May I sell my car, knowing there is a defect but that the buyer does not know that at the time of the sale?

Responsa of the Week: May I sell my used car to a non-Jew, knowing there is a defect but that the buyer does not know that at the time of the sale?

A weekly series by Dr. Meir Tamari about responsa regarding business ethics issues.

In order to demonstrate the work of the halakhic system and its moral considerations regarding a variety of issues in business and economics, I will present a number of responsa drawn from the literature. These represent questions addressed either by laymen or by rabbis or communities to rabbinical authorities and their answers. They cover a period of close to 2000 years and reflect Jewish life in all the countries of the Diaspora. Even though the answers may vary and conflict with each other so that one cannot draw behavioral conclusions from them, they demonstrate Jewish thinking and values in this field.

ANSWER: “If the seller assures the buyer that there are no defects and the buyer relies on his word, then assuredly it is forbidden. To cause a non-Jew [even an Akum, an idolator] to err is forbidden as geneivat da’at, [lit. to steal another’s mind] (Hullin, 94; Choshen Mishpat, section 228; and Rambam, Hilkot Mechirah, chapter 18, halakhot 1-3).”

If the sale is made ‘as is,’ without any undertaking or promises or guarantees as to the absence of defects [‘let the buyer beware’], then if there is no chance that there will be a hillul Hashem, desecration of G-d’s Name, as could happen if the buyer later found out that the seller knew of the defect at the time of the sale, we have to consider the opinion of the Rama that it would be permissible (gloss on the Shulchan Arukh,Choshen Mishpat, section 248, sub- section 2). “Great care should be taken to avoid any desecration of His Name.” (Meishiv Kehalakhah, section 14).

Free market economists assume that the knowledge and information regarding the nature and quality of the goods transacted, are equally available to buyer and seller, so that all that is required for ethical markets is the due diligence of both parties. In real life, that seldom is true as the seller almost always has better knowledge than the buyer, so that merely relying on caveat emptor may result in injustice. Halakhah insists on the obligation of full disclosure as the basis for markets. This dealt with in the concept of ‘mekach taut’ or faulty sale. One may not sell to another goods or services that are defective in quality, nor may one cover up these defects; rather, one is obligated to make full disclosure of any defect in the goods or services sold. The existence of a warranty or guarantee is automatically implied and the lack of these is assumed to be a scribe’s error. The buyer cannot be forced to accept a discount as compensation for the defect. It should be noted that there does not have to be any attempt to defraud; even where the seller was ignorant of the flaw, the sale may be cancelled.

There is nothing immoral about presenting the goods or services we are selling, in the best possible light. To that end we may advertise and package them as we see fit. Advertising serves an additional positive purpose, in that it enables buyers and sellers to operate with the best knowledge of prices, quality and availability of goods and services, and therefore make the best decisions possible. The ethical dilemma is concerned with the truth of our presentation and our responsum deals, in addition to the question of defective goods as such, with the truth required in the presentation or advertising of the goods offered and the impression they create. The key to this subject is the concept of geneivat da’at, that is a category of fraud and theft (Choshen Mishpat, section 228, subsection 6).

The example given in the sources of geneivat da’at, is selling to a gentile, non-kosher meat under the impression that it is kosher. The gentiles are made to believe that the seller is doing something special or beneficial for them, while actually no such thing is done. It should be noted that there is no issue of the buyer suffering any harm or damage from this sale, since the non-Jew is not required to eat kosher food. Nevertheless, the seller did something wrong and we are always as concerned with the spiritual harm done to the perpetrator, no less than any damage suffered by the other party.

The Shulchan Arukh, in dealing with the laws of theft, first legislates against blatant fraud, such as putting the good fruit on top, which is tantamount to false advertising. It then continues to legislate against misrepresentations.

“One is forbidden to beautify the article being sold in order to create a false impression. So one is forbidden to dye a [old] slave’s hair or beard in order to make him appear young. One is not allowed to give an animal bran to drink that makes her hair brown and upright, thus creating the impression that she is fat and sleek. Nor may one comb her hair artfully in order to create the same false impression. One is not allowed to paint old baskets to make them look new.” (Hilkhot Geneivah, section 358)

The examples given in the Shulchan Arukh should not mislead us into overlooking many similar practices in modern business. Financial reporting that changes the rate of profits by changing methods of calculating inventory or by bringing forward or postponing expenses, and the window dressing of balance sheets and profit and loss statements, are simply repainting old cracked baskets. The Hebrew expression for these practices, ‘to beautify’ is more explicit. A corporation offering its shares to the public may include a temporary infusion of capital to make a sick entity look healthy, just like the cow in the Shuchan Arukh. We can all think of how writing a c.v. or resume may easily become like dyeing the hair of a old slave.

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

Dr. Meir Tamari is the former chief economist of the Office of the Governor at the Bank of Israel, and the founder of the Business Ethics Center of Jerusalem.