The defendant adds that additional heads of damages that were claimed, such as attorney's fees and fees for an administrative petition, financing expenses and general expenses, were not proven at all, and that according to him, there is no factual causal connection between the alleged violation and the alleged damage, and that the building permit expired due to the plaintiffs' financing difficulties and not due to the land tests. Finally, he argues that the plaintiffs did not meet the burden of reducing the damage.
- Other Municipality Applications 2274/21 Mor v. Elad Israel Residences Ltd. (January 1, 2023) The Supreme Court discussed the principles of calculating the damages in a case where a contract was entered into based on a false representation and the injured party did not wish to cancel the contract. In such a case, the damage can be calculated in one of two ways, according to his choice: compensation that will place the injured party where he would have stood if the contract had not been signed, or compensation that will place him in the place where he would have stood if he had entered into a contract from the beginning on the basis of the facts as they are. Calculating the compensation according to the first way will place the injured party as close as possible to where he would have been if he had not negotiated with the other party. The calculation of compensation according to the second method aims to place the victim in the place where he would have paid for the property for a different, lower consideration and one that reflects the real value of the sale.
- The Supreme Court noted the manner in which the calculation of compensation should be made in each of these options.
The first way, compensation that will place the injured party where he would have been if the contract had not been concluded, requires the court to determine the damage of the victim in light of the profit that the victim derived from the contract. Accordingly, the current value of the property being sold must be deducted from the damage caused by the victim (which consists of all the expenses incurred in connection with the contract). This calculation can result in a negative amount or ineligibility for compensation, if the value of the property has increased, or if the contractual consideration he paid was less than its true value. According to this option, it is also possible to calculate the damage according to the profit that could have grown to the victim from an alternative transaction, or compensation for excess expenses incurred as a result of the misrepresentation, such as the prolongation of the negotiations, expert examinations, and more.
- The second way, adjustment compensation, is intended to remove the distortion from the agreed contractual consideration and to adapt it to the actual state of affairs, in the manner in which the injured party would have stood if the contract had been concluded out of awareness of the facts as they are. As part of this approach, the assumption is that the injured party would have entered into the transaction in any case, but at a lower price that reflects the weighting of all the facts related to the transaction. This method of calculation is not affected by the question of the profitability of the contract.
There are three ways to calculate adjustment compensation: subtraction from the contractual consideration, the market value gap, and proportional calculation.