Jack operates a large summer camp that services his community annually. After collecting deposits from many applicants for the summer of 2020, he needed to cancel the camp’s opening because of the COVID-19 pandemic. Although it was perhaps legal for him to open as scheduled, nevertheless, the restrictions imposed by the state with regard to the number of campers allowed and various other regulations made it nearly impossible for him to operate at a profit. Furthermore, Jack was concerned for the safety of his campers, and opening the camp would seemingly jeopardize the wellbeing of all involved. Upon cancellation, the parents requested their deposit money in return. Many applicants were disappointed with Jack’s decision not to open and were scrambling to find other options for their children’s summer vacation and needed the funds to apply elsewhere. Jack turned to our Bet Din for guidance and instruction. Is Jack required to return the deposits? How should the Bet Din rule and why?
An Important Notification
Due to the current COVID-19 crisis, many financial disputes have emerged and are presently being settled by qualified rabbinical courts around the globe. It is important for parties in dispute to submit their respective claims to competent halachic authorities. The laws governing a pandemic are detailed and complex, and only an experienced Bet Din with a broad knowledge of monetary law can rule accurately. The following article highlights only some of the research done for this case, as part of the information is too intricate to record and is beyond the scope of this article. Since no two cases are the same, it is not recommended to apply this ruling even to a similar case, as often minor details can substantially sway the outcome of a decision. Nevertheless, it is valuable for us to study the laws of the Torah and acquire a basic understanding of monetary laws that apply to a pandemic.
Torah Law
According to the ruling of the Shulhan Aruch, a transfer of funds from a buyer to a seller constitutes a valid transaction. Such a transaction can potentially require both parties to fulfill the remaining terms of their contractual agreement. Hence, even prior to the actual shipping of merchandise, or the start of employment, the transfer of funds creates a relationship between two parties. As per reneging on a sale after funds were transferred, a severe chastising is imposed by a Bet Din on such an individual. For further details on this topic, one is to contact a competent halachic authority, as such information is beyond the scope of this article.
The above ruling is applicable to all standard forms of payment. If, however, the payment provided was in the form of a registration fee or the like, the law differs. Since payment of a registration fee is merely to secure a spot, it does not constitute a transaction that binds the parties to perform as per their agreement. Hence, if either party elects to back out of a deal, the deposit or registration fee is either forfeited or returned. In short, when a party reneges after a registration fee was already paid, the only exposure is the refunding or forfeiting of the money transferred.
Hence, according to Torah law it is irrelevant whether a camp does not open because of a nationwide disaster like a pandemic, or because of a financial decision. In both instances the registration fee is required to be refunded to the parents. As mentioned, the deposit was transferred by the parents to secure a spot for their child in camp. Once camp is cancelled and the spot is unavailable all monies must be refunded.
A Bet Din will at times formulate a payment plan for debtors to reimburse creditors in an efficient and reasonable manner. Quite often a debtor simply does not have the financial stability to pay back the money owed, and in order to enable payment a payout plan is required. Nevertheless, the debtor is not entitled to determine the terms of payment, nor may he demand that the money he owes serve as a credit for camp enrollment for next year.
In instances in which the money collected was rightfully used for preliminary camp expenses, the above ruling may differ. A separate hearing and ruling are necessary to resolve such matters.
Needless to say, parents are entitled to a refund of their deposit even if they are not in need of the money. Torah law makes no distinction between the rich or poor when ruling on a monetary dispute.
By contrast, there are times when one is liable for damages beyond the forfeit of a deposit. If, for instance, a party secures a spot in a camp and subsequently backs out at the last minute, the camp is entitled to payment to offset their loss. A Bet Din will first verify that the camp originally had other potential campers that they turned away, and that presently a replacement camper is not available, before imposing payment for the loss incurred.
VERDICT: Refundable
Our Bet Din instructed Jack the camp owner to refund all money he collected in March. Since the money paid by the parents was to reserve a spot for the upcoming camp season, they are entitled to a complete refund upon Jack’s cancellation. Regardless of whether Jack cancelled because of pandemic restrictions or due to personal financial considerations, he is required to return the funds. Jack was aware early on that the pandemic could possibly force camp to remain closed and he wisely chose not to carelessly use the money collected. Although Jack suggested that the funds serve as a credit for next year, our Bet Din rejected his proposal. While this ruling somewhat put Jack in an uncomfortable financial position, it nevertheless represented Torah law. In the long run Jack will benefit from complying with this ruling, as he will gain the confidence and trust of the parent body he yearly services. Maintaining a good reputation is clearly more valuable than unearned money.
YOU BE THE JUDGE
But You Gave Your Word
Steve and Jennifer were actively pursuing the purchase of Sam’s home for nearly a year. Sam owned a desirable property and was clearly holding out to get his price. Eventually, Steve and Jennifer conceded to pay Sam’s price and in late February they shook hands and verbally committed to the deal. While the lawyers were preparing the final draft of the contract for the sale, the coronavirus spread throughout the Tri-State area. As soon as the couple internalized the potential financial effects of the pandemic, they notified Sam that they were reneging on their word to buy his property. Sam was flabbergasted by the turn of events. In Bet Din, he presented a list of three buyers that he turned away after Steve and Jennifer agreed to the deal. Sam claimed that these buyers were no longer available, and that one buyer already closed on another property. Steve and Jennifer expressed their potential financial hardships and were unwilling to commit to the purchase even at a lower price.
Are Steve and Jennifer required to keep their word and purchase the property? Is Sam entitled to compensation for his loss? How should the Bet Din rule and why?