The "Swords of Iron" War and Late Delivery of Apartments
Are Developers Exempt from Compensating Purchasers?

A. Introduction

The "Swords of Iron" war, which broke out on 7 October 2023, raises a legal question with far-reaching implications: may a developer who delivered apartments late because of the war postpone delivery without bearing the statutory compensation owed to purchasers? The question is sharpened by section 5A of the Sale (Apartments) Law, 5733-1973, which prescribes fixed compensation to the purchaser for each month of delay, and by the mandatory (cogent) nature of its provisions.

B. The Statutory Framework

Section 5A of the Sale (Apartments) Law obliges the seller to pay the purchaser compensation without proof of damage, graduated according to the length of the delay: the rental value of a comparable apartment for months 1–4; the rental value multiplied by 1.25 for months 5–10; and the rental value multiplied by 1.5 from the 11th month onward.

The statute recognizes two exceptions: first, where the delay was caused solely by an act of the purchaser; second, where the delay is the result of frustrating circumstances within the meaning of section 18(a) of the Contracts (Remedies for Breach of Contract) Law, 5731-1970 — that is, circumstances which the breaching party did not know of and could not have foreseen or prevented, and by reason of which performance of the contract became impossible or fundamentally different from what was agreed. The burden of proof rests on the seller.

C. The Two Cumulative Conditions for the Frustration Defence

The case law has clarified that recognition of the frustration exception requires proof of two cumulative conditions: first, that the delay was caused by circumstances beyond the seller's control; and second, that the risk of the occurrence of those circumstances and of their consequences was not allocated to the seller. A genuine causal link between the frustrating circumstances and the actual delay is also required — mere overlap in time between the construction schedule and the security event is not sufficient.

D. War as a Frustrating Event — the Lines Drawn by the Case Law

Over the years the courts have adopted a relatively lenient approach to the doctrine of frustration in the context of war. It has been held that the foreseeability test applies not to the outbreak of the war itself, but to its practical consequences for the contractual relationship. A frustration defence has been recognized where a complete closure, and the resulting shortage of labour, prevented performance.

The case law has further held that in standard-form contracts — which most apartment sale agreements are — the Standard Contracts Tribunal has approved frustration clauses referring to war and to a nationwide shortage of labour, provided that the relevant risk is not allocated to the company.

E. The "Swords of Iron" War — Characteristics and Recent Case Law

The "Swords of Iron" war differs in scope and duration from previous security events. According to data of the Ministry of Economy and Industry, upon the outbreak of the war approximately 50% of the non-Israeli workforce in the economy was idled, with the construction sector suffering the heaviest blow (74%). A survey from June 2024 put the decline in the number of foreign and Palestinian workers at 87.8%.

The Supreme Court has held that the war cannot be declared a "force majeure" event across the board, and that the determination must be made in each case on its own facts.

In the case law accumulated since 2024 a clear pattern emerges: the courts have recognized an exemption from compensation in areas directly hit by attacks — where concrete evidence of the causal link was presented. Conversely, the courts have rejected the defence where no real evidence connecting the war to the delay was adduced.

F. Summary — Guiding Principles

The above is general in nature and does not constitute legal advice. For advice on your specific circumstances, please contact the office.