The Contract Law (Remedies)

Chapter A: General Provisions

1. Definitions

(a) In this Law—

“Breach”—an act or omission that is contrary to the contract;

“Injured party”—a person entitled to the performance of the breached contract;

“Enforcement”—whether by an order for payment of a monetary obligation or by another mandatory order, or by a prohibitory order, including an order to remedy the consequences of the breach or to remedy the breach itself;

“Damage”—including loss of profit.

(b) Wherever this Act refers to a breach of contract, a breach of any of the obligations under the contract is also included.

Civil Law

(a) In this Act—

(a) In this Law—

“Breach”—an act or omission that is contrary to the contract;

“Injured party”—a person entitled to the performance of the breached contract;

“Enforcement”—whether by an order for payment of a monetary obligation or by another mandatory order, or by a prohibitory order, including an order to remedy the consequences of the breach or to remedy the breach itself;

“Damage”—including loss of profit.

(b) Wherever this Act refers to a breach of contract, a breach of any of the obligations under the contract is also included

 2. Remedies of the Injured Party

If a contract is breached, the injured party is entitled to demand its enforcement or to rescind the contract, and is entitled to damages, in addition to or in lieu of any of the aforementioned remedies, all in accordance with the provisions of this Law.

Civil Law

If a contract is breached, the aggrieved party is entitled to demand its enforcement or to rescind the contract, and is entitled to damages, in addition to or in lieu of any of the aforementioned remedies, all in accordance with the provisions of this Law.

Chapter II: Remedies

Section A: Enforcement of the Contract

 3. The Right to Enforcement

1) The aggrieved party is entitled to the enforcement of the contract, even if the enforcement requires the performance of work or the provision of a service, and certainly if failure to enforce the contract would cause irreparable harm and even if the execution of the enforcement order requires an unreasonable degree of supervision by the court or the enforcement office.

2) However, a contract shall not be enforced if the contract is unenforceable;

Civil Law

The aggrieved party is entitled to enforcement of the contract, unless one of the following applies:

1) The contract is unenforceable;

2) Enforcement of the contract constitutes coercion to perform or accept personal labor or a personal service;

3) Execution of the enforcement order requires an unreasonable degree of supervision by the court or the Enforcement Office;

4) Enforcement of the contract is unjust in the circumstances of the case.

 4. Conditions for Enforcement

The court may make the enforcement of the contract conditional upon the performance of the aggrieved party’s obligations, or upon a guarantee of such performance, or upon other conditions arising from the contract as the circumstances of the case may require.

Civil Law

The court may make the enforcement of the contract conditional upon the performance of the aggrieved party’s obligations, or upon a guarantee of such performance, or upon other conditions arising from the contract as the circumstances of the case may require.

5. Enforcement in Transactions Requiring Registration

If an enforcement order is issued regarding an obligation to transfer property or a right in property, and such transfer requires registration in a registry maintained pursuant to a statute, the registration shall be made pursuant to the enforcement order and in accordance with its terms, as if it had been made at the request of the parties.

Civil Law

If an enforcement order is issued regarding an obligation to transfer property or a right in property, and such transfer requires registration in a registry maintained pursuant to a statute, the registration shall be made pursuant to the enforcement order and in accordance with its terms, as if it had been made at the request of the parties.

Section 2: Rescission of the Contract

 6. Definition

For the purposes of this section, “fundamental breach” means a breach in respect of which it may be assumed that a reasonable person would not have entered into the contract had he foreseen the breach and its consequences, or a breach that was agreed upon in the contract to be considered fundamental; A blanket provision in a contract that classifies all breaches as fundamental breaches without distinguishing between them is invalid unless it was reasonable at the time the contract was entered into.

Civil Law

For the purposes of this section, “fundamental breach” means a breach in respect of which it may be assumed that a reasonable person would not have entered into the contract had they foreseen the breach and its consequences, or a breach agreed upon in the contract to be considered fundamental; A blanket clause in a contract that treats all breaches as fundamental breaches without distinguishing between them is invalid unless it was reasonable at the time the contract was entered into.

