FAQs- Enforcement of contracts in Israel
A healthy economy needs a legal system that can effectively resolve commercial disputes. Without one, businesses risk living in an atmosphere where contractual commitments are not strictly adhered to. Although there are advantages of using alternative conflict resolution mechanisms, doing Business depends on how government agencies work in the event of a contractual dispute. This article explores in detail the enforcement of contract in Israel.
Q1. Which domestic laws and regulations govern the recognition and enforcement of contracts in Israel?
The Standard Contracts Law,5743-1982, governs standard contracts in Israel (hereinafter: Standard Contracts Law).
Contract Law is governed by a number of laws in Israel, including the Contracts (General Provisions) Law (5734-1973), the Contracts (Remedies for Breach of Contract) Law (5732-1971), and the Standard Contracts Law (5734-1973).
Other regulations, such as the Insurance Contract Law (5742-1981), the Contract for Supplies and Services Law (5735-1974), the Sale Contract Law (5729-1968), the Guarantee Law (5728-1967), and the Lease Law (5732-1971), govern specific contracts.
Q2. What is the purpose of the law of contract in Israel?
The aim of this legislation is to shield consumers from unfairly disadvantageous regular contract terms.
Q3. Can the Court or Tribunal annul or amend any standard contract?
Yes, Under the rules of this statute, a court or the Tribunal can annul or amend any standard contract requirement that, in light of the entirety of the contract's terms and other circumstances, results in an unreasonable disadvantage to customers or an unfair benefit for the provider, and is likely to result in the customers' deprivation (any other circumstance hereinafter referred to as "unduly disadvantageous condition").
Q4. What are the conditions will be presumed to be unduly disadvantage?
The following circumstances would be considered unduly disadvantageous.
- a condition that relieves or limits the liability that the supplier would have to bear by virtue of the contract if not for that condition, or that relieves or limits the responsibility that the supplier would have to bear by virtue of the contract if not for that condition;
- a condition that gives the supplier an arbitrary right to cancel, postpone, or delay the contract's results, or to change any material requirement put on him by the contract;
- a condition that gives the retailer the ability to delegate liability to a third party;
- a condition that gives the supplier the exclusive right to change a price or any other commodity requirement levied on the consumer after the deal has been made, unless the change is due to conditions about which the supplier has no influence.
- a condition that forces the customer to rely unreasonably on the supplier or another party, or otherwise restricts the customer's ability to enter or not enter into a contract with another person.
- a condition that denies or reduces a legal right or remedy open to the consumer, or that unreasonably restricts a contractual right or remedy, or that requires any other right or remedy conditional on providing notice in an unreasonable manner, within an unreasonable period, or on any other unreasonable provision.
- a condition that places the burden of evidence on those who would not have to bear it if the condition didn't exist.
- a condition that, with the exception of being part of a standard settlement arrangement, refuses or restricts the customer's ability to bring such pleas before judicial authority or to pursue certain legal action;
- a condition that specifies the law governing place of jurisdiction which gives the provider the unilateral right to select the place of jurisdiction or arbitration for the resolution of a dispute.
- a condition that requires a case to be referred to arbitration where the supplier has more control than the client on the selection of arbitrators or the location of the arbitration.
The Tribunal decision in the Ituran case12 is a clear example in this regard, according to which the fact that the corporation has been proclaimed a monopoly in the area of car position systems imposes a heavier burden of equity and reasonability on it. The Tribunal also took into account the fact that some of the company's clients do not do business with it voluntarily, but rather that their insurance providers need it as a condition of offering car-theft insurance plans. The Tribunal determined that as long as Ituran has a monopoly, it cannot fail to provide its services for unfair reasons; as a result, the clause of its regular contract that allows the corporation to terminate the contract at its own discretion is an unduly disadvantageous situation.
Q5. Can a limitation of right to apply to judicial authorities be placed?
No, A clause in a regular contract that denies or restricts the customer's ability to seek judicial relief is invalid.
Q6. What does the Standard Contract law cover?
The Standard Contracts Law applies to a wide and diverse range of situations. It is not the typical consumer law, and its scope of application is far wider. The word "customer" is described as "the person to whom a provider offers a standard contract for an engagement between them, regardless of whether he is the receiver or the giver of something." As a result, the Standard Contracts Law also extends to a deal between two suppliers where one of them suggests that their engagement should be based on a standard contract. The Basic Contracts Law covers anyone who enters into a standard contract, regardless of the type of business transaction or intent.
