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The Failure of The Remedy of Reduction in Israeli Law — Causes and Lessons

Published online by Cambridge University Press:  16 February 2016

Eyal Zamir
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Extract

The process of codifying Israeli private law began in the mid-1960's. Since then, numerous laws have been enacted, each devoted to a certain field or transaction (land law, pledges, sales, etc.). The idea was, and continues to be, that after the enactment of the separate laws is completed, they will be combined in order to create an integral, complete civil code. This stage of enactment is nearly finished, and at present a jurists' committee is considering changes and adjustments required in any of the laws in order to fit them together into one code. This method of legislation by stages has many disadvantages, which have been pointed out in the legal literature. However, there are also advantages. The new laws in the sphere of private law are not inspired by a single legal system or by any particular existing code; rather, they constitute an original, modern Israeli creation, based on comprehensive comparative research and implementation of new, original ideas. In the absence of an established Israeli legal tradition, and absent rooted legal concepts or terminology, the Israeli legislature must create a code which does not grow naturally out of an existing legal system. The code itself will constitute the basis for future development of the system.

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Research Article
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Israel Law Review , Volume 23 , Issue 4 , Autumn 1989 , pp. 469 - 505
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Copyright © Cambridge University Press and The Faculty of Law, The Hebrew University of Jerusalem 1989

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Footnotes

*

Dr. Jur. (Hebrew University); Teaching Fellow, Faculty of Law, The Hebrew University of Jerusalem. I would like to thank Ms. D. Lewinsohn-Zamir and Mr. Boaz Biran for their most helpful comments.

References

1 On this process, see generally Tedeschi, G. & Zemach, Y.S., “Codification and Case Law in Israel”, in The Role of Judicial Decisions and Doctrines in Civil Law and Mixed Jurisdictions, Dainow, J., ed. (Baton Rouge, 1974) 272, at 287 et seq. Google Scholar; Friedmann, D., “Independent Development of Israeli Law” (1975) 10 Is. L.R. 515, at 536 et seq. Google Scholar; Barak, A., “The Codification of the Civil Law in Israel” (1972/1973) 3 Iyunei Mishpat 5 Google Scholar.

2 On the changes and adaptations required in the process of the unification of the separate laws into a complete code, see Yadin, U., “From Piecemeal Legislation to a Modern Code”, in Liber Amicorum A.D. Schnitzer (Geneva, 1979) 523 Google Scholar.

3 See, e.g., Procaccia, G., “Israeli Legislation by Stages: Comment and Criticism” (1971) 1 Iyunei Mishpat 41 Google Scholar; Barak, supra n. 1, at 9 et seq.; Friedmann, supra n. 1, at 538-541. See Yadin, U., “The Use of Comparative Law by the Legislator”, in Israeli Reports to the XI International Congress of Comparative Law, Goldstein, S., ed. (Jerusalem, 1982) 10 Google Scholar; Shalev, G. & Herman, S., “A Source Study of Israel's Contract Codification” (1975) 35 La. L.R. 1091 Google Scholar.

4 See Yadin, U., “The Use of Comparative Law by the Legislator”, in Israeli Reports to the XI International Congress of Comparative Law, Goldstein, S., ed. (Jerusalem, 1982) 10 Google Scholar; Shalev, G. & Herman, S., “A Source Study of Israel's Contract Codification” (1975) 35 La. L.R. 1091 Google Scholar.

5 See Zeltner, Z., Contract Law of the State of Israel, Part 1, (Tel-Aviv, 1974, in Hebrew) 11–14 Google Scholar; Yadin, ibid.; Yadin, U., “The Succession Law as Part of the Israeli Civil Law Codification” (1972/1973) 3 Iyunei Mishpat 26, at 30 Google Scholar; Barak, A., “The Independence of the New Civil Codification: Risks and Prospects” (1976) 7 Mishpatim 15 Google Scholar.

6 A detailed description of the remedy of reduction is provided in part II, infra.

7 “Affirmed”, since some of the remedies (e.g., rescission of contract) may be executed by the injured party himself, without the need for a court decree. In these cases, the court deals with the validity of the rescission and may affirm it, but the court does not award the relief.

