Civil Case (Nazareth) 10551-02-23 Michal Egler vs. Renana Peretz - part 2

The plaintiffs' claims:

10. According to the plaintiffs, the agreement signed by the parties is an agreement for the sale of the property. In accordance with what was stated therein, they were not given a choice to purchase the property, but it was mutually agreed to sell it to them.  The agreement adopts categorical language of obligation to sell, and its provisions indicate the parties' agreement regarding the sale of the property.  Therefore, this is not an option agreement for the purchase of the property, but rather an agreement regarding its purchase by the plaintiffs.
11. The plaintiffs further claim that the essence of the agreement is learned from the totality of the circumstances of the case. This includes the background to the engagement - their search for a property to purchase and not to rent and the defendant's desire to sell the property.  In addition, the reason for which the agreements were drawn up as they were drawn up was due to the defendants' desire to avoid liability for betterment tax, and therefore the defendant sought to postpone the signing of a sale agreement for another 18 months.  In accordance with his request, the parties signed a lease agreement, which in effect served as a cover for the payment paid by the plaintiffs in advance at the expense of the transaction price of ILS 90,000.  At the same time, the parties anchored the undertaking to sell the property in the document underlying the claim.  The agreements were drawn up by the defendants and the plaintiffs signed them without making any changes.
12. The plaintiffs claim that at the beginning of October 2022, the defendant invited them to a meeting with Adv. Ohana for the purpose of drafting a sales contract, which was drawn up on November 3, 2022. At that meeting, the plaintiffs found out for the first time that there was a registration problem and that as a result they would not be able to take out a mortgage on the property.  According to them, they intended to pay the consideration by paying from the equity they had in their hands from the sale of their previous home and the balance by taking out a mortgage, which was known to the defendant and was not in dispute.  When it became clear to them that this was not possible, they acted quickly so that the deal could be completed.  They immediately contacted a separate legal representation and their attorney contacted Attorney Ohana for the relevant information.  According to the plaintiffs, the defendants set a tight and unreasonable timetable for signing a sale agreement, refused to make any change to the draft sale agreement prepared on their behalf, and litied in relation to the comments of their counsel, and threatened them that if this was not done, they would have to vacate the property.  Even after the plaintiffs announced their agreement to pay the full consideration within a period of less than a month, and this after the plaintiff's father came to their aid by taking out a mortgage on a property he owned, the defendants refused any cooperation, evaded the plaintiffs' requests and announced the cancellation of the transaction.
13. According to the plaintiffs, a binding agreement was entered into between the parties that satisfies the requirements of discretion and specificity. They further claim that the defendants acted in extreme bad faith in order to thwart the transaction, against the background of the increase in real estate prices in the area during the period that has elapsed since the engagement between the parties and the defendants' desire to retain the property whose price has increased.
14. In addition, the plaintiffs claim that even if it is determined that this is an option agreement as claimed by the defendants, the option was exercised by them. The defendants, with their bad faith management, their attempts to repudiate the agreement, the setting of an unreasonable timetable for the payment of the consideration, etc., prevented the signing of a sale agreement and they cannot build on this conduct.
15. The plaintiffs petitioned for declaratory relief that there is a binding agreement between the parties for the sale of the property and a remedy for its enforcement, or alternatively, to the extent that it is determined that the agreement is an option agreement, to declare that the option has been exercised and to order its enforcement. Alternatively, they demanded to obligate the defendants with subsistence damages for conducting negotiations in bad faith, in the sum of ILS 1 million, the discrepancy between the value of the property on the date of signing the agreement and its value on the day the claim was filed, or between the price of a similar property that they were able to purchase at that time and the price of such a property today.  In addition, compensation for mental anguish in the amount of ILS 100,000 is requested.

