Legal Updates

A supplier who agreed to waive a customer debt due to its bad financial status is not allowed to demand the balance upon improvement in financial situation

October 22, 2023

A flower supplier agreed to waive a customer debt, but later regretted it.

The Court dismissed the claim and held that the waiver settlement must be honored. An agreement is meant to create a balance in the distribution of risks and opportunities between the parties. A party that took a risk upon itself (and alongside the risk also enjoy the chance), cannot contend that the risk fulfilled itself and therefore it cannot pursue its obligations under the contract. A 'mistake' within the scope of the risk that a party assumed within the contract cannot be considered a 'mistake' that justifies the cancellation of the agreement. Here, the supplier agreed to waive a debt of approximately ILS 130,000 at the request of a long-term customer, the owner of a flower shop, due to financial difficulties it was having and which led the shop owner to make settlements with various creditors. In retrospect, it became clear to the supplier that the flower shop was working and did not close shop and therefore demanded to receive the balance of the debt. The supplier made his considerations and agreed to waive the debt and choose a settlement that would ensure payment of a portion of the debt, rather than leaving a higher debt "on paper", which included a risk that he will not be able to collect it in full, or at all. The fact that the flower shop owner succeeded the economic crisis and continued to operate the store, at the end of the day, does not mean that he cheated or misled the supplier only because he indicated that there was a risk that he would not be able to repay the debt. The supplier's 'wisdom' is only 'wisdom' after the fact and constitutes a risk that he consciously took upon himself and as such does not justify cancellation of the waiver settlement.