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Levi was browsing the bikes in Benny’s Bike Bazaar. He saw a used bike standing on the side. “What’s that?” he asked.

“I’m selling this for my neighbor, Effi,” said Benny. “It’s used, but in good condition.”

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“I’ll take it for $100,” said Levi.

Benny thought for a moment. “OK, you got a deal,” he said.

That evening, Levi received a phone call from Effi. “I understand you bought my bike from Benny,” Effi said. “I instructed him to sell for $125, not less. Please pay the difference, or return the bike and I will refund the $100.”

“I bought the bike through Benny,” protested Levi. “I assumed the price was acceptable to you. If he was your agent, his actions on your behalf are valid.”

“But he violated his agency,” argued Effi.

“I’d like to check this out,” said Levi. He called Benny and asked: “Were you instructed to sell for $125?”

“I was,” said Benny, “but I thought I could convince Effi to accept $100.”

Levi called Effi back. “Benny acknowledged that you instructed him to sell for $125,” he said. “As far as I’m concerned, though, that’s between you and him!”

“Why do you say that?” replied Effi. “Benny is only a middle man; you bought the bike from me. If you want – you can deal with Benny afterward for the $25!”

“I intend to keep the bike,” said Levi. “I don’t owe you and don’t intend to deal with Benny. If you have an issue, go ahead and do what you want.”

“I’d like to bring the issue before Rabbi Dayan,” said Effi. “We can ask him how to deal with the case.”

“Fine!” said Levi. “Have Benny come also.”

The three came before Rabbi Dayan. “Is the sale valid?” Effi asked. “Does Levi or Benny have to pay the difference?”

“In general, when an agent violates the owner’s instructions, his action is null and void,” replied Rabbi Dayan. “The owner authorized the agent for his benefit, not detriment. However, in a certain case the Gemara requires the agent to uphold the transaction and make good on his failing.” (B.B. 169b; C.M. 182:2; Gra 182:7)

“How do we resolve this seeming discrepancy?” asked Benny.

“The Rambam [Hil. Shluchin 2:4], cited by Shulchan Aruch, distinguishes as follows,” answered Rabbi Dayan. “When the buyer knows the person who sold to him is only an agent, the action is null and void if the agent violated the instructions. When the agent didn’t inform that he was an agent, the action is valid and he has to compensate the owner.” (C.M. 182:2)

“How does this relate to us?” asked Levi.

“The Rambam (2:6), cited by the Shulchan Aruch, writes that if the agent was instructed to sell for a certain amount and sold for less, he is required to fill in the difference,” said Rabbi Dayan. “However, if the buyer knew that he bought from an agent, the owner can invalidate the sale.” (C.M. 185:1,6; Pischei Choshen, Pikadon 12:12[32])

“However, the Ra’avad [ibid.], cited by the Rama, disagrees and writes that the buyer does not have to return the item, even if the agent acknowledges that he violated the instructions,” added Rabbi Dayan. “The buyer can claim that the owner and agent are falsely colluding against him to undo the sale.”

“Thus, in our case, since Levi is in possession of the bike and there is a halachic dispute on the issue, he can keep it, in accordance with the Ra’avad and Rama,” concluded Rabbi Dayan. “Nonetheless, since Benny admits that he violated the owner’s instructions, he is responsible to make good to Effii and fill in the $25. Had there been witnesses confirming the instruction, though, Effi could invalidate the sale.” (See Neos Desheh #56; Diveri Chaim (Aeurbach), Dinei Shluchin #4,15; Pischei Choshen, Pikadon 12:[32])

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Rabbi Meir Orlian is a faculty member of the Business Halacha Institute, headed by HaRav Chaim Kohn, a noted dayan. To receive BHI’s free newsletter, Business Weekly, send an e-mail to subscribe@businesshalacha.com. For questions regarding business halacha issues, or to bring a BHI lecturer to your business or shul, call the confidential hotline at 877-845-8455 or e-mail ask@businesshalacha.com.