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The Halachot of overcharging and underpaying
By Dayan David Grossman, Rosh Bet HaVaad
On her way back from driving her daughter’s carpool, Sarah spotted a yard sale on a side street. An elderly Jewish woman had passed away and her children were eager to sell her house and her belongings. Never one to pass up a bargain, Sarah decided to see what was being offered. She found a beautiful piece of silver, which would look just lovely on her sideboard – for a pittance. Then just for the fun of it, she took her find to an appraiser, and he told her that she had really picked a winner; this silver piece was an antique and was worth thousands of dollars!
Sarah mentioned her good fortune to her husband, and he told her that she must ask their rabbi if she is permitted to keep the piece of silver.
Could there be anything wrong with buying a piece of silver at a great price? And what if Sarah had been told by the appraiser that what she thought was a piece of silver was nothing but scrap metal, and that she had overpaid?
The Torah Prohibition
The Torah states[1]: “V’chi timkeru mimkar la’amitecha, oh kanoh miyad amitecha, al tonu ish et ahiv” — “When you are to make a sale to your fellow, or when you buy from the hand of your fellow, do not victimize one another”. Rashi explains that this is referring to the prohibition of “Ona’at Mamon” – victimization in financial matters.
While in secular law, when a buyer and seller are both aware of the price of the item and what kind of product it is, then even if the buyer makes a mistake and pays too much, there is no recourse; when dealing with fellow Jews – although one is obviously allowed to make a profit – one cannot overcharge a person who is unaware of how much the item is really worth. At times, the one who was cheated can also get his money back.
What Constitutes Overcharging or Underpaying
The Gemara in Bava Batra[2] sets the guidelines as to what is considered overcharging. The Gemara asserts that if one was charged less than one-sixth (“Pahot MiShtut”) over the actual value of the item, then the sale is valid. In such a case, the seller would not have to return the extra money. But if he overcharged one-sixth (“Shtut”) above the value of the item, then he must return the extra money. If it’s more than one-sixth above the value, then the one who was overcharged has the right to undo the sale.
The reverse is true, as well. A person may not pay one-sixth less than the full value of an item if the seller is unaware of the correct value. As in the case of Sarah and the yard sale, often after a person dies, his children want to get rid of the odds and ends in the house in a timely manner, so they make a yard sale, without bothering to figure out the value of the items they are selling. Just like what happened with Sarah, very valuable items are often sold for a fraction of their market value.
The Halacha is that if a person purchases such an item – even though the price has been agreed upon – if he pays more than one-sixth less than the market value, he has transgressed the prohibition of Gezela – stealing – as well as Ona’at Mamon, and he must return the item. If the difference in price is exactly one-sixth less than the value, then he must come up with the difference in value and pay it up.
Determining Market Value
How do we calculate market value? Market value is not calculated by looking at the profit margin. A person can make a tremendous amount of money on any item and it would not be Ona’at Mamon. In contrast, a person could make almost no profit and it would be considered Ona’a.
For example, if the customer paid a high price, and then the market crashed, he does not have a right to sell it at the profit that he was anticipating, but only at the current market value, even if that means selling at a loss.
Less than One-Sixth
What if a person unknowingly overpaid for an item, but paid less than one-sixth over the market value?
The Halacha is that when the amount that was overcharged was less than one-sixth over the item’s value, then this is not considered Ona’a and the sale is valid. As such, the seller does not have to return the extra money he was paid. This is because the buyer is assumed to have forgiven the change, as the difference is so small that he does not care.
The Rosh [3] wonders: Does this mean that because this is the “Derech Mekah U’Memkar” – the usual manner of buying and selling in the marketplace —that there will be a little bit of underpaying or overcharging here and there, and therefore there is no prohibition whatsoever? Is a person permitted to knowingly overcharge or underpay less than one-sixth? Or, does this just mean that one does not have to return the money in such a case because the friend who was cheated won’t bother asking for the negligible difference in price, yet, it is nevertheless considered to be cheating and is forbidden?
The Shulhan Aruch[4] does not rule in this matter but rather leaves it as a Safek – a doubt. The Tur, though, quotes the Rosh and says that a Yere Shamayim – one who fears Heaven – should be careful on both ends. The Hattam Sofer explains this to mean that a person should have in mind before the sale that if he will be overcharged less than one-sixth, he will be Mohel, so that the seller should not violate a possible Torah prohibition. Similarly, the seller should make sure not to overcharge the buyer even less than one-sixth, and always ensure that his prices are in-sync with the prices of the market.
Getting Your Money Back
Once a person is overcharged, even if it is by one-sixth over the market value, the Halacha is that if he would like to get his money back, he must demand it right away. If he waits and does not demand his money within the amount of time it would take to check out the true price (online or elsewhere), then the one who cheated him would not have to pay back the difference.
Sarah’s Silver
Sarah’s rabbi told her exactly how to proceed based on the circumstances. The next time Sarah passed a yard sale that was being run by Jews, she didn’t even stop and just went straight to her house, which, by the way was for sale.
Meanwhile, she had been told that she would not have to worry about Ona’a when it comes to real estate. Is this so? Stay tuned…
Sources:
[1] Vayikra 25:14
[2] 95a
[3] Bava Metzia, 4:20
[4] 227:6