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based on ruling 79127 of the Eretz Hemdah-Gazit Rabbinical Courts

Paying for Changes to Building Project–part II

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Beit Din Eretz Hemda - Gazit

Tevet 17 5782
Case: The plaintiff (=pl) hired the defendant (=def), a contractor, to extend his home, with a 55,000 NIS contract for the frame and 21,132 NIS for the interior. The agreement was for pl to provide all the materials and def to be paid only for work, but def ended up providing many materials, for which pl paid 44,000 NIS. After the agreement, def asked pl for a 150,000 NIS short-term loan, for which he was to receive a 2,000 NIS reduction on the contract. The loan has still not been repaid, although most of it is covered by offsetting pl’s obligations to def. (Beit din criticized def’s non-payment without permission, but pl did not request compensation for this). During the work, def asked for an increase in charges due to heightening expenses, and they agreed on 6,000 NIS. A few days later, def reneged on that agreement, claiming that pl’s changes to the plans during the building require a total increase of 21,000 NIS. Pl disagrees because def’s site supervisor, who suggested the changes, implied that they would not increase the cost. Also, def should not have charged for transportation of materials, which should be included in his responsibilities. Def also claims that the materials he provided, which were not in the contract, cost 56,158 (not 44,000) NIS, as they were more expensive than he had estimated. The two also disagree about whether def had promised pl that 1/3 of the fee would be without VAT.

Ruling: Transportation of materials to build scaffold – Although the contract does not discuss transportation of the materials, logic dictates that if the scaffold was necessary for def’s work and will not remain with the final product, then def was to transport these materials like all other tools.

Reneging on the agreement of 6,000 NIS – There are two ways to look at def not charging more than an additional 6,000 NIS: it was mechila of (relinquishing rights to) that which he deserved; it was a peshara (compromise) as to what he deserved to receive. Mechila does not require an act of kinyan to be binding, and peshara does (Shulchan Aruch, Choshen Mishpat 12:7-8). The explanation is that one who is mochel understands better what he is doing, whereas when one agrees to peshara, it is more likely that he agreed based on a misunderstanding of his rights (Sanhedrin 6a). The Shach (ad loc.) says that this requirement of a kinyan only applies to pesharot upon which beit din presided, whereas those done by the parties are binding without a kinyan. Possibly, according to the Maharam Lublin, the source of the Shach, this is only when the sides give up their rights and not when they are arguing about money and either could lose. However, the Shach seems to treat our case like that of people who prefer to decide the matter themselves rather than adjudicate, so that it would be binding. Therefore, we do not allow def to back out of the agreement.

Reduction from VAT – the contract does not address this matter, but pl says that this is because they do not want in writing that def is granting an "exemption" from VAT. In any case, pl did not prove an "exemption." In practice, def has paid VAT on the entire sum, and the question of VAT was already on the table when the sides agreed on the 6,000 NIS. Therefore, pl must pay def for full VAT.
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