The Right to Back Out of a Sale – part II | Various Rabbis | Beit Midrash

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Beit Midrash

קטגוריה משנית

The plaintiffs (=pl) wanted to buy one of the apartments that the defendant (=def) was building, for 650,000 shekels. Pl gave def 15,000 shekels as d’mei retzinut (earnest payment), and the sides signed a memorandum stating that if def did not go through with the deal, the money would be returned; if pl would back out, def would keep the money. Subsequently, pl invested money into the apartment, paying def for building changes they requested. Two years after the original agreement, def told pl that he would not sell them the apartment, blaming pl’s behavior and lack of cooperation. Pl sued def for breach of contract, a sum of 440,000 shekels, arguing that not only had his investment in the apartment been lost, but that while waiting for the apartment to be ready, home prices went up nationally dramatically. The matter was taken to a different beit din (some of the ruling will be discussed below), but the sides agreed that Eretz Hemdah should review it in a binding appeal process according to Eretz Hemdah’s appeal rules (rulings are overruled only for mistakes in Halacha or clear mistakes in facts of the case).

Based on ruling 76105 of the Eretz Hemdah-Gazit Rabbinical Courts

Case: The plaintiffs (=pl) wanted to buy one of the apartments that the defendant (=def) was building, for 650,000 shekels. Pl gave def 15,000 shekels as d’mei retzinut (earnest payment), and the sides signed a memorandum stating that if def did not go through with the deal, the money would be returned; if pl would back out, def would keep the money. Subsequently, pl invested money into the apartment, paying def for building changes they requested. Two years after the original agreement, def told pl that he would not sell them the apartment, blaming pl’s behavior and lack of cooperation. Pl sued def for breach of contract, a sum of 440,000 shekels, arguing that not only had his investment in the apartment been lost, but that while waiting for the apartment to be ready, home prices went up nationally dramatically. The matter was taken to a different beit din (some of the ruling will be discussed below), but the sides agreed that Eretz Hemdah should review it in a binding appeal process according to Eretz Hemdah’s appeal rules (rulings are overruled only for mistakes in Halacha or clear mistakes in facts of the case).

Ruling: [Last time we saw that while def was responsible for halting the agreement, he did reserve the rights to do so in a way that should not include a mi shepara.]

There are other reasons for there not to be a mi shepara. Two contemporary poskim posit that mi shepara is only for cases in which there was full intention to complete a sale, just that the kinyan was incomplete. Here, in contrast, the sides were unsure if they would go through with it, even if money was paid. Also, there is a machloket whether mi shepara applies to a case where money was paid for real estate with an incomplete kinyan, or only for movable objects (see Beit Yosef, Choshen Mishpat 191). Finally, according to the S’ma (209:23), there is no mi shepara on an object that was not fit to be sold (e.g., it did not yet exist) at the time of the agreement. In our case, most of the apartment was unbuilt at the time of agreement, and the land, which did exist, was not the sides’ main intention. Therefore, we do not accept the penalty payment ruled by the first beit din.

Def must pay pl for the damages he caused them, as they invested money into the apartment through def. However, these expenses come only to 2,500 shekels (plus return of the 15,000 shekels). The skyrocketing of home prices while pl was waiting is not a direct damage, which one needs to pay for, but preventing gain from occurring. Although we often obligate even for the latter, that is only when the gain by use of one’s money was definite (see Shut Chatam Sofer, CM 178), which is not the case here. Furthermore, in this case, pl did not prevent def from buying something else with his money, as only a small percentage of the sales price was advanced. The fact that he had reason to expect that it was unnecessary to buy something else is not direct enough to obligate payment.