8 On the rules of redhibitory defects in Roman Law, and on the remedy of reduction in particular, see Morrow, C.J., “Warranty of Quality: A Comparative Survey” (1940) 14 Tulane L.R. 327, 529, at 347 et seq. Google Scholar; Rogerson, A., “Implied Warranty Against Latent Defects in Roman and English Law”, in Studies in the Roman Law of Sale, in memory of F. de Zulueta (Oxford, 1959) 112 Google Scholar; Mackeurtan's Sale of Goods in South Africa (Cape Town, 4th ed., 1972) sec. 336, at 238–244Google Scholar.

9 See Rodhe, K., “The Quantum of Damages under the Scandinavian Sale of Goods Act” (1966) 10 Scan. Stud. L. 149, at 160–164 (on Scandinavian law)Google Scholar; A.M. Honoré, “The History of the Aedilitian Actions from Roman to Roman-Dutch Law”, in Studies in the Roman Law of Sale, ibid., at 132 (on Roman-Dutch law); Eörsi, G., “Contractual Remedies in Socialist Legal Systems”, in VII Int. Encyc. Comp. L., Ch. 16 (1976) sec. 190 et seq., at 153 et seq. Google Scholar (on socialist legal systems).

10 On the seller's liability for hidden defects under the Code Civil, see generally, Mazeaud, H., Mazeaud, L. & Mazeaud, J. & Chabas, F., Leçons de droit civil, t. III, vol. 2 (principaux contrats) lère partie (Vente, Echange) (Paris, 7th ed., 1987), paras. 977–989, pp. 297–314 Google Scholar; Encycl. Dalloz, Droit civil 2 éd, t. VII, Vente (Obligation du vendeur) N° 455-697, pp. 25-40; Juris-Classeur, Civil, Vente, Art. 1641 à 1649, Fasc. X-1 — X-3 (11, 1986); Malinvaud, Ph., “Redhibitory Defects and Their Importance in Contemporary Society” (1976) 60 Tulane L.R. 517 Google Scholar; Morrow, supra n. 8, at 529-556. On the seller's liability for quality defects under the BGB, see generally, Larenz, K., Lehrbuch des Schuldrechts (Munich, 12th ed., 1981) B. II, secs. 33–71 Google Scholar; Daniels, W.G., “The German Law of Sales” (1957) 6 Am. J. Comp. L. 470, at 489–495 CrossRefGoogle Scholar; Horn, N., Kotz, H. & Leser, H.G., German Private and Commercial Law, trans. Weir, T. (Oxford, 1982) 125–131 Google Scholar.

11 On the remedies for hidden defects in the sale object under French law, see generally, Juris-Classeur, ibid., Fasc. X-3; Mazeaud, ibid., paras. 986-989, at pp. 308-314. On the rules in German law, see generally, Horn, Kotz & Leser, ibid., at 127-131.

12 See Rabel, E., Das Recht des Warenkaufs, Bd. 2 (Berlin-Tübingen, 1958) secs. 126–127 Google Scholar; Daniels, supra n. 10, at 495; Amaudruz, M., La Garantie des défauts de la chose vendue et la non-conformité de la chose vendue (Berne, 1968) 38–40 Google Scholar.

13 See Bergsten, E.E. & Miller, A.J., “The Remedy of Reduction of Price” (1979) 27 Am. J. Comp. L. 255, at 258 CrossRefGoogle Scholar.

