Guide to litigation in Israel: procedures and principles in Israeli law

9 May, 2023

This article is the third in a series on litigation in Israel and outlines noteworthy procedures and principles in Israeli law (for the first and second article in the series, see “Guide to litigation in Israel: Israeli legal system and service of process” and “Guide to litigation in Israel: class actions“).

Good faith

Great emphasis is placed on the principle of “good faith” under Israeli law. The duty of a party to act in good faith is often sufficient to establish liability (or rights), and sometimes even to create duties towards a party harmed by conduct in bad faith – even if said obligations are not expressly included in the original agreement between the parties.

In practice, the courts consider themselves authorised to provide broad interpretations of the language of the contract and enforce contractual obligations that are not expressly (or even implicitly) set out in the agreement between the parties.

The duty to act in good faith was set in the Israeli Law of Contracts and applies to all the contractual stages – negotiations, the execution of the agreement and termination thereof.

Over the years, the application of the principle was extended beyond the Law of Contracts. In accordance with well-established and binding Israeli case law, the principle of good faith now applies to all areas of private law.

Unjust enrichment

Unjust enrichment is a recognised and well-established cause of action under Israeli law. It is often used by the injured party in situations where there is difficulty proving damages (or where it is impossible to do so), but where the injured party can show that there is enrichment resulting from a breach of contract.

Under such circumstances, a party might be required to reimburse the other party for its enrichment. Under Israeli law, a plaintiff must prove three cumulative elements in an unjust enrichment claim:

  • the existence of enrichment;
  • that the enrichment is at the expense of the plaintiff; and
  • that the enrichment is unlawful.

Standard form contracts

A standard form contract is a contract with a uniform formulation intended for many engagements. Generally, the contract is drafted by one party to be used in agreements with its customers and is usually presented to the customer as a finished product that cannot be negotiated.

The Standard Form Contracts Law No. 5743-1982 was enacted to protect consumers party to a standard contract. The law stipulates that in circumstances where – considering the entirety of the contract’s provisions and the context of the engagement – a specific clause of a standard form contract is found to be exploitative or provides an unfair advantage to a service provider, the court is empowered to invalidate it. The law also includes a list of instances which are presumed to be exploitative.

Numerous claims are filed under this cause of action, alleging that the provisions set out in agreements dictated by service providers are exploitative and, therefore, are not binding.

Many class actions are based on claims alleging the exploitative nature of clauses in standard form contracts – such as user agreements of international online platforms.

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