Lawyers like to believe that a well-drafted contract prepares for the unknown. But in Israel, where the unexpected is often tragically routine, even the most cautious agreements can be no match for reality.
We recently handled a case that illustrates this complexity with uncomfortable clarity.
At first glance, it appeared to be a straightforward transaction. A property sale agreement was signed, and ownership of the property was to transfer to the purchaser only upon final payment. This is a common structure under Israeli law, where the initial contract represents a commitment to complete the transaction rather than an immediate transfer of title.
Before that final step could occur, however, the property was destroyed, a casualty of ongoing regional hostilities. It is here that the legal concept of force majeure comes into play. Under Israeli contract law, a party may be excused from liability for breach if performance becomes impossible due to unforeseen and uncontrollable events such as missile strikes.
Yet while force majeure may relieve a party from blame, it does not alter fundamental principles of property law. Until the last payment is made and ownership formally transferred, the seller remains the legal owner, and with ownership comes risk. In this case, the destroyed property remained the seller’s responsibility. The purchaser, if they wish, may insist on restoration or withdraw from the agreement altogether. But here, a uniquely Israeli twist complicates matters further.
In several cases involving damage to residential properties, the State has intervened not only to compensate for losses but to rebuild entirely. Our firm has successfully negotiated situations where the authorities committed to constructing a new, modern apartment building on the same site, with upgraded amenities and contemporary standards. In some instances, the State even offers the affected party a monetary equivalent, effectively saying: “Take the value of the new apartment and buy yourself a different home.”
The legal and moral question then becomes even more intriguing.
Can the seller, in such circumstances, unilaterally cancel the sale agreement and retain the enhanced compensation or new property for themselves? Or is the purchaser, as the intended future owner and party to the binding agreement, the only one entitled to decide how to proceed?
As with so many legal dilemmas shaped by life under uncertainty, the answers remain open to interpretation and require careful attention from anyone drafting, negotiating or entering into property transactions in today’s reality.
One thing, we believe however, is beyond debate. Such exceptional scenarios must be addressed explicitly in contracts, because when the dust settles, clarity is worth more than compensation.
*All details shared with the client’s consent