The defendants' claims:

16. According to the defendants, the claim against the defendant should be dismissed in the absence of rivalry between him and the plaintiffs since he has no rights in the property, and therefore he did not and could not give the plaintiffs any option to purchase the property. The defendant is the owner of the rights and is the one who bears the obligations according to the agreements between the parties, and this does not concern the defendant.
17. On the merits, the defendants claim that the agreement between the parties is an option agreement, alongside which the parties signed a lease agreement. According to the defendant's version, she was interested in renting the property at the time, as were the plaintiffs, who even stated that they owned a property elsewhere that had not yet been sold and that they were unable to finance the purchase of another property at that time.  In accordance with the agreement between the parties, the plaintiffs paid in advance annual rent plus an additional financial component in the security fence.  The option agreement was signed at the request of the plaintiffs, after they expressed interest in the possibility of purchasing the property and the defendant agreed to it.  The option period was set until the end of the lease period, i.e., until October 30, 2022.  However, the plaintiffs did not exercise the option until the said date, and not even after the defendant allowed them another opportunity to do so, and therefore the option expired.
18. According to the defendants, the fact that this is an option agreement clearly emerges from the title of the document, which states that: "As soon as this is possible, the parties will meet and advance a sale agreement for signature", which indicates the intention of the parties that a binding agreement will be signed only in the future. In addition, the agreement was not reported to the tax authorities, which also indicates that the parties did not view it as a binding sale agreement.  Even the conduct of the parties afterwards, including the meeting with Adv. Ohana in order to promote the signing of a sale agreement close to the end of the lease period, shows that no binding agreement was entered into between them at that time.  In this context, the defendants deny the plaintiffs' claim regarding the circumstances of the drafting of the aforementioned agreements and the argument behind them regarding the claim regarding the defendants' desire to postpone the signing of a formal agreement by 18 months due to taxation considerations, and note that since the property was not given a Form 4, in any case the said period for the purpose of exemption from betterment tax does not begin to be counted.  The defendants further claim that the plaintiffs demanded a change in the terms of the option, both in terms of the payment date that they sought to postpone for an extended period and in the demand that the defendant be responsible for correcting the defects in the registration of the property, which deviates from the terms of the option and constitutes a new offer that was not acceptable to the defendant.
19. The defendants further claim that the document signed by the parties lacked the intention to enter into the agreement and also lacked specificity due to the lack of material details for the transaction.

Discussion and Decision:

20. At the outset, I will demand the defendants' argument that the lawsuit against the defendant should be dismissed out of hand in the absence of any rivalry between him and the plaintiffs. The claim should be rejected.  Indeed, the defendant is not the owner of the property and is not a party to the engagement at the basis of the claim, so the declaratory and enforcement remedies are irrelevant to him.  However, the claim also includes monetary remedies, some of which are alternative and some of which are cumulative, the cause of which was a lack of proper conduct in the negotiations, and in this regard the plaintiffs have a possible cause of action against the defendant, in the category of someone who took a direct part in the negotiations (Additional Hearing 7/81 Fender, Open and Building Investment Company in Tax Appeal v.  Castro, IsrSC 34(4) 673).  In fact, as will be detailed below - the defendant was the dominant factor in conducting the negotiations on the part of the owner of the property (his home).  It is therefore clear that there is no reason to dismiss the claim against him outright for the reason of lack of cause.

The nature of the engagement between the parties:

