Calculating Late Penalty According to Contract or Law – part IV | Various Rabbis | Beit Midrash

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The plaintiff (=pl) bought property from a building company (=def), which was supposed to complete construction by 20.06.2014. After negotiations, the contract included a penalty of 2,800 shekels a month against def for lateness, starting from two months after the target date. Pl received the apartment more than 18 months late. According to a new law, a buyer is compensated for more than 60 days of lateness (retroactively from the beginning) according to the following schedule – 150% of the apartment’s rental value for the first 8 months; 125% of the value after that. Buyers cannot waive their legal rights. Pl claims that the apartment’s value is 4,200 shekels and claims 105,275 shekels. Def claims the payment should be reduced on two general grounds. Since the contract included an arbitration agreement to beit din, Halacha, which recognizes the sides’ agreement, rather than the law, should be binding. Therefore: 1. The monthly rate is 2,800. 2. Payments start only after two months. 3. The contract gives a two month extension for the buyer’s requesting building changes, which pl did. Furthermore, the following delays, which were beyond def’s control, push off the target date: 4. (Arab) workers could not come to the site during the fighting in the summer of 2014. 5. The water authority illegitimately delayed connecting the water supply, which delayed by months receipt of a Tofes 4, needed for legal occupancy. 6. The fire department improperly delayed approval for several weeks. 7. Pl refused to receive control of the apartment for 42 days after it was ready.

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(based on ruling 75030 of the Eretz Hemdah-Gazit Rabbinical Courts)

Case: The plaintiff (=pl) bought property from a building company (=def), which was supposed to complete construction by 20.06.2014. After negotiations, the contract included a penalty of 2,800 shekels a month against def for lateness, starting from two months after the target date. Pl received the apartment more than 18 months late. According to a new law, a buyer is compensated for more than 60 days of lateness (retroactively from the beginning) according to the following schedule – 150% of the apartment’s rental value for the first 8 months; 125% of the value after that. Buyers cannot waive their legal rights. Pl claims that the apartment’s value is 4,200 shekels and claims 105,275 shekels. Def claims the payment should be reduced on two general grounds. Since the contract included an arbitration agreement to beit din, Halacha, which recognizes the sides’ agreement, rather than the law, should be binding. Therefore: 1. The monthly rate is 2,800. 2. Payments start only after two months. 3. The contract gives a two month extension for the buyer’s requesting building changes, which pl did. Furthermore, the following delays, which were beyond def’s control, push off the target date: 4. (Arab) workers could not come to the site during the fighting in the summer of 2014. 5. The water authority illegitimately delayed connecting the water supply, which delayed by months receipt of a Tofes 4, needed for legal occupancy. 6. The fire department improperly delayed approval for several weeks. 7. Pl refused to receive control of the apartment for 42 days after it was ready.

Ruling: Pl contended that def should not be exempted for the delay due to the water utility because construction of the apartment was unrelatedly delayed. Def cannot blame the delay on the water if they would have been equally late because of the apartment. Def argues that this point does not make a legal difference and that, practically, when one knows of a major delay, he prioritizes other jobs. Neither the law nor the contract relate to such a case.

Bemare Habazak - Rabbis Questions (626)

Rabbi Daniel Mann

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The Shulchan Aruch (Choshen Mishpat 303:10) rules that if a shepherd left the flock and then a predator whom he could not fight off killed one of the animals, the shepherd is exempt. The Rama (ad loc.) says that if his absence was unauthorized, he must pay because he "started with negligence" and there is a slight chance that his leaving made the difference. If the same damage would have definitely occurred even without the negligence, the Rama agrees to exempt the watchman (Maharashdam CM 430). Therefore, def is exempt from delay on the apartment while the utility anyway prevented occupancy.
Might our case be different because the obligation is based on the sides’ agreement? Acharonim disagree about one who gave a get on condition he does not return by a certain time and his return was prevented by oness, but he would not have returned anyway (see Halacha Psuka, CM 21:(33)). A majority of dayanim reasoned that this does not apply to our case because conditions have to do with the intent of the parties, whereas damage payments depend on objective causes and if the damage would have happened even without the negligence, he is exempt. According to one dayan, since the natural situation is to compensate the buyer for the delay and oness is an exception, it must be a true exception, where def has no element of responsibility, which is not the case where negligence accompanied the oness.

Bemare Habazak - Rabbis Questions