Class Notes - Class #24

Earlier in our study we saw mitzvot that require a court to judge properly in different situations.  Mitzvah #58 requires a court to judge any civil case properly. Mitzvah #336 requires a court to judge disputes between buyers and sellers properly, so the mandate of this mitzvah is a sub-set of the mandate of mitzvah #58.  In this essay, the author does not cite a source verse in its usual place.  It seems the source verse is Lev. 25:14, but it is hard to see how this mitzvah is derived from the words of that verse.  Our author does not comment on that problem.

               It is self-evident to our author that a settled society needs a stable, fair legal system to settle disputes.  But our author wonders why the Torah has overlapping mitzvot and why the Torah repeats some ideas over and over whereas the Torah only mentions other concepts once.  He suggests that the Torah tends to repeat instructions about activities that are very common or very serious.  The Torah prohibits idol worship forty-four times because idol worship is very seriously bad.  The author also discusses instances where the Torah includes a general prohibition and also specific mention of some sub-set.  For example, the Torah prohibits idol worship and also specifically prohibits certain practices in the worship of Molech.  The Torah prohibits m’lachah on Shabbat and also mentions two specific m’lachot.  The author suggests that when the Torah mentions specifics it usually adds some aspect that we would not have known otherwise.  Here, the Torah mandates courts to reach fair results in sales disputes because those transactions happen so frequently.

               The author spends most of this mitzvah/essay on a systematic survey of how ownership of property transfers from one person to another.  The act that signifies transfer of ownership is called “kinyan.” At this point in his work, the author’s writing is clear and well organized.  We, as his students, have developed the intellectual skills to deal with close distinctions and follow complex arguments and we will need those skills to follow this discussion.  My impression is that there are certain topics our author wants us to know about.

               It is important to know exactly when the ownership of a sold item transfers from the seller to the buyer.  Both parties are trying to transfer the ownership and they will want to know if they have done so.  If the sold item is destroyed, the parties will want to know who owns it at that moment so they know who bears the loss.  And if the sold item itself does some damage the parties will want to know who is responsible for that damage.  Imagine that someone sells a used car to a buyer.  The car is parked on a hill.  The brakes fail, the car careens down the hill.  It is totaled, and it totals another car.  We need to know who owned the car at the moment the brakes fail to know whether the buyer or the seller is out the car and responsible for the damage to the other car.  Much anguish will be avoided if the rules for when ownership changes hands match what people buying and selling things expect.

               Different categories of property change hands in different ways.  There are different rules for “real property,” land and slaves, and “moveable property,” most anything else.  We still make that distinction.  The process of transferring ownership of land and cars is much more formal than the process for transferring ownership of other goods.  Property is sometimes sold for money and sometimes it is bartered, and the process of transferring ownership works differently for cash sales and for barter transactions.  In the pre-industrial world, cash was unique because coins were fungible in ways that other things were not.  Even cash sales are more complex than we might think, because cash worked differently in the ancient and medieval world than it does now.

               Ownership of real property transfers in three different ways: transfer of money from buyer to seller, transfer of a deed from seller to buyer, or action of the buyer that demonstrates that the buyer owns the property.  These kinyanim apply to sale of real property and rental of real property, since rental is analogous to a sale for a limited time. The author mentions that there are complex rules for each of those types of transfer, but he does not explain what they are.

               Ownership of moveable goods transfers differently, and cash sales are fundamentally different from barter transactions. 

               Before discussing the details of these different transfer methods the author discusses which transfer methods are d’oraita and which are d’rabanan.  Because the source verse for this mitzvah refers to selling something “hand to hand,” the rabbis understood that kinyanim for real property are not necessarily the same as kinyanim for moveable goods. The actual kinyanim for moveable goods are rabbinic but the author says the rabbis brought proof for those kinyanim from the verse.  A surface reading of the verse does not seem to describe any particular process.  So what is the role of the source verse?  The author says the verses provide a “remez,” a hint to the rabbis about what those kinyanim should be.  But the hint is not strong enough to create a Biblical mandate, and the various kinyanim the verse hints at are considered d’rabanan.  We saw in the last several classes that the relationship between the categories of d’oraita and d’rabanan is complex.  Here we have another example of the subtle ways those categories relate to each other.

When real or moveable property is sold for cash, d’oraita the transfer of the cash also transfers ownership of the goods.  But the rabbis ruled that in sales of moveable goods transfer of the cash does not transfer ownership of the goods.  If the seller keeps possession of goods that belong to the buyer, the seller can abscond with the goods but tell the buyer the goods have been accidentally destroyed.  To protect buyers, the rabbis ruled that the buyer does not own the goods until the buyer takes possession.  (Note this is another example of the rabbis overruling the Torah.  In a sale of goods for cash, when the money changes hands, according to the Torah the goods belong to the buyer, but according to the rabbis the goods belong to the seller.)