14 On the rules governing nonconformity in leases under French law, see generally Mazeaud, supra n. 10, t. III (Paris, 2nd ed., 1963) paras. 1116-1117, at pp. 911-912; Dalloz, supra n. 10, t. I, Bail, N° 219-236, at pp. 16-17.On the rules relating to contracts for services, and especially to contracts for the construction of buildings, see Lorenz, W., Contracts for Work on Goods and Building Contracts, in VIII Int. Encyc. Comp. L. Ch. 8 (1980) secs. 53–65, at pp. 59–67 Google Scholar; Malinvaud, Ph. & Jestaz, Ph., “La loi n° 78-12 janvier 1978 relative à la responsabilité et à l'assurance dans le domaine de la construction”, J.C.P. 1978, I, 2900 Google Scholar. On the rules relating to leases in German law see generally Larenz, supra n. 10, secs. 195 ff., and on contracts for services — Larenz, ibid., 280 ff.; Lorenz, ibid., secs. 72-85, at 72-85.

15 See, e.g., Morrow, supra n. 8, at 537-543; Malinvaud, supra n. 10, at 519 et seq.; Bergsten & Miller, supra n. 13, at 257-258. See also n. 46, infra, and accompanying text.

16 Sec. 46 of the Uniform Law on the International Sale of Goods (ULIS) provides:

“Where the buyer has neither obtained performance of the contract by the seller nor declared the contract avoided, the buyer may reduce the price in the same proportion as the value of the goods at the time of the contract has been diminished because of their lack of conformity with the contract.”

Sec. 50 of the Vienna (1980) Convention (corresponding to ULIS, sec. 46) provides:

“If the goods do not conform with the contract and whether or not the price has already been paid, the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time. However, if the seller remedies any failure to perform his obligations in accordance with article 37 or article 48 or if the buyer refuses to accept preformance by the seller in accordance with those articles, the buyer may not reduce the price.”

On the Hague Conference and on ULIS, see generally, Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2-25 April 1964 (The Hague, 1966), 2 Vols.Google Scholar; Honnold, J.O., “The 1964 Hague Convention and Uniform Laws on the International Sale of Goods” (1964) 13 Am. J. Comp. L. 451 CrossRefGoogle Scholar. On the U.N. Convention of 1980, see generally, Honnold, J.O., Uniform Law for International Sales under the 1980 Vienna Convention (Deventer/Netherlands, 1982)Google Scholar; Galston, N.M. & Smit, H. (eds.), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (New York, 1984)Google Scholar; Schlechtriem, P., Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods (Vienna, 1986)Google Scholar; Bianca, CM. & Bonell, M.J. (eds.), Commentary on the International Sales Law - the 1980 Vienna Sales Convention (Milan, 1987)Google Scholar.

17 See Bergsten & Miller, supra n. 13; Treitel, G.H., Remedies for Breach of Contract in VII Int. Encyc. Comp. L., (1976) Ch. 16, sec. 67, at 42–43Google Scholar.

18 Nonconformity does not necessarily involve a diminution of the object's value. Thus, the delivery of a larger quantity of goods than agreed upon constitutes nonconformity, although it does not involve any diminution of value (see, e.g., sec. 33(1)(a) of ULIS).

19 See Treitel, supra n. 17. On the distinction between expectation interest, reliance interest, and restitution interest, see generally Fuller, L.L. & Perdue, W.R., “The Reliance Interest in Contract Damages” (1936) 46 Yale L.J. 52, and 373 CrossRefGoogle Scholar; Treitel, ibid., secs. 49-65, at 27-41.

20 See Commentary on the Draft Convention on the International Sale of Goods (A/CN.9/116, annex II) in VII UNCITRAL Yearbook (1976) 96, 116, 117 Google Scholar; Bergsten & Miller, supra n. 13, at 259 et seq. On the resemblance between reduction and partial rescission of the contract (combined with partial restitution), see part IVA(3)(b) infra.

21 See also Daniels, supra n. 10, at 491; Amaudruz, supra n. 12, at 132.

22 For further demonstrations of the relative formula, see Bergsten & Miller, supra n. 13; Commentary on the Draft Convention, supra n. 20; Honnold, supra n. 16, sec. 312, at 323-325; Staudingers Kommentar zum BGB (Berlin, 12th ed., 1978) Bd. II, Art. 472, p. 406 Google Scholar. An excellent example of the computation of reduction was provided in sec. 346 of the Mejelle.

