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Cancellation of a Transactions: A Comprehensive Consumer Guide

Consumer transaction cancellation is regulated by the Consumer Protection (Cancellation of Transactions) Regulations, 5771-2010. The...

Cancellation of a Contract: A Comprehensive Consumer Guide
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This article was translated using AI technology. While efforts were made to ensure accuracy, some nuances may vary from the original.

This article was translated using AI technology.

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Legal Basis for Contract Cancellation

Consumer contract cancellation is regulated by the Consumer Protection (Cancellation of Transactions) Regulations, 5771-2010. The regulations define seven categories of transactions and specify cancellation rules for each. Underlying all categories is a fundamental principle: only the consumer has the right of rescission (the right of rescission is not granted to the business); meaning a consumer may notify a business of their intent to cancel a transaction without providing a reason – simply because they changed their mind.

What are Cancellation Fees?

Businesses often condition contract cancellation on cancellation fees. This is an amount equal to 5% of the transaction value or NIS 100, whichever is lower. This includes “expenses or commitments due to shipping, packaging, or any other expense or commitment that, according to the business, were incurred by it or to which it was committed due to the transaction or contract, or due to its cancellation.”

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Basic Conditions for Cancelling a Consumer Transaction

These are the basic conditions for cancelling transactions for the purchase of goods (for cancellation conditions in specific transactions, see below):

  1. The product price exceeds NIS 50;
  2. The consumer provides proof of the transaction, its date, amount, and payment method (such as an invoice, exchange slip, or cash register receipt);
  3. The consumer returns the product to the business;
  4. The product is undamaged and unused; two important points regarding this:
  • Opening the packaging will not be considered use or damage in certain cases, unless otherwise proven;
  • If the consumer was required to purchase goods to receive a specific service from the business, then the consumer may return them even if used, provided the product was not damaged.

Cancellation of Transactions by Type – A Complete List of Transactions and Their Unique Cancellation Characteristics

Beyond the basic conditions for contract cancellation and without considering “special transactions” for now, the Consumer Protection Regulations define seven product categories with specific, tailored conditions for cancelling transactions for their purchase. For your convenience, these categories are summarized below:

Group 5: Products and services sold in the context of a “presentation event” (such as a launch event).

Cancellation of Transactions in Launch Events – This pertains to situations where a consumer purchased a product or service following a sales method characterized as a “presentation event.” This sales method involves the vendor inviting consumers (including through enticements such as “gifts” and “prizes”) to showcase goods or services they wish to sell. For example: A business inviting to a launch event where products will be distributed at a reduced price or as gifts.

If goods were purchased: Cancellation is permitted within 14 days of receiving the goods.

If services were purchased: This depends on whether the transaction is ongoing or one-time:

  1. Ongoing transaction: A right of cancellation exists within 14 days of the latest occurrence of the following events:
  • From the date of the transaction;
  • From the date of providing a written contract;
  • From the date of providing a written document (akin to a “disclosure statement”), whichever is later, including the following details:
  • The consumer’s right to cancel an ongoing transaction;
  • Details of payments the consumer must pay due to the cancellation (if any) and the method of calculating such payments (if determined);
  • In a transaction for a fixed period – the duration of the transaction and its end date.
  1. One-time transaction: Within 14 days from the date of the transaction and up to 2 business days prior to the commencement of the service.
Group 4: Cosmetic and aesthetic services (including hair removal); vacation units, discount club memberships or subscriptions, communications companies; fitness or health club (spa) memberships, internet providers, television companies, mobile radio services, dating and matchmaking club memberships/subscriptions, lottery and gambling subscriptions.

Further transactions eligible for cancellation include: cosmetic and aesthetic services (including hair removal); vacation units, club memberships or discount club memberships, communication services; fitness or health club (spa) memberships, internet providers, television companies, mobile radio services, dating or matchmaking club memberships/subscriptions, lottery and gambling subscriptions.

The transaction may be cancelled within 14 days, commencing from one of the following dates (depending on the method of communication):

  1. The date of the transaction;
  2. The date a written contract was provided to the consumer;
  3. The date a written document (akin to a “disclosure”) was provided to the consumer, including the following details:
  • The consumer’s right to cancel an ongoing transaction;
  • Details of payments the consumer must pay in the event of cancellation (if any) and the method of calculating such payments (if determined);
  • For a fixed-term transaction – the duration of the transaction and its end date.

