The Economic Division of the District Court of Tel Aviv ("Court") recently dismissed a claim to cancel an investment agreement ("Agreement") on the basis of false representations by the company and the controlling shareholder.
The plaintiff, who had invested millions of dollars in the Company prior to the Company's collapse, alleged that during the parties' negotiations the controlling shareholder had made false representations to the plaintiff and had delivered misleading economic forecasts. The defendants noted that these allegedly false representations were not included in the Agreement itself, and that the Agreement included a "No Other Representation" clause that provided that the only representations binding on the parties were those included in the written Agreement. Therefore, the defendants argued, the representations at issue were not binding on the parties.
The Court accepted the defendants' argument and dismissed the plaintiff's claim. The Court held that from the language of the Agreement it was clear that the intent of the parties was that only those representations specifically included in the Agreement were binding, and that the Court was not prepared to retroactively add representations to the Agreement that had not been agreed upon by the parties.
The Court added that its decision to follow the plain wording of the Agreement was influenced by the plaintiff's experience and sophistication, explaining that the presumption is that an experienced and sophisticated party will insist on the inclusion of all relevant representations, and when a representation is absent, it is generally due to the distribution of risk between the parties and is reflected in the transaction's financial terms.
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