7. The Right to Rescind

(a) The aggrieved party is entitled to rescind the contract if the breach was fundamental.

(b) If the breach of contract was not fundamental, the aggrieved party is entitled to rescind the contract after first granting the breaching party an extension to perform, and if the contract was not performed within a reasonable time after the extension was granted, or if enforcement was impossible—the aggrieved party is entitled to rescind the contract.

(c) If the contract is divisible into parts and one of its parts has been breached in a manner that constitutes grounds for rescission of that part, the aggrieved party is entitled to rescind only the breached part; and if it can be assumed that the parties would not have entered into the contract had it included only the part that was not rescinded, either party may make the rescission of that part of the contract contingent upon the rescission of the entire contract.

Civil Law

(a) The aggrieved party is entitled to rescind the contract if the breach was fundamental.

(b) If the breach of the contract was not fundamental, the aggrieved party is entitled to rescind the contract after first granting the breaching party an extension to perform, and the contract was not performed within a reasonable time after the extension was granted, unless, under the circumstances of the case, rescission of the contract would be unjust; No claim that the cancellation of the contract was unjustified shall be heard unless the breaching party objected to the cancellation within a reasonable time after the notice of cancellation was given.

(c) If the contract is divisible into parts and one of its parts has been breached in a manner constituting grounds for rescission of that part, the aggrieved party is entitled to rescind only the breached part; if the breach also constitutes a fundamental breach of the entire contract, the aggrieved party is entitled to rescind the breached part or the entire contract.

 8. Manner of Rescission

Rescission of the contract shall be effected by notice from the aggrieved party to the breaching party within a reasonable time after the aggrieved party becomes aware of the breach; however, in the case referred to in Section 7(b) and in any other case where the aggrieved party has first granted the breaching party an extension to perform the contract—within a reasonable time after the expiration of the extension.

Civil Law

Rescission of the contract shall be effected by notice from the aggrieved party to the breaching party within a reasonable time after the aggrieved party becomes aware of the breach; however, in the case referred to in Section 7(b) and in any other case where the aggrieved party has first granted the breaching party an extension to perform the contract—within a reasonable time after the extension has expired.

 9. Restitution Following Rescission

(a) Upon rescission of the contract, each party must return to the other party what it received under the contract, or pay the value of what it received if restitution is impossible or has diminished in value, or if the party seeking termination of the contract so chooses.

(b) If the contract is rescinded in part, the provisions of subsection (a) shall apply to what the parties received under that part.

Civil Law

(a) Upon rescission of the contract, the breaching party must return to the aggrieved party what it received under the contract, or pay the value of what it received if restitution is impossible or unreasonable, or if the aggrieved party so chooses; and the aggrieved party must return to the breaching party what he received under the contract, or pay him the value of what he received if restitution was impossible or unreasonable or if the aggrieved party so chose.

(b) If the contract is rescinded in part, the provisions of subsection (a) shall apply to what the parties received under that part.

 Section C: Damages

 10. Right to Damages

The aggrieved party is entitled to damages:

1) For direct damage caused to him as a result of the breach and its consequences;

2) for indirect damage caused to him as a result of the breach and its consequences, if the parties expressly agreed to this in the contract or if this is the custom in contracts of this kind;

3) for expenses arising from the contract, where the very fact of the contract’s execution indicates that the aggrieved party would incur them.

Civil Law

The injured party is entitled to compensation for the damage caused to him as a result of the breach and its consequences, which the breaching party foresaw or should have foreseen at the time the contract was concluded as a probable consequence of the breach.

11. Damages Without Proof of Loss

If an obligation to supply or receive property or a service has been breached and the contract has been rescinded as a result of the breach, the aggrieved party is entitled, without having to prove loss, to damages in the amount of the difference between the consideration for the property or service under the contract and its fair market value on the date of rescission. However, the aggrieved party may collect such damages only from funds of the breaching party held in his possession.

