Legal Updates

Disclosure duty during negotiations does not apply to information that was visible and known to the parties

January 29, 2023

A business owner leased a space in Nesher for the purpose of operating a minimarket. A short time later, the municipality began extensive infrastructure works for the construction of metro lines, as part of which the service road was blocked and the parking lot near the leased area was demolished.

The Court rejected the claim against the lessor and held it did not breach its duty of disclosure during the negotiations. The duty to act in good faith during negotiations constitute the duty to disclose information relevant to the contract that is known to one of the parties entering into the contract. Such duty is not a general and comprehensive disclosure obligation for all information known to the parties. Hence, the duty of disclosure does not apply when the information is visible and known to both parties. Here, the lease agreement did not include representations regarding development works that may be carried out outside the project area where the leased property is located. However, billboards alerting the public of the works were displayed around the road before the signing of the agreement. In addition, the need to demolish the parking lot arose only after the beginning of the works and the lessor had no knowledge of this during the negotiation phase. Therefore, and whereas the information regarding the infrastructure works was already known to the lessee before the signing of the contract, the lessor did not violate breach the duty of disclosure during the negotiation phase.