P'ninat Mishpat: End of Tenure of Development Company – part II | Beit Din Eretz Hemda - Gazit | Beit Midrash

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Case: The defendants (=def), an association of people having homes built in a project, hired the plaintiffs (=pl) to serve as their development company to handle the building of dozens of apartments. After years of work and progress made in the project’s actual building, disagreements arose, and def fired pl after paying them partially. Pl, who claim to have finished 82% of the work, are suing for 1,300,543 NIS, which they claim is still owed to them. Def, who claim that pl completed only 42%, do not believe the contract between them is binding, and are countersuing for 6,715,342 NIS for damages pl caused during their involvement. [We will deal with the some of the elements of this dispute (the full ruling covers 75 pages) in installments.]

Ruling: Payment for watchmen: Pl paid for watchmen to secure the building site for 10 months, paying 114,000 NIS, and is demanding reimbursement because the agreement obligated def to pay. Def claims the right to withhold the money in lieu of the money pl allegedly owes them.

P'ninat Mishpat (802)

Beit Din Eretz Hemda - Gazit

803 - P'ninat Mishpat: End of Tenure of Development Company – part I

804 - P'ninat Mishpat: End of Tenure of Development Company – part II

805 - P'ninat Mishpat: Reducing Amount Owed Due to Interest Taken

Def implicitly admits that the amount demanded Is fundamentally due to pl. The contract contains a provision that disallows withholding money due without permission of the other side or an arbitrator. Therefore, def must pay the 114,000 NIS for the watchmen.

Responsibility for flawed work: Def complains of many flaws in the building from pl’s time of work and claims pl must pay because they are responsible for selecting and supervising the contractors and subcontractors.

Pl is indeed legally required to arrange and supervise others’ work, but this does not normally include financial responsibility. Pl can be sued for not doing a reasonable job in the selecting process (limited in many cases because def must approve the contractor(s)). Pl employed multiple building supervisors, and there is no credible claim that the supervision was not done responsibly. Furthermore, even if pl were irresponsible in supervising, the first level of responsibility is on the (sub)contractors, and after def replaced pl, they were required to register the complaints with the (sub)contractors and, if necessary, sue them. Therefore, pl need not pay for any of the flaws raised.

Windows: Def claims that pl improperly built the window frames in a manner that would fit only windows that pl imports from abroad so that they could receive extra profit as an importer and when def refused, pl did not provide an alternative of Israeli windows, which def had to find. Def demands reduction of what pl received on the project as well as 17,000 NIS for having to chisel the window frames for a new size of window.

Beit din found in the sides’ correspondences that pl informed def early enough of their recommendation to import the windows, and did not receive money for arranging the windows. Their recommendation does not make them liable, and it is not problematic to try to make extra profit if they did not withhold information. Whether there was a need for extra chiseling or that was unchanged requires expert testimony to determine, and it serves the sides’ interests to not pay for such testimony. Therefore, we employ compromise and obligate pl 10,000 NIS for this.

P'ninat Mishpat