A supplier misses a milestone, a customer stops paying, or a service remains incomplete. Before sending a cancellation notice, put the promised performance beside the actual events. Identify the breach, the contractual provisions, any extension already given and the decision the business needs to make.
For a commercial contract governed by Israeli law, cancellation for breach requires attention to the classification of the breach, the opportunity to perform where required, the scope of cancellation and the notice. Build the file around those questions, then plan what happens to payments, deliveries and work already completed.
The right to cancel depends on the type of breach, on whether a cure period was given, and on the timing and form of the notice.
Start with the contract and the breach
Collect the signed agreement, schedules, orders and later amendments. Mark the obligation said to have been breached and any conditions on its performance. A delivery date may depend on an advance payment, approved specifications or access to a site. Record what each party was required to do and what the documents show actually happened.
Separate cancellation for breach from an agreed right to end the contract without relying on breach. Identify the governing law, the contracting entities and the agreements or orders affected.
What makes a breach fundamental?
Section 6 of Israel’s Contracts (Remedies for Breach of Contract) Law, 1970 defines a fundamental breach in two ways: a breach about which it may be assumed that a reasonable person would not have entered that contract had they foreseen the breach and its consequences; or a breach agreed in the contract to be fundamental.
The same section qualifies blanket clauses. A provision that makes breaches fundamental without distinguishing between them has no effect unless it was reasonable when the contract was made. When reviewing such a clause, read its wording alongside the particular obligation and the circumstances of the agreement.
Section 7(a) gives the injured party a right to cancel where the breach is fundamental. Prepare the documents supporting the classification: the relevant clause, the commercial purpose of the obligation and the consequences of the breach. Keep a disputed factual account separate from the legal basis for cancellation.
Non-fundamental breach: extension, performance and fairness
Under section 7(b), where the breach is non-fundamental, the injured party may cancel after first giving the breaching party an extension to perform and the contract has not been performed within a reasonable time after the extension was given. The section makes this subject to cancellation not being unjust in the circumstances. An argument that cancellation was unjust will not be heard unless the breaching party objected within a reasonable time after the cancellation notice was given.
Keep the extension notice, its delivery record and the performance history together. Identify what performance was requested, the period allowed, any response and what remained outstanding. If an objection to cancellation is received, record its date and grounds for review alongside the cancellation notice.
For a hypothetical installation project, the parties may disagree about whether missing equipment prevented completion or whether the customer failed to provide access. A useful chronology lists the requested access, delivery records, site visits and any extension, rather than treating every unfinished task as the same breach.
Does the whole contract need to be cancelled?
Section 7(c) addresses a contract that can be divided into parts. If one part is breached in a way that gives grounds to cancel that part, the injured party is entitled to cancel only the breached part. If the breach is also a fundamental breach of the whole contract, the injured party may cancel the breached part or the whole contract.
Map the affected work, order or stage against the rest of the agreement. Explain whether the other parts can be treated separately and identify what supports the proposed scope. A notice should make clear whether it concerns a particular part or the entire contract.
Calculate the notice window from the correct event
Section 8 provides for cancellation by notice from the injured party to the breaching party within a reasonable time after learning of the breach. In the case covered by section 7(b), and in any other case where the injured party first gave an extension to perform, the notice must be given within a reasonable time after that extension expired.
Record both dates where relevant: when the breach became known and when the extension expired. Add the documents establishing each date and the communications sent in between. Keep the statutory notice question separate from any contractual notice period or delivery requirement.
A single chronology helps management, procurement and finance work from the same account of events. Record later orders, payments, accepted deliveries and discussions about continued performance so they can be considered when preparing the company’s position.
Choose and document the delivery method
Section 21(a) says a notice under the Law is to be given in the manner agreed by the parties. If no manner was agreed, it is to be given by registered mail or another method customary in the circumstances. Check the contractual notice clause for the recipient, address, delivery method and any copy requirement.
Section 21(b) permits an injured party that gave notice as provided in subsection (a), with grounds to assume that it reached its destination on time, to rely on it even if it arrived late or did not arrive at all. Preserve the basis for that assumption, the notice itself and the sending and delivery records.
A draft notice should identify the agreement, the breach relied on, any extension and the intended scope of cancellation. Check the sender’s authority and the contracting recipient. Retain the exact version sent and attachments, together with replies and any objection.
Prepare for restitution after cancellation
Section 9(a) requires the breaching party, once the contract is cancelled, to return what it received under the contract to the injured party, or pay its value if return is impossible or unreasonable or if the injured party chooses that alternative. The injured party must likewise return what it received to the breaching party, or pay its value if return is impossible or unreasonable or if the injured party chooses that alternative. The choice identified in both limbs belongs to the injured party.
Under section 9(b), where only part of the contract is cancelled, those rules apply to what the parties received under that part. Prepare a schedule of payments, goods and other performance received by each side. Distinguish the proposed return of an item from a proposed value payment, and preserve the records supporting quantity, condition and value.
For the statutory framework, see the original published text of the Law. Sections 6 to 9 address fundamental breach, the right to cancel, notice and restitution; section 21 addresses the method of giving notice.
Build a decision file before sending
- Agreement: the signed contract, schedules, orders and amendments.
- Breach: the obligation, events, evidence and date of knowledge.
- Extension: the notice, delivery, expiry and subsequent performance.
- Scope: the part to be cancelled and its relationship to the whole.
- Delivery: the recipient, method and supporting records.
- Consequences: what each side received and the proposed restitution.
- Next decision: the operational deadline and the response received.
For the operational notice checklist, see our guide to a termination notice to an Israeli company. Where the issue is a delivery delay, use our guide to late delivery from an Israeli supplier to organise the supply documents. Where the parties discussed a revised scope or milestone, use the guide to change orders with an Israeli service provider to separate an agreed change from an unresolved proposal.
Reviewing the company’s next step
We review the agreement, breach chronology, extension history and proposed notice together. The review connects the legal basis for cancellation with the intended scope, the delivery record and the practical consequences for the business.
Bring the contract set, the proposed notice or notice received, the key correspondence and a short list of current deadlines. Identify whether the company is considering cancellation, responding to a notice or planning the return of payments or property.
Contact RNC Group before sending a notice. Start with the contract, the breach relied on and any deadline already running. Sensitive documents can follow through an appropriate channel.
This article is for general information only and does not constitute legal advice. Laws and their application depend on the facts and jurisdiction and may change. Although we aim to keep this information accurate and current, we do not guarantee that it is complete or up to date. The article may contain omissions or errors. Reading this article does not create an attorney-client relationship with RNC Group. Before making a decision or taking action, seek advice from a qualified lawyer in the relevant jurisdiction.