Civil Law

(a) If an obligation to supply or receive property or a service is breached and the contract is terminated due to the breach, the aggrieved party is entitled, without proof of damage, to damages in the amount of the difference between the consideration for the property or service under the contract and its value on the date of termination of the contract.

(b) If an obligation to pay a sum of money has been breached, the aggrieved party is entitled, without proof of damage, to damages in the amount of interest on the overdue payment, from the date of the breach until the date of payment, at the full rate prescribed by the Interest Rate Determination Law, 5721-1961, unless the court has determined a different rate.

 12. Preservation of Rights

The provisions of Section 11 do not prejudice the aggrieved party’s right to compensation for damage proven under Section 10.

Civil Law

The provisions of Section 11 do not prejudice the aggrieved party’s right to compensation for damage proven under Section 10; however, if the consideration for the obligation was unreasonable, or if there was no consideration at all, the court may reduce the compensation to the extent provided for in Section 11.

13. Damages for Non-Pecuniary Harm

If the breach of contract caused harm that is not pecuniary harm, the breaching party shall not be liable for any damages.

Civil Law

If the breach of contract caused harm that is not pecuniary harm, the court may award damages for such harm in an amount it deems appropriate under the circumstances.

14. Mitigation of Damages

(a) The breaching party shall not be liable for damages under Sections 10, 11, and 12 for damage that the injured party could have, by reasonable means, prevented or mitigated.

(b) If the injured party incurred reasonable expenses to prevent or mitigate the damage, or assumed reasonable obligations for that purpose, the breaching party shall reimburse the injured party for such expenses, if the damage was prevented or mitigated by the expenses,

Civil Law

(a) The tortfeasor is not liable for damages under Sections 10, 12, and 13 for harm that the injured party could have, by reasonable means, prevented or mitigated.

(b) If the injured party incurred reasonable expenses to prevent or mitigate the damage, or assumed reasonable obligations for that purpose, the breaching party must indemnify him for them, whether the damage was prevented or mitigated or not; If the results or obligations were unreasonable, the breaching party shall be liable for indemnification to the extent reasonable under the circumstances.

 15. Agreed Damages

(a) If the parties have agreed in advance on the amount of damages (hereinafter “agreed damages”), the damages shall be as agreed, without proof of damage; however, if the damages were determined without any reasonable relation to the damage that could have been foreseen at the time of the contract’s conclusion as a probable consequence of the breach, the breaching party shall pay only the reasonable amount.

(b) Where agreed damages have been agreed upon:

 (1) If it is implied from the language and intent of the parties that the agreed damages constitute an estimate of the damage, only such damages shall be paid.

(2)  If the language of the agreement implies that the agreed-upon damages constitute a penalty in and of themselves, the aggrieved party may claim additional damages pursuant to Sections 10 through 14.

c) Amounts that the breaching party paid to the injured party prior to the breach of contract and which the parties agreed in advance would be forfeited to the injured party shall be awarded even if they exceed the amount of reasonable damages; however, the injured party shall not be entitled to claim additional damages under sections 10 through 14.

Civil Law

(a) If the parties have agreed in advance on the amount of damages (hereinafter “agreed damages”), the damages shall be as agreed, without proof of damage; however, the court may reduce them if it finds that the damages were determined without any reasonable relation to the damage that could have been foreseen at the time of the contract’s conclusion as a probable consequence of the breach.

(b) An agreement on agreed damages does not in itself preclude the aggrieved party’s right to claim damages in lieu thereof under sections 10 through 14 or to seek any other remedy for breach of contract.

(c) For the purposes of this section, sums paid by the breaching party to the aggrieved party prior to the breach of contract, which the parties agreed in advance would be forfeited to the aggrieved party, shall be treated as liquidated damages.

 16. Damages and Insurance

In determining the amount of damages, no account shall be taken of any sum that the injured party has received or is entitled to receive due to the breach of contract under an insurance contract, unless the breaching party is the one who paid the premium.

Civil Law

In determining the amount of damages, no account shall be taken of any sum that the injured party has received or is entitled to receive due to the breach of contract under an insurance contract.

