Legal Updates

A duty of effort by a governmental authority is an enhanced duty, breach of which entitles to compensation

September 16, 2020

Landowners reached an agreement with the Israeli Land Authority according to which their lands will be transferred to the State, in exchange of a possibility for receipt of other lands of the same type and quality. The landowners transferred ownership of their lands to the State, but the exchange never took place.
The Supreme Court held that the State breached its duty of effort and therefore owes damages to the landowners. While a duty of outcome requires that the bearer brings about a specific result agreed by the parties, which may only be withdrawn from in extraordinary circumstances of force majeure or frustration of agreement, a duty of effort merely requires that the bearer will not be negligent and will take every reasonable effort to bring about the required result. When the duty of effort is borne by the State, the duty is even more enhanced, due to the State’s general duty of acting with an enhanced fairness and integrity when dealing with citizens, compared to transactions between two individuals. Contrary to a breach of duty of outcome, which allows for the injured party to demand that the agreement be consummated, when dealing with a breach of duty of effort such a remedy is not an option. Mainly because consummation merely means allowing the bearer of the duty to work diligently, over time, to show effort to reach the desired goal. However, the injured party may be entitled to terminated the agreement, receive damages or restitution. Additionally, the fact that had the bearer fulfilled its duties, the desired result could have been reached – may entitle the injured party to expectation damages that will place it at the same position it would have found itself had the bearer not breached its duties. Here, the State could not be obligated to consummate the exchange because no suitable alternative land was ever located, and the lands cannot be returned to their owners, because they already changed designation and became a natural preserve. Similarly, the landowners are not entitled to expectation damages because it can not be determined that had the State acted diligently, a suitable land for exchange would have been found. Therefore, the landowners are only entitled to damages in the amount of the value of the lands transferred to the State’s ownership, without receiving any consideration or exchange.