The duty of disclosure and loyalty of a lawyer obligates him to provide the client with relevant information and details and to explain to him their meaning. Lihi was obligated to obtain the defendant's approval for the wording of the draft contract that she intended to convey to Racheli, and to obtain his approval of this wording. Subsequently, she was obligated to share with the defendant any change in the wording of the draft, and certainly with regard to Racheli's proposal regarding the payment schedule and the comments that should be made in this regard. Lihi was also obligated to clarify to the defendant the significance that the transfer of a draft contract and the exchange of comments between the attorneys might have. By virtue of the relationship between the agency and the trusteeship, a lawyer must provide the client with a report and information on all his actions in connection with the draft contract, even if the client did not demand it. Had Lihi informed the defendant of the possible significance that might arise from the transfer of the draft, as well as of the exchange of comments, the wording of the draft and the proposal regarding the payment schedule, he would have been able to ask her to suspend the contacts with Racheli.
Conducting negotiations in breach of the duty of good faith
After I have determined that no binding contract was entered into between the parties, there is no reason to enforce the draft as a contract. In any event, as I noted above, since a binding contract was not concluded between the parties, there is no reason to accede to the plaintiff's demand for agreed compensation, since the entitlement to this compensation was detailed in a draft contract that was not perfected.
However, a separate question of good faith arises in negotiations. Section 12 of the Contracts (General Part) Law, 5733-1973, requires that the negotiations be conducted in an acceptable manner and in good faith prior to the conclusion of a contract, and allows for the award of compensation for the damage caused as a result of the negotiations, even when the contract itself has not been concluded (Additional Hearing 7/81 Fender, Investment, Development and Construction Company Ltd. v. Castro, IsrSC 37(4) 673 (1983); hereinafter: "the Fender case"). The duty of good faith is examined objectively, according to the standards of a reasonable person, but weight must also be given to subjective elements, including the personal characteristics and data of the parties to the transaction (High Court of Justice 59/80 Beer-Sheva Public Transportation Services Ltd. v. The National Labor Court in Jerusalem, IsrSC 35(1) 828 (1980)); Civil Appeal 207/79 Raviv Moshe & Co. Ltd. v. Beit Yoels Ltd., IsrSC 37(1) 533 (1982); the Fender case).