Contractual and Monetary Claims

Breach of Contract

What is a breach of contract?

The Contracts Law (Remedies for Breach of Contract), Tashla-1970, defines a breach as an act or omission that is contrary to the contract. A breach can take many forms: non-payment, non-supply, delay, partial or defective supply, and breach of ancillary provisions. The law distinguishes between an "ordinary" breach and a fundamental breach: a breach such that a reasonable person would not have entered into the contract had they foreseen it, or that the parties defined as such in the contract, subject to the limitations of the law on sweeping clauses. The distinction has enormous practical significance: a fundamental breach may confer a right of cancellation without an extension, but notice of cancellation is required within a reasonable time and in accordance with the agreement and the law.

The remedies available to the injured party

A party injured by a breach is entitled to choose between remedies, and to combine remedies that are consistent with one another without double recovery: specific performance, requiring the breaching party to perform the contract in practice; cancellation of the contract and mutual restitution of what was received; and damages for the harm caused, alone or alongside the other remedies. The choice between remedies is a strategic decision: unlawful cancellation of a contract turns the cancelling party into the breaching party, and this is one of the common pitfalls in commercial disputes.

Practical steps when you are facing a party in breach of contract

Documenting the breach in real time; sending a written notice demanding performance within a reasonable time, a condition for some remedies; avoiding rash declarations of cancellation; and considering urgent relief, a temporary attachment, and an injunction where there is concern about dissipation of assets. Early legal action significantly increases the chances of collection at the end of the process.

Contract Enforcement

Specific performance: the primary remedy

Unlike other legal systems, Israeli law places specific performance as the primary remedy: a party injured by a breach of contract is, as a rule, entitled to demand that the court require the breaching party to perform the contract in practice, rather than being limited to monetary compensation. This is especially critical in unique transactions: real estate, shares in a specific company, assets that have no substitute in the market.

When will the court refuse to enforce?

Section 3 of the Remedies Law lists four exceptions: the contract is incapable of performance; enforcement would amount to compulsion to perform or accept personal work; execution of the enforcement order requires an unreasonable degree of supervision by the court; and enforcement would be unjust under the circumstances of the matter. The legal struggle is conducted around these exceptions, and preparation of the case, evidence regarding the ability to perform, the balance of justice, and the conduct of the parties, determines the outcome.

Contract Rescission

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.

Damages for Breach of Contract

The basic principle: restoring the injured party to the position they would have been in had the contract been performed

Section 10 of the Remedies Law entitles the injured party to compensation for the damage caused as a result of the breach, provided that the breaching party foresaw or should have foreseen the damage in advance as a probable result of the breach. The compensation covers actual damage and loss of profit: the difference between the actual situation and the situation that would have been created had the contract been performed. An important counter-principle is the duty to mitigate damages; an injured party who sat idly by when they could have reduced their damage will have their compensation reduced.

The abbreviated tracks

Compensation without proof of damage (Section 11): in the breach of a monetary obligation, interest may be claimed in accordance with the law; and in the breach of an obligation to supply or receive an asset or service, when the contract was canceled due to the breach, the difference in value may be claimed according to the terms of the section. Agreed compensation (Section 15) is an amount the parties determined in advance, and it may be claimed without proof of the actual damage. The court may reduce it if it was set without a reasonable relationship to the damage that could have been anticipated at the time the contract was formed. Compensation may not be combined in a way that grants double recovery for the same damage.

Proof of damage: the heart of the case

Compensation claims most often fail not on the question of breach but on the quantification of damage: financial statements, canceled orders, accounting and economic expert opinions, and evidence of lost profit. Building a professional damages case, supported by experts, is the difference between a symbolic judgment and real compensation.

Complex Monetary Claims

What makes a monetary claim "complex"?

A complex monetary claim is not measured only by the amount: it is measured by the multiplicity of transactions and parties, by multi-year accounting, by a combination of causes of action (contractual, tort, unjust enrichment), by the need for experts, accountants, appraisers, actuaries, and by battles over documents and disclosure. These are cases in which the organized party, who arrives with structured accounting, sorted documents, and expert opinions, defeats the party who arrives with a "sense of grievance."

The proper construction of the claim

A winning monetary claim is built backward: first, all existing evidence is mapped out—contracts, invoices, bank statements, correspondence; the gaps are identified and filled—document demands, disclosure orders, expert opinions; and only then is a statement of claim drafted, focused on the strong causes of action. The cause of action of unjust enrichment serves as a safety net alongside the contractual causes of action, for cases in which the money was transferred without an orderly contractual basis.

Commercial Debt Collection

An uncollected debt is the damage that buries businesses

A client who does not pay is not just a "cash-flow problem": it takes away the profit from dozens of other transactions. Effective commercial collection rests on one principle: speed. The passage of time may make it harder to locate assets and collect the debt. At the same time, early action does not guarantee priority: in insolvency, the order of repayment set by law applies, according to the type of debt and the collateral.

The legal routes

Attorney warning letter: a professional demand letter resolves a considerable portion of cases without proceedings; a claim under fast-track or ordinary procedure, accompanied by motions for temporary attachment of accounts, assets, and funds held by third parties the debtor's clients; enforcement of a promissory note or check through the Enforcement and Collection Authority: a bounced check is a powerful collection tool, granting an expedited procedure in which the burden of objection is on the debtor; and, when the legal conditions are met, a motion to open insolvency proceedings. This proceeding is not a substitute for clarifying a genuine dispute over the debt. Against companies being emptied out: piercing the corporate veil and personal claims against controlling shareholders who diverted operations.

Before anything else: business intelligence

Smart collection begins with the question of what can be collected from: locating accounts, real estate assets, vehicles, clients, and rights of the debtor. An attachment motion directed at real assets achieves results; a "blind" attachment wastes time and fees. At the same time, orderly business documentation, agreements, signed orders, checks, and personal guarantees from the company's owners are built in advance and make any future collection simpler.