23 For a comparison between the remedies of reduction and compensation, see also part IVA(1) infra.

24 Suppose the agreed consideration constitutes 80% of the market value of the conforming object, and the nonconformity reduces that value by 20%. Mechanistic diminution of the defective object's value from the stipulated consideration would result in no reduction (since the value of the defective object is equal to the stipulated consideration).

25 See Zeltner, Z., Sale Law, 1968, in Commentary on Laws Relating to Contracts, Tedeschi, G., ed. (Jerusalem, 1972, in Hebrew) sec. 43, at 129–130 Google Scholar

26 Though it is not necessarily so. See Prosser, W.L., “Open Price in Contracts for the Sale of Goods” (1932) 16 Minn. L.R. 733 Google Scholar; Howard, M., “Open Terms as to Price in Contracts for the Sale of Goods” (1974) 48 Australian L.J. 419 Google Scholar. Of course, when calculating the reduced sum according to the agreed consideration, one should take into account the mechanisms contemplated by the parties for the determination and computation of this consideration.

27 See, inter alia, Rodhe, supra n. 9 (on Scandinavian law); sec. 46 of ULIS (“at the time of the conclusion of the contract”); Daniels, supra n. 10, at 490-491 (on sec. 472 of the BGB); and generally, Bergsten & Miller, supra n. 13. See also n. 72 infra.

28 25 L.S.I. 11. The full text of the law is annexed to Prof. Shalev's article: Shalev, G., “Remedies on Anticipatory Breach” (1973) 8 Is. L.R. 123 CrossRefGoogle Scholar. For general comments on the Law's provisions, see also Friedmann, D., “Remedies for Breach of Contract” (1975) 1 T.A. Univ. Stud. L. 170 Google Scholar.

29 On the influence of the remedies provisions in ULIS on the Israel Remedies for Breach of Contract Law, see the explanatory notes to the Contracts Law (Remedies for Breach of Contract) Bill, 1969, H.H. 1969, p. 392; Friedmann, supra n. 1, at 543.

30 22 L.S.I. 107; 25 L.S.I. 152; 28 L.S.I. 115. For a general review of the Israel Sale Law, see Aronovsky, M., “Comments on the New Law of Sales” (1969) 4 Is. L.R. 141 CrossRefGoogle Scholar; Yadin, U., “The Uniform Sales Law of the 1964 Hague Convention and the Israel Sales Law of 1968”, in Ius Privatum Gentium, Festschrift fur Max Rheinstein (Tubingen, 1969) Bd. I, p. 455 Google Scholar. For a general review of the Contract for Services Law, see Yadin, U., “The Contract for Services Law, 1974” (1975) 10 Is. L.R. 569 CrossRefGoogle Scholar. It should be noted that the introduction of the remedy of reduction into Israeli law did not occur with this legislation. This remedy was already included in the Ottoman legislation that preceded the new codification, in secs. 345 and 346 of the Mejelle. But since even before its formal repeal, the Mejelle was considered an obsolete piece of legislation, and since in the field of contract law the courts absorbed English concepts and rules, these provisions did not leave any significant traces (see generally Tedeschi & Zemach, supra n. 1). The term “reduction” appears in the new legislation also in sec. 32(b) of the Consumer Protection Law, 1981 (35 L.S.I.298), but its meaning there is different. The use of the same term by the legislature with different senses is obviously likely to mislead.

31 The inaccuracy in the language of the provision is in that, in fact, it does not matter what the buyer “wishes”, but which remedies he succeeds to obtain. Even where the buyer “wishes” to enforce the contract, but for some reason he is denied that relief, he may still get a reduction (subject to procedural rules, which are not of interest to us here).

32 For example, if due to nonconformity in a machine delivered to him, a buyer breaches his obligation to supply a certain product to a third party, this is consequential damage caused by the nonconformity. The same applies to personal injuries or damages caused to an injured party's property (other than the object itself) as a result of the nonconformity.

33 See Zeltner, supra n. 25, sec. 43, at 129-132. See also Zamir, E., Sale Law, 1968, in Commentary on Laws Relating to Contracts, Tedeschi, G., ed. (Jerusalem, 1987, in Hebrew), secs. 550–551, at 569–572 Google Scholar.

