C. Agreed compensation for the delay
21.On 3 March 2024 the parties signed an agreement for the construction of a photovoltaic installation on the roofs of the Plaintiff’s logistics center. Section 9.1 of the agreement set the completion date at 1 September 2024, and the total consideration was NIS 18,400,000.
22.Section 18.3 of the agreement provides that “for each day of delay in completing the works, the Contractor shall pay the Client agreed compensation of NIS 25,000, without need to prove damage”. The installation was connected to the grid only on 14 January 2025, 135 days late, so the agreed compensation stands at NIS 3,375,000.
23.Section 15(a) of the Contracts (Remedies for Breach of Contract) Law, 5731-1970, provides that where the parties agreed in advance on the amount of compensation, “the compensation shall be as agreed, without proof of damage”1. The court may reduce it only if it finds that it was fixed “without any reasonable relation to the damage that could have been foreseen at the time the contract was made as a probable consequence of the breach”2.
24.The test, then, looks forward from the day of signing. The question is not what the damage turned out to be, but what damage could be foreseen when the agreement was signed. Whoever seeks to reduce the compensation must show that it bears no reasonable relation to the foreseeable damage, and here that burden lies with the Defendant.
25.On the day of signing, both parties knew that every day the installation was not connected to the grid would cost the Plaintiff about NIS 21,000 in lost electricity sales, before the financing costs it bears. That forecast is set out in Appendix C to the agreement, which was attached at signing. Compensation of NIS 25,000 a day therefore matches the foreseeable damage, and does not stray from it.
26.Moreover, section 18.3 is the product of negotiations between two commercial parties, both represented by counsel throughout. The Defendant has not alleged any defect in the formation of the agreement, and raised no objection to the amount of compensation until the delay was already a fact.
27.The Honorable Court is therefore asked to order the Defendant to pay the agreed compensation in full, NIS 3,375,000, plus linkage differentials and interest as provided by law from 14 January 2025 until actual payment.
D. Alternatively: the damage actually caused
28.Should the Honorable Court decide to reduce the agreed compensation, the Plaintiff will ask that the Defendant be ordered to compensate it for the damage actually caused. Section 15(b) of the Remedies Law preserves the injured party’s right to claim, instead of the agreed compensation, damages under sections 10 to 14 of the Law.
29.The damage caused to the Plaintiff during the delay includes lost revenue from electricity sales of NIS 2,835,000 (135 days × NIS 21,000), additional financing costs of NIS 412,000, and its supervising engineer’s fees of NIS 96,000. Full details appear in the expert opinion attached as Exhibit 14.
30.The total damage, NIS 3,343,000, is very close to the agreed compensation. This, too, shows that the compensation was set in reasonable relation to the foreseeable damage.