By Adv. Assaf Shavit Stricks, Partner, Litigation Department, Abadi & Co. Law Firm
The recent military operations, "Rising Lion" and "Roar ofthe Lion," have once again raised an important question for businesses: what happens to a contract when an extraordinary security event fundamentally alters the circumstances on which the parties base their agreement.
At the time of writing, Israeli courts have not yet issued decisions dealing specifically with the legal consequences of Operation Rising Lion in the context of force majeure or frustration. Even so, the legal framework for addressing these issues is already well established. The answer lies in the wording of the contract, the doctrine of frustration, the principle of good faith, and the case law developed in response to previous national emergencies.
Force Majeure in Comparative Law
Looking at how other jurisdictions have approached similar situations provides some useful context.
In the English case of Taylor v. Caldwell (1863), a concert hall rented for aseries of performances burned down before the first event took place. The courtheld that where the performance of a contract depends on the continued existence of a specific asset, and that asset is destroyed without fault by either party, the parties may be released from their contractual obligations.
A few decades later, Krell v. Henry (1903) involved premises rented for thepurpose of viewing King Edward VII's coronation procession. When the procession was cancelled because of the King's illness, the court found that the very purpose of the agreement had disappeared, even though the premises themselves remained intact.
The American approach has generally been more restrictive. In Eastern Air Lines v. Gulf Oil Corp. (1975), the court rejected a claim of commercial impracticability arising from the energy crisis, holding that higher costs and economic hardship alone were not enough to excuse contractual performance.
Thesecases share a common theme. Courts are not persuaded simply because an event is described as a war, a crisis, or an economic collapse. Instead, they askwhether the event truly undermined the contractual foundation on which the parties relied.
An interesting example emerged during the 2008 global financial crisis, when Donald Trump, years before becoming President of the United States, argued inlitigation against Deutsche Bank that the financial crisis itself constituted a force majeure event relieving him of his contractual obligations.Although the argument attracted considerable public attention, it also demonstrated the judiciary's reluctance to treat broad economic turmoil, by itself, as a sufficient legal basis for avoiding contractual commitments. Even a dramatic market collapse does not automatically excuse performance.
The Israeli Perspective
Israelilaw begins with Section 18(a) of the Contracts (Remedies for Breach ofContract) Law, 1970, which applies where unforeseen circumstances makeperformance impossible or fundamentally different from what the parties originally agreed.
Accordingly,the key question is not how severe the security event was, but whether itactually prevented the contractual obligations from being performed.
In CA715/78 Katz v. Natzhoni Mizrachi Ltd., the Israeli Supreme Court declined to recognize the Yom Kippur War as an automatic ground for frustration. At thesame time, the Court stopped short of holding that war can never justify such aclaim.
Acting President Justice Landau left open the broader question of whether war should always be regarded as foreseeable in Israel, while Justice Haim Cohen focusedon the facts of the specific case, particularly the foreseeability of price increases and the contractual provision stating that the agreed price wasfinal.
Thejudgment illustrates an important principle: the outcome depended not on the existence of the war itself, but on its actual impact and the way the parties had allocated contractual risks.
More recent decisions reflect a more flexible approach. Israeli courts increasingly examine not only whether the event could have been anticipated, but also how itaffected the commercial basis of the transaction and what the parties agreed regarding risk allocation. This trend can be seen in cases such as B. Yair Construction Co. Ltd. v. Ministry of Construction and Housing, Euro Israel v. Ministry of Construction and Housing, and other decisions emphasizing the close relationship between the doctrine of frustration and theduty to act in good faith.
The case law that developed during the COVID-19 pandemic reinforced the same principle. An extraordinary external event may support a claim of frustrationor force majeure, but only where it creates a genuine obstacle to performance. Mere commercial inconvenience or reduced profitability is not enough.
Force majeure, therefore, is not a catch-all phrase. It remains a legal doctrine that must be supported by concrete facts and convincing evidence.
Practical Experience
We have seen this play out in practice.
In one matter handled by our firm involving the tourism sector, we argued on behalf ofa service provider that holiday cancellations resulted from external security circumstances that directly affected flights, overseas services, and the supply chain. The claim relied on an express force majeure clause contained in the parties' agreement.
In another matter involving corporate events and organized vacations, we advanced the opposite position. Although security tensions existed, there was noevidence that, at the relevant time, the event could not be held. In fact, it was later argued that flights ultimately operated as scheduled.
These examples demonstrate that the legal analysis does not turn solely on the occurrence of a military operation. It depends on the facts, the contractual language, and the available evidence.
Force Majeure or Frustration? There Is No Automatic Answer
The practical conclusion is straight forward.
The recent military operations may, in appropriate circumstances, support a claimof force majeure or frustration. However, they do not automatically release parties from their contractual obligations.
Aparty relying on such a claim must generally show that the operation or itsconsequences genuinely prevented performance, that the relevant risk was not allocated differently under the contract, and that it acted in accordance with the duty of good faith.
UntilIsraeli courts issue decisions dealing directly with these operations, thisremains the guiding principle: the outcome will depend farmore on the facts, what the contract actually says, and the available evidence than on the headline describing the crisis.
Three Practical Lessons for Commercial Clients
A carefully drafted force majeure clause is significantly more valuable than relying on the default rules of contract law. When a contract clearly defineswhat constitutes a force majeure event, how risks are allocated, and what obligations apply regarding notice, mitigation, and contractual adjustments,uncertainty is greatly reduced. Without such provisions, disputes will usually be resolved under the narrow and fact-specific doctrine of frustration.
Experiencing a crisis is not enough. A party must demonstrate that the crisis actually disrupted contractual performance. Courts distinguish between higher costs,commercial inconvenience, or uncertainty, and a genuine inability to perform. For that reason, businesses should preserve evidence such as cancelled flights,government directives, site closures, supplier interruptions, and correspondence showing how the event directly affected performance.
Finally,even in the middle of a crisis, courts still expect parties to actreasonably and in good faith. A party invoking force majeure should be able to demonstrate that it explored alternatives, attempted to reduce losses,communicated openly with the other party, and did not rush to treat every difficulty as a reason to terminate the agreement. In many situations,proposing a postponement or another practical adjustment may strengthen a legal position more effectively than unilaterally declaring the contract at an end.
Legal Disclaimer
The information contained in this article is intended solely for general informational purposes. It does not constitute legal advice, a legal opinion,or a substitute for professional legal counsel tailored to the specific circumstances of any individual case. Anyone facing a legal issue or making a decision with legal implications should seek advice from a qualified legal professional.