34 See Zeltner, supra n. 25, sec. 43, at 130.

35 Zeltner, ibid., at 130; Zamir, supra n. 33, sec. 552, at 572-573.

36 Sec. 6 of the Hire and Loan Law imposes on the lessor liability for other defects in the property as well, provided that they existed at the time of the delivery of the property, i.e., at the beginning of hire.

37 Among other linguistic differences between the three provisions, there is a difference even in the denomination of the relief. While the Sale Law and the Contract for Services Law use the verb “deduct”, the Hire and Loan Law uses the verb “reduce”. Nevertheless, the official translation of the heading of sec. 28 of the Sale Law is “Reduction of Price”. These differences are unjustifiable, in the Hebrew as in the English translation. However, there is no basis for the supposition that the Hire and Loan Law refers to a different remedy than the Sale Law, since it is quite clear that the Hire and Loan Law provides for the proportional formula of reduction, while in the Contract for Services Law (which uses the same terminology as the Sale Law), the formula is, prima facia, different.

38 The original plan of the Ministry of Justice was to apply the provisions of the Sale Law, including sec. 28 dealing with reduction, mutatis mutandis, to contracts for services (see H.H. 1968, p. 384, 385 Google Scholar; H.H. 1972, p. 380 Google Scholar). When this idea was abandoned, and a separate bill for the regulation of the contract for services was prepared, it was stated explicitly that sec. 4 of the bill is similar to sec. 28 of the Sale Law (see explanatory notes to the Contract for Services Bill, 1973, H.H., p. 402), and to the corresponding remedy in the Hire and Loan Law (see the Minister of Justice's speech in the Knesset, , referring to the bill brought for first reading, Divrei HaKnesset, vol. 70, p. 1241 Google Scholar).

39 See Hayat v. Automobile Agency for the Mediterranean Sea (1981) 35(ii) P.D. 330, at 333; Solonetz v. “HaTahof” (1984) 38(iii) P.D. 630, at 637-638; Chen v. Shetreet (1985) 39(ii) P.D. 617, at 623.

40 Hayat v. Automobile Agency for the Mediterranean Sea, ibid.

41 In Howard v. Miara ((1981) 35(ii) P.D. 505), the buyer gave up his demand for price reduction prior to the litigation, and following the seller's conduct, preferred to rescind the contract and claim restitution of the money he had paid as well as agreed compensation. In Rogozin Industries in Israel v. Nilit ((1983) 37(i) P.D. 664), the Court dealt with a buyer's application to obtain permission to defend against the seller's claim for the payment of the price, filed in summary procedure. The Court granted the buyer permission to defend against the claim by a plea of set-off of amounts in accordance with the provisions of reduction and compensation, and ordered a remittal of the case to the lower court, in order that the contradictory claims of the parties be decided there.

42 Pioneer Concrete v. Ramet (1977)(i) P.M. 251, at 265; Alychent v. Kalaic Agencies Ltd. (1985)(ii) P.M. 76, at 82; Dorshab v. Namlit (1985)(iii) P.M. 81, at 84-85.

43 Levi v. Barzilai (1975)(i) P.M. 461.

44 Amar v. Yanay (1975)(i) P.M. 469. While the remedy of reduction is aimed to adjust the consideration to the defective state of the hired object, the purpose of selfrectification is to enable the lessee to cure the defects and claim indemnification for his expenses.

45 See generally Zamir, supra n. 33, sec. 561, at 584-585. In this matter, the Israeli legislature followed sec. 46 of ULIS and deviated from the common rule in many legal systems, e.g., sec. 43 of the Scandinavian Laws of Sales, sec. 205 of the Swiss Code of Obligations and sec. 1644 of the French Civil Code.

