Legal Updates

Not any party injured by breach of agreement has a lien on the assets of the breaching party but a linkage to the assets is required

May 13, 2019

A lessee of a showroom for kitchen and related goods did not pay rent and the lessor, upon evacuation of the property after the lessee entered liquidation proceedings, refused to release the showroom equipment contending that it has a lien over the equipment.
The Supreme Court held that the lessor has no lien of the equipment. A lien is a right to hold an asset as security for a debt until the debt is repaid and it applies even if the debtor enters liquidation but need be notified immediately to the appointed receiver or liquidator. The right may arise from a contract or under law. Israeli law grant a lien to a party to a contract who was injured by a breach of the contract and it applies on assets that the injured party received as a result of the contract and is to secure any amount due because of the breach. However, there must be a linkage between the fact that the asset is in the hands of the injured party and the contract, such as amelioration linkage (assets on which work was done under the breached contract) or transactional linkage (assets that the breaching party was to deliver to the injured party as part of the transaction that created the obligation to pay) . Here the equipment was not finance by the lessor or even demanded exist under the contract, but assets that by chance were in the showroom at the time of the evacuation of the lessee and thus no lien exists