Shabbat Parashat Ki Tisa 5783

P'ninat Mishpat: Was There a Sale to Renege on? – part II

Case: The plaintiff (=pl), a real estate investor, negotiated with the defendant (=def) about apartments to be built in a building under Tama 38 (strengthening and expansion of buildings). They agreed (on some level) that pl would buy three apartments for 3 million NIS. The two then signed a handwritten document titled “Summary of Loan + Purchase Agreement of Apartments.” Later, they agreed that pl would buy a fourth apartment for 600,000 NIS. Under the guidance of a lawyer (=lyr), who discussed the legal challenges, they reached an agreement of principles. Later pl signed an agreement to lend 1.5 million NIS each to a company that def owns and to a company which def owns in partnership with another person (=prtn). Lyr testified that the reason the payment was presented as a loan, with interest and guarantees, rather than a purchase, was due to tax issues. Eventually it was supposed to have led to purchase contracts and erasure of the interest. The sides progressed close to a final agreement and payment. However, after some disagreements, and a couple of months later, def returned the “loan money” with an additional sum for interest, as written in the original agreement. Pl claims that the money given in relation to the loan agreement was purchase money. Pl brought several proofs from documents that indicate that there was really a sale, not a loan, and that their agreement is no less than a zichron devarim (memorandum of understanding). Pl wants to go through with the purchase of the four apartments. If that cannot be done, he demands a fine of 10% as written in the agreement of principles. Def argues that there were only advanced negotiations about the purchase, and the loan was just one stage in the process. He raised different indications (including that the agreement of principles is unsigned) that the sale had not been finalized. Def also claims that prtn approved only the loan agreement. Prtn did not agree for beit din to adjudicate. 

Ruling: [Last time we saw that the “loan” was payment for a purchase but that the contract does not represent a finished sale.]

Although the payment was presented as a loan, it was in the framework of a sale. Actually even a loan can be a fulfillment of a kinyan kesef (Shulchan Aruch, Even Haezer 28:9), even if not all of the sales price is paid (ibid., Choshen Mishpat190:2).

Nevertheless, there are a few obstacles to a ruling that an enforceable sale took place. 1) Prtn did not sign on to the arbitration, and therefore even if we believe the sale is binding, we could not give pl the properties.

2) Since the apartments are not yet built, the transaction is on a davar shelo ba la’olam (something that still does not exist or cannot be transferred); a kinyan cannot transfer such a thing (ibid. 209:4). On the other hand, one can obligate himself to make a sale when it will be possible (ibid. 60:6), although there is a machloket (Ktzot Hachoshen 203:2 vs. Netivot Hamishpat 203:6) whether it works regarding the obligation to sell a specific article. The agreement of principles uses a language of obligation to sell, but it is unsigned. We reject the contention that sending an email of a mainly complete text of the agreement is equivalent to a signature. It is clear from the parties and the lawyer that they did not intend to distinguish between a direct kinyan and an obligation to sell. Therefore it does not make a difference that obligation to sell is common in such documents.

We will continue next time.

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