Quick Answer: Israeli contract law does not use the term "force majeure." The closest equivalent is the frustration doctrine in Section 18 of the Contracts (Remedies for Breach of Contract) Law 5731-1970. Four conditions must all be met simultaneously, and courts apply the doctrine narrowly. The general state of war or security unrest in Israel does not qualify; specific governmental orders that physically block performance sometimes do. A well-drafted contractual force majeure clause gives broader protection than the statutory default and is far more predictable to apply. Without one, the risk falls on whichever party cannot perform.

Foreign companies contracting with Israeli parties run into two surprises when a disruption hits. First, their contracts often reference "force majeure" as if it were a self-executing mechanism. Israeli courts do not treat it that way; force majeure is not a recognized legal category under Israeli law. Second, the doctrine that does exist, frustration (sikul), is considerably harder to establish than the contractual clauses most foreign lawyers draft.

The consequences of misunderstanding this are concrete. A foreign company that suspends performance after a security incident, assuming its clause automatically protects it, can find itself facing a damages claim with a weak defense. An Israeli supplier that stops deliveries because of a localized military order in the south may or may not have a legal excuse, depending on where its warehouse sits and what the order actually says. The analysis is always fact-specific, and general impressions of what "force majeure" covers tend to be wrong when tested in an Israeli court or arbitration.

This guide sets out the statutory frustration standard, the evidence courts look for, the remedies available when frustration is established, and how to write a clause that actually covers the situations foreign businesses care about.

1. Israeli Law Has No Force Majeure Category

The phrase "force majeure" appears frequently in contracts negotiated between Israeli and foreign parties, often because the foreign party's standard terms include it or because the parties are working from an international template. Israeli courts will read and apply a contractual force majeure clause, but they do so as a matter of contract interpretation, not by reference to any statutory force majeure doctrine. There is none.

What Israeli law provides instead is Section 18 of the Contracts (Remedies for Breach of Contract) Law 5731-1970. The provision is titled "frustration of contract" and occupies roughly the same space as force majeure in civil law systems, but it is narrower. A party claiming frustration must satisfy all four statutory conditions before any court or arbitrator will excuse the breach. Meeting three out of four is not enough.

This creates a practical gap. A foreign business that relies on its standard boilerplate force majeure language, without checking how Israeli courts read those words, is in a different position than it thinks it is. Courts have applied their own frustration analysis even where the contract contained a force majeure clause, particularly where the clause listed events without specifying the consequences or procedure. The safer approach is to draft the clause specifically for Israeli law, which Section 6 of this guide covers.

2. The Section 18 Frustration Test

Section 18 excuses a contractual breach when four conditions are all present. A court or arbitrator will go through each one, and a claim fails at the first condition it cannot satisfy.

The first condition is that the breach results from circumstances the breaching party neither knew nor could reasonably have known at the time the contract was formed. "Could reasonably have known" is an objective standard. It asks what a party in that position, in that industry, in Israel, should have anticipated. General awareness that Israel has security risks counts against the claimant; specific knowledge of an upcoming military operation counts against it even more heavily.

The second condition is that the party could not have prevented the breach. This looks at what reasonable precautions were available: alternative suppliers, stored inventory, insurance, hedging in the contract terms. A party that had practical options and chose not to use them does not satisfy this condition.

The third condition is that performance either became physically impossible or became so fundamentally different from what the parties originally agreed that it no longer resembles what was contracted for. Financial hardship alone does not qualify. A price increase, even a severe one, rarely makes performance "fundamentally different" in the required sense. Courts draw a sharp line between performance that became expensive and performance that became something entirely other than what was promised.

The fourth condition is that the party did not assume the risk of the frustrating event. Courts look at the contract itself for risk allocation provisions, and at the surrounding circumstances of the deal. A party that accepted a fixed-price contract for goods that are notoriously subject to supply disruptions will struggle to argue it did not implicitly take on that risk.

In Practice: Section 18 also permits temporary frustration: where the obstacle is time-limited, a court can suspend the breaching party's obligations for the duration rather than excusing the breach entirely. The Home Front Command issues area restriction orders (tzavei pikud ha'oref) that typically run from days to a few weeks. If a supplier's warehouse sits within a declared restricted zone and the order prevents access for 12 days, a court may suspend the delivery obligation for those 12 days rather than treating the contract as discharged. The practical question is whether that suspension displaces or merely delays the breach, which depends on whether timely delivery was an essential term of the contract. Write delivery deadlines as "time is of the essence" only if you actually mean it; that phrase dramatically changes the remedies available to both sides.

