Cancellation of a real estate sales agreement – ​​Is it possible to cancel a sales contract due to a mistake?

Canceling a real estate sale agreement is a legal action. Possible, but will usually involve considerable difficulties because usually after the transaction is completed, the interests of the seller and the buyer do not coincide, and if one party wants to cancel the sales agreement, this does not mean that the other party will also want to do so.

In this situation, the party interested in canceling the agreement will be forced to file a lawsuit with the court to cancel the real estate sale agreement, and to specify why, in his opinion, there is a need to order the cancellation. Cancellation of the agreement. מכיוון שסוגיית ביטול הסכם מכר מקרקעין כרוכה בסכומי כסף גבוהים במיוחד, אתם יכולים לצפות "למלחמה" ארוכה ומתישה בבית המשפט, משום שכל צד ינסה לעשות הכל כדי לא להפסיד בבית המשפט (ולא להפסיד הרבה מאוד כסף).

A situation in which a court does not order the cancellation of a real estate sale agreement

Before detailing the situations in which a court may order the cancellation of a real estate sales agreement, it is useful to understand the situation in which the likelihood of a real estate sales agreement being canceled is very low to zero.

We will illustrate this with an example: Shlomi sold his father a piece of land for a million shekels. The day after the transaction was completed, Shlomi received an offer to purchase the land for two million shekels from another person. Shlomi immediately contacted his father and announced the cancellation of the land sale agreement, because now he could sell the land to another person for double the price.

In our example, Shlomi wants to cancel the deal due to an error in the viability of the deal. Contract law Does not allow this.

Transaction feasibility error

Section 14 of the Contracts Law specifies the circumstances in which a real estate sale agreement (and other types of contracts) may be voided due to a mistake. However, Section 14(d) expressly states in which circumstances a voiding of an agreement may not be voided due to a mistake.

Section 14(d) states as follows:

"טעות", לענין סעיף זה וסעיף 15 – בין בעובדה ובין בחוק, Except for an error that is only in the feasibility of the transaction.

כלומר, סעיף 14(ד) קובע שאם מדובר בטעות שהיא טעות בכדאיות העסקה, לא ניתן לבטל את ההסכם מחוק טענת "טעות" לפי חוק החוזים (This does not mean that other legal claims cannot be raised to cancel the agreement.).

Cancellation of a real estate sale agreement due to an error – the legal source

The relevant legal source for the issue of canceling a real estate sales agreement due to an error is set out in Section 14 of the Contracts Law, which states as follows:

(A) A person who entered into a contract due to an error and it can be assumed that without the error he would not have entered into the contract and the other party knew or should have known about it, is entitled to cancel the contract.

(on) If a person who entered into a contract due to a mistake and it can be assumed that but for the mistake he would not have entered into the contract and the other party did not know and should not have known about it, the court may, at the request of the party who made the mistake, cancel the contract, if it deems it just to do so; if it does so, the court may order the party who made the mistake to pay compensation for the damage caused to the other party due to the conclusion of the contract.

(third) An error is not a ground for rescission of the contract under this section, if the contract can be performed by correcting the error and the other party has notified, before the contract is rescinded, that he is willing to do so.

(d) "טעות", לענין סעיף זה וסעיף 15 – בין בעובדה ובין בחוק, להוציא טעות שאינה אלא בכדאיות העסקה.

It is important to note a number of essential points relevant to Article 14 of the Contracts Law:

1. Cancellation of a real estate sale agreement can be claimed both under Section 14(a) and under Section 14(b). A person who claims the cancellation of a real estate sale agreement pursuant to Section 14(a) must prove that the opposing party knew or should have known about the mistake.
2. לבית משפט יש בכל מקרה סמכות להורות על ביטול הסכם מכר מקרקעין עקב טעות מכוח סעיף 14(ב) "אם ראה שמן הצדק לעשות זאת". במקרה כזה בית המשפט רשאי לחייב את אחד הצדדים בפיצוי כספי בגין הנזק שנגרם לצד שכנגד.
3. לא בכל מקרה בית המשפט חייב להורות על ביטול עסקת מכר מקרקעין עקב טעות. במקרים מסוימים בית המשפט יעדיף לפסוק פיצוי כספי לאחד הצדדים כדי "לאזן" או להפחית את הנזק שנגרם לו עקב הטעות בביצוע העסקה.

Court ruling regarding cancellation of real estate sales agreement due to error

בית המשפט המחוזי בנצרת דן בסוגיית ביטול עסקת מכר מקרקעין עקב טעות (ת"א 53537-10-18 יוסף כופטייל נ' גיא שוורץ, verdict (dated 15.8.2023).

In this case, the seller went to court and demanded an order to cancel a real estate sale transaction due to an error. In this case, it turned out that after the transaction was completed, the seller had to pay taxes in excess of the amount for which the real estate was sold, which made the transaction economically irrational.

