Apartment owners pulled out of a transaction for the sale of their apartment at the last minute and informed the purchasers that "the transaction is null and void", after lengthy negotiations in which all the terms were agreed with the purchasers and the contract was ready to be signed.
The Court accepted the claim and the sellers were ordered to compensate the purchasers for their withdrawal from the transaction in bad faith. Conducting negotiations without the intention of engaging or withdrawing from negotiations for non-substantive motives in a manner that impairs the reasonable expectation of the other party may be deemed a breach of the duty to act in good faith. A party wishing to end the negotiations must notify the other party of its intention, specify the reason for the termination of the negotiations and give a fair possibility of remedying the obstacle for the purpose of fulfilling the contract. A breach of the duty to act in good faith entitles the harmed party to damages for the damage caused to it as a result of the negotiations. Here, the parties conducted lengthy negotiations for about seven months and exchanged 22 drafts of the contract at the end of which the parties reached an agreed version of the contract ready to be signed. The apartment owners withdrew from the transaction at a very last stage of the negotiations, and in fact after it was already concluded, without a justifiable substantive reason just because they were other potential purchasers of the property. A representation that the transaction will be signed and then sending a laconic notice of withdrawing it, amounts to conducting negotiations in bad faith that entitles the purchasers liquidated damages as stated in the contract.