Contractual Liability
- When a third party wishes to attribute personal liability to officers for a breach of contract law, it will be more difficult for it to establish status for its claim and rivalry with them. This is because in many cases, the engagement with the company is the product of early and serious thought and negotiations. At that time, the third party had the option of securing itself in the form of collateral, such as personal guarantees or other contractual agreements that it could reach with the officers. And if he did not do so, then he assumed the risk that he was contractually entering into a contract with a corporation that carries himself, and that the address for his complaints in the future would be the corporation and not its officers.
On the other hand, when tort liability is on the agenda, in many cases it is not preceded by a voluntary engagement with the company, and the injured party cannot take care of his interests and additional collateral in advance.
In this regard, we know what was ruled by the Honorable President Shamgar in Other Municipality Applications 407/89 Tzuk Or v. Car Security in a Tax Appeal (1994), IsrSC 48(5) 661, 698-699 (1994): "The contractual creditor is a voluntary creditor. A person is not usually forced to enter into a contractual engagement with a company. The tort liability is imposed on the tortfeasor like a tub. It is not based on the voluntary action of the injured party. The tort creditor is not a voluntary creditor. The company's contractual creditor can choose between a contractual engagement with the company only or a contractual engagement with the company and its controlling shareholders."
- In this regard, there is a normative significance. It is difficult for the applicant to establish legal status and personal rivalry against the officers on contractual grounds. This is the current commandment of the Supreme Court.
As the Honorable Justice Danziger ruled, "The contractual engagement is with the company, and therefore, in such a situation, the rule is that the organs and officers are not liable for breaches of the company's contract. There is a separation between the legal personality of the company and the organs and officers who are not liable to anyone who entered into an agreement with the company" (Civil Appeal 313/08 Nashashibi v. Rinrawi, IsrSC 66(1) 398, at para. 43 (2010) (hereinafter: the Nashashibi case)). He further added that "the cases in which contractual liability will be imposed on the organs and officers of the company will be more exceptional" (ibid.; Admittedly, his opinion was that of a minority, but not on this matter).