Attorney Gil Nadel, Gilad Paz
Many companies customarily establish a joint venture for importing and marketing certain products, with one company responsible for the importation process to Israel, and the other responsible for marketing the products in Israel.
When such a project fails, for one reason or another, the companies often bring their case to court. The court then analyzes both parties' behavior and the contract signed between them, to determine which is responsible for the venture's failure.
One such case was recently brought to court, having to do with a joint venture for importing and marketing Nile perch.
The court determined that the importer was responsible for the venture's failure, since he made an one-sided decision to stop selling fish to the marketer, without having any real reason for doing so. The importer claimed that he had serious reason to believe the marketer would breach the contract, and so he hurried to cancel it, but the court rejected this claim, accepting the marketer's counterclaim and charging the importer NIS 2 million.
The case:
The Elgrisi Group, which deals in the import of Nile perch fish ("the importer"), started a joint venture with Kafu Zan Food Industries, dealing in the marketing of fish related products ("the marketer"). This venture included a contract signed by both parties in October 2007 in which it was delineated that the importer would import fish and the marketer would market them in Israel.
It was furthermore agreed that during the first year of the contract, the marketer would purchase a minimum of no less than 500 tons of fish from the importer.
The contract set a compensation fee of NIS 1.7 million should a breach of contract occur.
After a few months, the importer discovered that the marketer ordered only 130 tons of Nile perch from him. In addition, the marketer was negotiating with the importer to change the dollar rate that was agreed upon by contract.
In light of this, the importer claimed that he had serious reason to be concerned that the marketer would not meet the quota of 500 tons of fish by the end of the contract's first year, and so the importer declared the contract to be canceled due to "a foreseen breach", and submitted a lawsuit against the marketer for NIS 1.7 million, the agreed compensation fee.
In retaliation, the marketer submitted a counterclaim for approximately NIS 2 million and claimed that it was the importer who had breached the contract by refusing to sell them fish.
Verdict:
As for the importer's lawsuit, the court determined that the marketer had not been obligated by contract to purchase a certain amount every month, and the fact that he had only purchased 130 tons does not give just cause to assume he intended to breach the contract and will fail to meet the minimum amount by the end of the year.
Therefore, the court determined that the importer had jumped to a conclusion to soon regarding the marketer's intentions of breaching the contract, and the lawsuit had been submitted too early.
The court discovered that even after the importer had declared the contract to be null and void, the marketer continued to send purchase orders for fish, which proves that he had not intended to breach the contract, and so the importer's claim was rejected in full.
In light of this, the court determined that the marketer's claim for damaged inflicted due to the importer's failure to supply fish, was justifiable, and accepted the counterclaim, charging the importer with paying the marketer a sum of approximately NIS 2 million, plus legal fees and attorney fees of approximately NIS 100,000.
[civil suit (Magistrate's court Petach Tikvah) 4368-08 Elgrisi Group Ltd. vs Kafu Zan Food Industries Ltd., Judge Nahum Sternlicht, verdict of May 16, 2012. Party representatives- on behalf of the importer- Attorney Shlomi Hadar. On behalf of the marketer- Attorney Tzafrir Paz].
Notes:
In this case the court decided not to interfere with the compensation that was agreed upon in the contract, and granted the marketer with the compensation fee as agreed between the parties.
In another case that was recently ruled in the Magistrate's Court of Tel Aviv, a venture for Italian shading products had failed, and the court ruled that the party bearing the damage would receive a sum of just NIS 45,000, even thought the compensation fee that had been agreed upon by contract was NIS 300,000. In this case, the court determined that the parties could not explain the manner in which this compensation fee had been calculated, which places serious doubt as to the reasonability of the agreed compensation. [civil suit (Magistrate's court Tel Aviv) 13693-06-10 Sohahey Tevel Ltd. vs. Sohahey Hamerkaz Shading Solutions Ltd., Judge Sharon Geller, verdict of June 18, 2012].
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