"2.1 The completion of the transaction that is the subject of this Agreement is subject to the fulfillment of the following suspension conditions:
2.1.1 Obtaining the regulatory approvals required for the establishment of the company, including the approval of the Competition Authority (to the extent required).
2.1.2 Granting the Franchise to the Company by the Manufacturer.
2.1.3 Obtaining an importer's license for the manufacturer's products."
Subsequently, clause 2.4 of the agreement states that:
"2.4 If, within 120 days from the date of the signing of this Agreement or any other date agreed upon in writing and in advance between the parties:
2.4.1 Some or all of the suspension conditions as set out in clause 2.1 above have not been met, and also;
2.4.2 The parties have not waived the fulfillment of all or part of the suspension conditions that have not yet been fulfilled by this date, and also;
2.4.3 The parties shall not agree in writing on a further postponement of such date,
then (a) each party shall be entitled to cancel this Agreement and the transaction pursuant thereto; and (b) neither party shall have any claims against the other party, including for the conclusion of the agreement, the conduct of negotiations between the parties and the cancellation of the agreement, unless one of the parties causes, by act or omission, the failure to fulfill the condition of suspension intentionally or intentionally.
The date of fulfillment of the last of the suspension conditions (and if the parties have waived the fulfillment of any of the suspension conditions, then the date of fulfillment of the last suspension condition that the parties have not waived) will be called the "completion date"."
We see that the agreement is subject to the attainment of three different authorizations: regulatory approvals for the purpose of establishing the joint company; Franchise from the manufacturer; and an import license from the state. If one or more of the aforementioned authorizations are not received within 120 days from the date of signing the agreement, i.e., until June 20, 2025, each party will have an independent cause of action to cancel the agreement, unless one of the parties intentionally caused the failure of one or more of the suspended terms.
- There is no dispute that the joint venture company (China-Israel Company) was established and registered in the Companies Register. There is also no dispute that China Israel received from the manufacturer the required concession for the marketing and distribution of trucks and heavy vehicles made by JAC. In this way, two of the three suspension conditions were met. However, the import license was not received, even after the contractual deadline (120 days) for obtaining it had passed. There is no evidence that the parties agreed to extend the date for obtaining the import license, and in any event, such an agreement should have been expressed in writing in accordance with the provisions of clause 20.1 of the agreement. The concession agreement was approved by the board of directors of China Israel only on July 14, 2025, i.e., about five months after the signing of the agreement and in deviation from the original contractual date. However, even if the date for obtaining the concession was extended retroactively, this does not mean that the date for obtaining the import license was also extended. Therefore, according to clause 2.4 of the agreement, the traffic devices have the right to cancel the agreement.
- Basic concepts are that a contract can be dependent on the fulfillment of a condition (a suspension condition) or cease to exist when a condition is fulfilled (a terminating condition) (section 27 of the Contracts (General Part) Law, 5733-1973) (the "Contracts Law"). Despite the similarity between the concepts, the law of a suspended condition is not the same as the law of a terminating condition. A suspension clause means that the operative provisions of the contract are contingent until the condition is met, and if the condition is not ultimately met, the contract is void retroactively and the parties return to the point they were at before the conclusion of the contract. On the other hand, a contract that includes a terminating clause has binding effect from the time it is concluded, and the fulfillment of the condition causes the contract to expire from here on out (Civil Appeal 1536/15 Paz Oil Company in Tax Appeal v. Hawassa Gas Station Ltd., at paragraph 40 (Nevo, February 8, 2018)). The distinction between a suspension condition and a terminating condition is also of evidentiary importance. When the contract is a contract on suspension terms, the person who wishes to enforce an obligation in his favor has the burden of proving the fulfillment of the suspension condition. On the other hand, with respect to a terminating conditional contract, a person who claims that his obligations have expired has the burden of proving the existence of the terminating condition (Gabriela Shalev and Effi Zemach Contract Law 593 (4th edition 2019)) ("Shalev and Zemach").
- A contract that is conditional on suspension conditions is a complete contract from the moment it is concluded (Civil Appeal 489/89 Sharon v. Appreciation of Real Estate, IsrSC 46(3) 366 (1992);Shalev and Maach, at p. 600). However, if the suspension condition is not fulfilled within the period set for it, or within a reasonable time, the contract expires and is cancelled retroactively (section 29 of the Contracts Law; Civil Appeal 2821/91 Control Centers in Tax Appeal v. Mashyan, IsrSC 48(4) 107, 114 (1994)). However, the parties may change the default and determine that the failure to fulfill the suspended condition on time confers the right to cancel the contract, as opposed to the automatic cancellation of the contract after the agreed date for the fulfillment of the condition (Civil Appeal 1363/04 Tze'elim Holdings in Tax Appeal v. Delek Israel Fuel Company Ltd., at paragraph 12 (Nevo, December 11, 2007)).
- 00In our case, the suspension condition regarding the receipt of the import license was not met. This is not a contractual obligation that Traffic Devices has undertaken. In any event, it cannot be attributed a breach of the agreement in this context. The parties stipulated on the default set by law, and determined that the contract would not be automatically cancelled due to non-fulfillment of the suspended condition, but rather granted an (active) right to cancel it in such a situation. This is indeed what Traffic Devices did when it sent the cancellation letter on November 16, 2025.