21. As it appears from the above, there is a dispute between the parties as to the nature of the agreements they made. Is it a lease agreement with an option agreement for the purchase of the leased property by the tenants in the future, as the defendants claim, or is it a single agreement for the purchase of the property by the plaintiffs, which was artificially split into two agreements, as the plaintiffs claim.
22. In order to determine the nature of the engagement between the parties, it is first necessary to interpret the provisions of the agreement that is the basis of the claim. Section 25(a) of the Contracts Law of 1973 states: "A contract shall be interpreted according to the intentions of the parties, as it is implied in the contract and the circumstances of the matter, but if the intentions of the parties are expressly implied by the language of the contract, the contract shall be interpreted in accordance with its language." The starting point for the interpretation of an agreement is its language, but when this is not unequivocal, the court is also required to consider circumstances external to the contractual text, on the basis of which the intentions of the parties must be examined when concluding the agreement.
23. An examination of the provisions of the agreement shows that it is not unequivocally worded in terms of the nature of the agreement between the parties, and it has, at the very least, faces one way or the other. While the title of the document speaks of an "option agreement for the purchase of an asset", which clearly supports the defendants' version as to the nature of the engagement, the content of the agreement does not clearly relate to this title.  In practice, with the exception of the title, there is no determination in the body of the document regarding the future right of choice given to the buyers (the plaintiffs), as opposed to mutual consent to enter into a transaction.  Thus, clause 1 of the option agreement states that "the property will be sold during the lease period and/or at the end of the lease to the tenant in the amount of ILS 2,660,000 net".  The document does not provide a clear and rigid definition of an option period (it will be sold "during the lease period and/or at the end of the lease") and it does not make any determination regarding the manner in which an option will be exercised - a mechanism for giving notice, etc.  In addition, clause 3 stipulates that "as soon as possible" the parties will meet and promote a sale agreement for signing, without tying it to a point in time when an option is exercised, but rather as a provision for immediate existence.  As a whole, the wording does not use the "language of choice" of the option holder, but rather the language of contemporary mutual obligation.
24. An examination of the provisions of the document as a whole does not support, therefore, the fact that it is an option to purchase agreement, as stated in its title. It is not superfluous to note that when we come to classify the type of transaction made by the parties, it is the essence that determines and not necessarily the nickname they chose to give to the contract: "That is, although the title of the agreement and its language have weight, if it turns out that the provisions of the agreement create an outline different from the one declared by the parties, so that in essence a different transaction was created, then the substance takes precedence over the language", Civil Appeal 7281/15 Copas Finance Israel (Israel) in a Tax Appeal v.  Agrexco Agricultural Export Company in a Tax Appeal(2018), paragraph 29 of his judgment by the Honorable Justice Danziger and the references therein).  In particular, this is the case with respect to option agreements in respect of which it was determined that "sometimes some restriction on the freedom of choice of the option recipient, with a slight fluctuation, is sufficient for an agreement boasting of an agreement boasting of an agreement to provide an option in real estate to be classified as a sale agreement" (paragraph 16 of the judgment in the matter of Civil Appeal 7869/14 D.  Lia Initiation and Investments in a Tax Appeal v.  Real Estate Taxation Administration Civil Case (2017), paragraph 16 of the judgment of the Honorable Justice Sohlberg).
25. Against the background of the aforesaid, the intentions of the parties must also be examined against the background of all the circumstances of the case, as presented in the evidence that was presented. In this regard, I was presented with two polar factual versions.  The plaintiffs' version is that the defendant, who conducted the negotiations with them, asked them to postpone the signing of a sales contract by 18 months due to tax aspects of the seller and in order to avoid paying betterment tax.  According to them, this was the only purpose behind the external appearance of the engagement as it was done in the two agreements in question.  The defendants, on the other hand, claim that the said documents reflect an authentic agreement between the parties; They agreed that the plaintiffs would rent the property for one year, and at the same time, at the plaintiffs' request, the defendant agreed to grant them a future option to purchase the property for an agreed sum.
26. In this dispute, I consider preference to the plaintiffs' version, which fits more convincingly with the evidence that was presented, which I will discuss below.
27. First, the plaintiffs' version in their testimony is supported by a transcript of a recording of a conversation that took place between the plaintiff and the defendant prior to the engagement between the parties (Appendix A to the plaintiffs' affidavits). In the course of that conversation, the plaintiff stated to the defendant that: "I told you that I don't need rent, it's...  Because you have to rent, I rent" (p.  2 of the transcript, paras.  13-14), and later on "We have to rent, I say the rent is for you, because you have to rent, not because I want to" (p.  9 of the transcript of the conversation, Appendix A, paras.  21-22).  The defendant, for his part, stated to the plaintiff in relation to Form 4 (a subject about which the plaintiff was asked) that: "That's it, I want Form 4 more, because if I have Form 4 I start to...  Counting 18 months, what, you see?" (p.  8 of the transcript of Appendix A, p.  8, paras.  17-18), and later the defendant said: "...  