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based on appeal ruling 75029 of the Eretz Hemdah-Gazit Rabbinical Courts

Compensating for a Breach of Exclusivity Agreement


Beit Din Eretz Hemda - Gazit

Tamuz 21 5780
Case: The plaintiff (=pl) received exclusive distribution rights to a book from the book’s publisher (=def). But def sold 1,000 copies of an abridged version of the book, which, pl claimed, caused them losses. The original beit din levied only a modest payment of 4,000 shekels because they viewed the breach of contract only from the perspective of preventing gains. The reviewer of the ruling accepted the right to appeal because they should have looked at the matter as gerama (indirect loss, i.e., devaluation of the book’s value), for which our batei din receive authorization to obligate. The reviewer reasoned that beit din should have hired an appraiser to determine the devaluation of the full-length book due to the existence of an abridged version.

Ruling: It is very difficult to quantify the damage to the value of the book. It might be wrong to see the immediate lower value and multiply by the number of unsold books because it is likely worthwhile to refrain from selling the books at the lower price but to wait for the price to rise.

Beit din asked pl to ask people who understand the field to help him quantify what his loss is. All of the people agreed there was damage, but there was a great divergence about the amount and the way to calculate it.

Def claim that since they sold the abridged version only to yeshiva students, this does not affect the price for non-yeshiva students, and it would only slightly delay how long it will take pl to sell out. However, it was already decided by the first beit din that this was not the case, and we did not find flaws in their reasoning on this matter.

When there are three different evaluations of a price, the Shulchan Aruch (Choshen Mishpat 103:2) rules that beit din is supposed to select the price that is half-way between the high and the low. The commentators (ad loc.) rule that one follows the middle estimate. In a case like ours, when each estimate is based on different logic, it is not reasonable to treat any of the possibilities as the likely correct one. In such cases, Rav Zalman Nechemia Goldberg reasoned that a compromise arrived at by beit din is preferable, especially because it saves money by not hiring appraisers. This is even truer in our case in which the damage is not direct.

One of the factors that should impact beit din’s compromise is that, given that def acted with full knowledge that they were violating the agreement in a meaningful way, there is logic to prevent def from gaining by means of their violation. Therefore, since def earned 10,000 shekels in selling the abridged version, this is the amount that def will have to pay, which is 6,000 shekels more than the first beit din obligated them.
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