A municipality refused to compensate a supplier for works performed in two projects at the order of the municipality, amounting to approximately ILS 850,000 due to the fact that no formal signed agreement exists, due to an election period and changes in the local administration.
The Court partially accepted the claim and ordered the municipality to pay the supplier for the services in a reduced amount. Under Israeli law, a financial undertaking shall be binding upon a municipality only if four cumulative conditions are met: the undertaking is in writing, signed by the mayor, signed by the municipal treasurer and bears the municipality’s stamp. Non-compliance with these conditions usually leads to the nullification of the engagement, but where financial consideration is involved, a Court may order payment of a portion of the agreed consideration when it is just and equitable. In this case, the fault rests with both parties who chose to execute the project assuming a written agreement would be signed during, or upon, completion of the work. Nevertheless, as the lack of a written contract did not prevent the municipality from receiving the full extent of the required services from the supplier, the municipality shall pay the supplier a reasonable amount of ILS 150,000 for the works performed.