Once again we set a price for the end of the road, it doesn't matter, we do the lease because of the 18 months, (emphasizing the word) as if you understand? To make the price is the final price, that's it, it's closed and that's after 18 months, you do the contract, that's it, it's a sales contract, but in principle it's formal" (p.  10 of the transcript, paras.  1-6).  It should be noted that the defendant confirmed in her testimony that she had received "in real time" legal advice that if she sold the property within 18 months, she would receive a Form 4 or she would receive an exemption (p.  24 of the transcript, paras.  20-21).  The above is unambiguous, and they fit well with the plaintiffs' version that the parties agreed from the outset regarding the sale of the property and that the lease agreement was drawn up at the defendant's initiative due to his desire to avoid imposing tax liability on the seller.  As is clearly evident from the evidence, it was the defendant who conducted the contacts with the plaintiffs for the sale of the property, according to him, by virtue of a power of attorney that the defendant (his daughter) gave to him.  Thus, the defendant's actions, knowledge and intentions are also binding on the defendant as stated in section 2 of the Mission Law, 5725-1965.
28. Second, the plaintiffs' version is also supported by the conduct of the parties with regard to the registration of the holder of the property with the local authority and the electric company. Initially, after the agreements were signed, the plaintiffs were registered as holders.  However, later on, during the alleged lease period, and although there is no dispute that the plaintiffs continued to live in the property without any change, the defendant was registered as the holder.  The meaning of this is evident from a transcript of a conversation that took place between the plaintiff and the defendant, after the plaintiff received a request from a representative of the local authority who asked her to settle a municipal tax debt for the period in which the property was registered in her name prior to the change in the holder's registration.  During the conversation, the defendant stated that he had approached the Council for the purpose of changing the registration, and explained this in the legal advice he had received, according to him, according to which the entitlement to an exemption from betterment tax requires the taxpayer's actual residence in the property, and hence the need to register the defendant as a holder (Appendix A to the plaintiffs' affidavit, p.  17, paras.  17-19).  In his remarks, the defendant explained to the plaintiff that the charges would continue to reach the address of the property as it had been until that time, and thus the plaintiff would be able to pay them herself without knowing the identity of the payer (p.  19, paras.  2-20).  The aforesaid fits well with the plaintiffs' claim that the defendants were guided by tax considerations in creating representations regarding the transaction in the property.
29. Third, it is clear from the evidence that the defendants were the ones who set in motion the design of the written contractual array between the parties at the relevant time. There is no dispute that the wording of the agreements (both the main agreement and the lease agreement) was presented to the plaintiffs by the defendant and that the latter did not change anything in their content.  In this regard, I will refer to the testimony of the defendant, who confirmed that the agreements were signed by him and by the plaintiff immediately upon their presentation to the latter, without any amendments or negotiations (p.  10 of the minutes of June 20, 2024, paras.  20-27).  The defendant testified that the person who drafted the agreements for her was some lawyer (p.  22, paras.  1-6).  Against this background, it is necessary to read clause 4 of the agreement, which states that "the parties are aware that this agreement is between the parties only and that it should not be shown and/or presented to anyone".  This clause, which the defendants saw fit to include in the document drafted on their behalf, ostensibly relates to a desire to refrain from reporting to the tax authorities, when no explanation was given on behalf of the defendants.  The above details support the plaintiffs' version that the motive for signing the agreements as drafted stemmed from tax considerations on the part of the defendants.  I will add that the defendants' argument that the 18-month period is irrelevant in the circumstances, since it is counted from the date of receipt of Form 4, whereas the property did not have a Form 4 at all, is not convincing in my opinion.  The defendants' intentions must be examined according to the circumstances that existed at the time the agreement was drafted, not according to the situation that arose retroactively.  It is clear from the evidence that at the relevant time, the defendants assumed that Form 4 was expected to be given as soon as possible and that no delays were expected in receiving it, as the defendant described it to the plaintiffs (transcript of a conversation between the plaintiff and the defendant, Appendix A to the affidavits of the claim, p.  8, paras.  7-13; transcript of a conversation between the plaintiff and the defendant, Appendix A, supra, p.  13, paras.  15-19).
30. Fourth, the provisions of the lease agreement also fit logically with the plaintiffs' version. In the lease agreement, the rent was set at ILS 5,000 per month.  The lease period was set in the lease agreement for one year.  The amount of rent for a year was therefore ILS 60,000.  Despite this, there is no dispute that the plaintiffs paid the defendant in advance and upon delivery of possession of the property, the sum of ILS 90,000.  This sum corresponds to rent for a period of 18 months, which is the period for which the defendants expected that it would enable the long-awaited exemption from betterment tax.  The defendants claim that the said sum was determined in such a way that the annual rent of ILS 60,000 was supplemented by an amount of ILS 30,000 as a security for them in the framework of the lease relationship, but this claim was not convincingly substantiated.  It has no expression whatsoever in the lease agreement.  Moreover, in clause 19 of the lease agreement it was stated that the tenant would deposit a promissory note for security, but the parties did not fulfill the clause in relation to the amount of the promissory note, and there is no dispute that such a promissory note was not delivered.  The lease agreement therefore does not have a single thread that attests to an agreement to deposit a sum of cash in the hands of the defendant as security for the terms of the lease.  It should be recalled that the drafters of the agreement are the defendants, and that the agreement was drafted with the assistance of an attorney on their part, so that the lack of this matter falls at their doorstep.  Moreover, in the eviction claim filed by the defendant against the plaintiffs, it was stated in the statement of claim that the sum of ILS 90,000 was paid on account of rent (paragraph 6 of the statement of claim) and nothing was said regarding the fact that part of the sum was secured for rent.  Against the background of all the above, the claim that it was agreed to provide security in the rental relationship, which is part of the amount paid by the plaintiffs to the defendant, is far from convincing.
