Even if you have been given a promise by a government or public authority, the final word may not have been spoken. Under certain circumstances, the authority may retract its agreements, even if they are anchored in a signed contract—a situation that breeds frustration and distrust. What, then, is the power of an administrative promise, and to what extent can one rely on it?
Recent Case Study: The Supreme Court recently issued a decision in the matter of the Israel Electric Corporation v. Golan Regional Council. The question discussed was whether a local authority is permitted to release itself from a contract in which it agreed to a reduced municipal tax (Arnona) charge. The authority argued that a change had occurred in the municipal tax order regarding property classification, and amendments were made to the General Municipal Tax Law of 2002, which established a minimum rate significantly higher than the rate in the contract.
The judges were divided on the local authority's right to withdraw from the contract:
Minority Opinion: The contractual obligation should be honored. Since the monetary gap between the minimum charge and the updated charge was relatively small, there was no justification to rely on the argument of harm to the public interest.
Majority Opinion: The authority is permitted to withdraw from its promise in cases where the public interest prevails, as well as in cases where the administrative promise violates the law or exceeds the authority's jurisdiction (ultra vires).
From the above, we learn that a local authority has the right to withdraw from administrative promises, even those anchored in contracts, if fundamental flaws are found in the authority's conduct that violate the law and harm the general public. Furthermore, the majority opinion suggests that the specific financial amount involved is not the deciding factor.
Therefore, before signing a contract that contains an administrative promise beneficial to the citizen, you must first examine several factors:
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Authority: Was the promise given by someone authorized to make it?
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Validity: Does the promise have legal validity?
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Capacity: Does the authority have the actual ability to fulfill its promise?
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Justification: Is there a legal justification for the promise?
Unlike contracting with a private entity, when dealing with a public authority (including municipal companies), a protocol of signatory rights, a board resolution, or an assembly decision is not enough. It is required that these decisions fall strictly within the authority's statutory powers. My 20 years of experience in this field have taught me that these rules are complex and vary from one entity to another.
Furthermore, even if the correct steps were taken to approve the engagement and sign the contract on the authority's side, a review of the authority's public capacity to enter into the contract from a public policy perspective is required. For this as well, it is important to consult a lawyer with many years of expertise in administrative law. Finally, court rulings handed down over the years teach us that even if an authority announces the cancellation of an administrative promise, in certain cases this decision can be challenged, provided the right steps are taken in a timely manner.