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Shabbat Parashat Ki Tetzei| 5767
Dissolving a Business with a Condition of No Future Competition - Based on Halacha Psuka - vol. 14 - A Condensation of a Psak from Piskei Din Rabbaniim - vol. III - pp. 336-345
Case: The plaintiff and defendant were partners in a kosher butcher store. At some point, they decided to dissolve their partnership, and the plaintiff bought out the defendant’s part. In that context, they drew up an agreement stating: “The side that left the partnership will be forbidden to open a butcher store in close proximity to the existing one.” Soon thereafter, the defendant’s son opened such a store nearby. He was funded by the defendant, who also worked in the store. Furthermore, the new store lowered prices significantly, which took away from the old store’s clientele. Eventually, the plaintiff sold his store to someone else. The plaintiff claims that their contract was breached and that the defendant should pay damages resulting from the opening of the new store. The defendant says that it was his son, not he, who opened the new store.
Ruling: Although the license for the new store was in the defendant’s son’s name, in practice a store which was opened with the defendant’s funding and with his active management of the store is considered his store.
The Shulchan Aruch (Choshen Mishpat 154:5) rules that a resident of an area may open a store to compete with an existing one. There are different opinions if this is permitted if the second store precludes the first one from making a living. However, in our case, the second store curtails profits but does not preclude having a viable business.
The contract, as written, is not halachically binding. The S’ma (60:18) does say that one can obligate himself, not only in funds, but to do something on behalf of someone else. However, obligating oneself to not do something is certainly only a kinyan devarim (an obligation of words) and is not binding (Maharsdam 274). The Perach Mateh Aharon (13-14) says that the agreement of partners who divided a property not to build a wall in between that would steal light from the other’s yard is valid, for the division was made on that condition. However, it is evident from the Maharashdam that he does not agree. Therefore, our case would depend on that machloket.
Clearly, part of the value of a business is determined by the number of its customers it. Because the defendant did not keep his word, the store’s value declined. Considering the prospect, unknown to the plaintiff, that his store was about to be lowered in value, the plaintiff mistakenly bought the defendant’s portion of the store for too much money. Therefore, the defendant has to return money to compensate for the extra money he received. The amount is hard to determine, but since the sides agreed to adjudication even by compromise, an approximate settlement will be imposed.
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This edition of Hemdat Yamim is dedicated to the memory of
R' Meir ben Yechezkel Shraga Brachfeld o.b.m.
Hemdat Yamim is also dedicated by Les & Ethel Sutker of Chicago, Illinois
in loving memory of
Max and Mary Sutker
and Louis and Lillian Klein, z"l.
May their memory be a blessing!
This edition of Hemdat Yamim is also
dedicated to the memory of
Yitzchak Eliezer ben Avraham Mordechai Jacobson