31. Fifth, the conduct of the parties before and after the signing of the agreements and with regard to the property, also supports the conclusion that the plaintiffs' version is more plausible. as to the date prior to the signing of the agreements; The plaintiffs testified that from the outset they were looking for a property for purchase and not for rent, after they decided to sell their home in Merom Golan and relocate their place of residence (paragraph 7.2 of the plaintiffs' main witness affidavits; p.  13 of the transcript, para.  5; p.  31 of the transcript, para.  36).  The plaintiffs were consistent in their version, it was not contradicted in anything and is also supported by the transcript of the conversation between the plaintiff and the defendant quoted in paragraph 27 above.  At the time of signing the agreement, the plaintiffs had not yet sold their home in Merom Golan, but it was sold a short time later (only a month and a half) in a way that fits in with their claim that from the outset they intended to sell and purchase an alternative residential property.  As for the defendant, her testimony that she was interested in renting the property and only later acceded to the plaintiffs' request to give them an option to purchase the property, is inconsistent with the defendant's statements, which indicate that prior to the engagement between the parties, the defendant received purchase offers from others and published the property (see transcript of the conversation, Appendix A to the prosecution's affidavits, p.  6, paras.  11-14, 20-22).  Her version that she did not want to sell the property does not logically fit with her agreement (according to her) to commit to an option agreement in the framework of which she undertook to sell, without a satisfactory explanation for the matter.  From the aforesaid, it appears that both parties were interested in executing a sale transaction from the outset and not in a lease transaction.  as to the period after the signing of the agreements; As detailed above, the defendant initiated a change in the registration of the name of the owner of the property and its transfer to the defendant's name, for one purpose - "preparing the land" to receive an exemption from betterment tax in the sale.  The plaintiffs, for their part, claim that they acted in the property in the manner of the owners and invested in it multiple investments.  Indeed, no references were attached to all the alleged expenses, so the claim in this regard was not fully proven.  However, the plaintiffs presented correspondence between them and the defendant, from which it appears that the plaintiffs paid the defendant for the construction of a fence on the property, which on the face of it does not logically relate to the format of the tenant-landlord relationship, and the defendant confirmed in her testimony that they made repairs to the house pool (p.  26, paras.  29-30).  The plaintiffs even paid a substantial sum of ILS 90,000 in advance, which is consistent with their version that they considered themselves bound by the agreement to purchase the property.
32. Sixth, the defendants' argument that what is stated in clause 3 of the agreement ("As soon as it becomes possible, the parties will meet and advance a sale agreement for signing") indicates that this is an option agreement, is not convincing. As detailed above, a series of indications, both in the wording of the agreement and in external evidence as to the circumstances in which it was drafted, indicate its essence, and the said clause does not detract from the conclusion that arises from them.  the opposite of things; This provision, which is ostensibly intended to greatly reduce the time gap between the signing of the agreement in question and the signing of a sale agreement, is inconsistent with the basic essence of option agreements to give one of the parties a sufficient period of time for the purpose of formulating its decision whether to enter into a transaction.
33. I will note that Adv. Ohana, in his testimony before me, noted that the parties met in his office shortly before the engagement between them, and that it was agreed that an option should be given to the plaintiffs since they did not have the full amount required to purchase it and that the property would be rented for the period of the option. This testimony raises considerable difficulty.  In their affidavits, the parties did not describe any involvement of Adv. Ohana at this stage (as opposed to a year later, when they met in his office for the purpose of promoting the signing of a sale agreement).  The defendant testified clearly in his testimony that Adv. Ohana was not involved at all at the said stage (p.  10 of the transcript, para.  21).  There is no dispute, even according to the testimony of Adv. Ohana, that he did not prepare the agreements, but only learned about them retroactively.  In these circumstances, it is difficult to rely on his testimony with regard to the point in time of the beginning of the parties' relationship, and it is possible that this stems from a connection to the facts as they were brought before him in retrospect.  In any event, in the overall weight of the evidence detailed, the scales are tilted to accept the plaintiffs' version.
34. Against the background of all the compilation, I accept the plaintiffs' version as to the nature of the agreement that existed between the parties - the sale of the property to the plaintiffs and not an option agreement. A separate question is whether a binding agreement has been formulated between the parties that establishes a valid contractual liability, a question that I will discuss below.

