"It is agreed between the parties that a breach of one of the main clauses of the contract - clauses 3,5,6,7,9 in whole or in part, by any of them, will entitle the injured party to pre-agreed compensation in the amount of ILS 1,000,000 (ILS million) without the need to prove damage. The parties declare that they have determined this amount after fully considering all aspects of the damage that can be seen at the time of signing this contract as a probable result of such breach. For this purpose, the parties took into account, inter alia, contractual consideration, the expenses that would be caused to the injured party as a result of the breach, the unexpected damages and the inconvenience that would be caused to the injured party as a result of the breach... "
When the apartment was delivered about two years late from the agreed date, the sale agreement was fundamentally breached. Hence, the plaintiffs are indeed entitled to receive the sum of ILS 1,000,000.
- Addressing the question of the reasonableness of the agreed amount of compensation
- The statement of defense did not include an argument regarding the unreasonableness of the scope of the agreed compensation. For the sake of caution, I will note that even if such a claim had been made, there would have been room to reject it, due to what is stated in the following paragraphs:
- First, why is there no room to intervene in the amount of the agreed compensation - the case law is that the court's intervention in the scope of the agreed compensation is limited. As long as there is a reasonable ratio, even if it is weak, the court does not intervene in the agreed compensation. In this regard, see Civil Appeal 1880/19 The League for the Prevention of Lung Diseases Tel Aviv v. Shir Mishkenot Veterans in a Tax Appeal (October 25, 2020, Judge v. Sohlberg, G. Kara and Y. Elron); Civil Appeal 4630/04 Shopping Malls Properties and Building in a Tax Appeal v. Bnei Yaakov Real Estate in a Tax Appeal (December 13, 2006, N. (Ret.) A. Barak, Judge A. Rubinstein and S. Jubran); Civil Appeal 8506/13 Zeevi Communications Holdings in Tax Appeal v. Bank Hapoalim in Tax Appeal (August 23, 2015, Judges Y. Danziger, A. Fogelman and N. Sohlberg)].
- Second, why is there no room to intervene in the agreed compensation amount - the amount of compensation set out in the agreement is 10% of the consideration set for the apartment. The amount was determined in a reasonable proportion to the damage that could have been foreseen at the time of the conclusion of the contract as a probable result of the breach. Agreed compensation at the rate of 10% of the contract value is a common compensation in real estate sales contracts, but in some cases a higher compensation is also valid - and R. Yitzhak Amit, Agreed Compensation - Issues and Aspects of Deuteronomy 10, 32 (2018). Moreover, in the agreement, the parties noted that they had considered various considerations, such as the contractual consideration set out in the agreement, the expenses that would be caused to the injured party as a result of the breach, the unexpected damages and the inconvenience that would be caused to the injured party as a result of the breach, before determining the agreed amount of compensation.
- Third, why there is no room to intervene in the amount of the agreed compensation - the reasonableness of the compensation can also be learned from the fact that the defendant himself filed a claim on behalf of the plaintiffs in which he claimed a fundamental breach on their part and petitioned for the relief of agreed compensation in the sum of ILS 1,000,000. In his interrogation, the defendant confirmed that this claim was delayed until a decision was made in the present proceeding (P. of September 17, 2025, 11-12):
"Adv. Bar: So you, in your lawsuit, are asking for a million shekels in agreed compensation.