In his list of questions for further study, the author explains an exception to this rule.  The rabbis say that, before major holidays, when people are buying meat for holiday meals, ownership of the meat transfers when the money changes hands.

Kinyanim for moveable property are variations on the theme of the buyer taking possession of the goods. Different variations that apply in different circumstances:

1.       Hagba’ah,” “lifting.”  Ownership transfers when the buyer picks up the sold item.  This works only for objects small enough to pick up and it can be done anywhere.

2.     Meshichah,” “pulling.”  Ownership of larger objects transfers when the buyer drags or pulls the item.  For animals, the buyer takes ownership by leading the animal or calling it so it comes to the buyer. This works in an area where people have the right to put stuff, for example an alley off the public way which is available for general use.

3.     Mesirah,” “transfer.”  Ownership of objects too large to move transfers when the buyer grasps the object at the behest of the seller. This works only in public place or somewhere that belongs to neither buyer nor seller.

Those kinyanim transfer ownership of the goods from seller to buyer.  They do not transfer ownership of any particular money from buyer to seller.  Rather, when the buyer takes ownership of the goods, the buyer has an obligation to pay the seller.  Because money is fungible, no one cares exactly what money is used to pay any given debt.  Thus, it doesn’t make sense to treat a sale of goods for cash as creating an obligation for the buyer to provide some particular piece of money.  The author explains later in the essay that trying to do that would change the cash sale into a barter transaction, and that the parties do not have the power to do that.

The rabbis said that, in order to protect the buyer from the danger of losing the goods because the goods are still held by the seller, transfer of money does not constitute transfer of ownership of moveable goods.  But if the goods are located on land belonging to the buyer, the buyer can protect the goods, so if the goods are located on the buyer’s premises, payment of money does transfer ownership and hagba’ah and meshichah do not transfer ownership.  Transfer of money transfers ownership of goods located on property owned by the buyer but rented to the seller, or owned by the seller but rented to the buyer.  In those situations, the buyer has enough access to the goods to protect his or her own interests in the goods so there was no reason for the rabbis to override the d’oraita rule.

Similarly, if the goods are in a vessel that belongs to the buyer and the vessel is in a place the buyer has a right to leave it, ownership transfers when the money is paid even if the buyer did nothing else to demonstrate possession.  If the buyer can protect his or her vessel, the buyer can also protect the goods in the vessel.  But if the vessel is somewhere the buyer does not have full control of it because it is somewhere the buyer does not have the right to keep it, for example in a public street, ownership does not transfer when the money changes hands.  The buyer must make the appropriate act of possession from the list above. 

The author considers another complex case.  Imagine that the buyer comes to the seller’s store to buy some fruit.  First the buyer buys a shopping bag, pays for it and picks up the bag.  Then the buyer buys some fruit, the seller puts it in the shopping bag and the buyer pays for it.  It is not clear whether or not the buyer has made a kinyan on the fruit.  The fruit is now in a vessel belonging to the buyer, which would indicate ownership of the fruit had transferred to the buyer.  But the shopping bag is on the seller’s property, where the buyer does not have a right to keep it, and that would tend to indicate the buyer had not yet made a kinyan on the fruit.  Here, though, the seller is glad to have sold the shopping bag and implicitly allows the buyer to keep the shopping bag in the seller’s store.  Therefore, the bag is in a place where the seller has implicitly allowed the buyer to leave it.  Hence, ownership of the fruit has passed from seller to buyer. 

In barter transactions, the parties trade goods for goods and no cash changes hands.  Our author says barter transactions were more common in ancient Israel than they were in his community.  Barter transactions can involve real property or moveable goods, or both.  When one party takes possession of the goods that person is receiving, ownership of both sets of goods changes hands.  The author says there is an exception if someone barters for produce.  In that case, if the appropriate party takes possession of the goods being bartered for the produce, the other party automatically owns the produce.  But if the appropriate party takes possession of the produce, the other party does not automatically own the goods being bartered for the produce. 

The author does not give a conceptual reason why barter involving produce should be different from barter involving other goods.  Rather, he cites a source at the end of the book of Ruth, where Boaz buys Naomi’s field after another potential redeemer declines to buy it.  One party passes a shoe to the other, and the rabbis thought that was a precedent for requiring that barter transactions involve artifacts rather than produce.  How they derived that is not obvious. Normally, only books in the Pentateuch are sources for halachah, books from the prophets and writings are not sources for halachah.  But sometimes the rabbis look at descriptions of people’s behavior that appear in the later books of the bible as models of people behaving properly.  For example, the story describing Hannah praying for a child is seen as a model for how people should behave when they pray.

