Civil Case (Rishon LeZion) 54046-02-19 Kioskey Marketing (2004) Ltd. v. Lid Technologies Ltd.

Judgment

1. A company that manually manufactures and markets cigarette rolling kits is seeking to purchase a machine that will mechanically manufacture the kits for industrial marketing. For this purpose, it enters into an agreement with a company that specializes in the production of packaging machines.  In Passing About three years Since the conclusion of the agreement, it was claimed that the machine manufacturer failed to manufacture the machine as agreed.  Against the background of the aforesaid, the lawsuit was filed.  The question underlying this judgment deals with the essence of the obligation in the agreement – did the agreement include an undertaking to manufacture the machine ("obligation to make an outcome") or only to try to produce it ("obligation to make an effort")? In addition, the judgment addressed the question of Whether the contract was breached by any of the parties, and on the question of what remedies the injured party is entitled to in the case at hand.

Background

2. The plaintiff, Kiosk Marketing (2004) Ltd., is a private company that during the period relevant to the statement of claim was engaged in the import, marketing and distribution of tobacco rolling papers and cardboard filters. The plaintiff is owned by Mr. Ziv Hamami (hereinafter: Hamami).
3. The defendant, Lead Technologies Ltd., is a company engaged in the manufacture and development of packaging machines and is owned by Mr. Yaakov Kiselowitz (hereinafter: Kieślowitz) and by Mrs. Dafna Kiselowitz (hereinafter: Dafna Kiselowitz).
4. According to the plaintiff, in the period prior to the engagement between the parties, she produced Manually A self-preparation kit for cigarettes for tobacco smoking, which was produced on the basis of a sample developed by Hamami. The kit consisted of two interlocking cases - one - a box of paper sheets for rolling cigarettes that are comfortably removable similar to paper handkerchiefs (hereinafter: Packaging of rolling papers); and the second is a pack of cigarette filters arranged in the form of an "accordion", which can also be easily removed (hereinafter: Filter Pack).
5. The plaintiff, according to her, marketed the said kit (hereinafter: Overall kit), and since it saw that there was a demand for this kit, it sought to expand the scope of production by purchasing a machine that would serve as an industrial production line for the production of the overall kit.
6. Against the background of the aforesaid, the plaintiff and the defendant entered into a series of agreements in which, in essence, it was agreed that the defendant would provide the plaintiff with a machine for the manufacture of its products.

The contractual system between the parties

7. The first agreement between the parties was signed on October 3, 2013, and is titled "Tax Order Agreement R6476A Prototype for a mechanism for folding cartons for cigarette filters" (hereinafter: The Prototype Agreement; See: Appendix 1 to Hamami's first affidavit dated August 17, 2020). As part of this agreement, the parties agreed that the defendant would develop Experimental Primary Mechanism (prototype) for the manufacture of the filter case only.  In the prototype agreement, it was stated that the price that the plaintiff would pay to the defendant for the production of the mechanism would be a total of NIS 110,000 plus VAT; Because the goal is to reach an order of 100-150 folds of the case per minute; that the mechanism that will be built will be the property of the defendant; that the materials will belong to the plaintiff; and that if the plaintiff waives a future activity agreement, the mechanism will remain in its ownership, but not the drafts and software.
8. The prototype agreement also included a "follow-up price quote for a machine for packing filters", with the understanding that as long as the initial mechanism (the prototype) meets the expectations of the parties, they will continue to enter into an additional agreement for the production of an industrial machine for the production of the filter case.
9. It appears that there is no dispute between the parties that the mechanism developed in accordance with the prototype agreement led the defendant to believe that there is a possibility of manufacturing a machine that will manufacture the filter package industrially, and therefore, after about two years, the parties again entered into an agreement for the manufacture of such a machine. However, as will be detailed below, the additional set of agreements did not limit itself to a machine whose purpose was only the industrial production of the filter case, but rather engaged in the production of a subsidiary machine Five Assemblies (hereinafter: The Machine), which will produce the Overall kit, which will include both Filter Pack and the Rolling Paper Packaging.
10. The agreement for the production of the machine was entered into in several stages. It should be noted that various price quotes and agreements were exchanged between the parties, and even the plaintiff's own version on this matter developed and changed throughout the proceeding.  Notwithstanding the aforesaid, the documents attached to the pleadings indicate that the main stages in the contractual array between the parties were as follows:
11. The price quote for the production of the machine - On March 8, 2015, the plaintiff submitted to the defendant a price quote for the production of the machine, entitled "Tax Price Quote" R6941B Complete production line (sic, per mm) for cigarette rolling paper packaging + filter package BOOKLET + FILTERS PACK" (hereinafter: The price quote for the production of the machine).