Story LineEverything in ProportionRabbi Meir Orlean
Avraham needed 500 iron gates manufactured for a building project. He contracted with Motty’s Metalworks.
“It is important that we receive the gates on time,” said Avraham. “Are you sure that you will be able to deliver that quantity in time? I know it’s tight.”
“Certainly. We take pride in our promptness,” replied Motty. “Our record shows that we manufacture on time.”
“If we do not receive the gates on time, it will cause us significant loss,” Avraham explained. “We need a commitment for timely delivery.”
“We guarantee you timely delivery,” assured Motty. “We are even willing to back it up.”
“The contract stipulates that if you do not provide the gates on time,” said Avraham, “there will be a $50,000 penalty.”
“I’m willing to commit to that,” replied Motty. “We will have the gates ready on time!”
Avraham and Motty signed the contract. “To avoid any questions of asmachta (insincere commitment),” said Avraham, “I want the contract and penalty clause confirmed before a beis din with a kinyan” (C.M. 207:15).
“That’s fine with me,” replied Motty.
The production proved more difficult than expected, especially due to the large quantity. By the specified delivery date, Motty’s Metalworks produced and delivered only 60 percent of the gates.
“You didn’t fulfill the contract,” Avraham complained. “You are liable for the $50,000 penalty.”
“We delivered most of the gates,” replied Motty. “The remainder are almost ready. The fine was if we didn’t deliver on time, and we did supply most of the gates.”
“You breached the contract,” replied Avraham. “You were required to provide all 500 gates on time. If even a single one was not delivered, you owe us the penalty.
“That’s not logical,” replied Motty. “Why should we pay a hefty penalty for delay of a single unit?!”
“If you’re not willing to pay the full penalty, I have no choice but to sue you,” said Avraham. “I emphasized from the outset that time was of the essence.”
Avraham sued Motty before Rabbi Dayan’s beis din. “Motty committed to a $50,000 fine if he did not deliver on time,” summarized Avraham. “He provided only 60 percent of the units on time. Does he have to pay the penalty?”
“The Gemara (B.M. 104b) addresses the case of a sharecropper who committed to paying the land owner a very large sum if he left the field fallow,” replied Rabbi Dayan. “He left a third of the field fallow. The Gemara states that he would be liable for a third of the sum were it not for the exemption of asmachta.
“Taz (C.M. 73:8; Y.D. 238:11) derives from this that when the penalty clause is valid, one is liable proportionally to his breach of contract,” continued Rabbi Dayan. “A borrower promised to pay by a certain date and pledged a sum to charity if he didn’t pay, but paid only half the debt. Taz ruled that he is liable for half the pledge, proportional to what he didn’t pay.”
“This seems relevant to us,” said Motty.
“Indeed. A person contracted to supply a quantity of produce by a certain date, and if not, to pay a penalty,” replied Rabbi Dayan. “He supplied only part, and Divrei Geonim (86:9) ruled that he must pay the penalty proportionally.
“Similarly, someone promised his friend a certain sum if he succeeded in collecting a debt. The friend succeeded partially, and Rav Pe’alim (C.M. 2:11) ruled that he is entitled to a proportional amount of the reward.”
“So how much must Motty pay?” asked Avraham.
“Motty must pay $20,000 of the penalty, proportionate to the 40 percent of units not delivered on time,” answered Rabbi Dayan. “Nonetheless, Taz, Divrei Geonim and Rav Pe’alim all conclude that if the penalty clause is so formulated that it is imposed for any breach of contract or requires full performance, the fine would apply completely, not only proportionately” (Pischei Choshen, Halva’ah 2:).
From the BHI HotlineSubletting
Q: I am one year into a three-year lease on an apartment, and I just bought a house. I want to sublet my apartment to my friend for the remaining two years for a higher monthly rental fee than I pay my landlord. May I sublet the apartment without notifying my landlord or do I have to secure his permission in order to do so?