Interim Note:

35. Before I turn to the analysis of the above question, I will note that if the defendants' version of the agreement being an option agreement had been accepted, it would not have decided the fate of the claim, but rather it would have been necessary to discuss the question of whether the option was exercised in such a way that a binding agreement was entered into between the parties. The answer to this goes through two sub-questions.
36. The first question is whether the elements required for the creation of contractual liability for a sale transaction were met in the agreement (upon the exercise of the option). In the aforesaid context, the accepted distinction is between an agreement that embodies an obligation to enter into a contract whose main terms are sufficiently defined, and an agreement whose essence is nothing but an undertaking to conduct future negotiations ( Civil Appeal 8872/18 Penny Weiss v.  Moshe Ben Menachem et al.  (July 18, 2019).  See the judgment of the Honorable President Hayut there, as follows: "A contract that leaves in the hands of the option giver the possibility of thwarting in negotiations that will be conducted between the parties after its exercise is not an option contract, and the treatment of it as such raises a conceptual difficulty.  In my opinion, if the contract that was entered into includes the conditions that enable the recipient of the option to exercise the main contract, we have before us an 'option contract' that was given is not entitled to thwart its realization" (paragraph 2 of the judgment).  The above question is largely parallel to the analysis of the foundations of discretion and specificity, as will be done below (compare: Civil Appeal 4933/17 Mordechai Green v.  Aryeh Friedman (February 11, 2020), paragraph 32), and I will therefore refer to all that is detailed therein.
37. The second question is whether the option was exercised by the plaintiffs, or whether it was not exercised and therefore it expired. The defendants' main argument in this context is that the option period was until October 30, 2022, the end of the lease period according to the lease agreement, in accordance with clause 1 of the agreement, in which it was determined that "the property will be sold during the lease period and/or at the end of the lease period to the tenant...".  According to them, since the plaintiffs did not exercise the option by signing a sale agreement and paying the consideration by the said date, the option expired.
38. I cannot accept this argument. The agreement does not set a hard time point for exercising an option, but all it says is that the property will be sold during the lease period and/or at the end of the lease period.  The term "at the end of the lease period" is vague and flexible and does not set a clear time limit.  In particular, this is the case against the background of the circumstances of the present case, when it emerges from the evidence as detailed above, that the period to which the parties were intended in the framework of their agreements is 18 months, and accordingly also the payment paid by the plaintiffs in advance.  Nor does the conduct of the parties indicate an intention to set a hard date, since the meeting at Adv. Ohana's office for the purpose of drafting a sale contract was held on November 3, 2022, a few days after the end of the lease period stipulated in the lease agreement, without any claim being raised regarding the expiration of the option (the argument in this regard was first raised in Adv. Ohana's letter of November 22, 2022).  Moreover, the evidence shows that the issue of the date of drafting the sale agreement was not cardinal "in real time" from the perspective of the defendants, who were placed in this context mainly in considerations relating to the seller's tax liability.  See, for the matter, a transcript of a conversation between the plaintiff and the defendant, in which the plaintiff asked whether it would be possible to buy the property in October, and the defendant replied that: "So in October I say, I'll talk to him, in October, November, I'll talk to him and we'll see what we do, as soon as there are these vouchers that they're running that are in her name, then they know that she lives in the apartment.  It's much better with the authorities." (Appendix to the Affidavit of the Claim, p.  21 of the transcript, paras.  2-6).  See also a written message sent by the plaintiff to the defendant on September 19, 2022, in which the defendant was asked whether he had spoken with the attorney, "and when will it be possible to sign?" (Appendix XI1 to the affidavits of the claim), which supports the plaintiffs' version that they tried to promote the signing of a sale agreement, while the defendants did not have the speed.
39. I also cannot accept the defendants' claim that the option was not exercised because the plaintiffs did not pay the full contractual consideration and did not sign a sale agreement. First, the agreement between the parties does not stipulate that the exercise of the option will necessarily be done by way of payment of the consideration, as opposed to a notice of a desire to purchase the property while taking actions within a reasonable time to sign a sale contract.  Even according to the defendant's version, the plaintiffs announced their desire to purchase the property (paragraphs 42-43 of the affidavit).  Second, as will be detailed below, the issue of the date of payment in this case was inextricably linked to the registration problem that turned out to exist in the property, which the plaintiffs first became aware of at the parties' meeting at Adv. Ohana's office on November 3, 2022.  Under these circumstances, the plaintiffs acted quickly to obtain alternative funding, and already on December 4, 2022, they announced that they would be able to pay the full consideration by the end of that month.  Third, it was the defendants in their conduct that prevented the signing of a sale agreement and the receipt of the consideration.  In this regard, I will refer to all that is detailed below regarding the conduct of the defendants at the said stage in a manner that thwarted the realization of the transaction.  A person who prevented the signing of the sale agreement cannot be heard on the argument that the option agreement was not exercised for this reason (see: Civil Appeal 8505/09 Mordechai Shasha v.  Green in a Gas-Powered City in a Tax Appeal (March 23, 2011), para.  12).