3. Why the General State of War Does Not Qualify

The leading Israeli authority on this question is C.A. 794/73 (Coco-Pina Co. v. the State of Israel), decided by the Supreme Court in 1979. The court held that Israel exists in a state of ongoing security risk that every party contracting in or with Israeli counterparties is expected to know about. Armed conflict, rocket fire, and military operations in the region are foreseeable in the relevant legal sense. A party cannot satisfy the first Section 18 condition, that the circumstances were unknown and unforeseeable, simply by pointing to a war or military operation.

This is counterintuitive for foreign companies whose home jurisdictions would likely recognize a major armed conflict as force majeure. The Israeli position is that parties dealing in this region priced the risk into their contracts, or should have. Courts have applied this reasoning consistently since 1979, including after major military operations in Gaza and Lebanon.

The result is that broad force majeure clauses that list "war," "acts of war," "hostilities," or "armed conflict" without more specificity tend to produce disputes rather than resolve them. An Israeli court will ask: war where, affecting what, preventing which specific obligation? General references to regional hostilities almost never carry the analysis.

What distinguishes cases that succeed from those that fail is usually the specificity of the governmental act and its direct connection to the precise obligation at issue. The war itself is background. The specific order that closed the specific port, the specific requisition that took the specific goods, or the specific emergency regulation that banned the specific export is what actually moves a court.

4. Government Orders That Can Qualify

Several categories of governmental action have satisfied Section 18 in Israeli case law. They share a common feature: they specifically target the type of performance at issue rather than creating general economic disruption.

Military area closures are the most common qualifying event. The Home Front Command has authority under the Civil Defense Law 5711-1951 to declare a closed military zone and prohibit all entry. When a supplier's factory or warehouse sits inside a declared zone and access is physically prevented, courts have found that the "impossible or fundamentally different" condition is met for the period of the closure. The key evidence is the text of the specific order identifying the zone boundaries and the dates of effect.

Ministry of Defense requisitions under the Procurement for Defense Purposes Ordinance (New Version) 5729-1969 allow the military to commandeer vehicles, equipment, and property. A haulage company whose trucks were requisitioned for military logistics during a mobilization has a genuine frustration argument for contracts that required those specific vehicles during that period.

Port and border closures are more complicated because they tend to be partial rather than absolute. Ashdod Port operated at reduced capacity during several periods between October 2023 and early 2024 due to security procedures. That restriction slowed shipping but rarely made performance impossible. A supplier that could ship via Haifa or by air, at higher cost, cannot claim frustration simply because the cheapest route was delayed. The impossibility must be genuine, not merely more expensive.

Emergency economic regulations issued under the Basic Law: The Economy can restrict specific commercial activities, prohibit exports of certain categories of goods, or freeze price controls. These statutory interventions by the government, as opposed to general market disruption caused by the conflict, carry more weight in a frustration analysis.

In Practice: After October 7, 2023, the Israeli government issued hundreds of emergency orders under the Emergency Powers (Foreign Service) Ordinance, the National Security Law, and various defense regulations. Some of these had direct contractual consequences: export bans on specific technology categories, suspension of civilian flight operations for defined periods, and Home Front Command orders closing entire municipalities in the south. A party that wants to claim Section 18 frustration based on these orders needs three things: the text of the specific order (obtainable from the Government Legal Adviser's website or the relevant ministry), the date the order was issued and when it took effect, and a clear causal link between what the order prohibited and what the contract required. Without that link, the argument fails at the third Section 18 condition. Courts repeatedly reject frustration claims based on general economic disruption caused by the security situation rather than a specific governmental directive.

5. Remedies When Frustration Is Established

When a court accepts a frustration defense, the legal consequences differ from what most foreign parties expect. The outcome is not the same as winning damages.

The fundamental effect of Section 18 is that the court will not order specific performance of the frustrated obligation and will not award damages for its non-performance. The breach is excused for the period and to the extent that frustration applies. The contract is not automatically terminated; if only one obligation is frustrated, the rest of the contract typically continues.

Section 19 governs what happens to money and goods exchanged before the frustrating event. Each party is entitled to restitution of what it paid or transferred. A foreign buyer that paid a 30% advance before performance became impossible is entitled to recover that payment, regardless of whether the Israeli supplier spent it. The legal analysis is unjust enrichment: no one should keep value transferred under a contract that cannot be performed.

Section 20 is where the real litigation usually happens. It gives courts discretion to equitably divide the total losses between the parties. A court can order partial restitution, require the party with expenses already incurred to absorb some of them, or apportion losses in any ratio that reflects the circumstances. Courts have used Section 20 to share the cost of raw materials purchased specifically for the frustrated order, to split sunk costs on a construction project interrupted by a government order, and to divide the storage costs of goods that could not be delivered.