The right to cancel shall apply within the aforementioned 14 days, regardless of whether the service has commenced or not, even if the transaction is for a fixed term.

Note: If it is an ongoing transaction that has commenced, the consumer must pay the proportional consideration for the use of the service.

Group 7: Gift Items (Gift certificates excluded)

When goods and services are gifted to a consumer by a third party (e.g., a gift from a friend), the right of cancellation will depend on the nature of the product. The applicable timeframe and procedures for cancellation are determined by the product type.

Refund Procedure:

  • The consumer must provide a receipt or other proof of purchase, including the date of purchase, the amount paid, and the payment method;
  • If the gift was paid for in cash, the refund will be in cash or by a cashable check;
  • If the gift was paid for by check, the refund will be in cash or by a cashable check, within 5 days of the check clearing;
  • If the gift was paid for by credit card, the refund will be in cash only, provided that the account of the purchaser has been debited.
Group 6: Annulment of a Contract for the Purchase of a New Vehicle from an Importer

Cancellation of a new vehicle purchase from an importer is permitted within 14 days, provided the vehicle has not yet been registered in the consumer’s name at the licensing authority.

Group 1: Furniture, home and garden equipment, electrical/electronic appliances (including peripherals), packaged goods, goods ordered but not delivered, watches, musical instruments, water purifiers, mineral water dispensers.

Cancellation of purchase of furniture, home and garden equipment, electrical/electronic appliances (including peripherals), packaged goods, cancellation of an order for goods that have not yet been delivered, watches, musical instruments, water purifiers, and mineral water dispensers.

Cancellation is permitted within 14 days of receipt of the goods and is subject to a cancellation fee.

Cancellation conditions (Regulation 2/Appendix to the Cancellation Regulations):

  • Value exceeding 50 ₪
  • The product has been returned to the merchant
  • The product has not been damaged and has not been used. In this regard: (1) Opening the packaging shall not be considered use or damage to the product unless proven otherwise. (2) Connecting to electricity, gas, or water shall be considered use or damage to the product. Clause 2 is relevant to home and garden equipment; electrical/electronic appliances; water purifiers; and mineral water dispensers.
  • The product has not been assembled at the consumer’s home
  • The manufacturing or ordering is not according to the consumer’s special requirements. Note: A standard product displayed to the consumer from the catalog and manufactured specifically only because it is out of stock shall not be considered an order according to special requirements.
  • If the product was installed by a technician on behalf of the merchant, installation fees shall be paid in an amount not exceeding 100 ₪

Please note! It is possible to cancel a transaction for goods (furniture/goods cancellation) that were ordered but not yet delivered, even if only because they are out of stock and need to be manufactured or ordered.

Group 2: Apparel, footwear, and jewelry priced below 3,000 NIS.

The following conditions apply to the cancellation of clothing purchases, subject to a cancellation fee:

  • The transaction value exceeds 50 NIS (for jewelry – the amount paid did not exceed 3,000 NIS);
  • Cancellation must be made within two business days of purchase;
  • The goods have been returned to the merchant;
  • The product is unused and undamaged;
  • For clothing and footwear: the price tag, if any, has not been removed.

Transactions involving the purchase of lingerie, including swimwear, are not cancellable.

Group 3: Domestic Hospitality Services, Clubs, and Courses

The following are the conditions for cancellation, subject to a cancellation fee:

  • Transaction value exceeds 50 ₪;
  • Cancellation is made at least 14 business days prior to the service commencement date;
  • For accommodation, travel, leisure and entertainment services: services are performed entirely within Israel;
  • For workshops and courses: no cancellation is permitted for psychometric tests.

Cancellation of “Special” Transactions

The law exempts certain types of transactions from the “standard” cancellation rules: distance selling, itinerant sales, vacation units, and distance selling for the provision of tourism services outside Israel. These provisions override the standard cancellation rules, and only they should be followed. For example: If I purchased a shirt from a store, the rules for cancelling clothing purchases will apply. But if I purchased it online, only the cancellation rules for distance selling transactions will apply. These are the cancellation rules for “special” transactions:

Agreement for the Purchase of Vacation Units – Right of Use in a Vacation Unit for a Minimum of Three Years

This agreement grants the right to use a vacation unit/residence, domestically or internationally, for a minimum of three years, with a stay of two or more days annually. For example: A 20-year agreement to use a hotel room in Eilat for one week in April.

