In relation toThe second argumentregarding the principle of good faith, the buyers claim that the trial court erred in focusing on their conduct - and not on the seller's conduct. According to the buyers, the seller ambushed them, and canceled the agreement immediately after the end of the grace period, without giving warning, warning or extension. Moreover, the seller tried to cancel the agreement in August 2021, prior to the events described above, after a dispute arose between the parties in connection with another matter (which is not before us), which also led to one of the purchasers (appellant 1) blocking the seller on the "WhatsApp" application (see paragraph 33 of the judgment). The buyers also claimed that the seller ignored the fact that he too had fundamentally breached the agreement in his conduct. Therefore, and given that the payment of the balance of the consideration was subject to the date of receipt of Form 4, the purchasers claimed that the seller was obligated to give them an extension prior to the cancellation of the agreement. Since it was not given, and taking into account that the non-payment was due to a malfunction, and the purchasers wish to fulfill the agreement, it was canceled in bad faith (and therefore unlawfully). This is correct, in their view, whether it is determined that this is a fundamental breach (extension by virtue of the duty of good faith) or not (extension by virtue of the provisions of the Law).
- On March 10, 2024, the seller submitted his response to the appeal, in which he argues that it should be rejected, while relying on the judgment. According to the seller's position, the appeal is based on an erroneous interpretive claim with respect to the classification of the contractual breach committed by the purchasers as a non-fundamental breach; However, this argument was not argued at all before the trial court, and therefore it should not be accepted. On the merits of the argument, the seller maintains that the interpretation proposed by the purchasers to clause 18 of the agreement is incoherent, and makes it a dead letter. According to him, the correct interpretation of the section is that "a breach of a fundamental undertaking will constitute a fundamental breach", but a delay of one week in its execution will not be considered a breach (section 26 of the Response to the Appeal). This interpretation, according to the seller, is also appropriate to the purposes of the agreement, since it creates certainty in a way that will encourage the fulfillment of contracts. It was further argued that even if the breach of the obligation in relation to the payment dates was not defined in the agreement as a fundamental breach, it should still be viewed as such. This is while most of the consideration for the purchase of the apartment has not been paid, and the buyers have even been warned of this in advance. Moreover, the seller argues that the purchasers are ignoring the implications of the manner in which they conducted, and in particular that they did not act in order to satisfy him that they were indeed trying to repay the balance of the consideration; They did not transfer to him the amount that was supposed to be paid from the equity, even though it was in their hands; They did not show him their financial situation. In these circumstances, according to the seller, there was a lack of trust on his part as to the ability or willingness of the purchasers to correct the violation.
As to the issue of good faith, and further to the above, the seller claims that he acted in good faith throughout the life of the agreement. As evidence, he informed the purchasers of the delay in receiving Form 4 even before the date for receiving it had passed, and was not answered with any protest until after the agreement was canceled; And the trial court ruled that it did not ambush them in an attempt to cancel the agreement, and was even willing to give them a short extension. It was further argued that the purchasers' claim that the delay in payment was due to a malfunction and without intention was not mentioned in the pleadings in the proceeding before the trial court, and in any case it cannot explain the retention of their share of the equity in their hands; and that in fact there is no connection between the delay in receiving Form 4 and the delay in paying the balance of the consideration. Finally, the seller argues that the purchasers have not proven that the cancellation of the agreement will cause them serious damage; and that only in exceptional cases, of which our case is not one of them, will the cancellation of a contract due to a fundamental breach be defined as an act of bad faith.
- On May 26, 2025, a hearing on the appeal was held before us. At the outset, counsel for the parties stated that in accordance with the judgment, the buyers pay the seller monthly usage fees for the apartment, and that the consideration paid was returned to them. Subsequently, counsel for the parties reiterated the main points of their written arguments. Counsel for the purchasers insisted, inter alia, that the cancellation of the agreement was made immediately after the deadline for payment of the balance of the consideration, despite the fact that the seller was delayed for more than three months in receiving Form 4. This delay, it was claimed, created a change in the agreement that obligates the seller by virtue of the principle of good faith to give the purchasers a proper opportunity, by way of extension, to correct the breach. It was further argued that the delay in payment stemmed from a malfunction and not out of a desire to breach the agreement, while the purchasers wanted (and still want) to fulfill it.
