It was further agreed that "the parties undertake to cooperate, to carry out all actions and to sign any document required for the purpose of executing this agreement and fulfilling its objectives for the operation of the business, including in the case of the sale of shares and/or the liquidation of the company" (ibid., section 16).
- The economic essence of the said agreements therefore includes long-term activity, which requires close cooperation between the parties involved.
- How should the agreements at issue be characterized? One option is to classify them as relational contracts.
As Prof. Barak noted, relationship contracts are "long-term contracts based on an ongoing relationship between the parties. This relationship is characterized by its complexity and uncertainty. Parties to these contracts - such as employment contracts, distribution contracts, nursing home contracts - operate according to a set of considerations that are different from those that apply as transactional contracts. Such contracts naturally require flexibility and adaptation to changes; they are based on a relationship of trust, solidarity, and reciprocity. It is difficult to determine all of their terms in advance, since they extend over long periods of time, in which the relationship between the parties changes; The contract develops over time" (Aharon Barak, Interpretation of the Law: The Contract 101-102 (2001)).
And in such contracts, which require cooperation and solidarity, there is an "increased willingness of the parties to act in good faith. Therefore, when the court identifies a relationship contract, the significance of the identification is also an intensive application and a high level of the principle of good faith" (Gabriela Shalev and Effi Zemach Contract Law 77 (2019)).
However, such a classification is not self-evident, taking into account the ruling of the Honorable Justice Stein in Other Municipality Applications 7/24 Levy v. Queen of Sheba Properties - Eilat (published in the databases; 2025). In this regard, it was held that "the vast majority of relationship contracts do indeed come to regulate relationships that are intended to exist for very long periods of time, but not every long-term contract is a 'relationship contract.' What characterizes a 'relationship contract' is that it is open to changes and updates in matters that the contracting parties have chosen not to settle in advance - this is based on the understanding that they will have to settle any such matter, when it arises, by formulating a separate ad hoc agreement" (ibid., at paragraph 18). On the other hand, when the contractual system between the parties includes a detailed regulation of the methods of conduct in detail, and is similar in essence to a closed contract, it would not be correct to classify it as falling into the category of a relationship contract.
- In the circumstances of the case, I am not required to make a finding on the question of whether or not we have relations before us. This is because it is sufficient for me to determine that the contractual relations between the parties subject them to increased duties of good faith. All contracts of relationship impose such duties, but it is not only the contracts of relationship that impose them. There may be additional contractual characteristics that would justify them.
It is easy to get the impression thatthe relationship between the parties is a joint journey, which is supposed to be long-term. In this framework, both sides have a common interest in achieving its success. They must act in cooperation. They must help each other. The concessionaires in the Sderot Agreement and the Bat Yam Agreement relied heavily on all of these. They spent considerable expenses and changed their situation for the worse.