Failure to Deliver Goods: Contract Rescission and Compensation

3. Non-Delivery of a Product in a Peddling Transaction

A peddling transaction occurs when the vendor offered a contract without a consumer request, in any place other than the vendor’s business or representative. This includes if the vendor came to the consumer’s residence; place of military service; work; studies; or near these places. For example: if the vendor held a sales fair at a military base and the consumer made a purchase, this is a peddling transaction because the consumer did not invite them and the transaction took place in the consumer’s vicinity.

First, the consumer must verify that the product is not among those that cannot be cancelled in a peddling transaction due to non-delivery.

Then, the rules for cancelling a transaction due to non-delivery of a product ordered in a peddling transaction apply:

• The transaction can be cancelled due to non-delivery at the agreed time, within 14 days of the date the property should have been delivered to the consumer (Section 14(a)(1) of the Consumer Protection Law, 1981); Specific populations have a longer timeframe;
• If the product was delivered late, the consumer will return it to the vendor at the place of delivery;
• Within 14 days of the vendor receiving the cancellation notice, the vendor will return the consumer’s payment. The vendor may deduct cancellation fees;

If a vendor fails to return the consumer’s payment, compensation without proof of damage can be demanded.

Cancelling a Distance or Peddling Contract Due to Non-Delivery – Specific Populations:

In 2016, Amendment 47 to the Consumer Protection Law introduced concessions for specific populations (people with disabilities, new immigrants, and senior citizens). Generally, these populations may cancel a distance or peddling contract within four months at the latest from the following three dates:

1. The date of the transaction;
2. The date of receipt of the property (or in case of non-delivery – the date the property was supposed to arrive);
3. The date of receipt of the “full disclosure” document.

Provided that the contract involved a conversation between the vendor and the consumer, including electronic communication. The vendor may request documentation proving the consumer’s status as a member of a specific population. For example: disability certificate, new immigrant certificate, or senior citizen certificate. However, the vendor may not request additional documentation beyond this.

The right of cancellation for these populations provides them with a benefit regarding the time available for cancellation. However, the other cancellation rules remain the same – both in peddling transactions and distance contracts.

Vendor’s Obligation to Return Paid Consideration

The vendor will return the consideration paid at the time of the cancellation notice and at the latest within 7 business days. The consideration will be returned in the same manner as the payment was made (Regulation 4 of the Consumer Protection (Cancellation of Transaction) Regulations, 2010). As follows:

• If in cash: Cash or cashier’s check
• If by check – the return method depends on whether the consumer’s check has been cashed:
  • If cashed: Return by check or cashier’s check with a maturity date of up to 5 business days (at most);
  • If not cashed: Return by check or cashier’s check with a maturity date of up to 5 business days after the check is actually cashed;
• If by credit card – the return method depends on whether the vendor has been credited by the credit card company:
  • If not yet credited: The vendor will cancel the credit card transaction;
  • If credited: The vendor will return the amount received from the credit card company in cash or by cashier’s check; or – the vendor will notify the credit card company of the transaction cancellation, and it will directly credit the consumer, provided that it can be compensated by the vendor for the cancellation.

If the vendor violates the return of consideration provisions, compensation without proof of damage can be demanded.

How to Issue a Cancellation Notice for Non-Delivery of a Product?

There are two cancellation notice options: immediate cancellation or cancellation after notice. How do we know which notice is appropriate? We ask what type of breach it is – i.e., is it a “regular” breach or a “fundamental” breach?

“Regular” breach = An act or omission contrary to the purchase agreement (Section 1(a) of the Contracts (Remedies for Breach of Contract) Law, 1970). If this is the case, the consumer must allow the vendor to remedy the breach and warn them that if the omission/act is not remedied within a reasonable time, the contract will be cancelled. If the vendor does not remedy the breach or another arrangement is not agreed upon within the given timeframe, the consumer may cancel the agreement.

Fundamental breach = One of two: (1) A breach specified in the agreement between the parties as a fundamental breach; or (if the agreement is silent on this) – (2) A breach that a reasonable person would not have entered into the contract in the first place if they had foreseen the breach and its consequences (Section 6 of the Contracts (Remedies for Breach of Contract) Law, 1970).

For example: If someone ordered clothes for their children and the order is delayed by a few days, this is probably not a fundamental breach. But if a security company owner is not supplied with uniforms and is thereby prevented from operating the business properly, they are suffering from a fundamental breach.

In a fundamental breach, the consumer can cancel the contract without prior notice (Section 7 of the Contracts (Remedies for Breach of Contract) Law, 1970). That is, the consumer does not need to give the vendor time to remedy the wrong before the transaction is cancelled. They may notify the vendor that the transaction is immediately cancelled and demand the desired remedy.

Note! The final cancellation notice must be given within the timeframe specified in the law and regulations, according to the type of transaction being cancelled.

Compensation Without Proof of Damage for Non-Delivery of a Product

The amount of compensation that can be demanded from a vendor varies according to the classification of the transaction. However, it should be emphasized that this section deals with provisions and limitations for claiming compensation without proof of damage. If a consumer wishes to file a claim for other compensation, they are not subject to the following provisions. The following are the amounts of compensation without proof of damage in relation to non-delivery:

• Product purchased in-store: Compensation without proof of damage can be demanded in the amount of the difference between the price paid for the product/service and its value on the day the contract was cancelled (Section 11(a) of the Contracts (Remedies for Breach of Contract) Law, 1970). In addition, compensation without proof of damage can be demanded for misleading the vendor regarding the place of delivery and non-delivery to that place (Section 31a(1a) of the Consumer Protection Law).
• In a distance or peddling contract (Section 31a(3)-(4) of the Consumer Protection Law): Compensation without proof of damage can be demanded for violating provisions regarding the return of consideration and improper collection of cancellation fees. This is up to 10,000 NIS and in certain cases up to 50,000 NIS (Section 31a(c) of the Consumer Protection Law).