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Shabbat Parashat Noach| 5771

Pninat Mishpat: Damages Stemming from a Sellers Breach of Contract

(condensed from Shurat Hadin, vol. IX, pp. 366-372)

Case: The defendant (=def) sold a car to the plaintiff (=pl). The contract included the following notable clauses: def was not to cancel his insurance until a certain date. An 800 shekel fine would be levied against one who backed out of the agreement. Def revoked the insurance before scheduled after which pl got into an accident, and pl had to pay in full. Pl demands to be reimbursed for that payment, receive payment for damages to his car, get the money def was refunded when ending his coverage, and/or receive 800 shekels for breach of contract. Def responds that he cancelled the coverage because the insurance company said that insurance cannot be transferred between buyer and seller of a car (rather, the former must make his own arrangement with an insurance company). He said that he warned pl not to drive until he arranged the matter.


Ruling: One question is if def is responsible for losses when he cancelled. Perhaps it is grama (indirect damage) and he is exempt, or it is garmi (semi-direct damage) and he is obligated. Since def informed pl that he was not covered, there was not a likelihood of damage needed for garmi. It is unclear from the contract whether his responsibility was just that he was not allowed to cancel the insurance or whether it included payment for his failure. We apply the rule that a contractual obligation has to be clear in order to extract money.

If def is correct that the transfer of the old insurance policy to the new owner is illegal, then def's obligation will not be binding, as that is an obligation that one is unable to fulfill (similar to asmachta- see Choshen Mishpat 207). Beit din turned to experts in the field of insurance and discovered the following. Regarding basic insurance that every car must have, the insurance company may not stop insurance unless the buyer has bought insurance elsewhere, which did not occur in this case. Only regarding comprehensive insurance, which is related to the particular owner’s desires and situation, does the coverage cease upon sale of the car. Therefore, in regard to the basic insurance, def was wrong in stopping the insurance.

In a situation where part of the contract was unable to be implemented (regarding comprehensive coverage), the Rama (CM 51:6) says that other areas of the agreement are still valid. Therefore, def should be obligated to pay 800 shekels for not keeping his promise to maintain at least the basic insurance. Even if we accept def’s claim that he was misled into thinking that the whole insurance clause was invalid, since he made an agreement, he is bound by the truth, not by what he believed to be true. Because there were certain questions about the wording of the contract, a compromise was implemented on this point. Also, since it is logical that part of the sales price was related to the expected continued insurance, def must return the value of the insurance corresponding to the number of days that pl was not insured.  

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