A property owner sold a property to her friend in a sales agreement which also included a rental agreement between the seller and the buyer for the remainder of the seller's life. In practice, the buyer did not pay any consideration to the seller for the property, while the seller did not pay rent to the buyer, even though she continued to live in the property for several years until her death.
The Supreme Court rejected the seller's heir's request to return the property to her in light of the existence of a covert contract at the same time as the overt contract. A fictitious contract is a contract in which there is a deliberate inconsistency between the apparent will of the parties, as reflected in the overt contract, and their true common will. Such a contract is null and void under Israeli law. However, sometimes, alongside the overt contract there is another, covert contract that expresses the true agreement between the parties. In contrast to the overt contract, which, as mentioned, is nulled, the real and covert contractual agreement between the parties can be enforced, provided that the covert contract meets the requirements of the law and the purpose of the contract is not illegal. Here, about it is a person who was tricked into thinking that she could not give her friend the property as a gift and therefore entered into fictitious sale and rent contracts. In practice, the parties entered into a hidden gift agreement for the transfer of the property to the friend subject to the transferers’ right of use without consideration. This covert agreement is not illegal and should be enforced.