FRAUD AND MISTAKE:
Where in a transaction one of the parties loses by the fraud, i.e., the misrepresentation, of the other, or by his suppression of the truth, the law gives relief either by rescinding the contract or by awarding damages. In some cases such relief is afforded when the loss occurs through mistake, without any evil intent on the part of him who gains by it. The Mosaic and rabbinical law forbids many fraudulent practises under religious and punitive sanctions. The law also sets aside some sales or purchases simply for excess or deficiency of price. The implied warranty that an article sold will come up to its description in quality and quantity may also be treated in connection with the subject of fraud and mistake.I. Forbidden Practises:
- 1. The written law is very severe against the use of false measures of length, false weights, false hollow measures, and untrue scales (Lev. xix. 35, 36); and it speaks of the possession of twofold weights or measures, one great and one small, as an abomination to the Lord (Deut. xxv. 13-16). This law applies in dealings with Gentiles as well as Jews (B. Ḳ. 113b). It is the duty of the courts to appoint inspectors of scales, weights, and measures (baraita to B. B. 89a), and to punish offenders by floggings, and, in later times, by fines also (Shulḥan 'Aruk, Ḥoshen Mishpaṭ, 231, 2). A deficient bushel should not be kept in the house for any purpose, lest somebody measure with it. In many places the custom required all measures to be sealed by authority.
- 2. It is as unlawful to cheat a Gentile as an Israelite. If there is a blemish in an article about to be sold, the buyer must be informed. Flesh or hide of a "fallen" beast must not be sold, even to a Gentile, as that of a slaughtered beast. "They must not furbish up man or beast," says the Mishnah (B. M. iv. 12). Thus, one must not dye a bondman's beard black; nor drug an animal so as to raise and stiffen its hair; nor paint old implements to make them look like new. Many similar tricks are named. Bad grain should not be mixed with good grain and the whole sold as good. Water must not be put into wine at all. A merchant may put corn from five thrashing-floors into one bin, and pour wine from many presses into one barrel; for all know that he does not grow his grain or his grapes (B. M. 60a).
- 3. A man must not assume false appearances to gain his neighbor's good opinion () thus, for instance, though good manners force you to invite to dinner even one who, as you well know, can not accept, you must not press such a one to accept (Ḥul. 94a)
- 4. For special rules as to weights and measures see Weights and Measures; but the moral aspect may be stated here, namely, that the heavenly punishment of the falsifier is very hard; for his is a sin for which there can hardly be real atonement; since he is a robber of the public, and he can not restore the money to those he has wronged, which is the first condition for receiving pardon (B. B. 88b).
Whenever a sale is made, a mistake in measure, weight, or number, no matter how small it may be, gives to the injured party the right to have the transaction set aside, to have the goods returned to the seller, and the price to the buyer, whether the mistake was made in the goods or in the money; and this at any time when the mistake is discovered. For it is a "purchase by mistake"; and such a purchase is void (Ḳid. 42b; Giṭ. 14a). He who receives money from his neighbor, whether as the price in a sale, or as a loan, or as a payment, and finds an excess, must return it, even unasked (B. M. 63b). On the other hand, in the sale of land or of slaves or of chattels, if the thing bought has a blemish in it which was unknown to the purchaser, the latter may return it at any time. Maimonides deduces this from the authorities given above as to mistake in weight or number. But whenever the purchaser uses the thing with knowledge of the blemish, he is barred (by analogy to the case put in Ket. 76a). Neither party can, without consent of the other, ask a reduction or proportional return of the price: the seller must take back his goods; the buyer must return them or pay in full. However, if houses at a distance have been sold, and it turns out they have been injured by trespassers before the sale, the injury being such as can be remedied by repairs, the seller may, by deducting the cost of repairs from the price, make the sale stand good; for here the blemish is temporary (Ṭur. v. 96, 6, on the authority of Asheri; see Ḥoshen Mishpaṭ, 232, 5).
