Sellers Backed Out of Herzliya Villa Sale – Ordered to Pay NIS 850,000 in Compensation

In a recent ruling, the Herzliya Magistrate’s Court determined that the sellers of a private home acted in bad faith when they withdrew from a transaction at the last moment. Despite the fact that the sale agreement was never signed, the court ruled that the contract was binding after seven months of negotiations and the exchange of dozens of draft agreements. The buyers’ attorney: “The ruling applies an old but rarely used precedent that a sales agreement may bind the parties even without their signatures.”

By Nimrod Bosu, Nadlan Center

The Herzliya Magistrate’s Court recently accepted a lawsuit filed by two potential buyers of a private house in the Neve Amal neighborhood, Herzliya, against six heirs who had offered the property for sale. The court ruled that although the sales contract was not formally signed, the parties had finalized their intent to form a binding agreement, and the sellers withdrew from it in bad faith. Judge Tsahi Almog ordered the sellers to pay NIS 790,000 in damages, as stipulated in the breach-of-contract clause, plus NIS 60,000 in court costs — a total of NIS 850,000.

The court noted that the negotiations spanned seven months and included 22 drafts of the agreement. “After reviewing the evidence and testimonies, I concluded that the parties finalized their intent to enter into a binding contract for the sale of the property, and all conditions for a mature transaction were met. The defendants withdrew from the negotiations in bad faith, without reasonable justification, right on the verge of the formal signing,” Judge Almog wrote.

The ruling relied heavily on email correspondence exchanged between the parties’ attorneys over two days in December 2022. On December 19, the buyers’ attorney sent the sellers’ attorney a final draft of the contract, noting that all of the sellers’ comments had been incorporated. Within an hour, the sellers’ attorney replied that his clients were ready to sign immediately, provided the buyers did so as well. However, later that same evening, he sent another email stating: “The seller asked me to inform you that, in his view, and I quote, ‘the deal is null and void.’” The buyers immediately responded that the contract was binding, sent a signed copy, and attached checks for the down payment.

Judge Almog wrote: “The plaintiffs presented clear evidence of a mutually agreed draft contract, reflecting the sellers’ intention to finalize the deal. The defendants’ claims that the contract had not been perfected or that they had justifiable reasons for withdrawing cannot be accepted.”

One seller argued that their attorney had acted against instructions, but this claim was dismissed. The judge noted that the defendants failed to call their lawyer to testify or to take legal action against him, which undermined their case.

The court further emphasized that when intensive negotiations are close to conclusion, a party seeking to withdraw must provide clear reasons and an opportunity for remedy. “The defendants’ sudden cancellation without explanation reflected a breach of the duty of good faith,” Judge Almog ruled.

In his summary, he determined that the agreed liquidated damages — 10% of the transaction value — were reasonable and enforceable. The court also rejected arguments by five of the six siblings that they were not bound, as only one brother had conducted the negotiations. Judge Almog found that all heirs had created the appearance of authorizing him and their attorney to represent them, making them all liable.

Attorney Adi Superski, who represented the buyers, welcomed the decision: “The court clarified that a signed document is not an absolute condition for a binding sales agreement. Once all material terms are finalized and the parties demonstrate intent, the agreement is enforceable. This ruling is significant because it revives a long-standing precedent that is rarely applied, confirming that a sales agreement may bind the parties even without a signature.”

Superski added that the sellers had backtracked in bad faith, likely due to interest from other potential buyers, and that their conflicting testimonies further weakened their defense. “This judgment is a strong reminder to all parties that good faith is a binding legal duty, and that even an unsigned sales agreement can have full legal force.”