The Binding Nature of the Tentative Agreement – part II | Beit Din Eretz Hemda - Gazit | Beit Midrash

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Case: The defendant (=def) wanted to sell a house, which he expanded without a building permit. The plaintiff (=pl) agreed in principle to buy it for 3.6 mil. NIS, if def succeeded in legalizing the expansion, a process def had begun. They decided to sign a zichron devarim (letter of intent), but pl rejected the first drafted (=zd1) because it was too obligating; pl drew up a weaker one (=zd2), which the sides signed, along with a formal handshake. Pl gave def a check for 10,000 NIS to cash only if the deal would come to fruition. After nine months of failure to receive a building permit, pl agreed to doing the sale "as is," but def demanded 4 mil. NIS, due to hikes in market prices. Pl demands that def go through with the sale for the original 3.6 mil. NIS, whereas def argues that the agreement did not bind him to a certain price. Pl adds that if beit din will not force the sale, def should compensate him for damages pl incurred waiting.

Ruling: [Last time we saw that zd2 is too weak to bind def to go through with the sale, at least at the original price.]
Was the handshake a kinyan based on common practice, as it normally is, at least to prevent the raising of the price? Since it was done in the framework of zd2, it works to strengthen only the commitment of good will, including to try to finish the permit process. It also might obligate def to give pl the first chance to buy the apartment at the price at the time it is sold. While the latter explanation is somewhat forced, the possibilities suffice to prevent pl from obligating def based on the handshake.
Chazal prescribed a mi shepara (a semi-curse) for those who back out of a sale after payment, where there was no kinyan (Shulchan Aruch, Choshen Mishpat 204:1). There are machlokot whether this applies to cases without payment but with a kinyan-like act like a handshake or zichron devarim (see ibid. 6; Sha’ar Mishpat ad loc.) and whether it applies to the sale of land (see Pitchei Teshuva, CM 204:2). However, mi shepara does not apply here because not all of the sale’s details were in place (see Pitchei Choshen, Kinyanim 1:(4)) and because some say that it does not apply regarding real estate when no money (only a check of deposit) was paid (Achiezer III:40).
There is a lower-level moral criticism of one who backs out of a deal called mechusar amana (Shulchan Aruch ibid. 7). There are two possible reasons to say that it does not apply here: 1. The details of the agreement were incomplete (see Pitchei Choshen VIII, 1:(4)); 2. The change of heart was because of a significant change in market price (see machloket in Rama, CM 204:11; Aruch Hashulchan, CM 204:8; Shevet Halevi IV:206).

P'ninat Mishpat (802)

Beit Din Eretz Hemda - Gazit

707 - Realtor Fee Without a Contract – part II

708 - The Binding Nature of the Tentative Agreement – part II

709 - The Binding Nature of the Tentative Agreement – part I

Based on all of the above, beit din will not require def to go through with the sale at the original price. Regarding pl’s claim of losses from waiting, none of the damages are direct enough to require payment. Although our arbitration agreement allows for payment even for indirect damage, we rule that way only with great discretion. In this case, where def did not act in an egregious way and pl also played a role in the delay in finishing the deal, no steps should be taken against def.

P'ninat Mishpat