Oral contract: is it valid in Israel?

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The rule in Israel: an oral contract is valid, except for the exceptions in the law

The Contracts (General Part) Law, 5733-1973 does not require a contract to be signed in writing to be valid. Agreement between two parties, whether in writing, orally or even by conduct, can create a binding contract. A deal you closed with a handshake with the contractor, the verbal agreement with your neighbor on using a parking space, the understanding with the supplier on a price: all of these may be contracts in every sense.

When does the law require writing?

The law requires writing only in defined cases, and these are the main ones: Land: under section 8 of the Land Law, 5729-1969, an undertaking to make a transaction in land requires a written document (a lease of up to five years is exempt, unless it comes with an option to extend it to a total period of more than five years, or its period, in whole or in part, falls more than five years after the contract was made; section 79). A future gift: under section 5 of the Gift Law, 5728-1968 (חוק המתנה, התשכ״ח-1968), an undertaking to give a gift in the future requires a written document. Arbitration: under section 1 of the Arbitration Law, 5728-1968 (חוק הבוררות, התשכ״ח-1968), an “arbitration agreement” is a written agreement. By contrast, a guarantee is created even without writing, by an agreement or by an undertaking of which the creditor was notified, under section 3 of the Guarantee Law, 5727-1967 (חוק הערבות, התשכ״ז-1967). And an insurance contract is made even before a policy has been delivered: under section 2 of the Insurance Contract Law, 5741-1981 (חוק חוזה הביטוח, התשמ״א-1981), the insurer must deliver it, and until then the terms it usually applies are in force.

Outside the exceptions set by law, an oral agreement is valid.

How do you prove an oral contract?

The other side says there was no deal? That is where the real battle is. Proving an oral contract relies on testimony, the parties’ conduct, payments made, WhatsApp messages, emails and witnesses. All of these can establish that the contract exists, but the other side will also bring its own version.

The principles of the law of evidence allow a contract to be proved by any means of evidence. An oral contract has no “immunity” just because there is no document.

What counts as evidence? A WhatsApp message saying “OK, I agree”: very good evidence. An email setting out the terms of the deal: excellent evidence. A payment on account: evidence that performance has begun. A witness who heard the agreement: admissible evidence. A transcript of a recorded conversation: admissible when it is a conversation you took part in. Such a recording is not “wiretapping”, which section 1 of the Wiretap Law, 5739-1979 (חוק האזנת סתר, התשל״ט-1979) defines as listening without the consent of any of the parties to the conversation; recording a conversation between others without the consent of any of them is an offense (section 2).

When does a conversation become a binding contract, and when not?

“We’ll talk about the details”, “we’ll close it later”, “I promise”: these phrases do not form a final agreement. A contract is made by offer and acceptance (section 1 of the Contracts (General Part) Law): an offer that shows the offeror’s intention to be bound and is sufficiently certain (section 2), and its acceptance. The law has no requirement of “consideration”. A meeting where you talked about an idea is not necessarily a contract. A specific commitment with a price and a timetable is.

And two points the law makes clear. Silence is not acceptance: an offeror’s statement that a lack of response from the offeree will be deemed acceptance has no effect (section 6(b)). But acceptance can be made by an act of performing the contract or by other conduct, if these ways are implied by the offer (section 6(a)). And if in the end no contract was made, a party who did not act in the negotiations in an acceptable manner and in good faith owes the other party compensation for the damage caused to it as a result of the negotiations (section 12). See The duty of good faith in contracts: principles and case law.