Contracts (General Part) Law: the sections this site discusses

What the law provides

Section 2 of the Law defines an offer as an approach that shows the offeror’s intention to be bound by a contract and is definite enough for the contract to be made by its acceptance. A contract is made when the offer is accepted (acceptance) by the other party. Section 23 provides that a contract may be made in writing, orally or in any other form (there is no general form requirement), unless a particular form is required by law (for example, in real estate transactions) or by the parties’ agreement. In practice, an oral contract is legally valid, but its existence and content are hard to prove when a dispute arises.

Section 12 imposes on the parties to negotiations a duty to act in good faith and in an acceptable manner. A party who breaches this duty (for example, by negotiating with no real intention to sign, or by hiding material information) may be liable to pay damages, even if the contract is not signed in the end. Section 39 extends the duty of good faith to the stage of performing the contract: in performing an obligation arising from a contract, a party must act in an acceptable manner and in good faith, and the same applies to exercising a right arising from a contract. Section 25 sets the rules of interpretation, and its subsection (a) was replaced by Amendment No. 3 to the Law. In a contract made or renewed on or after 7 January 2026: the parties may set how it is to be interpreted; a business contract that does not provide otherwise is interpreted according to its wording alone, unless the wording alone leads to an unreasonable result, or a contradiction arises between its provisions; and a contract that is not a business contract, a standard-form contract, an employment contract and a collective agreement are interpreted according to the intention of the parties, as it appears from the contract and from the circumstances. The Law does not define what a “business contract” is, and the question of which contracts will be considered as such will be decided by the case law. It is clear only that an employment contract and a collective agreement are, as a rule, interpreted according to the intention of the parties, and that a standard-form contract is interpreted this way even if it states otherwise (section 25(a)(4)). In a contract made before that date: according to the intention of the parties, and if it appears explicitly from the wording of the contract, according to the wording. Section 30 provides that a contract whose making, content or purpose is illegal, immoral or contrary to public policy is void.

A numerical example

Two companies negotiated for three months over a supply contract worth NIS 500,000, including detailed drafts and resources invested by both sides. At an advanced stage, one of the companies suddenly announced that it was withdrawing, without reasonable justification, at a time when the other side had already started ordering equipment to carry out the agreement. Although no binding contract was made (because there was no acceptance), the injured party can claim reliance damages for the loss caused to it by the negotiations conducted without good faith, under section 12 of the Law, and not full expectation damages as if the contract had been signed.

For practical guides on the subject, see The duty of good faith in contracts: principles and case law and Oral contract: is it valid in Israel?, and the pages Commercial contracts and Commercial contracts in Israel: drafting, review and enforcement.

Was a contract made? A check under the formation sections

1. Offer: an approach that shows an intention to be bound by a contract, and is definite enough for the contract to be made by its acceptance. It can also be made to the public (section 2).
2. The offer was still in force: the offeror may withdraw it by a notice delivered to the offeree before acceptance, unless the offeror stated that the offer is irrevocable or set a time for its acceptance (section 3). The offer lapses when it is rejected or when the time for its acceptance has passed (section 4), and if no time was set, it must be accepted within a reasonable time (section 8(a)).
3. Acceptance: a notice delivered to the offeror (section 5), or an act performing the contract or other conduct, if such a way of acceptance is implied by the offer (section 6(a)). A statement by the offeror that no response will be considered acceptance has no effect (section 6(b)).
4. Acceptance matches the offer: an acceptance that contains an addition, a limitation or a change, and an acceptance after the offer has lapsed, are a new offer (sections 9 and 11).
5. Form: no writing is required, unless a particular form is a condition of the contract’s validity under a law or under an agreement between the parties (section 23).

The sections the site discusses

This page brings together 6 sections of the Contracts (General Part) Law that are discussed in 10 guides on this site. The title of each section is the marginal note of the consolidated version of the Law (unofficial translation), not a heading we wrote. The last column links to the guides on this site that discuss that section.

The original text of the law

• Contracts (General Part) Law, 5733-1973: text of the Law
• Amendment No. 3 to the Contracts (General Part) Law, 5786-2026: Sefer HaHukim 3481 (Knesset, PDF) (in Hebrew)
• Contracts (General Part) Law: consolidated version on Nevo (Israeli legal database)

FAQ

Is an oral contract valid in Israel?
Yes, as a rule. Section 23 of the Law does not require a particular form, unless a written form is required by law or by the parties’ agreement. The practical problem with an oral contract is proof, not validity.

What happens when someone breaches the duty of good faith in negotiations and doesn’t sign in the end?
The injured party may claim damages under section 12 of the Law, usually reliance damages for the loss caused by the conduct of the negotiations, and not expectation damages as if the contract had been signed.

How is a contract interpreted when there is a dispute about what a clause means?
Under section 25 of the Law, as worded in Amendment No. 3: in a contract made or renewed on or after 7 January 2026, a business contract that sets no rules of interpretation is interpreted according to its wording alone, unless the wording alone leads to an unreasonable result, or a contradiction arises between its provisions; a contract that is not a business contract, a standard-form contract, an employment contract and a collective agreement are interpreted according to the intention of the parties, as it appears from the contract and from the circumstances. The Law does not define what a “business contract” is, and the question of which contracts will be considered as such will be decided by the case law. It is clear only that an employment contract and a collective agreement are, as a rule, interpreted according to the intention of the parties, and that a standard-form contract is interpreted this way even if it states otherwise (section 25(a)(4)). In a contract made before that date, the previous wording applies: according to the intention of the parties, and if it appears explicitly from the wording of the contract, according to its wording.

When is a contract void because of illegality?
Under section 30 of the Law, when its making, content or purpose is illegal, immoral or contrary to public policy.

This page collects the references to legislation on the site. The section headings are the marginal notes as worded in the consolidated text of the law, and are not our interpretation. The binding text is the one published in Sefer HaHukim (the official gazette of statutes). The content here is general information and is not legal advice. Translated: 12 November 2026 · Hebrew version updated: 13 October 2026.