Mishnah Berurah Tiferet
By: Rabbi Max Sutton, Rosh Bet Din Aram Soba
To help her husband with the burden of household expenses, Lea decided to sell her antique diamond watch, which she inherited from her grandmother. The appraised value of the heirloom was a minimum of $75,000, and the couple entrusted their Uncle Nathan, an experienced jeweler, with the task of selling it. Uncle Nathan reached out to his different contacts and after posting a picture of the watch online, he found an interested buyer in Moscow. Uncle Nathan then cut a deal with Lea and her husband which stipulated that whatever proceeds he received above $75,000 would be his profit. Although the price was clearly below the retail market rate, Lea and her husband agreed, and Uncle Nathan flew to Moscow to meet the customer.
The meeting with a lavishly dressed elderly woman took place in a local cafe’ in Moscow, and after the woman tried on the watch she seemed interested in the purchase. The woman casually got out of her chair and walked around the cafe’, testing how the watched looked on her wrist. Without hesitation, she exited the front door and entered a car which pulled away quickly, leaving Uncle Nathan dumbfounded by what he had just witnessed. Uncle Nathan tried to involve the local police, but he was not very successful, being that he was an American citizen in a foreign country. Upon returning home, he broke the news of the theft to his niece and the two reached out to our Bet Din to determine whether Uncle Nathan was liable for damages.
How should the Bet Din rule and why?
According to the ruling of the Shulhan Aruch, a salesman entrusted with the property of another is liable for payment should the property get stolen. Since a salesman is earning a commission on the property entrusted to him, he has the legal status of a paid watchman. Still, some leading halachic authorities maintain that, in certain instances of theft, a salesman is absolved from payment. If the salesman conducted himself in a normal fashion, exercising the necessary care for the property and it was nevertheless stolen by means beyond his control, he is not liable. This ruling does not necessarily contradict the aforementioned ruling of the Shulhan Aruch, since it is possible that in extreme circumstances the status of a salesman differs from that of a paid watchman. Since a salesman is not getting paid specifically to watch the property, he is arguably extended this leniency. To determine whether an occurrence of theft was beyond the control of a salesman, a panel of judges must evaluate the instance and apply the rulings of the sages to validate their decision.
Interestingly, by rule of the Shulhan Aruch, an agent or salesman who chooses to transfer the property of an owner to a buyer without explicit consent is liable if the buyer does not return the property. This blanket ruling of the Shulhan Aruch is contested by early halachic authorities. Since it is nearly impossible to sell an item without first transferring it to the buyer for inspection, it is unreasonable to impose liability on a salesman in the instance of a buyer refusing to return it. It is viewed by default as if the owner automatically consented to the transfer and the salesman should be absolved of payment. The consensus of contemporary halachic authorities is to impose liability on a salesman if he allowed an unknown buyer to inspect an item without proper surveillance. If, however, the potential buyer is otherwise reputable and he refuses to return an item, the salesman is not responsible for the theft.
The above rulings are applicable to an agent or a commission salesman. However, the laws pertaining to one buying on consignment are considerably more severe. One who buys on consignment not only enjoys the privilege of being able to return the item in the event he cannot find a customer, he also is entitled to go forward with a sale against the will of a reneging owner. Once the item is in his possession, he can either chose to sell or return the item. This liberty in turn imposes liability; he is responsible even if the item is lost or stolen by circumstances beyond control. Some halachic authorities only impose this liability if, in addition to the benefits mentioned, the item was sold on consignment at a very reasonable price. Since the item can easily be sold at a low price, enabling someone to buy it on consignment is clearly beneficial, and warrants a higher level of responsibility.
Generally, unless otherwise customary, one who buys on consignment is required to insure an item, especially when transporting it overseas.
Endnotes: Kesot HaHoshen 72:5,Hatam Sofer H.M. 16,Mishneh Lamelech Sechirute 10:3, Shulhan Aruch Hoshen Mishpat 185: 10,Sha’ar Hamishpat 185:2,Aruch Hashulhan 185: 9,
Shulhan Aruch H.M.186:2,Netivot Hamishpat 185:3, 186:1.
VERDICT A Payout Plan
Our Bet Din ruled in favor of Lea, obligating Uncle Nathan to pay her $75,000 for the stolen watch. We formulated a payment plan of three thousand dollars a month for twenty-five months, to ensure that Uncle Nathan provides payment. As mentioned in Torah law, Uncle Nathan is liable for allowing an unknown buyer to take possession of the watch without proper surveillance. Furthermore, since Uncle Nathan took the watch on consignment, his level of liability includes nearly all forms of loss. By purchasing on consignment, he enjoyed the privileges of possibly returning the watch if his customer was uninterested and theoretically could have forced the sale if Lea later reneged. These privileges obligate a buyer on consignment to assume liability even for accidental mishaps. Additionally, the watch could have been sold locally for a more modest gain, but it was Uncle Nathan’s choice to travel with the watch in order to earn a very substantial profit. Finally, Uncle Nathan was required to insure such an expensive item prior to traveling; his failing to do so was negligent.
Jason created and patented a sophisticated software program and sought a private investor to market his new project. After negotiations, he ultimately signed a multimillion-dollar deal with Eddie and the two entered into partnership in a newly established corporation. The contract signed contained the terms and profit sharing details and also outlined the scheduled financial projections Jason was required to meet in order to secure Eddie’s continuous funding. Another stipulation of the contract restricted Jason from investing company funds in anything other than the development and marketing of the software.
The company got off to a slow start, as Jason was not meeting his anticipated financial projections. With the goal of generating immediate funds to cover the shortfall, Jason used company funds and invested with an outside party, reaping a handsome dividend of nearly $100,000. Jason’s next venture was not successful, as he lost $50,000 while funding a wholesaler filling an order to produce ladies’ flip flops. The designated retailer cancelled the order midway and, due to the specifications of the order cancelled, the funds invested were as good as lost.
During the quarterly review of the company, it was apparent that Jason’s numbers were off, and as a result, Eddie’s staff researched the transactions of the company. They brought to Eddie’s attention Jason’s misappropriation of funds, and Eddie demanded that Jason either borrow and reimburse the $50,000 he lost the company, or sustain a reduction of his equity. Jason found Eddie’s demands preposterous, as he clearly netted between the two unauthorized deals the sum of fifty thousand dollars for the benefit of the company. He was unwilling to reimburse the company for a profitable outcome and challenged Eddie to terminate their relationship because of his breach of contract. Eddie was unwilling to prematurely terminate the deal, though he wanted Jason to pay the $50,000 lost with the wholesaler.
How Should The Bet Din Rule And Why?