Court Rejects Tel Aviv Seller’s Claim Over Payment by Ordinary Checks

The Bat Yam Magistrate’s Court recently rejected a Tel Aviv property seller’s demand for compensation from the buyer, who was accused of fraud and breach of contract, in part because she paid by ordinary checks instead of bank checks. Judge Meital Ben-Bast ruled that there had been no fundamental breach of the contract.

The plaintiff and the defendant, both limited liability companies, were co-owners of the property at the center of the case, on Aharonson Street in Tel Aviv. In late 2020, proceedings began to dissolve the co-ownership of the property, and at the end of those proceedings, the defendant bought out the plaintiff’s share. In March, however, the plaintiff turned to the court and sought payment of the agreed compensation.

Among other things, the seller complained about payment made by ordinary checks, contrary to what was set out in the agreement. She also alleged delay in paying the purchase price and an attempted fraud involving the mixing of deposit funds in an escrow account, which, she claimed, artificially inflated the amount actually paid. She valued her claims at about NIS 1.5 million.

The buyer, represented by attorney Itamar Katz, argued in response that she had not fundamentally breached the agreement and that the seller was trying to profit at her expense. According to her, the payments were made on time, or at most during the contractual grace period, and the checks were cashed, thereby fulfilling the purpose of the agreement. She denied any attempt at fraud and asked that the lawsuit be dismissed.

Judge Ben-Bast accepted none of the seller’s arguments. On the issue of late payment, she accepted the buyer’s position that the clock for fulfilling the obligation began running later than claimed, only after the agreement was approved by the court, which eliminated any delay that would amount to a breach. She found that the payment was made during the contractual grace period, and therefore was protected from triggering the agreed compensation.

As for payment by ordinary checks, the ruling explained that the contract did not define this as a fundamental breach, and in any event it did not justify awarding the agreed compensation. The court also accepted the argument that once the checks were cashed, the contractual purpose, ensuring payment of the consideration, had been achieved, so the seller was not harmed in practical terms.

"It cannot be said that this is not a breach," the judge wrote, "but it is not a fundamental breach, and therefore it does not entitle the plaintiff to the agreed compensation."

She also rejected the seller’s allegation of supposed fraud by the buyer, based on the use of her deposit funds for malicious purposes. In the judge’s view, even if the mixing of funds created a certain factual picture, it was not proven that it was done with intent to mislead, and no damage to the plaintiff was shown to have resulted from it.

After all of the seller’s claims were rejected, the judge ordered the dismissal of the lawsuit and ordered the plaintiff to pay NIS 25,000 in court costs and attorney’s fees.