Failure to Deliver Goods: On Contract Cancellation and Compensation

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

A peddling transaction occurs when a vendor offers a transaction without a consumer’s prior request, anywhere other than the vendor’s business premises or those of their representatives. This includes situations where the vendor visits the consumer’s residence, military base, workplace, or school, or nearby locations. For example: if a vendor holds a sales fair at a military base, and the consumer makes a purchase there, this is a peddling transaction. Because the consumer did not invite them and the transaction took place near the consumer.

First, the consumer must check that the product is not of a type that does not allow cancellation in peddling transactions due to non-delivery.

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

• The transaction can be cancelled due to non-delivery within 14 days of the date the product was supposed to be delivered (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 delivery location;
• Within 14 days of receiving the cancellation notice, the vendor must return the portion of the transaction paid by the consumer. The vendor may deduct cancellation fees;

If a vendor fails to return the portion of the transaction paid by the consumer, compensation without proof of damage can be claimed.

Cancelling Distance Selling or Peddling Transactions 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). These populations are generally entitled to cancel distance selling or peddling transactions within four months from the latest of the following three dates:

1. The date of the transaction;
2. The date of receipt of the product (or, in case of non-delivery, the expected delivery date);
3. The date of receipt of the “good faith disclosure” document.

Provided that the transaction involved a conversation between the vendor and the consumer, including electronic communication. The vendor may request documentation proving the consumer’s membership in the specific population. For example: disability certificate, new immigrant certificate, or senior citizen certificate. However, the vendor may not request additional proof beyond the aforementioned certificate.

The right of cancellation for specific populations provides them with a longer timeframe for cancellation. However, the other rules of cancellation remain unchanged – both in peddling transactions and distance selling transactions.

Vendor’s Obligation to Return Paid Consideration

The vendor must return the consideration paid at the time of the cancellation notice, and at the latest within 7 business days. The consideration must 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 was cashed:
  • If cashed: Return by check or cashier’s check with a due date up to 5 business days (at most);
  • If not cashed: Return by check or cashier’s check with a due date up to 5 business days after the check is actually cashed;
• If by credit: The return method depends on whether the vendor is 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 to cancel the transaction, and the company will directly credit the consumer, provided it can recover the amount from the vendor due to the transaction cancellation.

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

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

There are two cancellation notice options: immediate cancellation or cancellation after a warning. How do we know which notice is appropriate? We must determine the type of breach – whether it is a “regular” or a “fundamental” breach:

“Regular” breach = An act or omission that violates 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 rectify the breach and warn them that if the omission/act is not rectified within a reasonable time, the contract will be cancelled. If the vendor does not rectify the breach, or another arrangement is agreed upon within the specified timeframe, the consumer may cancel the agreement.

Fundamental breach = One of two: (1) A breach stipulated in the agreement as fundamental; or (if the agreement is silent on this matter) – (2) A breach that a reasonable person would not have entered into the contract had they 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, it is unlikely to be considered a fundamental breach. But if a security company does not receive uniforms and is thus unable to operate its business properly, it suffers a fundamental breach.

In a fundamental breach, the consumer may cancel the contract without prior warning (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 rectify the wrong before cancelling the contract. They may immediately notify the vendor that the contract is cancelled and demand the desired remedy.

Note! The final cancellation notice must be provided within the timeframe stipulated 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 claimable from a vendor varies depending on the transaction classification. However, this section addresses the 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. These are the compensation amounts without proof of damage related to non-delivery:

• Product purchased at the business premises: Compensation without proof of damage can be claimed equal to 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 claimed for misleading the consumer regarding the delivery location and failure to deliver to that location (Section 31(a)(1a) of the Consumer Protection Law).
• In distance selling or peddling transactions (Section 31(a)(3)-(4) of the Consumer Protection Law): Compensation without proof of damage can be claimed for violation of provisions regarding the return of consideration and wrongful collection of cancellation fees. This is up to 10,000 NIS and in certain cases up to 50,000 NIS (Section 31(a)(c) of the Consumer Protection Law).