Sol, an experienced plumber, was subcontracted by Ronnie to install a water system for the extension and renovation of a commercial site that he was building. The job description included reading blueprints, determining the layout of the piping and drainage systems, and of course installation. Sol submitted a price quote of $125,000 for his services. Ronnie agreed, and forwarded him $25,000 to close the deal. Although a written contract was being negotiated, it was never signed, and due to the urgency of the time frame for the job, Sol began the work immediately.
After only two days on the site, Sol detected that the piping system of the main edifice he was renovating was severely corroded. He immediately notified Ronnie that in order to correct the problem he would need an additional $85,000, explaining that he had no way of anticipating this problem before opening up the walls. Since the damage was unforeseen, it was perfectly acceptable to adjust the price.
Ronnie rejected Sol’s additional charge, as he had received another price quote for only an additional $50,000. Sol explained that it is too risky for him to work so close, and simply could not offer his services for a cheaper price, as it is likely that the job is more complicated than meets the eye. Ronnie proceeded with the other plumber, and requested that Sol return the $25,000 he had forwarded to him. Sol refused, noting that the money was given as a deposit and was not refundable. Moreover, he had forfeited other jobs in order to be available for Ronnie, and now that he lost this job he is entitled to keep the deposit. In addition, he had already spent close to $5,000 on pipes, valves, equipment, and hired labor. Ronnie counterclaimed that the money was forwarded to Sol as payment for his services and not as a deposit.
How should the Bet Din rule – in favor of Sol or Ronnie, and why?
According to the ruling of the Shulhan Aruch, in instances where an unforeseen circumstance prevents a contractor from completing his job, the customer is not liable for the contractor’s wages for the work that cannot be done. Hence, although the contractor is available and willing to complete the job, the property owner is not legally required to proceed if the terms of the employment changed. Since the relationship between the parties was severed on account of the circumstances, the employer is exempt from his initial commitment. This ruling applies even if the contractor forfeited other opportunities of employment prior to accepting the cancelled job, and even if he is consequently unemployed going forward. (It goes without saying, however, that if the customer was aware of the preexisting condition that could prevent the work from being done, this law does not apply.)
Leading halachic authorities debate the question of whether a contractor in such a case is entitled to withhold funds that he had received as advanced payment. On the one hand, advanced payment may be viewed as a non-refundable deposit, such that once the client willingly advanced the funds, he relinquished the right to retrieve his money if the agreement is breached. On the other hand, many halachic authorities, including the Shulhan Aruch, rule that an advanced payment may not be withheld. Even if the contractor finds himself out of work due to the job being cancelled, he must return his advanced payment. The exception to this rule is a case where the contractor incurs a direct financial expense as a result of the circumstances, such as if his equipment is lost or damaged. In such a case, he may withhold prepaid funds to cover his expenses.
If the parties in dispute are of Sephardic origin, they both are required to comply with this second opinion, which is the ruling of the Shulhan Aruch and has thus been accepted by Sephardic communities. Therefore, if money was forwarded to a contractor, and the job cannot be completed due to unforeseen circumstances, the contactor must return the money unless he can prove that he suffered a direct financial loss.
As opposed to all other realms of Torah law, the laws governing financial dealings are usually subject to the agreed-upon terms of the parties. Therefore, if a signed contract exists dictating the terms of the agreement, those terms are enforceable by Torah law. Hence, if a signed contract stipulates that advanced payment is non- refundable, this stipulation is considered halachically binding.
Furthermore, Torah law regards conventional market protocols as binding upon both parties, under certain conditions. One condition is that the protocol in question is widespread and followed undisputedly. (A list of the other conditions can be found in the works of contemporary halachic authorities.)
Baba Metzia 76b, 79a,Tosafot 79a, 79b;
Hazon Ish, Baba Kama 23:12;
Shulhan Aruch Hoshen Mishpat 334, 311;
Divreh Mishpat, 311;Yabia Omer, 1:10.
Verdict:A Gracious Gesture
The Bet Din ruled in Ronnie’s favor, and required Sol to return the balance of the money advanced after deducting his expenses. The total obligation amounted to the sum of $20,000. As discussed, in instances in which an unforeseen circumstance causes the termination of employment, the client is not responsible for the contractor’s wages, or obligated to employ the contactor under new terms. Since the piping and drainage systems were severely corroded beyond all expectations, and the difference in price for repairs was so large, Ronnie was not obligated to proceed with Sol, despite the fact that Sol had turned down other jobs and was now left without work. As there is no clear market protocol governing advanced payments, and no contract was signed, the Torah law is binding. And since Sol and Ronnie are both of Sephardic origin, they are bound by the ruling of theShulhan Aruch, requiring the contractor to return the advanced payment.
Nevertheless, the Bet Din explained to Ronnie that as other halachic authorities dispute the Shulhan Aruch’sruling, it would be appropriate to forego on some of the money owed to him, especially in light of Sol’s difficult financial situation. After verifying that Sol was indeed unable to return the funds, Ronnie, an affluent businessman, graciously waived his entire claim, and Sol expressed his profound feelings of appreciation for the extraordinary gesture.