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Beit Midrash Series P'ninat Mishpat

based on ruling 78063 of the Eretz Hemdah-Gazit Rabbinical Courts

Chapter 571

Money Given for Shemitta Observant Farms

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Case: The plaintiff (=pl) gave 480,000 NIS, for which he needed to take a mortgage, to the defendant (=def), an unregistered partnership of neighboring farms, to enable them to work their fields during Shemitta according to the otzar beit din system (without a heter mechira). Def was supposed to return the money plus 40% of net profits, which were expected due to an agreement to supply pepper to an otzar beit din (=obd), at 5 NIS per kilo. The obd did not keep their deal, causing def to do a late harvest and produce less than expected. Def ended up losing for the season, despite receiving some compensation from their insurance. Def returned a small amount to pl and admit to owing another 307,000 NIS; their representative had stated in a text message that they owe 338,600 NIS. Pl demands a return of all of the loan plus compensation for pl’s mortgage payment and what he could have earned elsewhere with the money. Pl claims that since def acted negligently, pl and def’s contract, which required def to act financially wisely, is null. Specifically, they should not have allowed obd to lower the price, but should have harvested on time, forced the produce onto obd, cashed obd’s guarantee check, and started working according to a heter mechira. Instead, def signed a compromise agreement with obd. Def also paid too much money to a marketing agent. The contract’s provisions for a breached contract award pl significant compensation (we will omit details). Also, def used some of the funds for other purposes. Def claims to have done the best possible under the circumstances, which include the actions of obd (which was not directly obligated to def but to their yishuv) and the impact of following the halacha on the growing process. The sides also differ if their agreement was of a loan or an investment.
P'ninat Mishpat (576)
Beit Din Eretz Hemda - Gazit
570 - Payment for Not Clearing Warehouse On Time – part II
571 - Money Given for Shemitta Observant Farms
572 - Money Given for Shemitta Observant Farms – Part II
Load More

Ruling: Witness 1 was the representative of the yishuv for interactions with obd. He testified that obd did not succeed in getting the price it expected from consumers, and so they did not have money to keep their commitments to the farmers. While some farmers abandoned the arrangement earlier, that was a risky step as prices were lower than expected across the board. An expert hired by beit din explained how the circumstances left def little choice other than to switch to heter mechira earlier; the main reason they did not was def’s religious principles.

The contract between pl and def can only be read as an investment, not a loan. This is clear from the language and the fact that pl took an expensive loan from the bank to finance it; this cannot be explained by good intentions alone. An investment is not guaranteed like a loan.

Regarding agreeing to give the produce for less than had been discussed, the Shulchan Aruch (Choshen Mishpat 185:1) says that an agent may not sell at a lower price than the owner agreed, even if it is a fair price. However, this case is different because: 1. Def did not promise pl they would sell peppers at a specific price; they just shared that expectation. 2. Pl is not an owner but an investor in def’s operation. 3. Def has more expertise than pl, and therefore they have authority to act according to their best judgment. Therefore, selling at a lower price was not necessarily negligence.
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