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Based on ruling 76021 of the Eretz Hemdah-Gazit Rabbinical Courts

Case: The plaintiff (=pl) bought a wig from the defendant (=def) at the price of 10,500 shekels, with several checks dated for different times starting with May 2015. Def delivered the wig in July, soon before pl traveled abroad for several weeks. Upon returning, pl gave back the wig to def, due to a defect that both agree makes it unusable. Def promised to have the wig producer fix it before the chagim of Tishrei, and while def did not return the uncashed checks, she said she would not cash anymore of them. When the chagim passed and the wig was not yet fixed, pl demanded her money back (def had actually cashed almost all the checks). Def refused, claiming that the defect was done by the wig manufacturer, whom she already paid. Since they refuse to return the money to def but only to repair it, pl must keep to her agreement with def and wait for the fixed wig.

Ruling: Def admits that she never presented herself as a representative of the wig producer and in fact also sells wigs from other companies. Therefore, she is the one who sold the defective wig, irrespective of whose fault it was that there was a blemish.
The question is whether the blemish justifies nullifying the sale, or whether the seller has the right to fix it instead. The Shulchan Aruch (Choshen Mishpat 332:3,4,7) rules that a buyer can demand a return of the sale even after a long time if it turned out that it was seriously blemished from the outset and the buyer just found out. The seller cannot force him to keep the object according to its value as a blemished item. The Rama (ad loc. 5) does say that at times the seller is allowed to fix the blemish and uphold the sale. However, that is only when the blemish is either external or not very significant, and neither of those is the case here (see also Netivot Hamishpat ad loc.).
There are times when the buyer waives his rights to nullify the sale, especially when the buyer continued using the object after finding out about the flaw (Shulchan Aruch, ibid. 3). However, this is only when this is an indication that he actually waived his right. However, here, pl expressed lack of willingness to keep the object as is and just agreed for def to try to fix it; that is not considered mechilla. Even if one wanted to claim that she agreed to have it fixed, that was on two conditions that were discussed: that it would be fixed before the chagim; that pl would not cash any more checks before it was fixed. Since def did not keep these conditions, pl no longer has to allow her the opportunity to fix the wig.
Therefore, def has to return the entire amount that was paid for the wig, and def of course can negotiate with the producer. Although there is some logic to obligate def to pay the entire beit din fee, since it was evident to beit din that def believed she was correct in her claims, she had a right to hear what beit din had to say. Therefore, the two sides will share the costs.
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