In everyday monetary transactions one issue is that of Onaah—fraud related to pricing. Although the word fraud is associated with intentional acts of deception, the halachic concept of Onaah is not limited to intentional deception, but applies even when the wrong price was charged (or paid) inadvertently.
Often, a buyer or seller may be faced with a tough decision. A highly attractive deal must be evaluated and considered as to whether it involves Onaah.
Many issues arise in this context. Does the knowledge of the other party make a difference? Is there a prohibition even with a small difference in price? And how is the correct price determined? In our first article on the subject, we will seek to address these questions, and present a general introduction to this important halachic topic.
Basic Laws of Onaah
The Torah teaches us the prohibition of Onaah, financial fraud: “When you make a sale to your fellow or make a purchase from the hand of your fellow, you shall not fraud one another” (Vayikra 25:14). Chazal (Bava Metzia 58b) understand this to refer to incorrect pricing.
The basic law of Onaah is that if an article is sold for significantly more or significantly less than the usual price, it is Onaah of either buyer or seller as the case may be. This applies to all financial transactions: sales, purchases, and even rentals (Shulchan Aruch, Choshen Mishpat 227:32). The consequence of Onaah, and perhaps even its definition, depends on the amount over or under paid.
If the price discrepancy is exactly one sixth of the market price, the prohibition of Onaah is transgressed by the offending party: the seller if the price was above the market price, and the buyer if the price was below. The consequence is that the sale remains valid, but the offending party must refund the difference. This is the most fundamental law of Onaah (Shulchan Aruch 227:2).
If the discrepancy is more than one-sixth of the market price, the prohibition is, of course, transgressed, but the victim has only the right to entirely void the sale, if he so wishes (Shulchan Aruch 227:4). He cannot demand a refund of the difference, but may only void the sale or accept it.
If, however, the discrepancy is less than one sixth, the victim has no halachic remedy, and he must suffer the loss. Whether a prohibition applies or not is more complex.
Small Price Fraud
The Rosh (Bava Metzia 4:20) ties the question if there is a prohibition of Onaah to the reasoning behind the threshold of one-sixth. The reason for this threshold, he suggests, might be because it is difficult to evaluate pricing mistakes that lie within a sixth of the true price. Because of this, a buyer or seller is prepared in advance to forego mistakes within a sixth of the true price, knowing that a claim of fraud will be hard to prove.
Based on this reasoning, he suggests that the defrauded party foregoes his claim only when the mistake was made unwittingly. If a seller who overcharged meant to swindle the buyer, the offended party is not so forgiving and the full prohibition of Onaah is incurred.
The Rosh also offers an alternative explanation: that less than a sixth is not considered Onaah at all. It is common in commerce that small discrepancies in price are disregarded, and therefore any price within a sixth of the true value is not considered to be a discrepancy. According to this, when the amount of Onaah is less than a sixth, no prohibition is incurred because the item is being sold at its true price.
The Tur and the Shulchan Aruch (227:6) cite the Rosh’s uncertainty over whether the prohibition applies to less than one sixth, and leave the matter unresolved. It is therefore prudent to steer clear of any Onaah, since the issue is a full Torah prohibition—aside from the general obligation to conduct one’s financial dealings with honesty and integrity.
Determining Market Value
One of the principal challenges related to Onaah is determining the market value. There are two ways in which market value is determined. The simple case is if there is a published, set market price for the item. The more complicated and more common case is where there is a range of prices.
The Beis Yosef (Choshen Mishpat 209, 2) rules that goods that are sold individually, without any specific price guidelines, are not governed by the laws of Onaah. If there is no set price for items such as raw wool and milk (see Bava Metzia 68b), these are outside the boundaries of the Onaah prohibition.
Following the same principle, the Aruch Hashulchan (227:7) writes that goods usually sold at different prices by different stores are exempt from the laws of Onaah. Where some charge more and some less, there is no prohibition against being among those that charge more. According to this, for most goods today (except those subject to government or other price regulation mechanisms) Onaah is somewhat rare.
The Machaneh Efraim (Mechero 24), however, cites the case of seforim as proof that Onaah applies even to items that have no single price. This is also the opinion of the Bach and Shach (Choshen Mishpat 209:1), who maintain that the lack of a fixed price does not necessarily preclude the laws of Onaah. Shut Shevet Haleivi (5:218) rules stringently on this matter, and prohibits Onaah even when there is no absolute price.
Based on this reasoning, Erech Shai (209) prohibits selling at a higher price even when there is a degree of fluctuation between different shops. Presumably, however, there must be some average price on the market with which to index Onaah. If there is a recommended price given by the manufacturer it may serve as a yardstick on which Onaah calculations can be based. Where this is not available, Pischei Choshen (p. 296) suggests that the median price is followed for Onaah purposes.
Another view is that market price is determined by what the majority of vendors sell the item for (Imrei Yosher Vol. 2, no. 155; see also Heshiv Moshe 102).
