Contracts (General Part) Law, 5733–1973

1. How a contract is formed

A contract is formed by way of offer and acceptance in accordance with the provisions of this Chapter.

2. Offer

A person's communication to another constitutes an offer if it indicates the offeror's settled intention to enter into a contract with the offeree and is sufficiently definite to enable the contract to be formed by acceptance of the offer; the communication may be addressed to the public.

3. Withdrawal of an offer

(a) The offeror may withdraw the offer by notice to the offeree, provided that the notice of withdrawal is delivered to the offeree before the offeree has given notice of acceptance.

(b) If the offeror has stipulated that the offer is irrevocable, or has fixed a time for its acceptance, the offeror may not withdraw it after it has been delivered to the offeree.

4. Lapse of an offer

An offer lapses—

(1) when the offeree rejects it or the time for accepting it has passed;

(2) when the offeror or the offeree dies, or either of them becomes legally incapacitated, or a receiving order or winding-up order is made against either of them, in each case before notice of acceptance has been given.

5. Acceptance

Acceptance shall be by notice from the offeree delivered to the offeror and indicating the offeree's settled intention to enter into a contract with the offeror in accordance with the offer.

6. Acceptance by conduct

(a) Acceptance may be by an act in performance of the contract or by other conduct, if these forms of acceptance are implied by the offer; for the purposes of sections 3(a) and 4(2), such conduct has the same effect as giving notice of acceptance.

(b) A stipulation by the offeror that the absence of a response from the offeree shall be regarded as acceptance has no effect.

7. Presumption of acceptance

Where an offer can only benefit the offeree, the offeree is presumed to have accepted it, unless the offeree notifies the offeror of an objection within a reasonable time after learning of it.

8. Time for acceptance

(a) An offer may be accepted only within the period fixed for that purpose in the offer, and, in the absence of such a period, within a reasonable time.

(b) If the offeree gives notice of acceptance in due time, but the notice is delivered to the offeror late for a reason beyond the offeree's control and unknown to the offeree, the contract is formed, unless the offeror notifies the offeree of rejection of the acceptance immediately after the notice of acceptance is delivered to the offeror.

9. Acceptance after lapse

Acceptance of an offer after it has lapsed is equivalent to a new offer.

10. Withdrawal of acceptance

The offeree may withdraw acceptance by notice to the offeror, provided that the notice of withdrawal is delivered to the offeror no later than the delivery of the notice of acceptance or the offeror's learning of acceptance in the manner stated in section 6(a).

11. Acceptance with a variation

An acceptance containing an addition, limitation or other variation from the offer is equivalent to a new offer.

12. Good faith in negotiations

(a) In negotiations towards the formation of a contract, a person must act in a customary manner and in good faith.

(b) A party who has not acted in a customary manner and in good faith is liable to the other party for compensation for the damage caused to that party by the negotiations or by the formation of the contract, and the provisions of sections 10, 13 and 14 of the Contracts (Remedies for Breach of Contract) Law, 5731–1970, shall apply with the necessary modifications.

13. Sham contract

A contract formed for appearances only is void; this provision shall not prejudice a right acquired by a third party in good-faith reliance on the existence of the contract.

14. Mistake

(a) A person who entered into a contract because of a mistake, where it may be presumed that but for the mistake that person would not have entered into the contract, and the other party knew or ought to have known this, may rescind the contract.

(b) Where a person entered into a contract because of a mistake, and it may be presumed that but for the mistake that person would not have entered into the contract, but the other party neither knew nor ought to have known this, the court may, on the application of the mistaken party, rescind the contract if it considers it just to do so; if it does so, the court may order the mistaken party to pay compensation for the damage caused to the other party by the formation of the contract.

(c) A mistake is not a ground for rescission of the contract under this section if the contract can be performed by correcting the mistake and the other party has stated, before the contract is rescinded, that it is willing to do so.

(d) “Mistake”, for the purposes of this section and section 15, means a mistake of fact or of law, excluding a mistake relating solely to the economic worthwhileness of the transaction.

15. Misrepresentation

A person who entered into a contract because of a mistake resulting from a misrepresentation made by the other party or by another on that party's behalf may rescind the contract; for this purpose, “misrepresentation” includes failure to disclose facts which the other party was required to disclose by law, by custom or by the circumstances.

16. Clerical error

Where a clerical or similar error has occurred in a contract, the contract shall be corrected in accordance with the parties' presumed intention, and the error is not a ground for rescission of the contract.

17. Duress

(a) A person who entered into a contract because of duress exerted by the other party or by another on that party's behalf, by force or by threat, may rescind the contract.