Appellate courts have said the equitable division should aim at a result neither party would have accepted contractually but that fairly reflects who was better positioned to insure against the risk. In practice, this means parties that obtained appropriate insurance recover less under Section 20 than uninsured parties, and parties whose industry has standard practices for risk allocation are judged against those norms.

In Practice: Section 20 equitable division orders are difficult to appeal because they rest on the trial court's factual findings and discretionary assessment. The safest way to control the outcome is to negotiate the allocation in advance. A contract that states how costs incurred before a triggering event are shared, who bears insurance obligations for disruption, and whether the parties will renegotiate or terminate gives both sides a known result rather than submitting to a court's discretion. The Israeli Contracts (General Part) Law 5733-1973 enforces these commercial allocations, including provisions that shift risk away from the statutory default. Contracting out of Section 20's equitable discretion is valid. Courts will respect it if the clause is clear and was reached between commercial parties of roughly equal sophistication.

6. Drafting a Force Majeure Clause That Works Under Israeli Law

Because Israeli law enforces contractual force majeure clauses as written, a well-drafted clause gives considerably more protection than the statutory frustration standard. The gap between the two can be significant: the clause can cover events that are foreseeable, partial impediments rather than complete impossibility, and agreed procedures for suspension and termination that the statute does not provide.

A functional clause needs several components. The triggering events should be listed specifically rather than by reference to vague concepts like "acts of God" or "natural disasters." For contracts involving Israeli performance, the list should include Home Front Command area restriction orders, Ministry of Defense requisitions, and emergency regulations issued under the Basic Law: The Economy. General references to war add little because of the Coco-Pina precedent; specific references to governmental orders affecting the particular goods, services, or location covered by the contract add something real.

The clause should set a notice deadline. Courts and arbitrators read silence on this point as meaning notice must be given within a reasonable time, which is always argued about. A stated deadline of 5 or 10 business days after the party knew or reasonably should have known of the event eliminates that argument. The notice should identify the specific event, the specific obligation it affects, and the anticipated duration.

The consequences of a triggering event need to be explicit. The clause should state whether performance is suspended, terminated, or subject to renegotiation; whether the contract price adjusts; and who bears costs already incurred. An open-ended suspension with no stated maximum duration and no termination trigger is a recipe for a later dispute about when the contract ended.

Parties with ongoing supply or service arrangements should also include a mitigation obligation. Israeli courts expect the frustrated party to take reasonable steps to reduce the impact of the disrupting event, and a clause that formally states this obligation actually strengthens the frustration defense when invoked, because it shows the party treated mitigation seriously from the outset.

In Practice: One drafting decision that consistently catches foreign parties out is the force majeure clause's relationship to the arbitration clause. A dispute about whether a force majeure event occurred, how long it lasted, and what costs should be shared is a dispute "arising under" the contract for purposes of an arbitration clause. Unless the force majeure clause specifically says these disputes go to a different forum, they follow the main arbitration clause. This is usually the right outcome, but it needs to be a conscious decision. Some contracts route force majeure adjustment disputes to expert determination (a faster, cheaper process) while routing breach claims to arbitration. If you want that split, state it explicitly. Israeli courts will not imply it from silence, and a poorly worded clause can produce parallel proceedings before both forums at once.

7. Force Majeure Claims in Israeli Arbitration

Israeli arbitration is governed by the Arbitration Law 5728-1968 for domestic disputes and by the International Commercial Arbitration Law 5784-2024 for international commercial disputes between parties whose places of business are in different countries. Both regimes authorize arbitrators to apply Israeli substantive law, including Section 18 frustration, unless the parties chose a different governing law.

An arbitration tribunal has the same authority as a court to excuse performance under Section 18, apply Section 19 restitution, and exercise the Section 20 equitable division discretion. It can also order interim measures while the frustration claim is pending, including an order preserving assets or maintaining the status quo during the assessment period.

The procedural difference from court is speed and confidentiality. A Section 18 dispute that goes to court in Israel will typically take 18 to 30 months to a first-instance judgment. An institutional arbitration at the Israel Centre for Commercial Arbitration (ICCA) or at the ICC under Israeli law runs 10 to 16 months for a comparable dispute, with the additional benefit of a private record. For commercial relationships where both parties want to continue after the dispute resolves, confidentiality has real value: a published court judgment naming both parties as having a force majeure dispute over an Israeli contract is not ideal for either side's market relationships.