In our economy, it is easy to distinguish a cash sale from a barter transaction.  All of our money is symbolic; the coins and bills we use have no intrinsic value.  But deciding when a transaction was barter and when it was a cash sale was complex in the ancient and medieval world.  Coins were made from precious metals, and the metal the coin was made of was valuable as a commodity.  Sometimes, though, a town or a king would decide to imprint an image on that piece of precious metal.  Then, people might treat all such coins as worth the same amount even if there was some variation in the amount of precious metal in the coin.  People might accept that coin as worth more than the commodity value of the metal the coin was made from.  But the imprint can wear off or be removed, returning the coin to nothing more than a piece of precious metal.  Or people to whom the coin was offered might choose not to honor the additional symbolic value added by imprinting it as a coin.  For example, the king or town that minted the coin might have withdrawn it as symbolic currency, or the king who minted the coin might have been overthrown so people would not recognize any extra value a coin minted by that king might earlier have had.  Or it might just become too clear that the coin had substantially less precious metal than its face value.  Some people might accept a given coin as a piece of precious metal while other people accepted the same coin as currency with additional symbolic value.  Or a coin might be accepted as currency in one town and only as a piece of precious metal in another town.

If a buyer pays with a coin that is accepted as currency, the transaction is a cash sale and not a barter transaction.  Even if the parties try to “barter” goods for currency, they cannot do so.  If an item is bought for currency, the transaction is a cash sale. But if someone trades a coin that has lost its status as currency for other goods, that is a barter transaction.

The author quotes the Talmud describing an exchange of gold for silver.  The problem is that either the gold or the silver, or both, could be currency or precious metals. When one party takes possession, the other party might get ownership of the other metal or might just have an obligation to pay, depending on what is currency and what is precious metal.  We have had plenty to get our heads around in this mitzvah, so we will not untangle this discussion in more detail.  But the author takes another opportunity to introduce us to a famous Talmudic passage, and gives us another hint that this topic is more complicated than the topics covered in this essay.

Last, the author considers what happens if one party wants to void a sale transaction.  That is less of an issue in barter transactions, since when one party takes possession, the ownership of both items change at the same time.  The transaction is complete.  But in cash sales there is a time lag.  When the buyer takes possession of the goods, the buyer still owns the money and has an obligation to pay the seller.  The buyer now owns the goods and cannot void the transaction unless the seller agrees.  The buyer is obliged to pay the seller.  But let’s say the buyer pays first, before taking possession of the goods.  D’oraita, the ownership of the goods changes when the seller gets the money, but d’rabanan it does not.  The seller can refuse to give the buyer the goods.  Of course, the seller would have to return the purchase price.  But the rabbis thought a seller who did that was behaving badly, and instituted that the seller be subject to a “misehparah.”  We have seen that rabbinic curse before in similar situations.

 

Now that we have summarized the rules, let’s apply them: 

1.  A buyer agrees to buy land from a seller.  The buyer pays for the land.  Who owns the land?  This is sale of real estate, so when the buyer pays, the buyer takes ownership of the land.

2.  A buyer agrees to buy a backpack from a seller.  The buyer takes possession of the backpack by picking it up.  Who owns the backpack?  Does the seller take ownership of anything?  This is a sale of moveable goods.  When the buyer picks up the backpack the buyer takes ownership of the backpack.  The buyer is obligated to pay the seller, but the seller does not take ownership of any particular money.

3.  A buyer agrees to buy a backpack from a seller.  The buyer pays for the backpack but has not yet touched the backpack.  Who owns the backpack?  This is a sale of moveable goods.  D’oraita, when the buyer pays, the buyer owns the backpack.  But d’rabanan the seller continues to own the backpack until the buyer takes possession of the backpack by picking it up.

4.  Two people agree to trade a pair of shoes for a backpack.  The person who wants the shoes takes possession of the shoes by picking them up.  Who owns the shoes? Who owns the backpack?  This is a barter transaction.  When one party makes a kinyan on the item he or she is getting, ownership of both bartered items changes.  So the person who originally had the shoes now owns the backpack, and the person who originally had the backpack owns the shoes. 

5.  Two people agree to trade a pair of shoes for a watermelon.  The person who wants the shoes takes possession of the shoes by picking them up.  Who owns the watermelon?  Who owns the shoes?  This is a barter transaction in which the kinyan is not made on the produce but is made on the other goods.  Ownership of both the shoes and the watermelon changes.  The person who originally had the shoes now owns the watermelon, and the person who originally had the watermelon owns the shoes. 

