Caselaw

Civil Appeal 4628/93 State of Israel v. Apropim Housing and Development (1991) Ltd. IsrSC 49(2) 265 - part 59

June 4, 1995
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And in another parasha I added:

"The interpretation of the contract by the court is done in two stages.  In the first stage – which we have explicitly called 'in the narrow sense' – the judge seeks to exhaust the contractual text.  This stage is governed by section 25 of the Contracts (General Part) Law...  In the second stage – which we explicitly called 'in the broad sense' – the court completes a void that was discovered in the first stage.  Such a space exists, only if the interpretation of the contract in the first stage does not give a positive or negative answer to the problem that needs to be decided.  Where a 'lacuna' is discovered in the contract, the court may fill in the gaps...  " (The Ata case [1], at p. 303).

My colleague, Justice Matza, noted in one of the cases that the judge is entitled to fill in a deficiency in the contract, and added:

"Even though there is a certain degree of judicial intervention in this as well, no one will say that from the point of view of contract law such an interpretive move is not legitimate" (Civil Appeal 479/89 [8], at p. 845).

To be precise: the silence of the contractor on a certain issue is not sufficient to grant the judge the authority to complete the contract.  "... Before the gaps in the agreement in question are filled, it must first be ascertained, from the

 

agreement or from the circumstances, that there is indeed a 'lacuna,' and only then can the void be filled by a new contractual norm...  If we are not dealing with a 'deficiency' that the parties to the agreement distracted themselves from at the time of the engagement, it is plain that the court does not have the authority to 'make a new contract, different in its essence, content, scope and application from that made by the parties themselves'..." (Justice Goldberg Other Municipal Motions 528/86 Polgat Industries in Tax Appeal v. Estate of the late Yaakov Blechner et al. [64], at p. 826).

  1. According to what criteria is the (judicial) completion of the contractual deficiency carried out? What is the legal construction that underlies this process? Of course, the process begins with interpretive activity (in the narrow sense). The judge interprets the contract and reaches the conclusion that the silence of the contract on a certain issue constitutes a deficiency – as opposed to the arrangement (negative or positive) or the non-applicability of the contract – with respect to that issue (see R. Ben-Natan (Kleinberger), "The Laws of Implicit Stipulation in Our Contemporary Law – Further Study" Mishpatim 17 (5747-48) 571). In light of this conclusion, the question arises, how will the deficiency in the contract be filled? Farnsworth  noted this: "Interpretation is necessarily the first step in that" process, since a court will supply a term only after it has Hand.  It follows that any term that a court would supply can be derogated determined that the language of the agreement does not cover the case at By necessary inference.  Such terms are therefore from by agreement of the parties, either explicitly or .(303Farnsworth, supra, at) "suppletory rather than mandatory When the judge has come to the conclusion that the contract is missing, how will he make up for the deficiency? In the past, the gaps were filled in according to the theory of implicit conditioning.  This doctrine was absorbed here from English common law by means of the "import channel" of section 46  of the King's Order in Council on the Land of Israel, 1922 (see, for example, Civil Appeal 39/47 Asher v. Birnbaum [65], at p. 539).  The courts have developed a number of auxiliary tests – such as the officious bystander test or the business ef fixation test – according to which it would have been determined whether an implicit clause could be read into the contract, which complemented what the parties had missed (see Shalev, in her book, supra, at p. 294).  With the enactment of the Contracts (General Part) Law, there is no longer a need and no room for this construction of an implied stipulation to fill a deficiency in the contract.  The Contracts Law (General Part) provided another instrument – with stronger power and more general application – to fill in a gap in the contract.  This is the principle of good faith set forth in section 39 of the Contracts Law (General Part).  I discussed this in one of the passages, noting:

"But what is the law in the absence of an explicit instruction? Some of these questions can be answered by way of 'regular' interpretation (or interpretation in the narrow sense), i.e., understanding the meaning of the contractual text against the background of the parties' intentions ("the purpose of the contract.  See section 25(a) of the Contracts (General Part) Law).  Some of the questions do not find its answer in the contractual text created by the parties themselves.  A 'complementary' interpretation (or interpretation in the broad sense) is required, i.e., the completion of a deficiency (lacuna) that exists in the contract between the parties.  This gap is filled by practice (  section 26 of the Contracts (General Part

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