Is an agreement binding?

40. As detailed above, the parties signed a document detailing the agreements that had been formulated between them, and at the same time it was determined that a sale agreement would be signed at a later date. Subsequently, contacts were held between them and drafts of an agreement were exchanged, but it was not signed, and on November 30, 2022, the defendants announced the cessation of negotiations and withdrawal from the transaction.  The question that arises against the background of the aforesaid is whether a binding agreement was perfected between the parties, or whether the document they signed was only an intermediate stage in the proceeding for a contractual engagement that was not completed, which in itself does not give rise to a valid contractual liability.
41. As is well known, a question of the above type has been discussed extensively in the case law of the courts with respect to documents of a similar nature to our case here, i.e., a document signed by the parties after conducting negotiations, which expresses agreement regarding certain terms of the transaction but further states that later on a sale agreement/final agreement will be signed between them (in common language - a memorandum of understanding). The starting point in the case law is that an interim document of the said type can establish a valid contractual liability, insofar as it meets the substantive conditions for the creation of such liability, i.e., discretion and certain finalities (Civil Appeal 158/77 Rabinai v.  Man Shaked Ltd., IsrSC 33(2) 283).
42. The terms of finality mean that there was a meeting of the parties' desires with the intention of entering into a binding agreement whose main details are known and agreed. This condition is objective and is examined according to external criteria, including the language and content of the document, including the manner in which the relationship between it and an agreement that the parties determined would be signed later on (the "Contract Formula") and the conduct of the parties before, during and after the signing of the document (Civil Appeal 9247/10 Aharon Rosenberg v.  Haim Saban (2013); (Civil Appeal 7193/08 Menachem Adani v.  Mordechai David (2010)).  The principle of specificity requires that the agreement between the parties includes the main conditions that are essential for entering into a contract.  There is a reciprocal relationship between the two conditions, since a high level of specificity can indicate that the parties are determined to enter into an agreement, while their absence may indicate that this is only an intermediate stage in the negotiations.  At the same time, it was determined that the existence of a high intensity of discretion makes it possible to suffice with a lower level of specificity in the document.  As a general trend over the years, the approach of case law in this context in particular with regard to the requirement of specificity has become more and more flexible, and it has been ruled more than once that it is possible to recognize the existence of a valid contract even when the document does not include all the main conditions essential for the engagement, to the extent that they can be completed by means of interpretation, external documents, provisions in the law or according to common practice (Civil Appeal 1456/22 Ibrahim Ajami v.  Neve Shalom Local Committee (February 28, 2024), Paragraph 29).  This is insofar as these are not material details about which there was an explicit or implicit disagreement between the parties at the time of the engagement (the Green case , supra, ibid.; the Adani case , supra, ibid., at paragraph 9 of the judgment of the Honorable Justice Vogelman).  For a description of the trend of case law in this matter, see the words of the Honorable Justice Gorskopf in the Ajami case above, as follows:

"In fact, the prevailing approach in Israeli law is that in cases where the parties have decided to enter into a contract, one of them should not be allowed to disavow it on the grounds that some of its terms are not specific enough.  As a result, the element of specificity, which at the beginning of Israeli case law was perceived as one of the two pillars on which the contract was built, declined from its greatness, and became secondary to the element of finality" (ibid., at para.  29).