6.  Two people agree to trade a pair of shoes for a watermelon.  The person who wants the watermelon takes possession of the watermelon by picking it up.  Who owns the watermelon?  Who owns the shoes?  This is a barter transaction where the kinyan was made on the produce.  The produce now belongs to the person who picked up the watermelon.  But the shoes still belong to their original owner since the bartered article subject to the kinyan was produce.  The original owner of the watermelon is obligated to provide the shoes to the other party.  Since the original owner still owns the shoes, if the shoes are destroyed the original owner has to make good the loss.

7.  Someone wants to trade a specific pile of coins for a pair of shoes.  The coins are the type of coins generally accepted as currency.  The party who wants the shoes takes possession by picking them up.  Who owns the coins?  The author explains that this is not a barter transaction, since the coins are accepted as currency.  So the person who took possession of the shoes now owns the shoes, but nothing has happened that would change the ownership of the coins.  The person who owned the coins still owns the coins but is obligated to pay. 

8.  Someone wants to trade a specific pile of coins for a pair of shoes.  The coins have had their imprints removed.  The party who wants the shoes takes possession by picking up the shoes.  Who owns the coins?  Since the coins no longer qualify as currency, this is a barter transaction.  In a barter transaction, when one party takes possession of the goods, ownership of both items to be bartered changes hands.  So the disqualified coins now belong to the party who originally had the shoes.

 

This essay ends with a very long list of questions for further study.  That helps us see just how much more complicated sales law can be.  Let’s look at some of those questions to try to understand why each one raises a significant issue.

Some people might not be able to accomplish binding sales because they do not have the mental capacity.  We would need a definition of who does or does not have the requisite mental capacity and what would happen if that person bought or sold something.

What happens in a sale where it is not clear exactly what was sold or for what price and the buyer and seller do not agree?  Are there guidelines for deciding what to do?

When someone is selling land, how specific does the description of the land have to be?  What happens if the description was less specific than it should have been?  Are there guidelines for deciding what to do?

What if someone sells something the seller does not own?  Does it matter whether the seller knew or should have known he or she did not own the goods? (Do you want to buy a bridge in New York?)

What if someone was coerced to sell land?  To give away land?  Can the recipient be forces to return it?  Would the result vary depending on what the coercion was?

Someone wants to buy a specific piece of land.  The owner does not want to sell the land but promises that if he ever wants to sell he will sell to that person.  Then the land owner sells the parcel to someone else.  Does the person who originally wanted to buy the land have any recourse?

Someone sells land because the person has plans to move to Israel.  Then the plans fall through.  Can the seller void the sale if the seller told the buyer that was why the land was for sale?  Can the seller void the sale if the seller didn’t tell the buyer but the buyer knew anyway?

Are there special limits on when and to whom one may sell a synagogue?

Many commercial transactions happen through agents.  What if I appoint someone to make a purchase on my behalf and the person uses the money to buy the thing for himself?  Do I have any recourse?

Are there special rules for a mortgage holder who wants to sell the mortgage to someone else? 

What if a butcher sells cuts of meat from a cow that is still alive, but fails to sell all the meat so the butcher no longer wants to slaughter the animal.  Can the butcher refuse, or must he slaughter the animal and bear the loss for the meat he couldn’t sell?

What happens when the purchased goods are flawed?  For example, what result if an animal someone bought that appeared healthy died shortly after the sale?

What if the buyer and seller are still negotiating about the price when the buyer takes possession of the goods?

               Note the very last line of this mitzvah/essay.  The author returns to the role of the judge in deciding sales disputes properly.  The judge is required to reach the proper result unless the judge can find a compromise both parties are willing to accept.  If both parties agree, the compromise is fine.

 

The same source verse, Lev. 25:14, is understood to create another mitzvah.  When we are involved in a sales transaction, that verse tells us not to “wrong” the other party.  Mitzvah #337 prohibits setting an inappropriate price in sales transactions.

               We are forbidden to set an inappropriate price for anything we buy or sell, real estate or moveable goods, even goods of minimal value.  This prohibition still applies, but it is less evident in our economy than it was when every transaction was individually negotiated. The author also interprets the source verse to create a preference for Jews to do business with other Jews.

In general, the price is inappropriate if the price is 1/6th off from the fair market value.  If something is worth $60, it should not sell for more than $70 or less than $50.  If it sells for $70 or more, the buyer is overcharged.  If it sells for $50 or less, the seller is underpaid.  The prohibition applies to buyers and sellers. For example, if a buyer thinks the seller’s price is too low, the buyer behaves badly by relying on the seller’s price on the assumption that the seller is an expert and knows what the price should be. This mitzvah is the antithesis of the notion of caveat emptor.