Counsel for the seller, on the other hand, argued that it is not the seller's duty, as a party to whom the agreement was fundamentally breached, to contact the violating party and offer him an extension. Therefore, according to him, he had the right to cancel the agreement due to its fundamental breach. Another requirement, according to which an extension should be granted in the circumstances described, nullifies the distinction between a fundamental violation and a non-fundamental violation. It was further argued, inter alia, that the delay in receiving Form 4 does not affect the date of payment of the balance of the consideration; and that after the purchasers were provided with Form 4, and were informed that they had to pay the balance of the consideration, they chose not to respond to these inquiries, and contacted the seller, for the first time, only after the cancellation notice.
- After the hearing of the arguments of the parties was completed, we proposed to the parties to settle the dispute by way of holding negotiations between them in order to reach an agreed-upon settlement. The buyers have expressed their willingness to agree to this offer; However, the seller objected to it. As such, we have no choice but to rule on the appeal.
Discussion and Decision
- After reviewing the written arguments of the parties, and hearing their oral arguments in the hearing before us, I have reached the conclusion that the appeal should be accepted; And so I will suggest to my friend and colleague that we do it.
- As stated, the dispute between the parties deals with the question of whether the agreement was lawfully cancelled by the seller upon sending the cancellation notice. It seems that there is no dispute that in the circumstances of the case, the purchasers breached the agreement by not paying the balance of the consideration by the deadline set for this in the agreement, and after the grace period had elapsed (i.e., until Thursday, October 28, 2011). There is also no dispute that the seller sent a notice of cancellation for this violation immediately (as early as Sunday, October 31, 2021), without giving the buyers any extension to correct the violation. In this situation, it is possible to focus the discussion on the question of whether, following the breach of the purchasers, the seller had the right to cancel the agreement by hand, or whether he was obligated to grant an extension to the purchasers before he exercised the right of cancellation by him. An answer according to which the seller is required to grant an extension means that the cancellation notice was given unlawfully, and in any case the cancellation by virtue of it does not take effect. This is sufficient to accept the appeal. I will therefore focus on two main questions: first, whether the failure to pay the balance of the consideration on time constitutes a fundamental breach of the agreement (if not, then an extension is required by virtue of the relevant provisions of the law); andsecond, and to the extent that it is indeed a fundamental breach, whether, in the circumstances of the case, insisting on the right to cancel immediately, without granting an extension, constitutes a lack of good faith (so that an extension is required by virtue of the duty of good faith).
As will be detailed below, my position is that the failure to pay the balance of the consideration on time does indeed constitute, as the seller claims, Fundamental violation Agreed of the Agreement, in accordance with the provisions of Section 18 of the Agreement, which defines this undertaking as a "fundamental undertaking". However, even though this is a fundamental breach, in the unique circumstances of the case before us, the seller should have given the purchasers an extension before cancelling the contract, by virtue of the principle of good faith. Thus, in essence, against the background of the delay that occurred in the production of Form 4 by the Seller, which also constitutes a fundamental breach of the Agreement, and which led to the creation of uncertainty as to the manner in which the Agreement will continue to exist, including with respect to the dates set therein; In light of the significant proximity of time between the deadline and the payment of the balance of the consideration and the date on which the agreement was cancelled, which indicates that the insistence on the right of cancellation was done with precision and meticulousness; And given the short additional period of time that the buyers needed in order to pay the funds. Since such an extension was not granted, the agreement was unlawfully cancelled. Therefore, as I noted above, I am of the opinion that the appeal should be granted. This is the essence of my position - the following is the details.