Kal Construction Ltd. v. E.R.M. Raanana for Construction and Leasing Ltd.

CA 6370/00, 56(3) PD 289 (2002)

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Kal Construction Ltd. v. E.R.M. Raanana for Construction and Leasing Ltd.

Israel Supreme Court
CA 6370/00, 56(3) PD 289 (2002)

Facts

E. R. M. Raanana for Construction and Leasing Ltd. (Raanana) (defendant) published a tender, that is, a solicitation for bids relating to a government contract. The tender included the required terms of the contract and invited companies to bid for the contract, which involved infrastructure work. Kal Construction Ltd. (plaintiff) participated in the bidding process and, apparently the top pick among the bidders, conducted negotiations with Raanana that resulted in a preliminary agreement as to all the conditions, subject to the approval of Raanana’s board of directors. The board of directors refused to approve the contract that had been negotiated with Kal Construction and instead awarded the contract to another contractor that had not even submitted a bid in response to the tender, under terms that varied from the requirements set forth in the tender. Kal Construction filed suit against Raanana, seeking damages for breach of its duty to act in good faith in the negotiations. Kal Construction sought two types of damages: (1) reliance damages, which would place Kal Construction back in the same position it would have been had it not participated in the negotiations at all (also known as negative damages); and (2) expectation damages for the expected profit that Kal Construction would have enjoyed had the contract been formed (also known as affirmative damages). The district court held that Kal Construction was limited to recovery of reliance damages and not expectation damages because the contract was only in the negotiation stage and had not yet been fully formed. Kal Construction appealed to the Israel Supreme Court.

Rule of Law

Issue

Holding and Reasoning (Barak, C.J.)

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