Beit Midrash

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To dedicate this lesson
based on ruling 73109 of the Eretz Hemdah-Gazit Rabbinical Courts

Was the Store Already Bought? – part I


Beit Din Eretz Hemda - Gazit

Elul 2 5781
Case: The defendant (=def) bought the rights to a store from the seller (=sel). The location of the store (=st) is owned by the landlord (=ldld), who rented it to sel. Sel did own equipment and merchandise. The plaintiff (=pl) claims to have, a few months earlier, bought st from sel for 400,000 NIS, including the equipment and merchandise, and demands control of the store and its content. The contract between sel and pl contains provisions that sel would continue to operate the store as pl’s employee for 15,000 NIS per month and that sel could buy back st for 401,000 NIS during the course of a year, which sel did not do. It lists equipment included but does not mention merchandise. Def counters that the many peculiarities of the alleged deal (including the low price) point to the conclusion that pl lent sel 400,000 for a year and used the store as collateral. Since it was not officially registered as collateral, sel was able to sell st to def. Additionally, sel could not sell st to pl because sel did not have the right to sublet without ldld’s permission. Ldld was not involved in the sale to pl; he was regarding def. Finally, since def did not know about any deal between sel and pl, for which there were no public signs, def should be able to keep the store and its contents based on "takanat hashuk" (protection of unaware buyers) as long as pl gets back his 400,000 NIS investment.

Ruling: It is clear from the contract and hinted at by pl’s witnesses that pl was not intended to keep st. While the contract was written carefully and, for example, is very detailed regarding the equipment, that is also consistent with st serving as a guarantee. According to Halacha, if pl and sel chose a mechanism for a loan to act as a sale and a kinyan was done, it would be binding. According to Israeli law, if the intention was that st should be a guarantee, we would follow the intention. This distinction is important because it is not clear that there was a halachic kinyan. The contract and sel’s giving keys to pl could serve as a kinyan based on situmta (accepted practice), but only if it is binding according to the law of the land, so we turn to the halachot of kinyanim.

Even if pl acted in some ways like the one with control of the physical store, he did not acquire rental rights to it because sel’s rental contract with ldld requires ldld’s explicit agreement to a new renter. Regarding sale of the monitin (roughly, intellectual property) of the store, while the general concept is halachically accepted, its parameters are not. Some view a store’s monitin as mainly the right to continue working in a certain place with a group of customers. If so, since sel himself was unable to transfer those rights, he was not capable of selling them. Also, the contract between ldld and sel stated that the sel would not have any claims to monitin in regard to the store. While the exact intentions of that clause are unclear, pl cannot use it to prevent def from operating the store after def’s agreements with sel and ldld.
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