Chapter 3: Miscellaneous

17. Anticipated Breach

If a party to a contract has indicated that it will not perform the contract, or if it becomes apparent from the circumstances that it will be unable or unwilling to perform it, the other party is entitled to remedies under this Act even before the date set for performance of the contract, if the court finds that damage is likely to result from a breach of the contract.

Civil Law

If a party to a contract has expressed its intention not to perform the contract, or if it becomes apparent from the circumstances of the case that it will be unable or unwilling to perform it, the other party is entitled to remedies under this Act even before the date set for performance of the contract, provided that the court, in issuing an enforcement order, does not direct that performance be enforced before the date set for performance.

 18. Exemption Due to Force Majeure or Frustration of the Contract

(a) If the breach of the contract resulted from circumstances which the breaching party, at the time of entering into the contract, did not know and was not required to know of, or did not foresee and was not required to foresee, and could not have prevented, and performance of the contract under those circumstances is impossible or fundamentally different from what was agreed upon by the parties, the breach shall not constitute grounds for enforcement of the breached contract or for damages.

(b) In the cases referred to in subsection (a), each party shall return to the other party what it received under the contract or its equivalent value.

Civil Law

(a) If the breach of contract resulted from circumstances which the breaching party, at the time of entering into the contract, did not know and was not required to know about, or did not foresee and was not required to foresee, and could not have prevented, and performance of the contract under those circumstances is impossible or fundamentally different from what was agreed upon by the parties, the breach shall not constitute grounds for enforcing the breached contract or for damages.

(b) In the cases referred to in subsection (a), the court may, whether or not the contract has been rescinded, order either party to return to the other party what it received under the contract or, at its option as provided in Section 9, to pay the other party its value, and to order the breaching party to indemnify the aggrieved party for the reasonable expenses incurred and the obligations reasonably assumed for the purpose of performing the contract, all if the court deems it just to do so under the circumstances of the case and to the extent it deems fit.

 19. Right of Retention

If the aggrieved party has received, pursuant to the contract, property of the breaching party that must be returned, the aggrieved party shall have a right of retention in such property as security for the sums due to him from the breaching party as a result of the breach, subject to the court’s authority.

Civil Law

If the aggrieved party has received property from the breaching party pursuant to the contract which the breaching party is required to return, the aggrieved party shall have a right of retention in respect of such property to secure payment of the sums due to him from the breaching party as a result of the breach.

 20. Set-off

Obligations owed by the parties to one another under this Act are subject to set-off.

Civil Law

Obligations owed by the parties to each other under this Act are subject to set-off.

 21. Provisions Regarding the Giving of Notice

(a) Notice under this Act shall be given in the manner customary under the circumstances.

(b) Where this Act refers to the delivery of a notice, the notice shall be deemed to have been delivered on the date it reached the addressee or his address.

Civil Law

(a) A notice under this Act shall be given in the manner agreed upon by the parties, and in the absence of such agreement—by registered mail or by any other means customary under the circumstances.

(b) A party who has given notice as referred to in subsection (a) and there is reason to believe that the notice reached its destination on time may rely on it even if it arrived late or did not arrive at all.

22. Preservation of Laws

Repealed

Civil Law

(a) Nothing in this Law shall derogate from the court’s authority to grant a declaratory judgment, an order to do or not to do, whether temporary or permanent, interim decisions, or any other relief.

(b) The provisions of this Act shall apply where there are no special provisions in the law governing labor relations or in any other law regarding the matter in question.

23. Repeal

Civil Law

Sections 106 through 111 of the Ottoman Civil Procedure Code dated 2 Rajab 1296 (June 21, 1879) are hereby repealed.

 24. Independence of the Law

Civil Law

In matters dealt with by this Law, Section 46 of the Royal Decree of the Council for the Land of Israel 1947–1922 shall not apply.

25. Commencement and Transitional Provision

Civil Law

This Act shall come into force on the 1st of Nisan 5731 (March 27, 1971); the previous law shall continue to apply to contracts entered into prior to the commencement of this Act.