The court ruled, among other things, as follows:

After reviewing the pleadings, the parties' affidavits and the evidence presented to me, and after examining the parties' arguments, I have come to the conclusion that the claim should be accepted due to the existence of an error as stated in Section 14(b) of the Contracts Law, which justifies the cancellation of the sales agreement, while charging the plaintiff with compensation in view of the damage caused to the defendant due to the conclusion of the agreement. I will discuss below mainly the parties' arguments which led me to this conclusion.

…

I will make it clear right now that I did not find that the plaintiff was entitled to announce the cancellation of the sales agreement under Section 14(a) of the Contracts Law, when he did not meet the burden of showing that there was a flaw in the defendant's conduct prior to the parties signing the sales agreement, in a way that he knew or should have known about the existence of the plan to change the land's zoning. On the other hand, I found that it was justified to order the cancellation of the sales agreement under Section 14(b) of the Contracts Law.

…

In my opinion, there can be no dispute that if the plaintiff had been aware of these preliminary proceedings, related to the planning status of the land and the high likelihood of changing its purpose, in a short time, from agriculture to residential, he would not have entered into the sales agreement with the defendant, in which he sold the land for a consideration of only 222,682 NIS.

לתמורה ששולמה עבור המקרקעין חשיבות רבה בבחינת קיומה של "טעות", שכן בענייננו, חייב הסכם המכר את התובע לשלם את יתרת מס השבח בגין העסקה, אשר עמדה במקור על סך 531,836 ₪, ולאחר הסכם הפשרה על סך 192,664 ₪.

Indeed, at the end of the day, after the plaintiff sent the notice of cancellation of the sales agreement, the defendant hurried and paid the tax authority the appreciation tax out of his own pocket, but there is no dispute that he was not obligated to do so by virtue of the sales agreement. Under these circumstances, I believe that there can be no dispute that we are dealing with an agreement that is devoid of any economic logic, which in turn indicates a fundamental error in the plaintiff's signature on the sales agreement.

…

In the circumstances of the case before us, I am satisfied that enforcing the sale agreement would cause the plaintiff greater injustice and damage than would be caused to the defendant if it were annulled. At the end of the day, we are concerned with a plaintiff who sold real estate for an amount that is a fraction of its true value, a result that the sense of justice finds difficult to accommodate.

אכן, כפי שיובהר בהמשך, בהתנהלותו של התובע לאחר החתימה על הסכם המכר נפלו פגמים, הן בהתנהלותו מול הנתבע והן בנוגע לפרק הזמן הרב שחלף בטרם הודיע "רשמית" על ביטול ההסכם. יתירה מכך, אינני מקל ראש בקושי ובעוגמת הנפש שייגרמו לנתבע. עם זאת, בשורה התחתונה סבור אני כי הפגמים בהתנהלות התובע, כמו גם הנזק שייגרם לנתבע כתוצאה מביטול הסכם המכר, ניתנים לאיזון בפיצוי כספי, כאמור בסיפא של סעיף 14(ב) לחוק החוזים, אשר יביאו לתוצאה צודקת יותר בנסיבות העניין, מאשר אכיפת הסכם המכר (וראו לעניין זה עניין אליאסיאן, פסקה 16 לחוות דעתה של כב' השופטת וילנר).

….

לנוכח כל המפורט לעיל, אני מקבל את התביעה ומורה על ביטול הסכם המכר מיום 27.7.2016. התובע מנגד, ישיב לנתבע כל סכום שקיבל מכוח הסכם המכר בצירוף הפרשי הצמדה וריבית החל מיום חתימת הסכם המכר. כן יוחזר לצדדים כל סכום כספי המוחזק בנאמנות אצל עו"ד בטשא, למעט כל סכום עבור שכר טרחתו, באם קיים.

Due to the damage caused to the defendant due to the conclusion of the sales agreement, as well as due to the defects in the plaintiff's conduct, I found that the plaintiff should be required to pay the defendant compensation in the amount of 140,000 NIS.

In conclusion

Canceling a real estate sale transaction due to a mistake is possible. Although this is not a simple legal procedure, but rather a long and complex one (since these transactions usually involve significant sums of money and neither party is willing to lose out), it is certainly possible to reach a situation in which a court orders the cancellation of the transaction.

The demand for cancellation of a real estate sale transaction can be based on Section 14 of the Contracts Law. It is very important to pay attention to the terms and requirements of the various subsections of Section 14, in order to understand exactly what to specify within the framework of Claim To be submitted to the court.

You cannot demand the cancellation of a real estate sale transaction due to an error, if it is a mistake regarding the viability of the transaction.

Frequently Asked Questions Regarding Cancellation of a Real Estate Sales Agreement