The Requirement of Specificity in Israeli Contract Law- Recent Trends

The Requirement of Specificity in Israeli Contract Law- Recent Trends

In Israel the requirement of Specificity, is enshrined in Article 2 of The General Contract Law Act of 1973 (hereinafter: "contract law act"), Article 2 states that an offer should be "specific enough to allow for a contract to be entered into by accepting it".

In the recent decades the Supreme Court of Israel has gradually eased the requirement of specificity, mainly by reducing the amount of substantive details necessary for an offer to be considered valid, and by willingly adding through interpretation of the Contract Law Act, the missing elements of an offer. Thus, for example, Justice Barak in the case of Ravinai,[1] had opined that as long as the requirement of Willing Consent is established then it is not necessary that all the essential substantive elements of the contract be present in the offer, and they could be supplemented from using the instructions in the Contract Law Act. This trend reached its pinnacle, arguably, in the ruling issued by Justice Dorner in the case of Beit HaPsanter,[2] arguing that a lack of specificity would not serve as cause for a side to the contract to be released from an obligation she had given Willing Consent to.

In the case of Levi v. Hevrat Kadisha (Hereinafter: Kadisha) brought before the district court of Tel-Aviv,[3] Hevrat Kadisha a burial company, published an invitation to submit offers for the purchase of land that it owns, an offer was made by Levi who had attached to the suggestion a check, as was required by the terms of the invitation. Eventually Levi's offer was accepted by the tenders committee of Kadisha, provided that Levi will bare all taxes and obligatory payments, once Levi had given his consent, the attached check was cashed by Kadisha. There were two unresolved issues that were left between the parties, the first was the question of who shall carry the burden of eviction of a tenant living on the property, the second was the question of dates of remaining payments. The second issue, was resolved in later negotiations between the parties.

However, before an official contract could be signed, and in light of new discoveries that concern the potential value of the land, Kadisha was planning to sell to Levi, the Kadisha tenders committee had informed Levi that since no official contract was signed, it was now reevaluating the profitability of the intended transaction with him. Subsequently Levi had brought before the Tel-Aviv district court a suit for declaratory warrant stating that a binding valid contract was already established between the parties.

The district court's ruling was that that enough specificity and willing consent were present in the interaction between the parties, for the contract to be considered a binding transaction, this despite the lack of an actual formal contract.

Kadisha had appealed this ruling to the Supreme Court of Israel, as the civil appeals court for rulings issued by the district court.[4] The Supreme court in an opinion written by Chief-Justice Grunis reversed the judgment of the district court of Tel Aviv, and opined that according to the draft that was signed by the parties, a formal contract will become binding only once all terms were agreed upon. Moreover, the lack of specificity concerning the issue of tenant residing on the land, was such that a contract cannot be said to have been established.[5]

Chief-Justice Grunis, stressed also that at the time of Kadisha accepting the Consideration offered by Levi, the parties did not agree on terms such as when remaining payments would be made by Levi. Using general standards from the Contract Law Act was too ambiguous in Chief-Justice Grunis' opinion, with terms such as "reasonable time" etc… to be used as the default supplementary tools for lack of specificity in a case such as this, when the parties – as he saw it – would have in all probability come to a different understanding concerning all of these issues. This approach seems to be contradictory to the Stare Decisis of the Supreme Court that we have introduced earlier.

Chief-Justice Grunis' approach would require that the parties reach a consensus concerning all substantive terms of a contract at the time the contract was formalized, for it to be considered binding – and would not take into account any later interim agreements reached between the parties. I.e. the only deciding moment remaining, is when a completecontract with all sufficient specificity is reached.

Although this ruling seems to be one of significant consequences in terms of the requirement of specificity- it should not be left unmentioned, that Chief-Justice Grunis' opinion, in terms of argumentation was not unanimous. The concurring opinion of Justice Hayut, stressed that the issue of the tenant remaining on land was a significant enough so that in and of itself, left unresolved, points to there not being sufficient willing consent on the part of Kadisha to sell the property.

Chief-Justice Grunis however is not alone, in his more restrictive view of judicial interpretation that can supplement a contract to de-facto completion, also referred to in Israel as the 'Liberal Approach' or 'Objective Interpretation'.

For example, Justice Hendel in the minority opinion the case of Sahar[6]argues that Objective Interpretation of a contract must be done as a last resort, Justice Solberg in the case of Delek[7] also argued that when the language of a contract is clear, the ability to interpret using external circumstances diminishes. Justice Hendel and Justice Solberg seem to be echoing the outspoken position of Justice Danziger who has openly stated his objection to Objective Interpretation in various cases.[8]

While it is tempting to view these cases as a growing trend, one must remember that while this counter-liberal, or conservative interpretation seems to be gathering support among the Justices of the Supreme Court of Israel, those who hold Justice Danziger's opinion are still in the minority among the 15 Justices currently in the Supreme Court.

Some scholars even argue that the recent ruling by Justice Vogelman in the case of Rosenberg,[9] is an intentional challenge to the position articulated by Chief-Justice Grunis in which Justice Vogelman writing a unanimous opinion was willing to use Objective Interpretation and principals for the Contract Law Act to view a general terms agreement as having sufficient willing consent from both parties, to not be hindered by the lack of specificity, and argued that all of the terms that are not agreed upon were not substantive enough to be viewed as an obstacle from the contract being finalized between the parties.[10]

While it is certainly true in the present author's opinion that indeed two approaches to the question of specificity exist in the Supreme Court today. It seems that the recent trend in case law, offers a relatively simple recipe for judicial non-intervention, parties drafting a contract must explicitly state that certain issues are basic and substantive to their negotiations- and until those are agreed upon, a contract cannot be considered to be formalized.        



[1]  CA 158/77 Ravinai v. Man HaShaked ltd. Pd 33(2) 281 (1978).

[2] CAA 4976/00 Beit HaPsanter v. Mor, Pd 56(1) 577, 588 (2001).

[3] C (District Court of Tel Aviv) 1241/03 Levi v. Hevrat Kadisha (5.11.2007).

[4] CA 10859/07 Hevrat Kadisha v. Levi (22.1.2012).

[5] Para. 8-9 of the Chief-Justice Grunis' opinion.

[6] ACA 1361/10 The Social Security Institution v. Sahar Inc., para 8 of justice Hendel's opinion (26.2.2012).

[7] CA 3894/11 Delek- The Israeli Gas Company Inc. v. Ben Shalom, para 19 of Justice Solberg's opinion (6.6.2013).

[8] For example see Justice Danziger's opinion in: CA 5856/06 Levi v. Norcate Inc (28.1.2008); CA 453/11 M.S. Aluminum products Inc. v. "Ariye" Insurance Company (21.8.2013).

[9] CA 9247/10 Rosenberg V. Saban, para 14-22 of Justice Vogelman's opinion (24.7.2013). 

[10] For more on the conflict between the 'conservative' and 'liberal' view of interpretation of specificity In Israeli Contract Law See: Or Yahalom, "Unspecified Specificity: Two approaches to the desired nature of the requirement of specificity", Mishpatim 44, 325 (2013).