Cancellation is permitted within 14 days of contract signing or receipt of the “disclosure statement,” whichever is later. Consumers wishing to cancel must send written notification to the vendor via this link. Cancellation takes effect at the end of the annual period following notification, or at the end of the current annual period if notification occurs during that period. For example: A cancellation notice submitted in early August for a vacation unit booked for the last week of August will take effect at the end of that last week.

The vendor must refund all sums paid by the consumer for the period after the cancellation takes effect, including accrued interest from the date of payment until the date of refund. If the vendor has not yet billed the consumer for the post-cancellation period, the vendor may simply cancel the charge for that period. However, if the transaction has not commenced, the vendor may not charge a cancellation fee!

If the transaction has commenced, the vendor may deduct only the following from the refund:

  1. The pro-rata share of the vacation unit’s price up to the effective date of cancellation;
  2. If the vendor did not restrict the consumer’s right to assign their rights under the contract to a third party (even by charging a fee), the vendor may charge 50% of the vacation unit’s price after deducting the “pro-rata share” mentioned in section 1.

Note that jurisdiction for disputes regarding the vacation unit depends on its location: For units in Israel, the competent court is in Israel. For units abroad, jurisdiction lies with the competent court in the unit’s location.

A fixed-term agreement – an agreement whose termination date is known to the parties in advance.

A transaction for the purchase of goods or services for a pre-defined, fixed period agreed upon by the parties. Examples include: theatre subscriptions, gym memberships, library memberships, etc. The consumer may cancel a fixed-term agreement at any time. The cancellation method depends on the type of product and is detailed in Appendix IV of the Consumer Protection Law.

Street vending transaction (a transaction conducted outside of a fixed place of business).

A peddler’s transaction is one where the vendor offered goods or services without a prior order from the consumer. This occurs outside the vendor’s place of business or that of their representative. For example, if the vendor sets up a sales stand at a military base and the consumer makes a purchase, this is a peddler’s transaction, as the consumer did not initiate the contact and the transaction took place within their proximity.

The consumer may cancel the agreement according to the type of peddler’s transaction (goods or services):

Peddler’s Transaction for Sale of Goods: The right of cancellation exists from the date of the agreement until 14 days from the delivery of the goods or from the receipt of the transaction details, whichever is later.

Peddler’s Transaction for Sale of Services: The right of cancellation exists within 14 days from the date of the agreement or from the receipt of the transaction details, whichever is later. In an ongoing service contract, the right of cancellation exists regardless of whether the service has commenced. In a one-time service contract, the right of cancellation exists as long as the service has not commenced.

In the event of cancellation of a peddler’s transaction, the vendor shall return the full consideration paid by the consumer. If the transaction involves goods, the consumer shall return the goods to the vendor. If the transaction involves an ongoing service contract and the service has commenced, the consumer shall pay the pro-rata consideration for the service rendered and return any goods received for the provision of the service (if any).

Note: A vendor who installed goods in the consumer’s home to provide a service under the agreement may charge a fee for installation costs not exceeding 100 ₪. The vendor also retains the right to claim damages – if any – due to a decrease in the value of the goods that were the basis of the transaction. Furthermore, it should be noted that peddler’s transactions for perishable goods are not cancellable.

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Contract Cancellation – What Am I Entitled To?

A consumer who has notified the cancellation of a transaction will be entitled to a full refund of the amount paid, less “cancellation fees” = 5% of the amount paid or NIS 100 – whichever is lower.

For example: I purchased a product for NIS 5,000 but changed my mind and want to cancel the transaction. 5% of NIS 5,000 = NIS 250, but the maximum cancellation fee is NIS 100. Therefore, the cancellation fee will be NIS 100, and the business will have to refund NIS 4,900 (transaction price less cancellation fee).

Important Note! The right of rescission does not exist in all situations, and the legislature has also established a list of products and services for which transactions cannot be unilaterally cancelled (even if all the above conditions are met).

