Case Number

CA 4628/93

Date Decided

4-6-1995

Decision Type

Appellate

Document Type

Full Opinion

Abstract

Facts: Because of large-scale immigration from the countries of the former Soviet Union, the appellant wished to encourage the speedy building of residential apartments. This was done within the framework of a ‘Programme Contract’, which gave incentives to builders in the form of a State guarantee to buy apartments that were not sold on the open market, and it provided for sanctions in the event of delays. The incentives were particularly significant in development areas, where the State undertook to buy all the apartments that were not sold on the open market. However, the contract was drafted carelessly, and it left room for the respondent to argue that although it provided sanctions for building delays in desirable areas, there was no such sanction for building delays in development areas.

The District Court accepted the respondent’s argument, holding that the Contracts (General Part) Law, 5733-1973, mandated a two-stage approach to contractual interpretation, whereby only if the language of the contract was unclear, could the court consider the surrounding circumstances. The District Court held that the language of the contract was clear, and therefore it could not take account of the circumstances, and particularly the underlying purpose of the contract.

Held: Whereas Justice Mazza (in the minority opinion) upheld the ruling of the District Court, the majority rejected the District Court’s interpretation of the programme contract; the outcome that there was no sanction for building delays in development areas was inconsistent with the underlying purpose of the progamme agreement. Vice-President Barak rejected the two-stage doctrine of interpretation.

Appeal allowed.

Keywords

Contracts -- Interpretation, Contracts -- Performance

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