The agent was appointed in order to promote the sales of specific machines of the principal (a foreign company). Under the agreement, the agent was entitled to a commission of 25% of the sales proceeds. Several years later, the main customer, the Airports Authority, decided to terminate the agreement with the principal and entered into negotiations concerning the supply of new different machines, to which the agency agreement did not apply. The principal then negotiated with the agent the possibility of entering into a new agreement between them. One of the demands of the principal was that the agent would stop representing a competitive producer. The agent refused and a new contract was not concluded. Yet, the agent kept using his good contacts with the Airports Authority and contributed to the conclusion of a new contract between the principal and the Airports Authority concerning the new machines. The agent then demanded a 25% commission for his contribution to the new deal on the basis of the former agreement. The principal refused.
The District Court held that in the lack of an agreement between the principal and the agent with respect to the new machines, the consideration agreed upon in the “old” agreement does not apply to the new transaction. Yet, in order to avoid “unjust enrichment”, the court ruled that the agent is entitled to a ”decent fee” equal to 15% of the sales of the new machines up to the filing of the suit.
The principal appealed to the Supreme Court. In its decision (rendered in October 2023), the Supreme Court reduced the fee granted to the agent by 50%, to 7. 5%, for two reasons: Firstly, considering the high value of the transaction from which the fee is calculated; Secondly, the Supreme Court criticized the behavior of the (former) agent who failed to set the fee for his assistance and, conveniently, relied on the court to do so in the future. Such behavior created business uncertainty and resulted in lengthy and costly litigation – which was also a burden on the court system – that would have been avoided had the agent insisted on an agreement concerning his fee at the outset.
Itamar Anaby, IDI Country Expert for agency & distribution in Israel
