Moreover, And with regard to the claim that the purchasers should have paid the seller the equity that they had in their possession (which embodies the difference between the balance of the consideration and the amount of the mortgage requested), and since they did not do so, there was a defect in their contractual conduct - I will add that at that time it was not clear what would happen to the agreement (in light of the cancellation notice sent by the seller), in the sense that the parties did not know if the agreement would be completed. And if so, in what way. Therefore, it was necessary that the purchasers would seek to 'reduce damages', in the sense that there was no legitimate expectation that they would transfer the equity to the seller, and thus significantly increase the risk to which they are exposed. This is especially true since the share of equity in the payment for the apartment is in any case quite negligible - only about 6% of the total consideration - while the lion's share was supposed to come from the mortgage (which they could not take without the seller's cooperation in signing the mortgage documents - a demand that he refused in light of the cancellation notice he sent).
- Thus, the combination of all these considerations leads to the conclusion that the seller's insistence on the immediate cancellation of the agreement was done in bad faith, in contravention of his obligation by virtue of section 39 of the Contracts Law to grant an extension to the purchasers in order to be able to meet their obligation to pay the balance of the consideration. In circumstances in which the seller fundamentally breached the contract, he was required to act with some flexibility with respect to the date of contractual payment, and accordingly, to give the purchasers an extension for the purpose of its existence before exercising the right of cancellation given to him - since he did not do so, but rather hastened to cancel the contract immediately after its breach, and it was not right to give any extension to the purchasers (except under conditions that they could not accept), the validity of the cancellation notice he gave should not be recognized. From here, the way to determine that the contract was unlawfully cancelled by the seller is short.
Summary of the discussion
- From what has been said so far, two main conclusions emerge. The first is that the failure of the purchasers to pay the balance of the consideration in accordance with the dates set out in the agreement and in the appendix constitutes a fundamental and agreed breach of the agreement. The second is that in the circumstances described, the seller acted in bad faith when he exercised the right of cancellation given to him immediately, without granting the purchasers an extension for a reasonable period of time for the purpose of fulfilling the agreement (i.e., for the payment of the balance of the consideration). Therefore, the appeal must be accepted, and it must be determined that the agreement was unlawfully cancelled by the seller.
- In order not to find anything missing, I will clarify that I did not find it appropriate to obligate any of the parties to pay the agreed compensation set out in clause 17(a) of the agreement. In this regard, the trial court's reasoning is that both parties breached the agreement in fundamental breaches of the agreement (the seller, in that there was a delay in the issuance of Form 4; the purchasers, by not paying the balance of the contractual consideration on time), and therefore the agreed compensation obligations are offset, which is correct even in my opinion, and therefore I did not see fit to intervene in it.
The operative result
- Since we have determined that the agreement was unlawfully cancelled, it is now incumbent upon us to discuss the operative significance of this determination - that is, we must examine the manner in which the agreement will be implemented.
- As stated, the purchasers held the apartment during the entire period of the dispute, and still hold it today. Therefore, all that remains in order to complete the performance of the contract against them is to order the transfer of ownership of theapartment in their favor. The situation in relation to the consideration that the seller should have received is more complicated. The seller did receive the consideration paid at the time (i.e., the advance consideration in the sum of ILS 1 million), but he returned his share to the sellers following the judgment of the trial court, and during the period he received additional payments that were defined in light of the trial court's rulings as proper usage fees for theapartment. Now that it has been determined that the agreement is valid, and therefore the buyers' possession of the apartment was by virtue of it, it is necessary to order that the purchasers return to the seller the amount that he returned to them following the judgment, and also to order that they pay the seller the balance of the contractual consideration, all at current values, and with the addition of interest according to the law, which represents the fact that these funds were in the possession of the purchasers even on the dates when they should have been paid to the seller. From these sums, the proper usage fees that have actually been paid by the purchasers since the judgment of the trial court are rendered, must be deducted, since in light of the acceptance of the appeal, there is no justification for their payment.
- The manner in which the financial calculation is performed is therefore as follows:
- The buyers must return to the seller the amount that the seller actually refunded them following the judgment of the trial court (an amount that reflected the consideration paid, less the proper usage fees determined by the trial court, and possibly also after deducting the expenses and fees that it awarded to the seller), plus linkage differences and interest according to the law from the date they were returned to them.
- The purchasers must pay the seller the balance of the contractual consideration, in the sum of ILS 2,620,000, less the amounts they actually paid following the judgment as proper usage fees (as opposed to proper usage fees paid by way of offset from the advance consideration), plus linkage and interest differentials from October 28, 2021 (the date on which the purchasers were required to pay this balance according to the agreement) in accordance with the Interest and Linkage Rulings Law. 5721-1961. For the avoidance of doubt, it is clarified that the proper usage fees that were actually paid will be deducted according to the date of their payment, while in relation to any amount paid in this way, the obligation to add linkage differences and interest to it from the date on which it was paid to the seller will cease.
- The parties shall come to the matter and shall submit to the court within 30 days a joint notice regarding the amount that the purchasers must pay to the seller according to the calculation in paragraph 51, as of the date of the notice. If disagreements arise between the parties regarding the manner in which the calculation is performed, they will be detailed in the joint notice, clarifying the meanings of each method of calculation, and the parties' arguments regarding them. After the notice is delivered, a supplementary judgment will be given according to which the parties will complete the performance of the contract.
Conclusion
- Given the aforesaid, insofar as my opinion is heard, we will order that the appeal be accepted, in accordance with the provisions detailed in paragraphs 50-52 above. In addition, in the circumstances of the case, I would suggest that we order the cancellation of the charge for expenses and fees imposed on the purchasers in the judgment of the trial court (to the extent that their payment was made by way of offset, in any case their restitution is included within the framework of the provisions set out in paragraph 51(a) above; to the extent that they were actually paid, they will be settled with the addition of linkage differences and interest from the date of payment in accordance with the law), and that instead of this, the seller will bear the expenses of the purchasers in both instances in a total sum of ILS 50,000.