Translation Notice — This is an English translation of a Hebrew law and may contain inaccuracies. In any dispute or legal matter, the original Hebrew text as published in Reshumot (ספר החוקים) is the sole authoritative and legally binding version.

Law

Contracts Law (General Part), 5733-1973

חוק החוזים (חלק כללי)

Chapter V: Performance of Contract

Performance in Good Faith

39.

In the performance of an obligation arising from a contract, one must act in a customary manner and in good faith; and the same applies to the exercise of a right arising from a contract.

Performance — By Whom

40.

An obligation may be performed by a person other than the obligor, unless, by the nature of the obligation or by agreement between the parties, the obligor must perform it personally.

Time of Performance

41.

An obligation in respect of which no time of performance has been agreed upon shall be performed within a reasonable time after the conclusion of the contract, at a time of which the obligee has given the obligor reasonable advance notice.

Early Performance

42.

An obligation may be performed before its due time, provided that the obligor has given the obligee reasonable advance notice thereof and the matter will not prejudice the obligee.

Postponement of Performance

43.

(a)The time for performance of an obligation is postponed —

(1)if performance at the due time was prevented for a reason attributable to the obligee — until the impediment has been removed;

(2)if a condition for performance is that the obligee's obligation be performed first — until that obligation has been performed;

(3)if the parties are to perform their obligations simultaneously — so long as the obligee is not ready to perform the obligation incumbent upon him.

(b)Where the time for performance of an obligation has been postponed as provided in subsection (a), the court may, if it sees fit in the interests of justice to do so, order the obligee to pay compensation for the damage caused to the obligor by reason of the postponement, even if the matter does not constitute a breach of contract on the part of the obligee; and if the obligor was required to make periodic payments until performance of the obligation whose time has been postponed — to exempt him from such payments during the period of postponement.

Place of Performance

44.

(a)An obligation in respect of which no place of performance has been agreed upon shall be performed at the obligee's place of business, or, if the obligee has no place of business — at his permanent place of residence.

(b)If the obligee changes his place of business or place of residence after the conclusion of the contract, he shall bear the additional expenses arising from performance of the obligation at the new location.

Performance of Medium Quality

45.

An obligation to provide an asset or service in respect of which no type or quality has been agreed upon shall be performed by providing an asset or service of medium type and quality.

Performance at a Reasonable Sum

46.

An obligation to make payment for an asset or service in respect of which the amount has not been agreed upon shall be performed by payment of a sum that would have been reasonably payable in the circumstances at the time of conclusion of the contract.

Performance in Israeli Currency

47.

An obligation to make payment in Israel in foreign currency where payment in that currency is prohibited by law shall be performed by payment in Israeli currency, at the official exchange rate on the date of payment.

Conditional Performance

48.

Where, for the performance of an obligation, the obligor has undertaken a further obligation toward the obligee, or has transferred to the obligee for that purpose a right against a third party, it is presumed that the parties did not intend to extinguish the original obligation unless the further obligation or the right has been performed.

Appropriation of Payments — Single Obligation

49.

A sum given in discharge of a single obligation shall be appropriated first to the account of the expenses incurred by the obligor in respect of that obligation, thereafter to the account of interest, and finally to the account of the obligation itself.

Appropriation of Payments — Multiple Obligations

50.

Where a sum is given to an obligee at a time when several obligations are owed to him by the obligor, the obligor may, at the time of payment, designate the obligation to the account of which the sum is to be appropriated; if the obligor has not done so, the obligee may do so.

Election Among Alternative Obligations

51.

(a)In the case of alternative obligations, the obligor may, by notice to the obligee within the period fixed for that purpose, or where no such period has been fixed — within a reasonable time before the time of performance, elect the obligation that he will perform; if the obligor has not done so, the obligee may, by notice to the obligor, elect the obligation.

(b)Where it has been agreed that the right of election shall be vested in the obligee and he has not exercised it within the period fixed for that purpose, or where no such period has been fixed — within a reasonable time before the time of performance, the obligor may, by notice to the obligee, elect the obligation.

Substitute Performance

52.

Where performance of an obligation has become impossible, and as a result the obligor has a right to compensation or indemnification against a third party, the obligor shall transfer to the obligee that right, or whatever has been received pursuant to it, up to the value of the obligation.

Set-Off

53.