What is a blemish within these rules depends in the main on the custom of the place. Every buyer has the right to expect that the thing bought is free from all blemish. Even if the seller proclaims that he will not be responsible for any fault, the buyer may still rescind on finding a blemish that has not been specially declared; for the waiver of the buyer is void unless he knows what he waives.
When the seller names several blemishes in the thing on sale, and it has only one of them, the court may conclude that the other faults were named only to put the buyer off his guard, and may rescind the contract (see the illustrations of a cow and a bond-woman in B. M. 80a). In a bondman or bondwoman only such blemishes are to be considered as interfere with his or her capacity for work; for slaves are not kept for pleasure. It is a blemish in a bondman that he is an "armed bandit," or that he is "inscribed to the king" (for punishment), but not that he is a thief or a gambler or a drunkard; for slaves are not presumed to be very moral (B. B. 92b).III. Fitness for a Purpose: Adapt-ability to an End.
The Mishnah (B. B. vi. 1) says: "If one sells grain to his neighbor, and he sows it, but it will not sprout, the seller is not liable on a warranty. Simeon b. Gamaliel says (not contradicting what precedes): 'For garden seeds that are not eaten, he is liable,'" In other words, the seller must have either actual notice ofthe purpose for which the article is bought, or implied notice in the nature of the article. It seems that there is no implied warranty that flaxseed will sprout; for though it is most frequently bought to be sown, it is also bought for linseed-oil; and "in money matters we do not go by the majority of cases." So also, when an ox is bought, and it turns out vicious, the seller may not be liable, for he can say, "I have sold it for butchering." But herein the great masters Rab and Samuel differed, the former insisting that farmers buy oxen so generally for the plow that the seller should presume this as the purpose.
Where the goods sold do not meet the description, there is no sale (Mishnah B. B. v. 6). Either party may object. So, when red wheat is delivered for white, or white for red; olive-wood for sycamore, or sycamore for olive, etc., either party may insist that there was a mistake; for every man has his own preference. But when the mistake is made of delivering a low grade for a high grade, the seller may not rescind; or if a high grade instead of a low one, the buyer may not rescind-even though, by reason of a great rise or fall in the market price, it may be of advantage to do so.IV. Damages:
Cases have been enumerated in which a return of the faulty article is impracticable, because it has been consumed before the fault is discovered; it might also be at such a distance that the cost of bringing it back would exceed the value. In these cases the seller must return the price, deducting only so much thereof as the buyer has been benefited. On the other hand, where the seller has sold an article unfit for the purpose for which the purchaser procured it, with knowledge of the purpose and of the unfitness therefor, he is liable not only for the return of the price, but also for the useless outlays to which the buyer has been put, such as in the sowing of seeds or in the transportation of goods to a foreign market. This liability for extra damages is asserted, though without authority in the Talmud, by the Ṭurim and the Shulḥan 'Aruk (Ḥoshen Mishpaṭ,232, 21).
Full details are also found in the codes for cases in which the goods sold by fraud or mistake are lost or are further injured in the hands of the buyer, before or after the discovery of the blemish (ib. 232, passim).V.
The Talmud takes notice not only of direct fraud between two parties dealing with each other, but also of wrongs done through their collusion (=κατυωυία) to third parties. Hence the rule not to return a lost bond; because it may have been redeemed already, yet the debtor and creditor may collusively put it in force against the purchasers of the former's lands (see Finder). Under Execution it has been shown (1) that the debtor, to clear himself from the ban, must satisfy the court that no property is held by another, as ostensible owner, for his benefit, and (2) that any property held is bound for his debts; in short, that feigned conveyances of the debtor's property are void as against his creditors. While fraudulent conveyances and the remedies against them occupy such a wide field in English and American law, the Talmud says nothing, and the codes hardly anything, as to how the creditor may proceed to overcome a fraud thus attempted against his rights.
- Shulḥan 'Aruk, Ḥoshen Mishpaṭ, sections quoted above, and sections 328-339, passim;
- Yad ha-Ḥazaḳah, especially Mekirah.