Legal Updates

‎‎‎‎‎‎‎‎Any party may withdraw from an agreement reached in mediation until the agreement was approved by the Court

August 24, 2017

Parties to a real estate partnership liquidation claim conducted mediation proceedings before a mediator and reached a mediation agreement according to which the rights of one of the parties will be sold to the other party for a sum written in the agreement and the seller will transfer to the accountant appointed by the mediator comprehensive information so that the accountant can suggest ways to reduce the tax burden, after which an agreement will be drafted and submitted for Court approval. After receiving the opinion regarding the tax burden, the purchaser withdrew from the agreement.

The Court held that a document executed and expressing agreement regarding certain terms of a transaction but further states that a final agreement will be executed in the future, may under certain circumstances be a binding contract but under other circumstances a mere intermediate stage in negotiations that does not bind the parties. A contract is to be construed both pursuant to the language of the contract and pursuant to the external circumstances of the execution thereof and the economic logic behind it, but the language of the contract is the center and the examination of a section of the contract should be made in the light of the document as a whole rather than focusing solely on the provision. In this case, it is unclear from the language whether the intent was to create a binding agreement or only an intermediate stage, but an examination of the circumstances and the economic logic teaches that the purchasers did not have full information when executed the agreement and the agreement was to be reexamined after receipt of the information – Thus, the contract was not binding and could have been withdrawn from.

Moreover, because it is an agreement within the framework of mediation proceedings, the agreement has no validity until it is submitted with the consent of the parties to the Court and receives the validity of a judgment and until then each party may withdraw from it.