- 0The argument of the trustees and the commissioner is that obtaining the import license does not constitute a suspension condition that has the power to cancel the entire agreement, as opposed to granting the right to cancel the transaction under the agreement. It was argued that clause 2.1 of the agreement states that "the completion of the transaction that is the subject of this agreement is subject to the fulfillment of the following suspension terms..."Therefore, the result of not obtaining the import license is limited to the cancellation of the transaction, as opposed to the cancellation of the agreement as a whole . The Director-General relies on the fact that in the second "Why" of the Agreement it is stated that "and since the granting of the distribution rights in Israel of trucks manufactured by JAC and related products in the same field, including 'Transportation Products' (as defined hereinafter) (hereinafter: the "Concession") to the Company, is a condition for the entry into force of this Agreement."According to the Director-General, you have learned no: since the agreement does not make a similar reference to the entry into force of the agreement upon receipt of the import license, as opposed to receiving the concession from the manufacturer, then the failure to obtain the import license does indeed give the parties the right to cancel the agreement but does not completely negate its validity.
These arguments should be rejected because they are a forced and artificial interpretation of a clear and unequivocal provision in the agreement. First, the parties themselves defined the receipt of the import license as a condition; Second, section 27(b) of the Contracts Law states that "a contract that required the consent of a third person or a license under legislation, presumes that the receipt of the consent or license is a suspension condition." This presumption was not hidden. On the contrary, it is clearly expressed in the provisions of clause 2.1 of the agreement, which states that the completion of the transaction under the agreement is subject to the fulfillment of the three suspension conditions mentioned later in the clause. It is clear that the term "completion of the transaction that is the subject of this agreement" refers to a condition for the entire agreement to enter into effect, since the transaction that is the subject of the agreement is in fact the business partnership between traffic devices and direct imports for the purpose of importing trucks manufactured by JAC to Israel. Without an import license, it is not possible to carry out the joint activity, and therefore it is clear that the parties viewed the receipt of the import license as a condition that subject the validity of the agreement to receive the license.
- Similarly, I am unable to accept the Director-General's argument that the cancellation letter sent by Traffic Devices contradicts the provision of section 68(b) of the Insolvency Law, which states that: "The opening of insolvency proceedings in respect of a corporation or its insolvency does not lead to the cancellation of an existing contract or to grant the other party to the contract the right to cancel it, even if it is determined in the contract that the contract will be cancelled in these circumstances or a provision has been made therein that gives the other party to the contract the right to cancel it in these circumstances."The reason for this is that this clause deals with a contractual stipulation that stipulates that it will be possible to cancel the contract if insolvency proceedings are opened against one of the parties. Section 68(b) of the Law is intended to nullify the validity of contractual stipulations of this type, in order to protect contracts of a corporation in operation, and to prevent further damage to creditors, including abuse that will lead to prohibited preference for creditors (see Liquidations (Tel Aviv District) 1315-06 Ronen Matri in his capacity as receiver of the Shomrim Services Company 1989 Security, Protection and Cleanliness in a Tax Appeal v. Oranit Local Council (Nevo 16.11.2010)). However, in the present case, it was not the insolvency of direct imports that constituted grounds for the cancellation of the agreement, but rather the non-fulfillment of the suspended condition. Therefore, section 68(b) of the Law is irrelevant to our case. This is even if it can be assumed that if it were not for the insolvency of direct imports, Traffic Devices might have agreed to extend the date for the existence of the suspension condition.
- In addition, the trustees' claim that traffic devices caused the thwarting of the suspension condition regarding obtaining an import license should be rejected. Indeed, section 28(a) of the Contracts Law states that "if a contract is conditional on a suspended condition and one party prevents the fulfillment of the condition, it is not entitled to rely on its non-fulfillment.and section 28(c) of the Contracts Law further states that "the provisions of this section shall not apply if the condition was something that the party was, according to the contract, free to do or not to do, and shall not apply if the party prevented the fulfillment of the condition or caused its fulfillment not maliciously and not negligently."Clause 2.4 of the Agreement also stipulates a similar provision stating that the parties shall retain their right to argue against the termination of the Agreement if one of the parties intentionally caused the non-fulfillment of one or more of the suspended conditions. However, in the present case, it is not possible to attribute to traffic devices the thwarting of the suspended condition, since it tried its best to obtain the long-awaited import license, but the attempt failed due to the banks' refusal to open an account with China Israel, because one of its shareholders was Direct Import. The agreement also did not impose the obligation on traffic devices alone to obtain the import license, and the clause to which the trustees referred in this context deals with a different type of undertaking, i.e., the undertaking of traffic devices to finance the purchase of the inventory of the Sino-Israel company. This section does not deal at all with the question of the financing required for the purpose of obtaining an import license.
- At the same time, the conduct of traffic devices in this case was improper and in some respects even tainted by bad faith.
What is this about? First of all, Gavaton admitted in his interrogation that Traffic Devices was aware of the trustees' entry into office at some point in November 2025. However, the cancellation letter on behalf of Traffic Devices was not sent first to the trustees, but to Mr. Tomer Levy (who was an officer in Direct Import) and Mr. Yuval Asraf, on the assumption that the letter would be forwarded to the trustees (pp. 4-5 of the minutes). Even when Tomer Levy noted to Traffic Devices that an order had been issued to open proceedings against direct imports, Traffic Devices did not contact the trustees (p. 7, verses 31-34 of the minutes), but only a few days later. It should be recalled that according to Section 43 of the Insolvency Law, upon the appointment of a trustee to the corporation, all the powers given to the corporation's organs and officers are transferred to him. In any case, the officers of the corporation are no longer given any authority to act in relation to its business. In this context, the words of the Civil Appeal Authority 7107-11-24 Bolotov v. Cohen Shai Insulation and Renovations Ltd., at paragraph 21 (Nevo, May 28, 2025) are appropriate: