Contracts (Remedies for Breach of Contract) Law: the sections this site discusses

What the law provides

Section 2 of the Law (“Remedies of the injured party”) provides that a breach of contract entitles the injured party to claim enforcement or to rescind the contract, and to claim damages in addition to either of them or instead of them. Section 3 sets the right to enforcement, the injured party’s primary right to demand that the party in breach perform the contract as agreed, subject to exceptions (for example, when enforcement is impossible, when a personal service is involved, or when enforcement would be unjust in the circumstances of the case). Section 7 sets the right to rescission. A “fundamental” breach allows immediate rescission. A fundamental breach is a breach about which it can be assumed that a reasonable person would not have entered into the contract had they foreseen the breach and its results, or a breach that the contract states will be considered fundamental; a sweeping clause that makes all breaches fundamental without distinguishing between them is valid only if it was reasonable when the contract was made (section 6). A non-fundamental breach allows rescission only if the party in breach was given a reasonable extension to cure the breach and did not cure it.

Section 10 sets the right to damages: the injured party is entitled to damages for the loss caused to it by the breach and its results, which the party in breach foresaw or should have foreseen, when the contract was made, as a probable result of the breach, even if the injured party did not rescind the contract. Section 11 gives a right to compensation without proof of damage in two cases: when an obligation to supply or receive property or a service was breached and the contract was rescinded, in the amount of the difference between the consideration under the contract and the value on the day of rescission; and when an obligation to pay money was breached, in the amount of the shekel interest on the overdue amount. Section 15 governs liquidated damages set in advance in the contract: the court may reduce liquidated damages if it finds that they were set “without any reasonable relation” to the loss that could have been foreseen, when the contract was made, as a probable result of the breach.

A numerical example

A contractor undertook to supply and install a kitchen by 1 March, for a total payment of NIS 60,000, with a liquidated damages clause of NIS 500 for each day of delay. The contractor was 20 days late. The customer can claim the liquidated damages, NIS 10,000 (20 × NIS 500), without proving an exact financial loss, unless the court finds that the amount was set without any reasonable relation to the loss that could have been foreseen, when the contract was made, as a probable result of the breach. In that case the court may reduce it (section 15(a)).

For practical guides, see Breach of contract in Israel: compensation, enforcement or rescission and Liquidated damages clauses: validity and enforcement, and the pages Commercial contracts and Commercial contracts in Israel: drafting, review and enforcement.

A worked example: compensation without proof of damage under section 11(a)

A supplier undertook to sell a buyer 1,000 units at NIS 50 per unit (NIS 50,000) and did not supply them. The buyer rescinded the contract because of the breach, and on the day of rescission the units were worth NIS 62 per unit (NIS 62,000). Under section 11(a), compensation without proof of damage is the difference between the consideration under the contract and the value on the day the contract was rescinded: NIS 62,000 − NIS 50,000 = NIS 12,000. The buyer must prove the value on the day of rescission, but not the loss itself. If the buyer suffered a greater loss that the party in breach foresaw or should have foreseen, such as lost profit, the buyer may prove it and claim under section 10 (section 12), subject to the duty to reduce the loss by reasonable means (section 14). And when an obligation to pay money was breached, compensation without proof of damage is the shekel interest on the overdue amount, from the day of the breach until the day of payment, unless the court set a different rate (section 11(b)).

The sections the site discusses

This page brings together 7 sections of the Contracts (Remedies for Breach of Contract) Law that are discussed in 5 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 (Remedies for Breach of Contract) Law, 5731-1970: text of the Law
• Contracts (Remedies for Breach of Contract) Law: consolidated version on Nevo (Israeli legal database)

FAQ

What is the difference between a fundamental breach and a non-fundamental breach?
A fundamental breach (a breach about which it can be assumed that a reasonable person would not have entered into the contract had they foreseen the breach and its results, or a breach that the contract states will be considered fundamental, section 6) allows rescission without the need to give an extension (section 7(a)). A non-fundamental breach allows rescission only if the party in breach was given a reasonable extension to cure it and the breach was not cured.

What is the main remedy the law gives a party injured by a breach of contract?
Enforcement, a demand that the party in breach perform the contract as agreed, subject to exceptions, such as when enforcement is impossible or unjust in the circumstances of the case (section 3 of the Law).

Can a court reduce liquidated damages set in a contract?
Yes, if it finds that the liquidated damages were set without any reasonable relation to the loss that could have been foreseen, when the contract was made, as a probable result of the breach (section 15(a) of the Law).

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.