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The Israel Law on Standard Contracts

Published online by Cambridge University Press:  12 February 2016

Ariel Hecht
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Type
Legislation
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Israel Law Review , Volume 3 , Issue 4 , October 1968 , pp. 586 - 594
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Copyright © Cambridge University Press and The Faculty of Law, The Hebrew University of Jerusalem 1968

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References

1 This article takes into account mainly material relating to Israel law. As to the literature concerning the laws of the English- and German-speaking countries, see the bibliography in Auer, E., Die richterliche Korrektur von Standardverträgen Karlsruhe 1964Google Scholar (published also in Abhandlungen zum schweizerischen Recht, Neue Folge, Heft 361, Bern) as well as to Prausnitz, O., The Standardization of Commercial Contracts in English and Continental Law, London, 1937Google Scholar. Compare also Wilson, N. S., “Freedom of Contract and Adhesion Contracts” (1965) 14 I.C.L.Q. 172CrossRefGoogle Scholar.

2 18 L.S.I. 51. For examples of legislative intervention in other countries see arts. 1341, 1342 and 1370 of the Italian Book of Civil Law of 1942; Sec. 2–302 of the Uniform Commercial Code of the U.S.A. The last mentioned are not expressly but in fact applied to the special circumstances of the standard contract.

3 Cf. Ginossar, S., “Israel Law: Components and Trends” (1966) 1 Is.L.R. 380Google Scholar, Hecht, A., “Entwicklungstendenzen in Privatrecht Israels” (1965) 29 Rabels Zeitschrift für ausländisches und internationales Privatrecht 302Google Scholar.

4 The protection of bonos mores and of public order as one of the restrictive norms in the Israel law is based upon art. 64 of the Ottoman Code of Civil Procedure of 1879: “Contracts and obligations of any sort, that are not contrary to the law and to special regulations and do not contradict public morals and public order … are considered legal and binding upon the parties ….”

5 Cf. Tedeschi, G. and Hecht, A., “The Problem of Standard Contract” (1959/1960) 16 HaPraklit 149Google Scholaret seq. (Hebrew) quoted from the French translation: “Les contrast d'adhesion en tant que problème de legislation, Proposition d'une Commission Israelienne” (1960) 12 Revue internationale de droit comparé 581Google Scholar; Gottschalk, R., “The Israeli Law of Standard Contracts, 1964” (1965) 81 L.Q.R. 32Google Scholar; Zim v. Masiar (1963) 17 P.D. 1319, 1337 and criticism by Tal, Y., “Public Policy and Exemption Clauses” (Hebrew) (1963/1964) 20 HaPraklit 208Google Scholar; Atid v. Banque Suisse-Israel (1962) 16 P.D. 268, 278; Shoham v. Feiner (1960) 14 P.D. 1451, 1454; Dan v. Yehiel (1958) 12 P.D. 517, 522. Cf. also the critique on the judgments of the Supreme Court in civil appeals Supergas v. Mizrahi and Dan v. Yehiel (Hebrew) (1958/59) 15 HaPraklit 12, 18.

6 See the critical remarks in O. Prausnitz, cit., 145; G. Tedeschi and A. Hecht, cit., 585.

7 Cf. E. Auer, op. cit., 92 f.

8 G. Tedeschi and A. Hecht, loc. cit., 583.

9 Ibid. 589.

10 For a fundamental critique of the combination of administrative and juridical control cf. Wolfson, R., Gottschalk, R. and Friedmann, S., “A Proposal for a Standard Contracts Law” 1962 (Hebrew) (1962/1963) 19 HaPraklit 172Google Scholar.

11 Sees. 6 and 14.

12 No regulations have as yet been published defining such persons. This lacuna can anyhow be filled by the judge. Sec. 16 of the Court Regulations (Appeals to the Supreme Court against Decisions of the Board of Standard Contracts) 1965, says in the marginal note “Joining of Parties” and in the text: “The Court is empowered, at all the stages of the case, to join any person as a party, who in the Court's opinion, appears to have an interest in the matter, as appellant or respondent, on condition that the appellant or respondent or the interested person requests it to do so.”

13 The Law stresses the binding force of the decision also of special tribunals. Examples of special tribunals known to the Israel court system are those created by the legislation for the protection of tenants, and the maritime court.

14 Cf. Zim v. Masiar (1963) 17 P.D. 1319.

15 Secs. 9 and 10.

16 Sec. 11.

17 Sec. 33 of the Courts Law, 1957, states:

“(a) A court shall be guided by a precedent established by a higher court.

(b) A precedent established by the Supreme Court binds every court, except the Supreme Court.”

But whether the approval or rejection of a contractual condition represents a legal ruling exceeding the field of a particular case, is to be decided according to its specific circumstances.

