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Based on ruling 77070 of the Eretz Hemdah-Gazit Rabbinical Courts

Case: The plaintiff (=pl) planned to buy an apartment in the project being built by a construction company (=def). The municipal planning board approved six apartments, but def decided to break each one into two, which concerned pl. Pl signed a preliminary contract with def, which included a 12,000 shekel down payment to show seriousness and called for the sides to reach agreement on a full contract. Months after the down payment and before signing a full contract, pl decided not to buy the apartment. He is demanding return of the down payment.

P'ninat Mishpat (812)

Various Rabbis

525 - Damages of Delay in Home Construction – part II

526 - Worker’s Benefits

527 - Hallel and Nirtza

Ruling: Par. 4 of the first contract states that if the sides do not reach agreement on a full contract within three months, the down payment becomes final (here, more than three months passed). On the other hand, pl included a clause that he can raise objections to the new contract, which def must consider, and that if no agreement is reached on the contract, the down payment will be returned. Def argues that this was intended for cases in which there are unresolved disagreements about the contract, not when pl backs out of the sale for a different reason. In this case, pl mentioned several times that it was the lack of approval of the plans that disturbed him.

Beit din agrees with def’s reading of the contract for two reasons. First, the addition is written in proximity to discussion of the writing of a full contract, implying that the ability to recover the down payment is related to difficulties in this regard. Second, according to pl’s reading, the idea of a down payment to show seriousness has no meaning, as pl can always get the money back. This is neither logical nor does it fit with the language of "without taking away from the above …" It became clear during the hearing that there were disputes about provisions of the proposed contract.

Pl cannot back out due to the lack of planning approval because there are several proofs that he was aware of that problem before signing the agreement and that he knew that this could take a long time to be resolved.

The question that remains is: given that there was not an agreement on a sale, is the promise that the down payment will later become irretrievable a halachically binding obligation or is it an asmachta (an obligation one did not expect to be operative)? According to the Shulchan Aruch (Choshen Mishpat 207:11), if one gives a guarantee payment for a transaction to the seller and the buyer backs out, the buyer does not receive the guarantee back. The Rama (ad loc.) says that he can get it back. The Pitchei Teshuva (ad loc. 13) says that the seller can demand to follow the Shulchan Aruch’s opinion. While the Chazon Ish’s (CM 16:11) opinion on the matter is complex, Rav Daichovski (Lev Shomeiah L’Shlomo, p. 479) concludes that the down payment becomes irretrievable. Part of his rationale is that due to the law that confirms this possibility, the accepted practice impacts the mindset of the participants and makes them serious about the matter.

In conclusion, def does not have to return the 12,000 shekels.

P'ninat Mishpat