This was an Additional Hearing granted by leave of the President of the Supreme Court for the purpose of considering the incidence, ratione personae, of the good faith requirement established under sec. 12 of the Contracts (General Part) Law, 1973. The significance of the decision lay in the question of the liability of agents and company directors who negotiate contracts to which they are not themselves party. In particular, the Court was called upon to consider whether, on the basis of sec. 12, a company director negotiating a contract solely on the company's behalf could be held personally liable in relation to that contract, or whether he could seek refuge behind the corporate veil.

The respondent, David Castro (hereafter: the Purchaser), had negotiated with Yosef Pnini (hereafter: the Appellant) for the purchase of an apartment to be built by Pnidar, Development and Building Investments Company, Ltd. (hereafter: the Company). The Appellant was manager of the Company, and he and his wife were the sole stockholders. The Appellant and the Purchaser signed a standard-form preliminary agreement which the Company used for the sale of apartments in buildings that it constructed, and the Purchaser made all payments due for the purchase of the apartment. During the course of negotiations it was not revealed to the Purchaser that neither the Company nor the Appellant owned the property upon which the apartment was to be constructed.