In short
What can you do when the other party breaches a contract?
Under the Contracts (Remedies for Breach of Contract) Law, 5731-1970, you can demand enforcement or cancel the contract, and in either case claim damages. For a breach that is not fundamental, you must first give the breaching party extra time to perform before you can cancel.
Before Signing: Drafting and Reviewing Business and Private Contracts
A good contract sets out in advance what each side undertakes to do, by when, how much is paid and what happens if something goes wrong. Most contract disputes begin with a clause that was never written, or one that was written vaguely.
When reviewing a contract drafted by the other side, we look closely at the payment schedule, the security, liability and limitation-of-liability clauses, agreed damages, the exit terms and the jurisdiction or arbitration clause. A service agreement, a supplier agreement, a partnership agreement, a loan agreement and a lease are each reviewed according to their own risks.
Memorandum of Understanding, Negotiations and Good Faith
Even a short document called a memorandum of understanding (zikhron devarim) can be as binding as a full contract if it records agreement on the essential terms. In real estate transactions, the Land Law, 5729-1969, requires a written document, so what is signed at this stage matters a great deal.
The Contracts (General Part) Law, 5733-1973, requires parties to negotiate in an accepted manner and in good faith, and to perform the contract in good faith. A party that negotiated in bad faith may have to pay damages even if no contract was ultimately signed.
When the Other Side Breaches the Contract
The Contracts (Remedies for Breach of Contract) Law, 5731-1970, gives the injured party several options: to demand enforcement, meaning that the other side performs what it undertook; to cancel the contract; and to claim damages, instead of or in addition to enforcement or cancellation.
The key distinction is between a fundamental breach and a non-fundamental breach. After a fundamental breach, the contract may be cancelled without an extension. After a non-fundamental breach, the breaching party must first be given an extension to perform, and only if it fails to perform within that time may the contract be cancelled. Notice of cancellation must be given within a reasonable time, so it is advisable not to wait.
When the contract contains an agreed damages clause, the court may award the agreed amount without proof of damage. It may reduce that amount if it was set without any reasonable relation to the damage that could have been foreseen when the contract was made.
What the service includes
- Drafting business and personal agreements
- Contract review before signing
- Negotiating the terms of the agreement
- Warning letters and demands for performance
- Breach of contract claims and defense
When to contact us
- Before signing an agreement drafted by the other side
- You are opening a business or partnership and want a proper agreement
- The other side is not doing what it undertook
- You received a cancellation notice or a warning letter
What to bring to the meeting
- The contract or draft, including appendices
- Correspondence by email, WhatsApp and text message
- Payment records and invoices
- A list of what was agreed orally
Contracts and Agreements throughout Israel
The firm represents clients from all over Israel: Jerusalem and the Shfela, Be'er Sheva, Ashdod and Ashkelon, Haifa and the North, the Sharon and Gush Dan. Meetings take place at our two Modiin branches, at the WE Towers branch in Tel Aviv or by video call, and documents can be sent in advance on WhatsApp. We represent clients in the courts, the Labor Courts and before planning committees throughout Israel. How we work with clients across Israel.
Frequently asked questions
What is the difference between a fundamental and a non-fundamental breach?
A fundamental breach is one where it can be assumed that a reasonable person would not have entered into the contract had they foreseen it, or a breach that the contract itself defines as fundamental. After a fundamental breach, the contract may be cancelled without an extension. After a non-fundamental breach, an extension to perform must be given first.
Is a memorandum of understanding binding?
It depends on what it says. A memorandum of understanding that includes the essential terms of the deal can be as binding as a contract, even if the parties intended to sign a detailed agreement later. That is why it is advisable to show it to a lawyer before signing.
How long do I have to sue for breach of contract?
Under the Prescription Law, 5718-1958, the general period is seven years from the day the cause of action arose, for claims that do not concern land. Claims concerning land and certain special cases have different periods, so the deadline is checked in each case.
Do I need a lawyer to draft a contract?
The law does not require one, but a template from the internet is not tailored to your deal and does not cover its risks. Careful drafting before signing is usually far less costly than a dispute afterwards.
What should I do when the other side breaches the contract?
Document the breach and send a written demand to perform the contract. After a non-fundamental breach, give an extension. Once the contract has been reviewed, decide whether to seek enforcement, cancel or claim damages.
