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A Claim in the Amount of NIS 15,721,560 for Breach of Contract to Purchase Iron

posted 3 months ago

In 2011, Shikun & Binui – Solel Boneh (Infrastructures) Ltd. entered into a contract with Packer Construction Steel to supply 20,000 tons of iron to Shikun & Binui’s construction sites across Israel.

In practice, despite Shikun & Binui’s commitment, it ordered only 14,616 tons of iron from Packer. As of April 2014, it stopped ordering iron from Packer and began ordering iron from other suppliers.

Packer filed a lawsuit with the court, arguing that Shikun & Binui should be ordered to pay them NIS 5.5 million for goods supplied and unpaid for, as well as NIS 10 million for the balance iron quantity that has not yet been ordered or for the loss of profit caused to Packer due to the non-ordering of the iron balance.

One of Shikun & Binui’s arguments was that the agreement between the parties did not specify the time frame within which Shikun & Binui must order the quantity of iron stipulated in the contract. Shikun & Binui relied on a clause in the contract, which stated that “the iron shall be supplied by the supplier to Solel Boneh’s project sites from time to time, according to the pace, types and quantities determined by Solel Boneh and in accordance with its instructions.”

Packer referred to another clause in the contract, which stipulated that “the total consideration paid de facto shall be calculated based on the types of iron actually supplied and the prices specified in the contract, when everything will be done to supply it by the end of the year.”

Shikun & Binui claimed it is entitled to order iron from Packer without any time limit, even today, ten years from now, and decades from now. Therefore, Shikun & Binui claimed that it had not committed any breach of contract by not ordering the remaining iron from Packer to-date.

The court did not accept this argument and ruled that if we accept Shikun & Binui’s argument regarding the absence of a time frame for ordering the iron, it renders Shikun & Binui’s obligation to purchase 20,000 tons from Packer unsubstantial. Furthermore, this is inconsistent with the parties’ agreement that everything shall be done so that the iron will be supplied by the end of the year.

The court ruled that if no defined date was set for the execution of the contract, it must be fulfilled within a reasonable time, in accordance with section 41 of the Contracts Law.

In the case before us, the supply began in 2012, and the parties determined that everything would be done so that the iron would be supplied by the end of the year, i.e., by the end of 2012.

Therefore, the court ruled that a reasonable time for fulfilling the agreement (ordering 20,000 tons of iron) is two to three years.

Shikun & Binui breached its obligation to purchase 20,000 tons from Packer since it only purchased 14,616 tons.

Hence, in addition to the payment for the iron Packer already supplied to Shikun & Binui and has not yet been paid for (approximately NIS 5.5 million), the court ruled that Shikun & Binui must pay Packer compensation for the profit denied from Packer due to Shikun & Binui’s breach of its obligation to purchase the agreed quantity of iron from it (approximately NIS 3.6 million).

In conclusion, Shikun & Binui was ordered to pay Packer NIS 8,475,441, including NIS 110,000 in legal fees.

Case 60431-11-17 Packer Construction Steel Ltd. v. Shikun & Binui – Solel Boneh (Infrastructures) Ltd. was judged in the Lod District Court on August 23, 2022.

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