Value is complicated and sometimes subjective. We need not reveal how much we personally value an item we want to buy, nor does a buyer need to reveal how much she values a particular item. In particular, antiques and rare items are especially complicated to put an objective, or wholly accurate, value on.
The Torah (Leviticus 25:14) teaches the prohibtion of ona’ah (taking advantage of another in business). An owner may not overcharge for an item and a buyer may not underpay. The Talmud considers ona’ah to be like theft. Generally, ona’ah mandates that an owner may not charge more than 1/6th of the market price for an item and the buyer may not pay less than 1/6th of the going rate.
Further, there is a halakhic concept that an acquisition is not valid if crucial information was not known at the time (mekach taut) that would have persuaded the buyer or seller not to make the deal. Knowing something is a rare valuable antique when the buyer does not know is not merely a case of ona’ah (underpricing) but is a case of mekach taut (a faulty deal) since there is a level of deception involved. This principle is meaningfully illustrated in the story of Simon ben Shatah:
Simon ben Shatah was occupied with preparing flax. His disciples said to him, “Rabbi, desist. We will buy you an ass, and you will not have to work so hard.” They went and bought an ass from an Arab, and a pearl was found on it, whereupon they came to him and said: “From now on you need not work anymore.” “Why? He asked. They said, “We bought you an ass from an Arab, and a pearl was found on it.” He said to them, “Does its owner know of that?” They answered, “No.” He said to them. “Go and give the pearl back to him.” “But, “they argued, “did not Rabbi Huna, in the name of Rav, say all the world agrees that if you find something that belongs to a heathen, you make keep it?” Their teacher said, “Do you think that Simon ben Shatah is a barbarian? He would prefer to hear the Arab say, ‘Blessed be the G-d of the Jews,’ than possess all the riches of the world…It is written, “Thou shall not oppress thy neighbor.” Now your neighbor is as your brother, and your brother is as your neighbor. Hence you learn that to rob a gentile is robber,” (Palestinian Talmud, Bava Metzia 34a)
Garage and rummage sales frequently raise questions about false perceptions. In one case covered by the media, a woman bought a box of miscellaneous items at a flea market. Among the items, she liked a painting because it had a nice frame. Rather than discard the painting, she put it in a garbage bag and took it to an auction house, which told her that
she had actually purchased an authentic Renoir painting worth $75,000. Since neither the buyer nor the seller knew that the painting was genuine, this was clearly not deliberate deception. On the other hand, if the purchaser had been an art dealer and known of its value, or if the seller had pretended that a known forgery was a masterpiece, then that would have been another matter.
In the United States the legal doctrines of caveat emptor (“let the buyer beware”) and caveat venditor (“let the seller beware”) generally apply to the exchange of goods, and or real property, between buyers and sellers. The case of Laidlaw v. Organ is perhaps the most famous, and oft-cited, decision regarding the principles of warranty, non-disclosure, misrepresentation, and/or mistake. The decision holds that when two parties are dealing at arms length and both have equal access to information that pertains to the bargained-for exchange there is no duty to disclose, for either party. However, if a party intentionally deceives another the contract is subject to rescission; the deception can either be fraudulent misrepresentation or material misrepresentation, and both forms make the contract entered into voidable.
There are exceptions to the general – no duty to disclose – rule. Courts will hold parties that are in fiduciary relationships and/or confidential relationships to higher standards due to their unique status. Fiduciary relationships, such as the relationship between business partners or attorneys and their clients, are based on one person’s ascendancy over another through the placement of trust and confidence, or the assumption of a position of influence. For these types of relationships to function successfully they require a high degree of candor between participants and therefore both parties are held to rigorous standards. Confidential relationships, such as the relationship between brother and sister, husband and wife, doctors and patients, clergyman and parishioner, are not so much the product of a legal status as they are the result of unusual trust or confidence reposed in fact. Parties with these sorts of relationships aren’t held to the same rigorous standards as those in fiduciary relationships but, legally, one party cannot take advantage of the other or deal on unequal terms.
A particularly evil case occurred in the then
British colony of Pennsylvania in 1763, when a British commander endorsed the idea of selling blankets from a smallpox hospital to the unsuspecting local Native Americans, in the hope that the Native Americans would contract smallpox and die. While the specific events and outcome remain controversial among historians, it seems clear that the sellers were not only distorting the value of the blankets, they were literally trying to kill the buyers. While such despicable and brutal acts of deception may seem so evil that it is hard for us to actually comprehend the act’s perpetration, similarly malevolent practices are taking place today.
The current economic crisis that our nation is slowly recovering from was largely set off by predatory subprime lending by major US investment banks. Banks would attract subprime borrowers with advertisements offering loans with no down payments and their no-savings requirements, then provide borrowers with adjustable rate mortgage (ARM) loans for the full purchase price of the home which have a fixed, below market, interest rate for the first 2-3 years but then are adjusted every six months to a much higher rate for the duration of the 30-year loan. These banks made loans to borrowers on terms that the borrowers would be unable to pay, which the banks knew. In determining what the borrower could afford, through the standard debt-income ratio, the banks would only consider the introductory interest rate and not what the ratio would ultimately be when the interest rate skyrocketed after the 2-3 year introductory period. These investment banks preyed on millions of families who sought their share of the American Dream, who wanted to raise their children in a home, who sought safer neighborhoods and better schools, all the while knowing that once that introductory interest rate went up after 2-3 years, and if the market didn’t increase allowing for re-financing, that these families would have their homes foreclosed and lose everything.
Overall, there needs to be some order in the marketplace in order to equally protect buyers and sellers. Indeed, the motivation behind many investments, or purchases at garage sales, is the hope, on both sides of the bargain, that there will be financial gain and there is nothing inherently wrong with this. The issue, very simply, is one of fairness. We must be cognizant of Torah and the prohibition of ona’ah as well as American legal precedent regarding misrepresentation and non-disclosure. However, the maxims of caveat emptor and caveat venditor stand for principles of being prudent, cautious, and informed buyers and sellers; therefore, we must be responsible and diligent in our business undertakings while remaining ethical and socially conscious.