46 On the rules requiring some degree of fault as a condition for the award of damages, see (in addition to references at supra n. 15): Riegert, R.A., “The West German Civil Code, Its Origin and Its Contract Provisions” (1970) 45 Tulane L.R. 48, at 75–78 Google Scholar; Zweigert, K., “Aspects of the German Law of Sale”, in Some Comparative Aspects of the Law Relating to Sale of Goods (London, 1964) 1, at 2 Google Scholar; Horn, Kotz & Leser, supra n. 10, at 97-98, 112 et seq. On French and Italian law, see Zweigert, K. & Kotz, H., An Introduction to Comparative Law, Vol. II, trans. Weir, T. (Oxford, 2nd ed., 1987) 189–191 Google Scholar. See also the introduction to the Contracts Law (Remedies for Breach of Contract) Bill, 1969, supra n. 29, at 394.

47 Sec. 18(a) of the Remedies Law states that in case of frustration, “the breach shall not give cause for enforcement of the contract or for compensation”. In that case, the Law authorizes the court to “require each party to restore to the other party what he has received under the contract… and [to] require the person in breach to indemnify the injured party for expences reasonably incurred and liabilities reasonably contracted by him for the performance of the contract…”. Prof. Honnold (supra n. 16, sec. 309, at 322) argues that the main role of reduction is to determine the monetary relief for the injured party in circumstances where the party in breach is relieved of liability for damages.

48 To the best of our knowledge, not even one judgment has been delivered in which the court has entertained a plea of frustration and accepted it, whereas in many cases this plea for exemption was raised, discussed and rejected. See, e.g., Hiram Landau v. Water Sources Development (1976) 30(iii) P.D. 661; Lopez v. Shoshani (1977) 31(iii) P.D. 748; Goldstein v. Gov-Ari (1984) 38(i) P.D. 309; Kefar Hasidim v. Avraham (1985) 39(ii) P.D. 490.

49 Golan v. Farkash (1980) 34(i) P.D. 813, at 821 (but see dissenting view, ibid., at 823); Public Transportation Services Beersheba v. The Labour Court (1981) 35(i) P.D. 828, at 836; Pomerantz v. K.D.S. Building and Investments (1984) 38(ii) P.D. 813, at 819.

50 This question was addressed in Israeli case law mostly on the background of acute inflation. See, e.g., Ports Authority of Israel v. Ararat; Ofer Bros. v. Ports Authority (1977) 31(i) P.D. 102. For a general discussion on this issue, see Tedeschi, G., “On the Date for Assessing Damage” (1978) 13 Is. L.R. 10 CrossRefGoogle Scholar.

51 According to the calculation: .

52 On the way courts have taken into consideration the effect of inflation when operating the remedies for breach of contract, see generally Novitz v. Leibovich (1982) 36(i) P.D. 537, at 547-551; “Ata” v. Zolotolov (1987) 41(i) P.D. 282, at 293-299.

53 See also Zamir, supra n. 33, sec. 554, at 575-576.

54 See Morrow, supra n. 8, at 537 (sale in French law); Dalloz, supra n. 14, secs. 234-235, at 17 (lease in French law); Lorenz, supra n. 14, sec. 56, at 60-61 (contract for services in French law); sec. 480 of the BGB (sale of fungibles in German law); Larenz, supra n. 10, sec. 197 (leases in German law) sec. 281 ff. (contract for services in German law).

55 See Peretz v. Biton (1976) 30(i) P.D. 367, at 373; Onison v. Deutch (1976) 30(ii) P.D. 398, at 404-407; Rabinai v. Man Shaked (1979) 33(ii) P.D. 281, at 292; Novitz v. Leibovich, supra n. 52, at 542-543; Adras Building Materials v. Harlo & Jones G.M.B.H. (1988) 42(i) P.D. 221, at 278-279.

56 This observation is common to scholars analyzing the place of the remedy of enforcement in the practice of Civil Law systems as well. See Treitel, supra n. 17, secs. 10, 14, at 8,11; Zweigert & Kotz, supra n. 46, at 158 et seq.