18 The same question arises in the case of retroactive administrative intervention, as described above, into already existing contracts.

19 Sec. 20.

20 Cf. G. Tedeschi and A. Hecht, loc cit., 581; Y. Tal, loc cit., 212.

21 For example, a contract of lease standardized for a certain residential quarter, obliging the leaseholder to respect the Sabbath rest prescribed by Jewish law. Invalidation of this clause as a restrictive term, under sec. 15(4) and 15(5) seems well justified and has been actually so declared by the Jerusalem District Court (cf. the articles in Ha'aretz of 4.5.1967 and 4.1.1968). In this case the question of validity arises not only concerning the single contract forming the object of the special lawsuit but also in connection with all the other lessees holding substantially identical contracts. The desire to set up residential quarters subject to religious law and to live there, is no reason for objection and may have been a decisive motivation for many of the leaseholders when they signed the contract. Should the objectionable clause have led to the assumption that in the quarters concerned a religious atmosphere will be guaranteed, its annulment may frustrate these expectations. The question whether this will be a sufficient reason for the leaseholders interested in maintaining the Sabbath rest clause to claim the voidability of the contract will depend on the nature of the mistake made when the contract was signed, i.e. if the mistake is one of fact or one of law. There are fair reasons to be argued for both versions.

22 Nevertheless the Court may ignore, according to sec. 13, the approval of the Board if the supplier has failed to inscribe it on the contract form.

23 Sec. 4 puts the case of contestation of the validity before a court in the same position as the invalidation actually obtained. However, in the first case the effect can only be the postponement of the Board's decision until the ruling of the court comes into force. The wording of the Law does not exclude the possibility that the Board may invalidate a restrictive term, although it has been regarded as admissible by the court.

24 Sec. 12 admits free access for the public to the minutes of the Board.

25 According to sec. 1 even the decision by an arbitrator is considered a ruling of the court. Certainly it would help if all courts and tribunals were obliged to notify the Board of every judgment given under the Law.

26 Diamond, A. L., in “The Israeli Standard Contracts Law, 5724–1964” (1965) 14 I.C.L.Q. 1415CrossRefGoogle Scholar, considers this the main weakness of the Law.

27 Cf. Reshumot, Bill No. 527 of 6.8.1962 (Hebrew) 314.

28 The criticism of the Law in “Administrative Regulation of Adhesion Contracts in Israel” (1966) 66 Col. L.R. 1340, referred to below as “Administrative Regulations”, is cautious because of the lack of practical experience in its workability. As far as its theoretic foundations are concerned, the Law is considered positively. “The benefits of the Israeli system are … certainty, quality of adjudication and uniformity of result.”

29 R. Wolfson, R. Gottschalk and S. Friedmann, loc. cit.; A. Levin, “The Small Print in Contracts”, daily newspaper Ha'aretz of 10.10.1962 (Hebrew); J. Rosental, “The Law of Standard Contracts”; Ha'aretz of 9.3.1964 (Hebrew). As against this O. Lando, Standard Contracts, a Proposal and a Perspective, a study submitted to the Scandinavian-American Legal Seminar 1965, considers precisely this aspect in a positive way. A. Genovese, , “La legge israelina sui contratti uniformi” (1965) 11 Rivista di diritto civile 483Google Scholar, stresses the advance in legal security achieved by the preventive administrative control.

30 Fortunately, the scanty material so far available gives some evidence of this intention, cf. the unpublished decision of the Board referring to the application of Dun and Bradstreet Ltd., mentioned in Administrative Regulation 1345, note 40, and the decision of the District Court of Tel Aviv-Jaffa, Dun and Bradstreet v. Attorney-General (1965) 46 P.M. 92.

31 We should, however, not oversimplify the situation arising from the confrontation of the administrative and the judicial control. The Board is not a purely administrative body, but shows in its functions some judicial traces as well. In this context, Secs. 5 and 8 may be mentioned, outlining an accusatory proceeding contrary to the mainly inquisitional administrative procedure in general, as well as the right of appeal to the Supreme Court. Appeals against judgments of the courts and against decisions of the Board are dealt with by the same tribunal.

32 Secs. 6 and 14.

33 As already mentioned, the legislator, openly admitting the disharmony between the two bodies set up for control, and expressing himself in literal analogy to the wording of sec. 6 concerning the Board, has empowered the court to invalidate a condition, if it implies a prejudice to “the customers” (not “the customer”).

34 Cf. sec. 4.

35 Sec. 9 speaks of the period of validity of the approval alone. Yet in the light of the structure of the Law as a whole, a refusal to approve should also be limited to a fixed period of time and upon the expiration of this period the jurisdiction of the court should revive.

36 See A. Genovese, op. cit., 485.