Cancellation due to breach or a defect in formation: grounds, notice, restitution, and the risk of unlawful cancellation.
Two completely different cancellation tracks
Israeli law recognizes two separate tracks for cancellation of a contract: cancellation due to breach, under the Remedies Law, when the other party has breached the contract; and cancellation due to a defect in formation, under Chapter Bet of the Contracts Law: mistake, misrepresentation, duress, and exploitation. Each track has its own conditions, timeframes, and consequences, and choosing the correct track is a substantive legal decision.
Cancellation due to breach: the rules
In a fundamental breach, there is a right to immediate cancellation, by notice within a reasonable time. In a non-fundamental breach, it is first mandatory to give the breaching party an extension to perform, and only if they do not perform within it may the contract be canceled, subject to considerations of justice. The cancellation is effected by notice to the other party, and its result is mutual restitution: each party returns what it received. Critical warning: cancellation carried out unlawfully, without grounds, without the required extension, or with delay, may itself be considered a breach of contract and give rise to a cause of action against the canceling party. Do not send a notice of cancellation without advice.
Cancellation due to a defect in formation
Misrepresentation, including non-disclosure of facts that must be disclosed, duress, and exploitation may give rise to a right of cancellation when the conditions of the cause of action are met. In cases of mistake, a distinction must be made between a situation in which the other party knew or should have known of the mistake, and a mistake that was not known to that party, in which an application to the court may be required. A mistake regarding the profitability of the transaction alone does not give rise to a right of cancellation. The timing is also examined according to the cause of action: in duress, for example, the cessation of the duress is examined. Proving these claims requires publications, representations, correspondence, and witnesses.
Legal representation
Israel Arama assists parties before and after contract cancellations: drafting notices of cancellation that will stand up in court, defense against unlawful cancellation, and management of restitution and compensation claims. Seek advice before the notice, not after it.
Two entirely different cancellation tracks — what is important to know?
Israeli law recognizes two separate tracks for cancellation of a contract: cancellation due to breach, under the Remedies Law, when the other party has breached the contract; and cancellation due to a defect in formation, under Chapter Bet of the Contracts Law: mistake, misrepresentation, duress, and exploitation. Each track has its own conditions, timeframes, and consequences, and choosing the correct track is a substantive legal decision.
Cancellation due to breach: the rules — what is important to know?
In a fundamental breach, there is a right to immediate cancellation, by notice within a reasonable time. In a non-fundamental breach, it is first mandatory to give the breaching party an extension to perform, and only if they do not perform within it may the contract be canceled, subject to considerations of justice. The cancellation is effected by notice to the other party, and its result is mutual restitution: each party returns what it received. Critical warning: cancellation carried out unlawfully, without grounds, without the required extension, or with delay, may itself be considered a breach of contract and give rise to a cause of action against the canceling party. Do not send a notice of cancellation without advice.
Cancellation due to a defect in formation — what is important to know?
Misrepresentation, including non-disclosure of facts that must be disclosed, duress, and exploitation may give rise to a right of cancellation when the conditions of the cause of action are met. In cases of mistake, a distinction must be made between a situation in which the other party knew or should have known of the mistake, and a mistake that was not known to that party, in which an application to the court may be required. A mistake regarding the profitability of the transaction alone does not give rise to a right of cancellation. The timing is also examined according to the cause of action: in duress, for example, the cessation of the duress is examined. Proving these claims requires publications, representations, correspondence, and witnesses.
This information is for initial orientation about the service and contact process. It is not individual legal advice.
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