How does a company cancel a commercial contract for breach under Israeli law?

Section 6 of the Remedies Law defines a fundamental breach as one that a reasonable person, foreseeing it and its consequences, would have treated as a reason not to enter the contract at all. Section 7 then sets two tracks: immediate cancellation for a fundamental breach, and cure followed by cancellation for anything less. Section 8 governs the notice itself, which must be given within a reasonable time and, on the second track, within a reasonable time after the cure period has expired. Section 9 obliges each side to return what it received or to pay its value, and Section 10 allows damages for loss that the breaching party foresaw or should have foreseen. Israeli courts read all of this through the good faith duty in Section 39 of the Contracts (General Part) Law 5733-1973.

Foreign companies most often lose the right to cancel simply by waiting. Continuing to accept deliveries, issuing fresh purchase orders or negotiating for months after the breach can be treated as waiver, and the remedy is then confined to damages. A cancellation notice should be in writing, identify the breach precisely, state unambiguously that the contract is cancelled and reserve the claim for damages. Our guide to commercial contracts in Israel covers the drafting side of the same problem. Where the contract fixes agreed compensation, Section 15 lets the court reduce the sum if it bears no reasonable relation to the damage foreseeable at signing, so cancellation is rarely a shortcut to a guaranteed payout.

From the full guide: Commercial Contracts in Israel: Legal Framework, Key Clauses & Drafting Tips

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