the negotiations between the parties did not materialize into a binding contract. The parties indeed agreed on the major part of the terms of the contract within the framework of the negotiations, but did not agree on a number of material conditions that were required for the purpose of concluding a binding contract – the delivery of possession date in the lot and the payment dates of the consideration.

According to contract laws, in order to be considered as a binding contract, an alleged engagement must demonstrate that the parties decided, or resolved, to enter into this contract, and that the contract must include the entire material and major details of the transaction.

Despite the fact that the court decided that no binding contract was concluded between the parties, the court concluded that the termination of the negotiations by Altshuler in such an advanced stage, for no objective reason, was made in bad faith and therefore Shalom would be entitled to claim their financial losses as a result of such action.

The court concluded that Altshuler changed his mind, and refused to sell the lot in very advanced stages of the negotiations, after the designated buyers relied on a very clear representation that Altshuler made, as if he was interested in selling the lot – otherwise, why would Altshuler publish an ad in the newspaper, conduct a competitive procedure and engage in negotiations in which the main part of the contract was agreed?

Therefore, the claim of Shalom against Altshuler for the enforcement of the contract was dismissed, but the court concluded that in light of the bad faith conduct of Altshuler, Shalom was entitled to file a separate claim against him, inter alia, on the grounds of breach of the duty to negotiate in good faith prior to the conclusion of a contract.

• Case 44411-02-16 Menashe Shalom v. Menachem Altshuler, given in the District Court of Haifa on March 25, 2018.

An appeal on the judgment was filed with the Supreme Court but was stricken by the appellant even before it was heard.