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based on ruling 79110 of the Eretz Hemdah-Gazit Rabbinical Courts

Who Caused the Renovations to Stop? – part III


Beit Din Eretz Hemda - Gazit

Shvat 19 5781
Case: The defendant (=def) hired the plaintiff (=pl) to do renovations, based on general guidelines, in a house she wants to sell or rent out. They signed a contract for 115,000 NIS not including VAT. In a later addendum, there are itemized additions with line values adding up to another 39,600 NIS. After starting, def stopped the work for a couple of weeks so that an interior designer could draw up exact plans. Disagreements, mainly about finances, arose after a few weeks, and the work ended, close to complete, with 135,000 NIS paid. Pl is unwilling to finish the work because def has indicated she will not pay any more. Def is unwilling to pay because she denies the validity of the additional fees for various reasons. Pl is suing for the remainder promised to him, with some adjustments if he does not finish, plus 2,000 NIS a day for the work stoppage in the middle, with the claim that his workers could not be reassigned to other projects. Def demands a return of money because of a list of uncompleted elements, faulty construction, and damage from the delay in completion, and because def had agreed to forgo VAT.

Ruling: We have seen that the agreements were binding and that it was def’s doing that pl did not finish the work.

Regarding the question of reducing VAT, there are indeed strong indications from the sides’ joint calculations that at least for the main payment, a 50% reduction in VAT was planned, although in a recording we hear pl say that he is in favor of the government getting its share. However, this concession is irrelevant. When contractors talk about a reduction in VAT, they do not mean that they will pay in place of the customer, but that they will do part of the payment "off the books" so that no one will pay. We refuse to take part in such illegal actions. Therefore, def will pay VAT, and pl will provide receipts for the full amount received.

Theoretically, pl has the right to finish the job and receive full payment (in this case, minus minor reductions due to accepting some of def’s claims). In a case that he cannot complete the job, when that is not his fault, the accepted opinion is that he receives a reduction in full pay only by the amount of the value of not having to complete the job (see Shulchan Aruch, Choshen Mishpat 333:2,4). In our final hearing, pl agreed to take a reduction of 4,000 NIS for everything not done. That is a sufficient reduction.

Regarding pl’s claim of 2,000 NIS a day for delay in the work, beit din rejects that claim. The contract gives a projected amount of work time for pl to finish the time. Def did not obligate herself to not take any breaks, especially a reasonable one like to bring in a designer due to the sides’ difficulty in planning jointly. In a discussion that was recorded, there was no hint of monetary demand for the stoppage (just general frustration). There are also no indications that pl had to pay workers or subcontractors for the delay (lack of predictability is a hallmark of construction work).

In total, def must pay pl 37,364 NIS including VAT due to incomplete payment.

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