57 Secs. 7(a), 7(b) of the Remedies for Breach of Contract Law. On these provisions see generally, Yadin, U., Contracts (Remedies for Breach of Contract) Law, 5731-1970, in Commentary on Laws Relating to Contracts, Tedeschi, G., ed. (Jerusalem, 2nd ed., 1979, in Hebrew) secs. 29–31, at 74–80 Google Scholar.

58 Let us assume the contract refers to ten units, and the stipulated price of each is 100. This price resembled the market price at the time of the conclusion of the contract, but until its performance, the market price has fallen to 50. Five out of ten units have turned out to be defective, so that their actual value is half of their expected value. In this example, the injured party is entitled to a reduction of 250 (half of the price of the five defective units), and after deducting this sum, he will have to pay only 750. If the injured party rescinds the contract altogether, he will get back what he paid under the contract, and in the free market he will be able to purchase ten conforming units at a total price of 500. If he chooses to buy five conforming units and five defective ones (as he would have received had he not rescinded the contract), he will pay only 375 for them (compared to 750 after reduction). Incidentally, if the injured party elects the remedy of compensation, it would amount to only 125 (the five defective units being worth, at the time of breach, 25 each, in comparison to conforming units worth 50), and after deducting that sum, he would have to pay 875.

59 See sec. 7(c) of the Remedies Law; Yadin, supra n. 57, sec. 32, at 80-81. Compare sec. 45 of ULIS.

60 See judgments cited in supra n. 49.

61 See, e.g., in American Law, Neumiller Farmers, Inc. v. Cornett, 368 So.2d 272 (1979); Summers, R.S., “‘Good Faith’ in General Contract Law and the Sales Provisions of the Uniform Commercial Code” (1968) 54 Vir. L.R. 195, at 249–250 Google Scholar.

62 See also Yadin, supra n. 57, sec. 32, at 80-81.

63 See, e.g., secs. 469-471 of the German BGB. On French law see Treitel, supra n. 17, sec. 175, at 138.

64 A conjecture even more remote may attribute the limited use of reduction to the possibility of receiving “negative” damages for breach of the duty to act in good faith in the negotiation stage, under sec. 12 of the Contracts (General Part) Law. Indeed, as opposed to some Civil Law systems, in Israeli law there is no obstacle to relying on defects in the formation of a contract and on a breach of the duty to act in good faith during negotiations as well, instead of having recourse to remedies for breach of contract. The injured party is entitled to base a claim on sec. 12 of the General Contracts Law even if the negotiations ended in a contract, and under Israeli law the “negative” damages may exceed positive, expectation damages. (On these characteristics of Israeli law, see generally Shalev, G., Formation of Contract, updated ed., in Commentary on Laws Relating to Contracts, Tedeschi, G., ed. (Jerusalem, 1978, in Hebrew) secs. 120, 130, 133, 135, at 85–86, 93–95, 97–98, 99–100.Google Scholar) However, the overlap between the incidence of conformity obligations and that of the duty to act in good faith is relatively small. Furthermore, even where such an overlap does exist, it will usually be easier to prove the existence of nonconformity rather than the bad faith of the supplier (even under an objective test for good faith). The lack of good faith may be in the concealment of a defect existing at the time of the conclusion of the contract, and this may occur only where the object is existing and identified at that time, and the supplier is, or at least should be, aware of the defect. Finally, the measure of reliance damages under sec. 12 is not necessarily equal to the sum the injured party deserves according to the formula of reduction.

65 Among these contexts one may recall the rules of compensation, restitution law, tax law, eminent domain, and others.

66 See the definition of “breach” in sec. 1 of the Remedies Law.

67 See, e.g., secs. 31, 32 of the Sale Law; secs. 10, 25 of the Hire and Loan Law.

68 On the difficulties of the system of legislation by stages, see the references in n. 3 supra. On the difficulties raised by the exaggerated tendency to brevity, see also Tedeschi, G., “About the Gift Law, 5728-1968” (1969) 1 Mishpatim 639 Google Scholar; Barak, supra n. 1, at 13-16; Zeltner, W.Z., “Reflections on the Contract Law (General Part), 5733-1973” (1975) 1 T.A. Stud. L. 153, at 168 Google Scholar; Friedmann, D., The Law of Unjust Enrichment (Jerusalem, 1982, in Hebrew) sec. 18 Google Scholar et seq., at 14 et seq.

