Set aside the text, check what actually happened…

Set aside the text, check what actually happened…

Yair Aloni, Adv.
May 17, 2023

Oftentimes, clients come to our office seeking legal advice regarding a dispute concerning various contractual obligations they have undertaken. More than once, after a short consultation, the picture reveals that any connection between the text of the contract and the way the parties actually behaved is purely coincidental and then the client mouths: "set aside the text, check what actually happened...". Will a party who does not fulfill a written contractual obligation due to a change in the behavior of the parties be considered in breach of an agreement? Is it possible to go back and demand to uphold the undertaking according to the original agreement? What is expected of the parties to the agreement under such circumstances?

The freedom of contracts gives each person the right to choose with whom it wishes to enter into a binding contract and allows the parties to design the content of the contract as they see fit, including the manner in which the contract should be amended. Thus, for example, in many contracts the parties stipulate that "any change or amendment to the contract must be by a written instrument...", inter alia, in the will to strengthen the certainty between the parties, preventing misunderstandings and unnecessary conflicts. However, in some cases the conduct of the parties can indicate that the parties sought to cancel or deviate from some written contractual provision.

When the question "Does the contract indeed differ in behavior?" arises, the Court will try to examine the relevant facts, including: what type of change is involved, how did the parties actually behave, for how long the parties behaved in such manner, were the parties aware of their deviation from the contract and so on. In addition, the question of whether any ‘consideration’ was given for the change is also important. As long as no ‘consideration’ was given, a party to the contract is entitled to demand that the original contract be fulfilled again, even if it "agreed" by its behavior to the change.

Thus, in a case heard in April, 2023, the Jerusalem Court held that a management company that did not charge management and maintenance fees for an extended period of time is not allowed to demand such management fess retroactively. In that case, failure to collect the management fees for a long time indicated a waiver or change of the contract by behavior of the parties. However, because no ‘consideration’ was given for the waiver, the management company was entitled to return to the original contract and demand the management fees accordingly, but only onward for the future period.

In another case, heard in in March, 2023, at the Tel Aviv Court, the Court refused to approve the eviction of a lessee from a property despite its non-compliance with the provisions of the agreement regarding the manner in which the rent must be paid. In that case, it was a long-term relationship and the lessor did not raise any claim regarding non-payment of rent or non-compliance with the terms of agreements. Even if there was a breach, the lessor’s silence over a long period of time indicates that it did not consider it a ‘material breach’ that justifies the immediate termination of the agreement and the lessee should be allowed to correct it within a reasonable time.

As can be seen, the Courts give considerable weight to the question of good faith and the way in which the parties actually behaved, despite the provisions written in the agreement. Therefore, and in order not to be at the mercy of the Court, it is suggested that insofar as it is a deviation from a material contractual undertaking, it is advisable to express this in writing even if not formally (such as: WhatsApp correspondence or sending an email...) in a manner that can show the parties' awareness and intent. Also, over the years evidentiary damage may occur as a result of the loss of documentation, so it is desirable and highly recommended to digitally save and document important references relating to the existence or waiver of financial obligations as much as possible (especially when payment is made in cash), either by creating a backup for WhatsApp correspondence or by saving excerpts correspondence or e-mail exchange in the cloud.

For any questions or doubts, it is advisable not to skimp on receiving professional advice from an experienced lawyer dealing in the field of contracts, starting from the early stages of course, but also throughout the contract period so that it can advise in real time in order to save the need for long, expensive and unnecessary litigation.