There are also special transactions (such as itinerant sales, distance selling, and vacation units) for which specific provisions are stipulated that override the standard provisions for products. For example: If I bought a refrigerator but made the purchase via distance selling, the specific provisions for distance selling transactions will apply, not the provisions that would apply if, for example, the refrigerator was purchased at the business premises.

Products and Services for Which There is No Right to Cancel a Transaction

  1. Furniture assembled at the consumer’s home;
  2. Goods manufactured specifically for the consumer according to special measurements or requirements;
  3. Goods that by law cannot be returned;
  4. Food products;
  5. Medicines and dietary supplements;
  6. Perishable goods – products that, once delivered to the customer, cannot be reused or supplied to another or products whose value will decrease (or will spoil) until returned to the business;
  7. Information as defined in the Computers Law (“data, symbols, concepts, or instructions, except software, expressed in a computer-readable language, and stored in a computer or other storage medium, provided that the data, symbols, concepts or instructions are not intended for use in a helper computer only”);
  8. Goods that can be recorded, copied, or duplicated, that the consumer has opened their original packaging (such as books);
  9. Underwear, including swimwear;
  10. Liquefied petroleum gas (gas cylinder or tank);
  11. Jewelry priced above NIS 3,000, except for watches;
  12. Hospitality, travel, vacation, and entertainment services that are performed entirely outside of Israel;
  13. When the consumer requested delivery of a product at a date later than 6 months from the date of the transaction, the transaction cannot be cancelled after the delivery of the products.
  14. Transactions for which payment was made using gift certificates, gift vouchers, or rechargeable magnetic cards.

The Business Refuses to Cancel a Transaction in Accordance with the Law? Compensation Can Be Claimed Without Proof of Damage (“Exemplary Damages”)

Amendment No. 21 to the Consumer Protection Law specifies cases where the court may order a business to pay compensation without proof of damage up to NIS 10,000 for each violation (hereinafter: “exemplary damages”). However, there are cases where the court may award compensation without proof of damage up to NIS 50,000: repeated violation, ongoing violation, or violation committed under aggravating circumstances (Section 31a(c) of the Law).

Consumer Rights and Written Notice

Section 31a(f) of the law states that consumers are not limited. They can claim other remedies for the same violation.

Please note! Section 31a(b) outlines a key requirement. Consumers must provide written notice to the business. This includes electronic messages like texts or emails. This notice must contain the relevant demand. Without it, claims for compensation without proof of damage are not allowed.

Imagine a consumer wants to return an item. They follow the policy, but the business refuses. The consumer cannot claim compensation without proof of damage. This claim requires prior written notice to the business. Documentation of this request is crucial.

However, a lack of written notice only impacts claims for compensation without proof of damage. A consumer can still pursue other compensation. This includes claims for actual financial or non-financial damages, like distress.

Court Considerations When Awarding Exemplary Damages

Section 31a: Pro-Consumer Standard for Damages

Section 31a establishes a “pro-consumer” legal standard. Courts disregard the specific damage amount. This greatly simplifies consumer claims. Consumers don’t need to provide proof of damage, even if no actual harm occurred.

Court Considerations under Section 31a(e):

Section 31a(e) outlines factors courts consider. These include:

  • Law enforcement and deterrence against violations.
  • Encouraging consumer rights enforcement.
  • Severity, scope, and circumstances of the violation.
  • Monetary value of the transaction.
  • Financial scope of the business.
  • Any legal fine stipulated for the violation.

Statute of Limitations for Consumer Claims – Generally 7 Years

The Consumer Protection Law does not stipulate a specific statute of limitations. Therefore, the statute of limitations for a civil claim under it will be as stipulated in the Limitations Law – 7 years. However, there are cases where the statute of limitations will be different and usually longer.

Not Just the Court: Whom to Report to in Case of a Consumer Violation?

Consumer Protection Authority Established (2006)

Amendment No. 20 (2006) created the Consumer Protection Authority. This agency appoints key officials. They hold broad powers. Their duties include:

  • Supervising consumer law
  • Investigating violations
  • Bringing criminal charges
  • Taking administrative action
  • Handling consumer complaints
  • Conducting consumer research

This authority works to protect consumers effectively.

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