Legal Updates

When the agreement parties act in good faith one must trace the parties’ intentions as reflected in the wording of the agreement and circumstances

August 17, 2021
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Two parties entered into a lease agreement for the establishment and operation of a public gas station which included an obligation of the station operator towards the lessor not to operate the station on Saturdays and holidays. However, after the establishment and operation of the station, it became clear that the parties disagree regarding the applicability of the aforesaid restriction with regards to the operation of the self-refueling pump.
The Court held that the interpretation of the agreement requires viewing the restriction as one which applies to the operation of the self-refueling pump and prohibits the self-refueling on Saturdays. When both parties to the agreement are operating in good faith, and each of them believes their interpretation of the agreement is correct, the fact that the agreement does not explicitly address the issue is a legal accident where the results and consequences will have to be borne by one of the parties. In order to determine which of the parties will bear the aforesaid consequences, one must trace the intention of the parties as reflected in the wording of the agreement, explicitly or implicitly and the circumstances of the matter. Here, the station operator had experience in drafting similar agreements and should have acted to draft the agreement and the sweeping restriction imposed under it in a more precise manner. As such, the language of the agreement stipulates that the operation of the self-refueling pump is an integral part of the station operations, and hence, by way of interpretation, the obligation to shut down the station also applies to this pump. In addition, tracing the parties' opinion indicates that the lessor sought to prevent public desecration of Shabbat at the station it owns and that the operator was aware of this desire, and hence it is inevitable to conclude that the operator's obligation not to operate the station on Saturday also includes self-refueling.

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