The other practical consideration is enforceability of the award internationally. An Israeli arbitration award, once confirmed by an Israeli court under Section 23 of the Arbitration Law, can be enforced in the 170 or so countries that have ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. A court judgment requires a separate recognition procedure in each jurisdiction and is subject to broader defenses. For foreign parties whose counterparty has assets outside Israel, this distinction matters.

8. Contracts Governed by Foreign Law

Many commercial contracts between Israeli and foreign parties include a governing law clause selecting English law, New York law, German law, or another system. The Israeli court or arbitration tribunal will apply the chosen law's force majeure standard, not Section 18.

This matters because the thresholds differ. English law frustration, for example, is if anything stricter than Section 18 on the impossibility condition, but it does not apply the same foreseeability analysis as Israeli courts. New York law has a commercial impracticability doctrine under UCC Article 2 for goods contracts that is somewhat more accessible than frustration in either English or Israeli law. French law has the concept of imprévision, which covers circumstances that were unforeseeable and make performance excessively onerous, a standard closer to what many foreign parties assume "force majeure" means.

The choice of foreign law is not, however, a clean escape from Israeli procedural reality. Even where a foreign law governs, an Israeli court or tribunal may decline to apply a foreign law result if it conflicts with Israeli public policy (taknat tzibur). Courts have been reluctant to apply this override except where the foreign law result would require something that is genuinely contrary to the Israeli legal system's foundational principles. But the public policy argument is available and occasionally used.

The more practical point is that an Israeli-seated arbitration with foreign governing law still produces an award that must be enforced through the Israeli Execution Office, and the Execution Office will follow the confirmed award regardless of which country's law the arbitrator applied. Parties choosing foreign governing law should make sure their local advisers in both jurisdictions have reviewed the clause and understand how it will function if the dispute ends up in an Israeli forum.

In Practice: When Israeli and foreign parties are deciding on governing law, the practical choice is usually between Israeli law, English law, or New York law. Israeli law is the most favorable to Israeli parties because their counsel are most familiar with it and Israeli courts are their natural home turf. English law is the most familiar to international commercial parties globally and has an extensive body of force majeure and frustration case law. New York law is common for agreements involving US investors or US-registered counterparties. Each of these systems enforces a force majeure clause as written, so a well-drafted clause matters more than the choice of governing law in most commercial situations. Where parties expect significant performance risk (long-term supply agreements, construction projects, technology development contracts), spend the drafting time on the clause rather than debating the governing law.

Frequently Asked Questions

Israeli law does not treat "force majeure" as a legal category. The equivalent is the frustration doctrine under Section 18 of the Contracts (Remedies for Breach of Contract) Law 5731-1970. Frustration is harder to establish than force majeure clauses in civil law systems: all four statutory conditions must be met simultaneously, courts apply the doctrine narrowly, and the general risk of war or unrest in Israel does not by itself excuse performance. A contractual force majeure clause, if properly drafted, creates broader protection because Israeli courts enforce it as written.

Probably not on its own. The Israeli Supreme Court held in C.A. 794/73 (Coco-Pina) that Israel is a country with a constant security risk, so the general existence of armed conflict is foreseeable and does not meet the "unknowing and unforeseeable" condition in Section 18. What can qualify are specific governmental orders that physically prevent performance: Home Front Command area closures in a named city, military requisition of specific property, or border closures that block the transport of identified goods. The analysis is always fact-specific and depends on the text of the particular order.

Frustration does not automatically entitle either party to damages. Section 18 excuses the breach: the contract cannot be specifically enforced and no damages are awarded for the frustrated obligation. Section 19 entitles each party to restitution of what it already paid or transferred before the frustrating event. Section 20 lets the court divide total losses equitably between the parties rather than leaving each to bear only its own. The Section 20 equitable division is the most actively contested aspect of frustration claims in practice.

Yes. Israeli courts treat a contractual force majeure clause as the parties' own agreed definition of excusing events and enforce it as written. A well-drafted clause can be broader than Section 18: it can cover events that are foreseeable but unpreventable, partial impediments rather than total impossibility, and agreed notice and cure procedures. The clause must list the triggering events, set a notice deadline, and state the consequences clearly. Without a clause, you fall back on Section 18, which is a much harder threshold to meet.

Israeli arbitrators apply Israeli law, so when the contract is governed by Israeli law they apply the same Section 18 frustration test as a court would. The difference is procedural: arbitration under ICCA or ICC rules typically resolves in 10 to 16 months rather than the 18 to 30 months a court case takes, and the record stays private. If the contract is governed by foreign law and the parties agreed to arbitrate in Israel under that law, the arbitrator applies the foreign jurisdiction's force majeure standard. This is common in international commercial agreements and is permitted under the International Commercial Arbitration Law 5784-2024.

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