(a)Monetary obligations owed by parties to each other arising from a single transaction, whose time of performance has arrived, may be set off by notice of one party to the other; and the same applies to monetary obligations not arising from a single transaction, if they are liquidated obligations.

(b)An obligation whose right of performance is not subject to attachment may not be set off.

(c)The provisions of Sections 49 and 50 shall apply, with the necessary modifications, also to discharge by way of set-off.

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Chapter VI: Plurality of Debtors and Creditors

Plurality of Debtors

54.

Where two persons are bound by a single obligation, they are presumed to be liable jointly and severally.

Joint and Several Liability

55.

(a)Where two persons are liable jointly and severally, the creditor may demand performance of the obligation, in whole or in part, from both of them together or from each of them separately, provided that the creditor shall not recover more than is owed to him.

(b)If the obligation of one of the debtors is void or is cancelled, the obligation of the other is likewise void or cancelled, unless the cancellation arises from a defect in the capacity or representation of the one debtor.

(c)If the creditor has released one of the debtors from the obligation, in whole or in part — whether by waiver, remission, compromise, or otherwise — the other debtor is likewise released to the same extent, unless a different intention is implied by the release.

Burden of the Obligation as Between the Debtors

56.

(a)Where two persons are bound by a single obligation, they are presumed to bear the burden of the obligation as between themselves in equal shares.

(b)A debtor who has rendered to the creditor more than his share of the burden of the obligation in performance thereof is entitled to seek recourse against the other debtor and to recover from him in accordance with their respective shares.

(c)Where there are more than two debtors and there is no reasonable possibility of recovering from one of them, the remainder shall bear his share in accordance with their respective shares.

(d)If the obligation of one debtor has been cancelled as provided in Section 55(b) and the cancellation arises from a defect in that debtor's capacity or representation, the other debtor has no right of recourse against him; if one debtor has been released as provided in Section 55(c) and the release is not such as to release the other debtor, the release shall likewise not prejudice the right of recourse against him under this Section.

Limitation on Right of Recourse

57.

A debtor who has performed the obligation beyond his share is not entitled to seek recourse against another debtor to the extent that the other debtor could have been released from liability toward the creditor by virtue of a defence that was known to him and which he failed to raise.

Transfer of Security

58.

(a)A charge or other right given to the creditor to secure the obligation shall pass to the debtor who has performed the obligation beyond his share, so as to secure his right of recourse against another debtor; provided that this shall apply only to the extent that it does not prejudice the creditor.

(b)Where a charge or right has passed as provided in subsection (a), the parties shall, at the request of the debtor who has performed the obligation, take all steps necessary to render the transfer fully effective for all purposes.

Plurality of Creditors

59.

(a)Where two persons are entitled to a single obligation, each of them is presumed to be entitled to demand its performance, provided that no more than what is owed by the debtor shall be recovered from him; the debtor may perform the obligation toward one of the creditors, at his choice, so long as no judgment has been given in favour of the other creditor.

(b)The creditors are presumed to share in the obligation in equal parts; where the obligation has been performed toward one of them, the other is entitled to demand from him his share thereof.

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Chapter VII: Miscellaneous

Manner and Time of Giving Notice

60.

(a)A notice under this Law shall be given in the manner customary in the circumstances of the matter.

(b)Where this Law refers to the giving of a notice, the notice shall be deemed to have been given at the time it reached the addressee or the addressee's address.

Application

61.

(a)The provisions of this Law shall apply where no other law contains special provisions for the matter in question.

(b)The provisions of this Law shall apply, to the extent appropriate to the matter and with the necessary modifications, also to juridical acts that are not in the nature of a Contract and to obligations that do not arise from a Contract.

Repeals

62.

The following are repealed —

(1)Sections 658, 948, 949 and 1003 to 1007 and the Twelfth Book of the Mejelle;

(2)[The text was incorporated into the Ottoman Civil Procedure Law.]

Independence of the Law

63.

In matters dealt with by this Law, Article 46 of the Palestine Order in Council, 1922–1947, shall not apply.

Commencement and Transitional Provision

64.

This Law shall come into force on the 1st of Elul 5733 (29 August 1973); the previous law shall continue to apply to contracts entered into before the commencement of this Law.

Golda Meir — Prime Minister

Yaakov S. Shapira — Minister of Justice

Shneur Zalman Shazar — President of the State

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