Case: The defendant (=def), a school within the broader Charedi community, reserved from the plaintiff (=pl) a navigation game for 100 girls to play in a forest, which includes madrichot, an app that needs to be installed on iPads, and riddles. The price was 3,500 NIS for the game and 1,200 NIS for renting the iPads. The arrangements were discussed by phone and WhatsApp between def’s secretary and social coordinator and pl’s secretary, who sent a contract to def. The contract states that if there is a cancelation within 36 hours of the event, the client has to pay 3,500 NIS and has to pay 10% of the order per month of late payment. Def’s principal asked about the appropriateness of the riddles for the girls and was assured that pl is religious, the riddles are appropriate, and the iPads will have only the game. Def’s secretary signed the agreement the day before the planned activity and def were told to go quickly to pick up the iPads by 6:00 PM. It turned out that the iPads had other apps, but pl told def they could be blocked. The principal thought it was okay, but checked with the supervisor, who rejected that idea, and def canceled the order before 6 PM. Def refused to pay, and so pl is suing for 3,500 NIS for the cancellation and 7,700 NIS for paying 22 months late. Def counters that a school is obligated by a contract only if they attached a seal in addition to a signature, and the former was missing. Also, def claimed that they were given until 6 PM to confirm or cancel and that the iPads were not the type they could use.

Ruling: [We saw last time that def was bound by their agreement and cannot renege based on misinformed consent. Now we discuss how much to pay.]

Since 3,500 NIS was the basic price for the game and in this case def did not get to benefit from it, paying that amount turns out to be a penalty, and possibly an asmachta (an obligation one never expected to be actualized), which is not binding (Choshen Mishpat 207). However, in this case, the sum is not exaggerated, due to pl’s loss of income (see Bava Metzia 104a), as work was done and def backed out at the last moment. This is strengthened by the fact that this type of clauses are standard in many present-day contracts. Therefore, the cancelation fee of 3,500 NIS is binding.

There are two issues regarding the late fee of 7,700 NIS – asmachta, and ribbit. First, considering that the initial payment in this case is itself only a penalty, to attach such a steep appreciation is exaggerated and therefore a problematic asmachta.

Regarding ribbit, the Shulchan Aruch (Yoreh Deah 177:14) rules that if one obligates himself to pay a certain amount for late payment, it is forbidden because of ribbit. We have found a very novel idea by Rav Shlomo Zalman Auerbach that when one pays extra after not paying, it can be considered paying for his treachery rather than ribbit if he was not given permission to pay late. Others argued on Rav Auerbach based on the Rashba (Shut I:651). Therefore one cannot extract this late money when it is not clear that def is obligated. Because def’s delaying was wrong (as even they admit), def will have to pay the full beit din fee.