Reneging on a Deal

Each week Rabbi Yoel Domb writes about issues of business ethics related to the Torah portion of the week.

Is a Jew allowed to renege on a business deal? For example, if Reuven entered a shoe store and bought himself a pair of shoes, and later decided that he doesn’t really need another pair of shoes, is he allowed to return them? Even assuming that the store will take the shoes back and refund his money, does the Torah allow Reuven to renege on the deal simply because it doesn’t suit him?

Shimon ordered a new closet from his furniture store. He paid half the money up front and promised to pay the rest on delivery. Later that week Shimon found a better closet for a similar price. Can Shimon request a refund and cancel the previous transaction?

Modern business society favors a liberal approach to transactions, and therefore allows the buyer to renege on the deal even after he has paid for the item. Nearly all stores will accept an item back, and will provide either monetary reimbursement, or a store credit. This policy is based on the assumption that people may change their minds after purchasing an item, and may even wish to return the items they bought.

Undoubtedly there are customers who take advantage of this policy to buy items and “check” them before returning them to the store. If the store refuses to accept the merchandise, the customer may threaten to expose the store’s refusal or to patronize a rival store. Although there is no legal flaw in the customer’s conduct, his actions may be ethically questionable. His intent may have been to take advantage of the store and use its merchandise for a short period, which is tantamount to stealing.

What is the common denominator of the above cases? In each case the buyer is showing bad faith by canceling his transaction, since the agreement was made unconditionally. By paying for the item and taking it home, the buyer is giving his word that he is not just trying out the item. By returning the item and demanding reimbursement, the buyer is effectively breaking that agreement.

In this light we can now understand Chazal’s stringent approach to a monetary purchase. If a buyer reneges on a deal after he has paid for it, he is allowed to receive his money back but also receives a powerful curse: “He who punished the generation of the flood and the people of Sdom and Amora and the Egyptians at the Red Sea, He will punish those who do not keep their words.” (Bava Metsia 44a; 47a)

What is the meaning of this analogy to the generation of the flood? According to the Torah, the generation of the flood was tainted with immorality and depraved behavior. Moreover, the Egyptians were punished for oppressing the Jewish nation and not for their lack of integrity! Why then do we invoke these nations when admonishing one who does not fulfill his word?

The thirteenth-century commentator Rabbeinu Asher ( the Rosh) pondered this question and explained that “the generation of the flood were steeped in corruption and did not fulfill their words….and the Egyptians too did not fulfill their words, since they constantly promised to release the Jews and then reneged on their promises.”(Tosfot Harosh, Bava Metsia 47) The Rosh sees the corrupt and mendacious approach of these nations as the source of their downfall. Indeed, despite the lurid description of the generation of the flood- “for all flesh had corrupted its way on earth”, the final decree of the flood was due to man’s insatiable desire for theft (Bereishit 6:13; Rashi). In the Midrash (Bereishit Rabba 34) we find that the people stole in small amounts in order to bypass the law, because such amounts did not need to be returned in a normal legal process. Thus the people were actually punished for using legal loopholes to achieve their goals of cheating their friends, and not for theft. Correspondingly, we
can now understand the Rosh’s interpretation that they did not “fulfill their words”. These artful men made many verbal promises, and reneged on them as soon as they could benefit from their reversal.

From the above analysis we see that reneging on one’s business transactions should not be taken lightly. Doing it causes mistrust among people and financial loss for salesmen and also it also creates an atmosphere of opportunist exploitation of the law. Ultimately it can lead to fiscal corruption, which in turn leads to a breakdown of the societal order. Shem Mishmuel (by Rabbi Shmuel of Sochatchov) explains that when a person steals, he blocks the sensitivity to crime which is innate in a human heart, and thus he opens the way to committing other transgressions. Therefore theft, even in small amounts and degrees, should be scrupulously avoided.

A Jew is characterized by his loyalty and honesty. As the prophet Zephania says “The remnant of Israel shall not do iniquity, nor tell lies” (3:13). A Jew must uphold both his words and the honesty of his business transactions, knowing that integrity is the fabric of a just society. If he keeps his word with other men, G-d will keep His word with him and will protect him in all his actions, as it written in Tehillim: “No good thing will He withhold from those who walk uprightly. O Lord of hosts, happy is the man who trusts in You”

This column presents general principles for approaching business ethics topics. For specific guidelines, please refer to a halachic authority.

Rabbi Yoel Domb is a graduate of JCT and a member of the faculty of the JCT Bet Midrash. He was awarded a fellowship from the Center for Business Ethics for the academic year 2000-2001. He is currently researching topics of business ethics in Jewish Law and is preparing a curriculum to facilitate the teaching of these topics in Rabbinical seminaries (Yeshivot).