69 See generally, Tedeschi & Zemach, supra n. 1; Friedmann, D., “Infusion of the Common Law into the Legal System of Israel” (1975) 10 Is. L.R. 324 CrossRefGoogle Scholar.

70 See Honnold's “confession” in this regard, supra n. 16, sec. 313, n. 5, at 327; Bergsten & Miller, supra n. 13, at 266 et seq.; M. Will, in Bianca & Bonell, supra n. 16, at 368-370.

71 See the wording of the section, as quoted in n. 16 supra. See also Will, ibid., at 368-376; Honnold, supra n. 16, secs. 309-313, at 322-327.

72 As opposed to the normal rule in continental law, the new provision provides that the decisive date for the calculation of the reduced sum is that of delivery, and not that of conclusion of the contract. This rule is incompatible with the nature of reduction and its purpose to protect the restitution interest of the injured party. This rule further blurs the distinction between reduction and damages (blurring which began in ULIS, with the abandonment of the requirement of fault as a precondition for the awarding of damages). In spite of the explanations given for the new rule (see, e.g., Will, in Bianca & Bonnel, supra n. 16, at 369-371), it seems that the criticism of it is well-founded. See Schlechtriem, P., “From the Hague to Vienna - Progress in Unification of the Law of International Sales Contracts?”, in The Transnational Law of International Commercial Transactions, Horn, N. & Schmitthoff, C.M., eds., (Deventer, Netherlands, 1982) 125, at 132 Google Scholar. The author mentions this rule among the mistakes in the new law. He explains that it is “based on a misunderstanding of the function of this remedy, as compared with claim of damages”.

73 Adras Building Materials v. Harlo & Jones G.M.B.H., supra n. 55.

74 Lipkin v. Dor HaZahav (1985) 39(iii) P.D. 85, at 95-96; Adras Building Materials v. Harlo & Jones G.M.B.H., supra n. 55, at 267-271.

75 See part IIC supra.

76 Friedmann, supra n. 28, at 183-184.

77 See secs. 13 to 17 of the Sale Law; sec. 6(2) of the Hire and Loan Law; sec. 3 of the Contract for Services Law. See also Zamir, supra n. 33, secs. 272-293, 300-348, 545, at 285-304, 310-355, 565.

78 Such a concentration of the rules relating to nonconformity is to be found in the General Civil Code of Austria, secs. 922-933.

79 At least theoretically, where in exchange for the nonconforming object the injured party promised to supply quantifiable goods (e.g., a certain quantity of flour or fuel), the remedy of reduction may be affected by a proportional reduction of that quantity, according to the formula of reduction. See also Zamir, supra n. 33, sec. 561, at 585.

80 Sec. 50 of the Vienna Convention, quoted in n. 16 supra. The provision makes clear that the buyer is entitled to reduction “whether or not the price has already been paid”. These words were not included in sec. 46 of ULIS. See also Honnold, supra n. 16, sec. 313, at 327.

81 On these difficulties see part IIC supra.

82 Sec. 41 of ULIS; sec. 45 of the Vienna Convention of 1980.

83 See also parts DC and IVA(1) supra.

84 Yadin, supra n. 57, sec. 15, at 43.

85 See also parts IIB and IIC supra.

86 There are legal systems in which the formula for the calculation of reduction in cases of quantitative deficiency does not refer to the change in the object's value, but rather directly to the proportion of the missing quantity to the promised one. Such a rule seems undesirable. In the normal case, where the proportional deficiency in terms of quantity and in terms of value is the same, there is no difference between the two rules (and presumably the reduction will be calculated by comparison of the quantities). But there may be instances in which the measure of deficiency in terms of the object's value will be different from the deficiency in quantity (e.g., where too little a quantity is useless). In such cases, the appropriate and just criterion seems to be the one of value.