At the foundation of the contract lies the autonomy of the private will, including the possibility of conscious choice whether to enter into a contract. The principle of freedom of contract allows each party to negotiate without fear that he will enter into a binding contract without ever intending to do so. Accordingly, each party entering into a negotiation assumes a risk that at the end of the day, the transaction he expected will not be carried out, since the other party is entitled to withdraw from the negotiations, as long as it has not expressed its full intention to commit itself to the contract (see, for example, Civil Appeal 921/91 Azari v. Estate of Rachel Levinberg [Nevo] (August 4,1993)). Other Municipal Applications 251/84 S.G.P. Investments Ltd. v. State of Israel, IsrSC 39(2) 463 (1985), it was held that "... The aforementioned section 12 does not come to impose on those who conduct negotiations the obligation to conclude a contract under any condition and at any price, and to obligate for compensation to anyone who decides, according to the best of his discretion and conscience, that a certain transaction offered to him is not worthwhile and undesirable, even if it turns out that he made an objective mistake in doing so. .." (hereinafter: " The SGP Investments case").
However, the exercise of a party's right to withdraw from negotiations prior to the conclusion of a contract is subject to the duty of good faith set forth in section 12 of the Contracts Law. Withdrawal from negotiations must be done in good faith and for practical considerations stemming from the nature of the transaction, the development of the negotiations, and the status of the parties (Civil Appeal 416/89 Gal Or v. Clal (Israel) Ltd., IsrSC 46(2) 177,185 (1992)).
As determined in the case of S.G.P. Investments, section 12 of the Contracts Law deals with a defined set of circumstances, which deals with a deviation from a moral norm that applies to anyone conducting the negotiations, with regard to conduct that is not expected of a decent and honest person, since it is capable of deceiving the other party or it is capable of improperly concealing factual data that the other party is entitled to know, and which should have been disclosed to him in advance.