An exclusive distributor who markets TCL air conditioners in Israel sought compensation of ILS 10 million from a competing distributor because it caused a breach of the exclusive distribution contract signed with the manufacturer.
The Court rejected the claim and held that there is no casual connection between the actions of the distributor and the breach of the exclusive distribution contract. The tort of inducement of breach of contract requieres the following preconditions: A. The existence of a legally binding contract; B. The contract was breached; C. The third party caused the breach (with a causal connection between the actions of the third party and the breach); D. The third party knew both about the existence of a binding contract and that as a result of its action a breach of the contract might occur; E. Lack of justification; and also F. In case one seeks compensation, proof of monetary damages. Here, a binding distribution contract between the distributor and the manufacturer was duly signed, in which the distributor had the exclusivity to market and sale air conditioners and other products produced by the manufacturer in Israel. The competing distributor found about it only in retrospect, but continued to market the products despite that. However, at that stage the contractual relationship between the manufacturer and the exclusive distributor had already deteriorated due to a loss of trust and the manufacturer was determined to end the contract with the original distributor and supply air conditioners manufactured by it through another distributor, one or another. Therefore, the decision of the competing distributor to continue marketing and distributing the products despite its knowledge of the exclusivity clause did not cause a breach of the contract between the manufacturer and the exclusive distributor, because this breach would have occurred, with or without it. Therefore, the competing distributor is not responsible for damages caused by the breach.