Honesty and ethics in business transactions – Going back on your word in a sale or gift – Part 1

Honesty and ethics in business transactions – Going back on your word in a sale or gift -Part 1:^[1]

A. Introduction:

Retracting from a sale and asking for a refund is common business practice which is a fundamental aspect in today’s world of commerce. Customers want to hold the right to retract from the sale not only before the actual reservation or payment for the product, but often even afterwards. For this reason, many stores have return policies which allow the customer to change their mind on the product and receive a cash or store credit refund. Nonetheless, not all services, products, and stores offer refunds and the ability to retract from the purchase, and it is all dependent on the specific business. Furthermore, even businesses that offer refunds, it often comes with certain regulations, such as a limitation on the amount of time after the purchase that the refund may be requested, as well as the condition of the item purchased, and the reason for the requested refund. In some countries and states, the ability to return the product in exchange for a refund is mandated in civil law. All in all, the concept of having the ability to refund one’s product helps raise consumer trust and in general is considered good for business and comes to benefit the sellers as much as the buyers. All the above is from a secular law and business perspective, however, in this article we will review what Torah law states regarding retracting from a sale. Our main focus will not be on the lengthy and complex technical laws of acquisitions which make a sale considered final according to Halacha, and therefore make it illegal to retract from it, but rather on the subject of honesty and ethics. When one agrees to a sale, aside from the question of whether retracting from it is considered legal, a more fundamental question is raised, regarding whether it’s considered honest. In this Halacha we will learn of the importance of keeping one’s word in a business transaction due to ethical reasons. Just as there exists laws which dictate the legality of business and commerce, so too, there exists a separate set of laws which dictate morals, ethics and honesty, and not always do the two go hand-in-hand. Meaning, just because something is legal in business, does not mean that it is ethical, and just because something is ethical doesn’t always mean that it is legal. This Halacha will focus on the ethics of business. If one promised to give a gift to someone, must he go through with his promise due to ethical reasons? If one agreed to buy a certain item must he go through with the sale due to ethical reasons, even if he now has reasons to retract from it? In Halacha, retracting from one’s given word in a business transaction, contains four levels of severity. The first level is where it is illegal to retract from the gift or sale, either due to the fact that an acquisition has taken place, or due to the fact that one’s word is considered binding. This matter, and the cases subject to this ruling, will be explained in length in Halacha E case 1-2. The second level is where one retains the legal right to retract from the sale or promise, but whoever does so is considered worthy of a special curse that the sages instituted for people who are untrustworthy. This matter, and the cases subject to this ruling, will be explained in length in case three. The third level is where one retains a legal right to retract from the sale or gift and is not liable to be cursed, but whoever does so is considered untrustworthy by the sages and they are displeased with his actions. This matter, and the cases subject to this ruling, will be explained in length in case four. The fourth level is where one is not considered untrustworthy or displeasing in the eyes of the sages if he retracts from his word or resolve, although, this may not be considered an act of piety and the way of the God-fearing. This matter, and the cases subject to this ruling, will be explained in length in case five. Prior to going into the four different levels of severity of retracting from a sale or gift we will first introduce the general concept of being honest in business as explained in C. However, before we jump into the subject we will give a short synopsis of the background of the subject from Scripture and Talmud, which will serve as the foundation for the entire discussion of the laws below.

B. The four levels of business misconduct:

• Illegal to retract
• Legal to retract, but liable for Mi Shepara curse by Beis Din if he does so, and is therefore forbidden to be done.
• Legal to retract, but considered unethical due to Michesurei Emuna & Ein Ruach Chachamim Noach Heymenu if he does so, and therefore according to some is forbidden to be done.
• Legal to retract and not considered unethical if he does so, although it may not be the ways of the G-d fearing.

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[1] List of Sources: Scripture: Kedoshim 19:36; Tehillim 15:2; Tzefanya 3:13; Shulchan Aruch: Admur O.C. 156:2; Admur C.M. Dinei Mechira Umatana Halacha’s 1-4 and 6; Michaber C.M. 204:6-9; Rama 204:11; Mishneh and Talmud: Bava Metzia 48-49a; Mishneh Shevi’is 10 and Mefarshim ibid; Yerushalmi Shevi’is 10:4; Sanhedrin 92a; Bava Basra 88a; Makos 24a Rishonim: Rambam Hilchos Deios 5:13; Hilchos Mechira 7:8; Rosh Bava Metiza 4:12; Rif Bava Metzia 29b; Nimukei Yosef Bava Metzia 49a and Hamaor Hagadol; Shita Mekubetzes Kesubos 86a; Rashi Kesubos 86a; Rav Ovadia Bartenura and Tosafus Yom Tov and Pirush Hamishnayos of Rambam on Shevi’is 10; Shaareiy Teshuvah of Rabbeinu Yona 183; Mordecai Bava Metzia 4 Remez 312 Achronim: Smeh 204:12; Shelah Miseches Chulin p. 114a; Minchas Chinuch 259; Minchas Pitim 204:8-11; Mishpitei Chaim 6; Yagdil Torah 68:36 Melaktim: Imrei Yaakov on Admur ibid Halacha’s 1-6 and in Likkutim and Biurim, Shaar Tziyon and Mekoros; Encyclopedia Talmudit Erech “Michsurei Emuna” Vol. 44 pp. 281-316; Encyclopedia Talmudit Erech “Mi Shepara” Vol. 46 p. 81-152; Encyclopedia Talmudit Erech “Ein Ruach Chachamim” Vol. 1 p. 716-717