Administrative Contracts and Promises
As in other areas of Israeli administrative law, the basic principles governing administrative contracts were inherited from the English legal tradition. The law in England limits the power of any administrative authority to create contractual obligations involving its governmental powers.1 The rationale for this rule is that contractual promises by an administrative authority as to its public functions would unlawfully fetter future executive action.
Quite early in Israel's history, the Supreme Court of Israel departed from the strict English rule. In its landmark decision of Miller v. Minister of Transport (included in this Section), the Court adopted a more flexible position, proclaiming that the very action of contracting by an administrative authority does not, in itself, create any illegality. Hence, the contract is prima facie valid and the authority will ordinarily be bound by its terms. However, in recognition of the special nature of administrative contracts, the law acknowledges the power of the authority to free itself from the contract when necessary to protect vital public interests.
This compromise position enables the Court to overcome the problems inherent in the strict approach, both on a theoretical and a practical level. On a theoretical level, the Court's position balances the importance of honouring contractual promises with the need to preserve future executive____________________