A: The Shulchan Aruch (C.M. 316:1) rules that a tenant may sublet an apartment to another renter. Chazal’s rule of ein hasocher rasha’i lehaskir (a renter may not sublet) applies only to objects, because the owner may claim that he is concerned that the second person might steal the object. Since a person cannot abscond with real estate, it is not included in this rule.
If the landlord offers to cancel the lease and take back the property for his personal use, we allow him to do so (ibid. 316:1, Sma 2; see Emek Hamishpat 5:61 regarding cases in which the landlord wants to give the property to his son or his friend). If the original tenant stands to earn money by renting the property for more than he is paying the landlord, he is not required to return the property to the landlord unless the landlord agrees to pay the difference (Pischei Teshuvah 316:1).
Five conditions must be met, however, in order for a property to be sublet:
The original tenant may not sublet to a family that is larger than his own (ibid. 316:1). The owner is entitled to object to a sublease to a larger family because the increased occupancy increases the probability of damage being inflicted on the property (Nesivos 363:9, but see Kesef Hakodashim 316:1).
If there is a chance that hidden damages can be caused to the property, which will be revealed only when it is too late for the owner to determine which renter is responsible for them, the owner can refuse to allow the sublease on the grounds that he might not be able to recover damages (Sma 316:1).
The person subletting the apartment must be a reliable person (Pischei Teshuvah 316:2). If the second renter tends to be a destructive, violent, argumentative or unhygienic person, the landlord may veto the sublease (Aruch Hashulchan, ibid. 3). It would therefore be forbidden, for instance, to sublet to single young men, who are more likely to damage the property.
If the landlord lives in the same building as the rental apartment, he may object to any renter he wants, because it is common practice for a landlord to be very selective in choosing a tenant for a property he resides in (see 316:2 and Teshuras Shai 1:379).
If the apartment is furnished, the owner may veto the sublease on the grounds that he is concerned that the second renter will steal the furniture or appliances. This rule does not apply, however, if the original tenant can prove that owner generally rents to anyone who shows interest in his property (see Erech Shai 342 and Umka Dedina 1:299).
As is the case with any financial transaction, however, all conditions set forth at the outset of the lease are binding. Therefore, if the landlord stipulated that the property may not be sublet, or even if he did not express this clearly but the minhag hamakom (prevalent local custom) is not to allow subleases, the renter may not sublet without the owner’s permission.
Nowadays, the practice in most jurisdictions is to include a non-subletting clause in real estate contracts. If that is the case in your locale, then even if this clause wasn’t written into your contract, the landlord can veto your sublease.
Note that these rules apply only to long-term subleases. It is generally accepted that a renter may sublet his apartment for a short time, such as over Shabbos or Yom Tov, so unless short-term subleases were specifically ruled out in the rental contract, the tenant may sublet for a brief period.
If the sublease was not permitted, and the renter sublet it anyway, the difference between the amount he pays the landlord and the amount he charged for the sublease belongs to the landlord (Rema 363:10; see Pischei Teshuvah 316:2 and Erech Shai 316:1). But if the sublease was allowed, then if the tenant charged a higher rent than he is paying, he may keep the difference (Choshen Mishpat 363:10).
Q: In certain industries, the mark-up can reach 300 percent. Is there any profit limit in halachah?
A: It is prohibited to acquire and hoard large quantities of basic produce in Eretz Yisrael or in a place that is predominantly Jewish, since this significantly reduces the supply and inflates the price. However, a person is allowed to withhold and hoard what he grows and sell it at high market time. In a time of famine, a person may not hoard more than his household needs for a year, even of his own produce (C.M. 231:24-25; Pischei Choshen, Geneivah 14:13).
Similarly, beis din can punish and fine those who inflate prices beyond the normal market range, such as a cartel (C.M. 231:21).
A person who hoards or inflates prices in a prohibited manner is tantamount to one who lends with interest, since he violates “vechai achicha imach” (Sma 231:43).
If fish sellers raise their prices significantly, beis din can decree that the community not buy fish for Shabbos for a number of weeks until the price returns to normal (Mishnah Berurah 242:2).