At the same time, see the words of the Honorable Justice Barak-Erez in her opinion in the Ajami case:
"Indeed, my colleague is right that there is room for caution with regard to the recognition of informal agreements as binding contracts, in order to contribute to legal certainty. However, as for myself, I do not believe that there is room for halakhic innovations in this area, but only for the careful application of the principles that have been formulated in case law in relation to this over the years. I am aware of the concern of an uncontrolled 'slide' into a state of contractual obligation, even in situations where the parties did not intend to give binding effect to the agreements they reached. At the same time, there is also reason to fear that sophisticated parties will disavow clear agreements, which have not been fully formally anchored."
- 2. "Not all contracts are created equal"
- As is well known, contract interpretation must also be carried out in accordance with the nature of the parties. This is also the interpretation of the validity of a memorandum of understanding.
- The Supreme Court's ruling focused on a distinction between two types of contractors in a contract. A caller who is a businessman, that is, a sophisticated communicator who conducts business and is legally represented, versus a caller who is a private person, who is usually not well represented legally. These types of contractors create three categories of contracts: a business contract in which all parties are engaged in a sophisticated business; a private contract to which all parties are private persons; and a consumer contract in which a dealer stands on one side and a private person on the other (see: Bibi Roads, the opinion of the Honorable Justice Grosskopf; Civil Appeal 9025/17 T.S Investments Inc. v. Segal Group (Dresden) GmbH and Co.KG, para. 21 (February 19, 2020); Civil Appeal 839/21 Hecker v. Klamtis Overseas Ltd., para. 33 (March 6, 2024); Ofer Grosskopf and Yifat Naftali Ben-Zion, "The Purposes of Contract Interpretation Law: Which Path Should We Take When It Matters to Us Where We Will Reach?" Studies in Contract Theory - Book 507 (Yehuda Adar, Aharon Barak, Effi Zemach eds., 2020)).
- In business contracts signed between two sophisticated parties, the rules of contractual interpretation are intended to promote a forward-looking purpose of legal certainty, efficiency, reducing the cost of transactions and creating business security. The starting point in these business contracts is that the contractors are actors who can invest time and resources in the way the contract is drafted in order to shape it as they wish, and there is no justification in the usual case for the court to be forced to look for their intention (see references above). Therefore, in contracts of this type, the court will give great weight to the language of the contract.
- 3. Memorandum of Understanding between Sophisticated Parties
- And what about a memorandum of understanding between two sophisticated parties?
- In a situation in which two sophisticated parties wish to be bound together in a memorandum of understanding, there is an expectation that they will formulate the provision that seeks to give the memorandum legal validity in a clear manner that is not open to interpretation. This is in order to promote considerations of business certainty, efficiency, and the reduction of transactions. This expectation is legitimate given that these are parties who act with the help of legal advice and are well aware of the rules of interpretation. These parties have the tools to prevent the waste of judicial resources and litigation costs relatively easily.
- This expectation is also consistent with the principle of good faith in contracts, as it prevents the parties from maintaining ambiguity that will serve them later in the negotiations. It is important to avoid a situation in which a sophisticated party to the contract maintains ambiguity regarding its validity in a way that can serve it in the continuation of the negotiations and in accordance with its development. If he wants a contract, he will claim that the memorandum of understanding is binding. If he does not want to, he will claim that the memorandum of understanding is not binding.
- Therefore, when it is sought to interpret the validity of a memorandum of understanding formulated between experienced parties, increased weight must be given to the language of the contract. In cases where the memorandum of understanding uses vague language regarding its legal validity, ambiguity will act as a significant consideration for rejecting the claim that it is a binding contract, assuming that if the parties wished to view the memorandum as a binding contract, they would explicitly state it. A deviation from the language of the contract in these cases will be made only when there are other indications of clear agreements between the parties (see the opinion of the Honorable Justice Barak-Erez in the Ajami case).
- 4. The Rule of Interpretation Against the Drafter
- Before examining the language of the commercial terms document, and given that Shufersal was the one that drafted it, we will mention another interpretive rule, namely the rule of interpretation against the drafter, according to which "in the event of an interpretive doubt, the rule 'against the drafter' will come and tip the scales in favor of the contract drafter" (see: section 25(b1) of the Contracts Law; Civil Appeal 8729/07 Aeronmetal in Tax Appeal v. Jewish National Fund, para. 16 (November 12, 2009)). This rule is mainly aimed at the interpretation of a contract entered into between the parties, but of course it can also be adopted in the interpretation of a memorandum of understanding and its legal status.
- Let us move from the normative rules to their application in the case before me.
- The commercial terms document does not constitute a binding agreement between Shufersal and Shem
- The interpretation of the commercial terms document, and in particular the question of whether it is a binding contract, must therefore be done with regard to the nature of the parties. As mentioned, Shufersal describes itself as one of the largest retail companies in Israel and even the largest. In other words, this is a company that is accustomed to entering into complex commercial contracts, understands the rules of interpretation and has the means to formulate the contracts in which it enters into it in a way that reflects its intentions. Even Geshem, an entrepreneurial company that manages and builds complex commercial and residential projects, is also a sophisticated party and is also involved in dozens of contracts for the lease of land in the projects it builds and operates.
- In addition, the commercial terms document should be interpreted in light of the fact that it was drafted by Shufersal (see: Minutes of the hearing of July 16, 2023; p. 36, paras. 19-20). It has not escaped my notice that the person who actually drafted the commercial terms document was Shlomi or Yael, who are not jurists (see: Minutes of the hearing of July 16, 2023; p. 36, para. 23; p. 142, paras. 9-11)). However, this does not detract from Shufersal's responsibility, as a skilled commercial entity, to formulate the agreements in which it is entered into in a clear and not vague manner.
- Therefore, in order to decide the question of the validity of the commercial terms document, the way we proceed will be as follows:
First, it is necessary to examine whether there was a meeting of desires between Shufersal and Rashe, which was expressed through an offer and acceptance.