Legal Updates

A local authority that received government funds for the performance of a supplier’s activity and pocketed it will pay the supplier

June 10, 2024

A local authority reneged on its obligations towards a supplier, which provided services and equipment in the field of implementing educational enrichment programs in schools between the years 2017 - 2019 without a written contract duly signed by the authorized signatories, including the Ministry of the Interior appointed accompanying accountant. Support funds received by the local authority from the Ministry of Science for the supplier's activity were not transferred to the supplier.

The Court accepted the supplier's claim and held that the local authority acted unjustly and must pay the supplier for the equipment and services it received, but in a reduced amount. A contract with a Local Authority that includes a financial obligation on the Authority’s side without a written contract signed by the legal signatories (mayor, treasurer and an accompanying accountant, if appointed), is illegal. When obliging the local authority to pay the supplying party its consideration for the performance of a service on the basis of an illegal contractual engagement, it is necessary to review: A. The good faith (or lack thereof) on the part of the service supplier and on the part of the local authority; B. The existence or absence of budgetary approval for the contractual consideration within the budget for the relevant period; C. Is the defect in the contract marginal or substantial; and D. Is it possible to balance the "guilt" of the service supplier and the "guilt" of the local authority. Here, the supplier knew about the provisions of the law regarding the requirement of a written contract duly signed by the signatories and although it did not receive consideration for the 2017-2018 work , it continued to rely on promises given to it by various parties in the Local Authority during the following year. However, the local authority moved to receive financial support from the Ministry of Science for the activities that the supplier carried out, but lied and denied that it received such support from the Ministry of Science while pocketing funds designated to the supplier. Although the supplier took a risk when providing the services without a written and duly signed contract, the conduct of the Local Authority evokes a severe sense of injustice and abuse of the provisions of the law. Therefore, the local authority will pay the supplier for the activity carried out, but only for the year 2017-2018.

The supplier in this procedure was represented by attorney Yair Aloni from the office of Afik & Co.