What is contract enforcement?
Contract enforcement is a situation in which one of the parties to a contract, who has violated it, is forced to act in accordance with the provisions of the contract, even if he does not want to or if it is not economically beneficial for him.
Most often, enforcement of a contract will be carried out by issuing a judicial decision. Violation of the judicial decision may lead to severe sanctions against the violator, which makes non-compliance with the judicial decision unprofitable.
A contract can also be enforced through arbitration. The sanction for non-performance of the contract after the arbitration process can be similar or identical to the sanction that a court might impose on the violator.
Let's illustrate the enforcement of a contract with a simple example: Shlomi decided to purchase a luxury car from my father worth half a million shekels. Shlomi paid my father a small down payment and promised to pay the majority of the amount shortly before the car was delivered. My father ordered the car from the manufacturer on the assumption that Shlomi would pay him the entire balance. Suddenly Shlomi informs my father that he is no longer interested in the car and that he does not intend to pay him the balance. At this point, my father is in a serious problem because he has already ordered the car for Shlomi from the manufacturer. In such a situation, my father can file Claim for breach of contract Against Shlomi and demand contract enforcement.
On what basis can a contract be enforced?
A remedy for enforcing a contract may be sought by virtue of provisions חוק החוזים (תרופות בשל הפרת חוזה), תשל"א-1970.
"אכיפה" מוגדרת בחוק החוזים כך:
"אכיפה" – בין בצו לסילוק חיוב כספי או בצו עשה אחר ובין בצו לא-תעשה, לרבות צו לתיקון תוצאות ההפרה או לסילוקן;
The relevant section for remedies for breach of contract is Section 2, which states as follows:
Breach of contract, The injured party is entitled to demand its enforcement. or cancel the contract, and is entitled to compensation, in addition to or in lieu of one of the aforementioned remedies, all in accordance with the provisions of this law.
That is, by virtue of this section, it is possible to sue for the enforcement of a contract or its cancellation. Plus financial compensationIt is not possible to demand both enforcement and Contract cancellationThese are two remedies that contradict each other.
A contract cannot be enforced in any case.
Article 3 of the Contracts Law determines in which situations the contract cannot be enforced:
The injured party is entitled to enforce the contract, unless one of the following occurs:
- The contract is unenforceable;
- Contract enforcement is coercion to do, or receive, personal work or personal service;
- Execution of the enforcement order requires an unreasonable degree of supervision by a court or enforcement office;
- Enforcement of the contract is unjust in the circumstances.
By virtue of Section 4 of the Contracts Law, the court may also set conditions for the purpose of enforcing the contract. Section 4 states as follows:
The court may condition the enforcement of the contract on the fulfillment of the injured party's obligations or on ensuring their fulfillment or on other conditions required by the contract according to the circumstances of the case.
Non-enforcement of a contract by virtue of a Supreme Court ruling
The Supreme Court's ruling is a very important ruling because it is binding on all other courts. The Supreme Court recognized that it is not possible to order the enforcement of a contract in other cases not explicitly specified in Section 3 mentioned earlier, for example when it concerns a business dispute regarding a distribution contract. In such cases, according to the court, consideration should be given to providing financial compensation and severing relations between the parties.
פסיקת בית המשפט העליון בתיק רע"א 5292/24 שיראור סחר ישיר בע"מ נ' NIngbo AUX IMP & EXP.CO.LTD (פסק דין מחודש אוגוסט 2024) קבעה בעניין זה כך:
לא למותר להוסיף כי בעניינם של חוזי הפצה, נקבע לא אחת כי "As a general rule, parties to this type of agreement whose relations have run aground should not be forced to continue business cooperation against the will of either of them, and the appropriate remedy for such cases is not an injunction or a temporary injunction, but rather a remedy of monetary compensation." (רע"א 7246/11 חיים לוי סוכנות רכב מוסך איזורי ירושלים (1998) בע"מ נ' קרסו מוטורס בע"מ, פסקה 7 (16.1.2012); ראו גם: רע"א 2479/06 ארגון סוכני דואר נ' חברת דואר ישראל בע"מ, פסקה 11 (9.7.2007); רע"א 5843/05 איגוד ערים לאיכות הסביבה דרום יהודה נ' שרון דן השקעות בע"מ, פסקה 6 (13.12.2005); רע"א 5284/95 ג'יג'י מערכות קוסמטיקה בע"מ נ' של סוכנויות יופי בע"מ (24.10.1995)).
Can an oral contract be enforced?
Not everyone knows that they don't have to Sign a contract To create a binding commitment. You can also cut Oral contract (Except for certain cases such as real estate transactions – in these cases there is a requirement to draw up a written contract).
To the extent that it can be proven that an oral contract was indeed made, it can also be enforced in a situation where one of the parties breaches it. However, proving the existence of an oral contract is sometimes a very difficult, if not impossible, task, especially if there is no recording of a conversation relating to the making of the oral contract, or if there are no witnesses who can testify that an oral contract was indeed made.
This is precisely the reason why people tend to make agreements in writing, because it is relatively easy to prove the terms of the agreement, and there is usually no need to resort to witnesses or recorded conversations.
If the injured party from a breach of an oral contract succeeds in proving the terms of the agreement reached by the parties orally, and proves that the terms of the agreement were violated, he will be able to obtain a remedy for enforcing the contract in court.
How to act after a breach of contract if you want to enforce it?
As explained at the beginning of this article, not everyone can order the enforcement of a contract, but rather the matter is usually left to the discretion of the court (or arbitrator).
Sometimes a breach of contract creates immediate and significant damage and it is not always possible to wait a year or two until the lawsuit is fully resolved and the court orders the contract to be enforced. In these situations, the lawsuit can be filed and with it a request for Temporary remediesThe purpose of interim relief is to ensure that the lawsuit between the parties is not conducted in vain, and that in the end it does not turn out that the relief sought (enforcement of the contract) is not possible at all.
In these cases, it is possible to consider requesting temporary relief in the form of Order made or injunction In order to establish the existing situation. In some cases, it is even possible to demand the imposition of Temporary seizure order For funds owed to the injured party by virtue of the contract.
If we use the example at the beginning of the article regarding the purchase of the car, then in order to ensure the possibility of enforcing the contract, we can request from the court an injunction prohibiting Shlomi from purchasing another replacement car, as well as a temporary seizure order on the funds that Shlomi undertook to pay my father for the car.
Of course, each case must be examined on its own merits, but the bottom line is that we must always think about how to act to ensure that at the end of the procedure the plaintiff will not be faced with a broken trough and will not be able to receive relief in the form of contract enforcement or financial compensation.
In conclusion
Enforcing a contract is a situation where you demand that the contract be performed. Usually, to enforce a contract, you will have to file a lawsuit in court to obtain a judicial decision on the matter.
Not in every situation is contract enforcement possible, and the Contract Law and even Supreme Court rulings recognize cases in which a contract cannot be enforced. In cases where a contract cannot be enforced, monetary compensation will usually be awarded.
It is not possible to demand enforcement of a contract and cancellation of a contract in the same lawsuit, because these are conflicting remedies, and the plaintiff must choose one of the options.
When filing a claim to enforce a contract, it is sometimes worth considering filing a request for interim relief to ensure that you can obtain the contract enforcement relief at the conclusion of the claim.