(b) A warning given in good faith that a right will be exercised does not constitute a threat for the purposes of this section.

18. Exploitation

A person who entered into a contract because the other party or another on that party's behalf exploited that person's distress, mental or physical weakness or inexperience, and the terms of the contract are unreasonably worse than customary, may rescind the contract.

19. Partial rescission

Where the contract can be divided into parts and the ground for rescission relates to only one of its parts, that part alone may be rescinded; however, if it may be presumed that the party entitled to rescind would not have entered into the contract but for that ground, that party may rescind that part or the entire contract.

20. Manner of rescission

Rescission of the contract shall be effected by notice from the contracting party to the other party within a reasonable time after learning of the ground for rescission, and, in a case of duress, within a reasonable time after learning that the duress has ceased.

21. Restitution following rescission

Upon rescission of the contract, each party must restore to the other party what it received under the contract, and, if restitution is impossible or unreasonable, pay the other party the value of what it received.

22. Preservation of remedies

The provisions of this Chapter shall not derogate from any other remedy.

23. Form of a contract

A contract may be made orally, in writing or in another form, unless a particular form is a condition of its validity under statute or under an agreement between the parties.

24. Content of a contract

The content of a contract may be whatever the parties have agreed.

25. Interpretation of a contract

(a) [Wording following Amendment No. 3, published on 7 January 2026; see the application note below.]

(1) The manner of interpreting a contract and the evidence admissible for its interpretation shall be as agreed by the parties; if the parties have not agreed on the manner of interpreting the contract, the contract shall be interpreted in accordance with the other provisions of this Law.

(2) A business contract that contains no provisions concerning the manner of interpretation shall be interpreted according to its wording alone, unless one of the following applies:

(A) the wording of the contract alone produces a result that is unreasonable;

(B) the wording of the contract alone reveals a contradiction between different provisions in it.

(3) A contract that is to be interpreted according to its wording alone, whether under paragraph (1) or paragraph (2), and in which the provisions of paragraph (2)(A) or (B) apply, shall be interpreted in accordance with the other provisions of this Law, including paragraph (4).

(4) A contract that is not a business contract, a standard contract even if it provides otherwise, and an employment contract or a collective agreement shall be interpreted according to the parties' presumed intention, as it is inferred from the contract and the circumstances of the matter; the relative weight given to the wording of the contract and to the circumstances of the matter shall be based, among other things, on the following considerations:

(A) the relationship between the parties, including information disparities or a special relationship of trust between them;

(B) the level of detail in the contract;

(C) the parties' professional experience and the legal representation they had in relation to the drafting of the contract.

(5) For the purposes of this subsection—

(A) parties who are not represented by an advocate in relation to the drafting of the contract shall be regarded as parties who have not agreed on the manner of interpretation under paragraph (1);

(B) an agreement between the parties that conflicts with subsection (b1) shall have no effect.

(b) Where a contract is capable of different interpretations, an interpretation that upholds it is preferable to an interpretation under which it is void.

(b1) Where a contract is capable of different interpretations and one of the parties to the contract had an advantage in shaping its terms, an interpretation against that party is preferable to an interpretation in that party's favour.

(c) Expressions and stipulations in a contract that are customarily used in contracts of the same type shall be interpreted according to the meaning attributed to them in those contracts.

(d) Sections 2, 4, 5, 6, 7, 8 and 10 of the Interpretation Law, 5741–1981, and section 57C of the Evidence Ordinance [New Version], 5731–1971, shall also apply, with the necessary modifications, to the interpretation of a contract, if there is no other provision concerning the matter in question and nothing in that matter or its context is inconsistent with such application.

26. Supplementation of particulars

Particulars not determined in or pursuant to the contract shall be in accordance with the practice existing between the parties, and, in the absence of such a practice, in accordance with the practice customary in contracts of the same type; these particulars shall also be regarded as agreed.

27. Conditional contract

(a) A contract may be dependent on the fulfilment of a condition (hereinafter—a suspensive condition), or may cease upon the fulfilment of a condition (hereinafter—a resolutive condition).

(b) Where a contract requires the consent of a third party or a licence under an enactment, obtaining the consent or licence is presumed to be a suspensive condition.

(c) Where a contract is subject to a suspensive condition, each party is entitled to remedies to prevent its breach even before the condition has been fulfilled.

28. Frustration of a condition

(a) Where a contract is subject to a suspensive condition and one party prevents the fulfilment of the condition, that party is not entitled to rely on its non-fulfilment.

(b) Where a contract is subject to a resolutive condition and one party brings about the fulfilment of the condition, that party is not entitled to rely on its fulfilment.

