The determination that a reference to circumstances is possible only "where the contract itself does not indicate the intentions of the parties" is certainly influenced by the two-stage theory. Although I do not need the conceptualization of clear/unclear language, the wording of the ruling echoes this approach. I regret that. I will only note that already at a fairly early stage in the development of the case law I noted that :
"My colleague distinguishes between 'internal interpretation' and 'external interpretation.' This distinction also raises very serious problems, and I wish to leave it for consideration" (Other Municipal Applications Judgment 765/82 [25], supra, at p. 715).
The reference to external sources will be made in any case, and it is not limited only to the place where the contract itself does not indicate the intentions of the parties. However – as required by section 25(a) of the Contracts (General Part) Law – in a contradiction between their intentions implied in the contract and their intentions learned from the circumstances – the first hand has the upper hand.
From the general to the individual
- Therefore, we are entitled to refer to the totality of the data – the contract as an integrative unit
and the external circumstances – in order to formulate the purpose of the program contract. This purpose – according to the totality of the data before the District Court – is to bring about the rapid construction of apartments and their sale by contractors to new immigrants and young couples on the free market. The plan is based on incentives that encourage the construction of a large number of apartments within a short time and their sale on the free market. The main benefit is the undertaking that the state undertook to purchase from the contractors those apartments that will not be sold on the free market (in desirable areas (type A) – half of the apartments, and in development areas (type B) – all the apartments. In this way, the marketing risk of the construction companies was reduced. Another benefit granted to contractors is that which allows them to demand that the state fulfill its obligation to purchase them (in type A, upon completion of the building, and in type B, upon completion of the skeleton and partitions). The agreement is also based on additional incentives to expedite the start of construction, such as special grants if the construction is completed within a relatively short period of time, and partial financing of the construction. Alongside these (positive) incentives, a number of sanctions (or negative incentives) have been set that are intended to incentivize contractors to meet each of the stages of the schedule, and to sell the apartments on the free market. The main "sanction" that the state has reserved for itself – in order to encourage contractors to finish construction on time and sell the apartments to new immigrants on the free market – is to reduce the purchase price if the contractors are late in carrying out the construction. This central sanction, according to the language of the contract, applies only to delays in construction in the requested areas. This is the "presumption of purpose" that arises from his language. This presumption – with all its strength – is contradicted by the (objective) purpose that arises from the other parts of the contract, and by the reading of the contract as an integrative unit, based on positive and negative incentives that are intertwined. The purpose of this was to grant a (civil) sanction of price reduction in the event of a delay in execution, in all types of apartments. Indeed, according to its very essence and according to the internal logic of the contract, the sanction should apply to both types of projects, and should not be limited to the first type only. An examination of the contract against the background of its circumstances shows that the main instrument available to the state to bring contractors to meet the construction schedule in the development areas is its power to reduce the purchase price if the contractor is late in execution. Another "sanction" is to reduce the price of the apartment if a long period of time passes between the end of the execution period and the realization of the purchase obligation by the state. In formulating this purpose, the interpreter was assisted by the language of the contract and external circumstances, as presented by the parties before the first instance. Against the background of this purpose, we can now move on to the second question that arises in the appeal before us, which concerns the realization of the purpose stated in the framework of the program contract.
- Fulfillment of the Purpose within the Framework of the Contract
Fulfillment of a purpose that the tongue cannot tolerate
- As I noted at the beginning of my judgment, two are the propositions made by my colleague, Justice Matza. The first concerns the purpose of the program contract. My colleague sought to determine that the purpose of the contract is that which arises from the clear language of the contract. According to it, it is not the purpose of the program contract to establish a sanction for delays in construction in development areas. I have discussed this proposition so far. My conclusion was – and thus I joined the view of my colleague, Justice D. Levin – that the judge should not be limited