Where it is accepted practice for different stores to sell the same goods at different prices (a luxury story may sell the same goods for a higher price, reflecting the high-end nature of the store), the price which is used to determine onaah is based on the prices which are charged by this type of store (Pischei Choshen ibid).
The Ketzos Hachoshen (227:1) cites an interesting ruling from the Ritva (Kiddushin 8a). The Gemara teaches that Rav Kahana, who was a Kohen, accepted a head covering in place of the mandatory five Sela’im that must be paid by a father for redeeming his firstborn son (for Pidyon Haben). Although the head covering was not worth the mandatory sum, the Gemara states that in Rav Kahana’s case it was sufficient payment, because for Rav Kahana (who was an important personage and needed the garment to cover his head) the head covering was indeed worth five Sela’im.
The Ritva derives from this passage that whenever a particular item has a personal value higher than the market price, there is no prohibition of Onaah in selling the item to the relevant individual for the higher price. Although the price of a green shirt is generally the same as its blue counterpart, a green shirt may be sold at a higher price to someone who especially needs it and is prepared to part with more money to purchase a green item. The exception to this rule, the Ritva adds, is an individual who needs to purchase an item or service due some pressing personal need. In this case, it is prohibited to take advantage of his desperate condition to raise the price of the goods or service. One who does so is subject to the laws of onaah.
The Ketzos Hachoshen disagrees with this ruling. Basing himself on a case referring to the sale of precious stones (Bava Metzia 56b), where laws Onaah apply in spite of the buyer’s need to purchase matching jewels, the Ketzos argues that personal preference has no impact on the laws of Onaah, which apply universally according to market prices.
Items with No Price
In a widely quoted responsum, the Rosh (Klal 13, no. 20; see Machaneh Efraim, Onaah 24) discusses a case in which the right to levy taxes from a particular community was sold to an individual. Relating to a claim of unfair pricing, the Rosh responds that Onaah only applies to goods that have a price.
The right to levy taxes from a community, however, is something that has no fixed price, for the amount of tax one can levy fluctuates greatly from year to year, depending on the community’s state. This being the case, there can be no claim of Onaah.
The same reasoning will apply to goods such as antiques, collector’s items, and so on, which have no market price. Because such goods can be given no set price, there cannot be a prohibition or a monetary claim of Onaah.
Does Onaah apply to an auction?
Mishpat Shalom (227:16) notes a creative proof to this question from a Mishnah (Erchin 27a), which seems to refer to an auction-style procedure concerning the redemption of Hekdesh (although regular Onaah does not apply to Hekdesh, according to some Rishonim this is true only up to twice the market price). Yet, he mentions that the proof can be deferred if we assume that the bidding procedure was a means of giving wilful donations to Hekdesh, as the Tosafos Yom-Tov (Kiddushin 1:6) argues. In this case, no proof concerning laws of Onaah can be adduced.
A counter-proof is brought by Teshuras Shay (456) from the above-mentioned responsum of the Rosh, who rules that laws of Onaah do not apply to a purchase of the right to levy taxes from a particular community. The reason given is that the right to tax a community is subject to large fluctuations in value, and no fixed price can be assigned to it. Assuming, as was often the case, that this right was auctioned off, we can derive that Onaah does apply to auction sales—since this is not mentioned by the Rosh as a reason why Onaah should not apply.
The Nesivos Hamishpat (109:5) clearly implies that Onaah does not apply to auctions. His case is of a lender who has the right to collect his debt from the borrower’s liened property. The collection is done by means of an official evaluation by Beis Din. If Beis Din’s evaluation turns out to be wrong, the laws of Onaah are applicable, so that the lender will not lose his money. If, however, the lender makes a bid for more than the valuation of the possessions made by Beis Din, then the lender loses any claim of Onaah. It seems that the same ruling will apply to everyday auctions.
This is also the position of Shut Sho’el U’meishiv (Vol. 4, part 3, no. 137). Although Mishpat Shalom deflects his proofs, he agrees with the halachic ruling, affirming that Onaah does not apply to auctions. As the Nesivos Hamishpat reasons, the bidder’s willingness to pay more is seen as a relinquishment of his rights to a claim of Onaah.
An additional factor to consider is the common custom. Even if Onaah theoretically applies to auctions, it can be claimed that the custom dictates that there is no law of Onaah on auction sales since bidders are prepared to pay prices they know are above market price. Indeed, we find that the Maharit (Choshen Mishpat 19) uses the reasoning of minhag to defer a claim of Onaah, and this idea is also mentioned by Chochmas Shlomoh (annotations to Choshen Mishpat 209).
The Teshuras Shai, however, is unconvinced. Although we usually follow the custom, laws of Onaah might be different, since even an explicit condition is not valid in avoiding the laws of Onaah.
There are many further issues of Onaah that are yet to be discussed, including various exceptions to the rule (real estate, documents, and others), questions related to the victim’s prior knowledge, and much besides. Be’ezras Hashem we will reach these in forthcoming articles.