(c) The provisions of this section shall not apply if the condition was something the party was, under the contract, free to do or not to do, and shall not apply if the party prevented or brought about the fulfilment of the condition without intent and without negligence.

29. Invalidation of the contract or the condition

Where a contract is subject to a condition and the condition is not fulfilled within the period fixed for that purpose, or, in the absence of such a period, within a reasonable time after formation of the contract, then, if it was a suspensive condition, the contract is invalidated, and, if it was a resolutive condition, the condition is invalidated.

30. Invalid contract

A contract whose formation, content or purpose is unlawful, immoral or contrary to public policy is void.

31. Application of provisions

The provisions of sections 19 and 21 shall apply, with the necessary modifications, also to the invalidity of a contract under this Chapter; however, in a case of invalidity under section 30, the court may, if it considers it just to do so and on such conditions as it considers appropriate, exempt a party from the obligation under section 21, in whole or in part, and, to the extent that one party has performed its obligation under the contract, require the other party to perform the corresponding obligation, in whole or in part.

32. Contract for a game, lottery or wager

(a) A contract for a game, lottery or wager under which a party may gain a benefit and the gain depends on chance, guessing or a fortuitous event more than on understanding or ability does not give rise to a claim for enforcement or compensation.

(b) The provisions of this section shall not apply to a game, lottery or wager regulated by statute or for the holding of which a permit has been given under statute.

33. Contract for awarding grades

Where a contract provides for a grade, degree, prize or the like to be awarded according to the decision or assessment of one of the parties or of a third party, the decision or assessment under the contract is not a matter for determination by a court.

34. Conferral of the right

An obligation undertaken by a person in a contract for the benefit of a person who is not a party to the contract (hereinafter—the beneficiary) confers on the beneficiary the right to demand performance of the obligation, if an intention to confer that right is implied by the contract.

35. Rejection of the right

The beneficiary's right to demand performance of the obligation is cancelled retroactively if the beneficiary notifies one of the parties to the contract of rejection of the right within a reasonable time after one of them has notified the beneficiary of it.

36. Cancellation of the right

(a) As long as neither party has notified the beneficiary of the beneficiary's right under the contract, the parties may vary or cancel that right by varying the contract.

(b) In the case of an obligation to be performed upon a person's death—under an insurance contract, membership of a pension fund or a provident fund, or a similar ground—the creditor may, by notice to the debtor or by a will of which notice has been given to the debtor, cancel the beneficiary's right or substitute another beneficiary, even after the beneficiary has learned of the right.

37. Defences against the beneficiary

Any defence available to the debtor against the creditor in connection with the obligation shall also be available against the beneficiary.

38. Preservation of the creditor's right

The beneficiary's right does not derogate from the creditor's right to demand that the debtor perform the obligation for the beneficiary's benefit.

39. Performance in good faith

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

40. By whom performance may be effected

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

41. Time for performance

An obligation for which no time for performance has been agreed shall be performed within a reasonable time after formation of the contract, at a time of which the creditor has given the debtor reasonable advance notice.

42. Early performance

An obligation may be performed before it falls due, provided that the debtor gives the creditor reasonable advance notice and that doing so does not prejudice the creditor.

43. Postponement of performance

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

(1) if timely performance is prevented by a reason attributable to the creditor—until the impediment has been removed;

(2) if performance is conditional on prior performance of the creditor's obligation—until that obligation has been performed;

(3) if the parties must perform their obligations concurrently—as long as the creditor is not ready to perform the obligation imposed on the creditor.

(b) Where the time for performance of the obligation has been postponed as stated in subsection (a), the court may, if it considers it just to do so, order the creditor to pay compensation for the damage caused to the debtor by the postponement, even if the matter does not constitute a breach of contract by the creditor, and, if the debtor was required to make periodic payments until performance of the obligation whose time has been postponed, exempt the debtor from those payments during the postponement.

44. Place of performance

(a) An obligation for which no place of performance has been agreed shall be performed at the creditor's place of business, and, if the creditor has no place of business, at the creditor's permanent place of residence.

(b) If the creditor changes the creditor's place of business or residence after formation of the contract, the creditor shall bear the additional expenses resulting from performance of the obligation at the new place.

45. Performance of average kind and quality

An obligation to provide an asset or a service whose kind or quality has not been agreed shall be performed by providing an asset or service of average kind and quality.

46. Performance by payment of a reasonable amount

An obligation to pay for an asset or service, where the amount has not been agreed, shall be performed by paying an amount that was reasonable in the circumstances at the time the contract was formed.

47. Performance in Israeli currency

An obligation to pay 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 day of payment.