               Our author finds it obvious that society will be better off if sellers charge fair prices and buyers pay fair prices.  Overall, financial fairness is better for society than everyone getting the most they can in an atmosphere of unrestrained capitalism.  The author says that had the Torah not given us this prohibition, we would have invented it on our own. In the author’s ideal society we each have what, with God’s help, we have earned honestly and fairly.  Our author warns us again that someone who could take financial advantage now might be the victim at some other time.  At the end of the essay, the author points out that we violate this mitzvah if someone sets an inappropriate price that is only a little off from the fair market value, but the rabbis limited penalties to certain cases to avoid putting impossible limits on commerce.

               The source verse that prohibits inappropriate pricing describes something being sold from “hand to hand,” so it is talking about the sale of moveable goods.  But the source verse appears in a passage discussing the return of land in yovel. This mitzvah prohibits inappropriate pricing in sales or real property and moveable property.

               Although the prohibition on inappropriate pricing applies to all sales transactions, the harmed party only has a remedy in some cases.  The mitzvah only prohibits intentional and undisclosed inappropriate pricing.  So if the seller wants to try to charge more than the fair market value and the seller explains to the buyer in detail that the price is higher than the fair market value, the seller does not violate this mitzvah.                

               The harmed party has no remedy from inappropriate pricing for real estate, slaves, deeds and consecrated property.  People are more tolerant of inappropriate pricing for real estate.  Each parcel of real estate is unique.  People tend to think and plan carefully before buying or selling land, so people are tolerant of variations in prices.  The author quotes the Talmud as saying that land is worth any price, a statement the author sees as an exaggeration.  Slaves are treated like real estate, possibly because each slave is unique just as each parcel of land is unique.  Deeds are promises recorded in writing.  The rabbis interpret the source verse to mean that it applies only to cases where something is sold for its value as an object. When deeds are sold, the transaction is about the promises recorded in the deed rather than about the deed as an object.  Therefore, if the buyer is buying the deed because of the value of the deed as an object, the mitzvah does apply and the buyer has redress if the price is inappropriately high.  For example, if an apothecary buys deeds to use the paper to wrap merchandise, the apothecary can void the transaction if the price is too high.

               Inappropriate prices are prohibited in sales involving merchants, but not in sales between one ordinary person and another.  People expect merchants to charge based on the fair market value of goods. But people understand that ordinary people will ask the best price possible.

               The author says people are intolerant of inappropriate pricing for moveable goods.  If a buyer buys goods priced more than 1/6th over the fair market value, the buyer can void the sale even if the seller objects; the buyer returns the goods and gets a refund.  If the buyer buys for exactly 1/6th more than the fair market value, the buyer can get a refund of the overcharge.  If the buyer buys at more than the fair market value, but the overcharge is less than 1/6th the fair market value, the buyer has no remedy.  Only the harmed party has recourse.  The person who got inappropriate benefit from the transaction cannot force the other party to void the transaction, which that person might not want to do if the fair market value changed in the interim.  The wrongdoer does not get to take advantage of a situation created by his or her own bad behavior.

The author gives another example of a case where either the buyer or the seller can be the harmed party.  A buyer buys produce based on the seller’s representation that the fruit is good quality.  After the sale the buyer discovers the produce is not so good.  If the quality is bad enough, the buyer can void the transaction but the seller cannot.  But if the seller claimed the fruit was poor quality and it turned out the fruit was good quality, the seller can void the transaction but the buyer cannot. 

               Commerce will suffer is people doing business are constantly wondering if the transactions they do can be rescinded, so the harmed party has to object to the unfair transaction promptly.  If the issue depends on the value of the money in the transaction, the buyer has to consult an expert money changer as soon as one is available.  If the issue depends on the value of goods, the buyer has to consult a confidant or merchant promptly.  If the dispute goes to court, the judge has to decide whether the buyer has evaluated the transaction promptly or waited unnecessarily.  If the buyer waits too long, he or she no longer has a legal remedy, although the rabbis suggest the seller make recompense anyway.  But the seller can object long after the transaction. Since the seller no longer has the goods, the seller has no way to re-evaluate the fairness of the transaction.

               The recourse we just described applies when the inappropriate price is for the value of the item being sold.  But a seller can price inappropriately by misrepresenting the amount being sold, saying the size or weight of the goods is larger than it actually is.  In that case, the author says, the buyer can void the transaction even if the value of the misrepresentation is less than 1/6th the fair market value.

                

Comments