The law extends similarly to the Administration, according to Article 22 of the Standard Contracts Law. As a result, the statute requires the State to file applications for approval of standard contracts that it has drafted7, as well as applications for annulment of standard contracts that have unduly disadvantageous provisions.
Q7. Can an Unduly Disadvantageous Condition be annulled?
Q8. How can the proceedings go about if the unduly disadvantageous conditions need to be annulled?
The Tribunal has the authority under Art. 17 of the Standard Contracts Law to cancel or change an unduly disadvantageous clause to the degree possible to remove the undue disadvantage. In practice, this is not a discretionary power, and if the Tribunal determines that the requirement is unduly burdensome, it must revoke or change it. Those named in the statute – the Attorney General and the Head of the Authority for Consumer Protection – are entitled to petition the tribunal in annulment proceedings.
Customers' associations or governmental authorities, as specified by the law's legislation, are also eligible to petition the Tribunal. Israel's Consumers' Committee, the Consumers' Protection Authority, and the Bank of Israel are therefore empowered under Regulation 4 of the Standard Contracts Regulations, 5743-1983.
Furthermore, the legislation gives the Minister of Justice the authority to authorize a consumer entity that has not been designated by the regulations to apply for annulment in a particular matter.
The supplier whose contract is being annulled is the respondent to the annulment petition; moreover, the Tribunal may order a representative body of suppliers, or any party interested in the matter, to enter the case as a respondent. The cancellation and obliteration of a clause from the contract occurs as it is annulled.
An annulment, unlike a normal contract acceptance, has no time limit and remains in effect as long as the Tribunal has not rescinded or reversed its ruling. The Tribunal has the authority to extend its ruling to contracts that were concluded prior to the decision but have not yet been fully implemented. Under the legislation or the rules, any individual or body who appeared before the Tribunal as a complainant or respondent will appeal the Tribunal's judgments to the Supreme Court within 45 days.
Q9. What are the courts’ authority in regards to Standard Contracts?
The Basic Contracts Law also gives the courts the power to look at standard contract terms that are unduly disadvantageous. The Court is required by Art. 3 to annul or change a clause in a regular contract that the Court deems to be unduly disadvantageous. When exercising its jurisdiction, the Court must consider the whole contract's terms as well as all other relevant factors. When exercising its jurisdiction, the Court must consider both the entirety of the contract's terms, as well as all other applicable conditions, as well as the case's particular facts. Another way to assert an undue advantage claim is to file a lawsuit for a verdict declaring the situation to be unduly disadvantageous.
Q10. How are the enforcement of the Tribunal’s decisions handled in regards to the amendment of an unduly disadvantageous condition?
A supplier who disregards a Tribunal order on the cancellation or amendment to an unduly disadvantageous provision is not subject to a fine under the Standard Contracts Law. This is being handled as a general contempt of court lawsuit. The Prosecutor General's Office has the authority to sue a supplier for failing to comply with the Tribunal's orders, but this type of action is rarely used. It's necessary to differentiate between a supplier who petitioned the Tribunal to approve a standard contract against a supplier who was a respondent in an annulment proceeding in this sense.
It does not seem to be often reasonable to impose such a harsh penalty on suppliers who have petitioned the Tribunal for approval of their standard contracts and then opted not to comply with the proceedings, or to use the standard contract as authorized by the Tribunal, for any reasons, most of which are economic in nature.
Q11. Is there any restriction on the applicability?
Q12. What are the restrictions or the limitations on applicability of the provisions?
The provisions of this law will not be applicable to the following;
- a condition that specifies the amount of money the consumer must pay;
- a condition that complies with the requirements of a statute or is authorized by an enactment;
- a provision that Israel must meet in accordance with the terms of an international agreement of which it is a member state;
- a contractual arrangement made in writing and prescribing pay limits under the Collective Agreements Law 1957, whether or not it has been applied for registration under that Law.
Q13. How does the Minister of Justice carry out the law's implementation?
The Minister of Justice is in charge of enforcing this law, and he has the authority to issue regulations to do so, including regulations on:
- The Tribunal's process, the extension of time for filing appeals, and the hearings' continuity;
- persons or entities that can appear before the Tribunal to plead in favour of a group or as respondents;
- When the State wants approval of a standard contract, there are many options for appointing an attorney.
- the reimbursement of witnesses' fees and lost working hours allowances in Tribunal proceedings
- on the face of a contract, the type of the indication listed in section 15;
- requiring a seller to include a copy of a standard contract that he has concluded or plans to conclude to the Attorney General or the Commissioner of Consumer Protection and Fair Trade, upon request.