48. Conditional performance

Where, for the performance of an obligation, the debtor has undertaken another obligation towards the creditor or has transferred to the creditor a right against a third party, the parties are presumed not to have intended to extinguish the original obligation unless the other obligation or the right has been satisfied.

49. Appropriation of payments towards one obligation

A sum given in discharge of one obligation shall be appropriated first towards the expenses for which the debtor has become liable in respect of that obligation, then towards interest, and finally towards the obligation itself.

50. Appropriation of payments towards several obligations

Where a sum is given to a creditor when several obligations are due from the debtor, the debtor may, at the time of payment, specify the obligation towards which the sum is to be appropriated; if the debtor does not do so, the creditor may do so.

51. Choice between alternative obligations

(a) In the case of alternative obligations, the debtor may, by notice to the creditor within the period fixed for that purpose, or, in the absence of such a period, within a reasonable time before performance falls due, choose the obligation to be performed; if the debtor does not do so, the creditor may choose the obligation by notice to the debtor.

(b) If it has been agreed that the right of choice belongs to the creditor and the creditor has not exercised it within the period fixed for that purpose, or, in the absence of such a period, within a reasonable time before performance falls due, the debtor may choose the obligation by notice to the creditor.

52. Substitute performance

Where performance of an obligation has become impossible and, as a result, the debtor has a right to compensation or indemnification against a third party, the debtor must transfer that right, or what was received under it, to the creditor up to the value of the obligation.

53. Set-off

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

(b) An obligation may not be set off if the right to its performance is not subject to attachment.

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

54. Multiple debtors

Two persons who owe one obligation are presumed to be jointly and severally liable.

55. Joint and several liability

(a) Where two persons are jointly and severally liable, the creditor may demand performance of the obligation, in whole or in part, from both together or from either separately, provided that the creditor does not recover more than is due.

(b) If the obligation of one of the debtors is void or is rescinded, the obligation of the other is also void, unless the invalidity results from a defect in the capacity or representation of the first debtor.

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

56. Burden of the obligation between the debtors

(a) Two persons who owe one obligation are presumed, as between themselves, to bear the burden of the obligation in equal shares.

(b) A debtor who has given the creditor, in performance of the obligation, more than that debtor's share of the burden of the obligation is entitled to recourse against the other debtor and to recover from that debtor in accordance with their respective shares.

(c) Where there are more than two debtors and there is no reasonable possibility of obtaining recourse and recovery from one of them, the remaining debtors shall bear that debtor's share in proportion to their respective shares.

(d) Where the obligation of one debtor has been rescinded as stated in section 55(b) and the rescission results from a defect in that debtor's capacity or representation, the other has no right of recourse against that debtor; where one debtor has been released as stated in section 55(c) and the release does not release the other, the release also does not prejudice the right of recourse against the released debtor under this section.

57. Limitation of the right of recourse

A debtor who has performed the obligation beyond that debtor's share is not entitled to recourse against another debtor to the extent that the first debtor could have been discharged from liability to the creditor by virtue of a defence known to that debtor and not raised in defence.

58. Transfer of securities

(a) A charge or other right given to the creditor as security for the obligation shall pass to a debtor who has performed the obligation beyond that debtor's share, to secure that debtor's right of recourse against another debtor, insofar as this does not prejudice the creditor.

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

59. Multiple creditors

(a) Where one obligation is owed to two persons, each is presumed to be entitled to demand its performance, provided that they do not recover from the debtor more than the debtor owes; the debtor may perform the obligation towards one of the creditors, at the debtor's choice, as long as no judgment has been given in favour of the other creditor.

(b) The creditors are presumed to hold equal shares in the right to performance; if the obligation has been performed in favour of one of them, the other may demand their own share from that creditor.

60. Manner and time of delivery of notice

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

(b) Where this Law refers to delivery of notice, the notice is deemed delivered at the time it reaches the addressee or the addressee's address.

61. Application

(a) The provisions of this Law shall apply where another statute contains no special provisions concerning the matter in question.

(b) The provisions of this Law shall also apply, insofar as appropriate to the matter and with the necessary modifications, to legal acts that do not constitute a contract and to obligations that do not arise from a contract.

62. Repeals

The following are repealed—

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

(2) section 64 of the Ottoman Law of Civil Procedure of 2 Rajab 1296 (21 June 1879).

63. Independence of the Law

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

64. Commencement and transitional provision

This Law shall commence on 1 Elul 5733 (29 August 1973); the previous law shall continue to apply to contracts formed before the commencement of this Law.

Passed by the Knesset on 9 Nisan 5733 (11 April 1973).

Golda Meir — Prime Minister

Yaakov S. Shapira — Minister of Justice

Shneur Zalman Shazar — President of the State