In a previous Daily Halacha, we discussed the ruling of the Shulhan Aruch (Hoshen Mishpat 232:3) that if somebody purchases defective merchandise, he can demand that the transaction be voided and the seller must fully refund the money. The question arises, under what circumstances, if any, may the seller insist on maintaining the transaction and simply refund part of the payment to compensate for the defect? May he refuse to void the sale, and instead offer to return some money as compensation for the low defective portion only?
The Shulhan Aruch (Hoshen Mishpat 232:4-5) rules that the answer to this question depends on the nature of the defect. Based on a responsum of the Rosh (Rabbenu Asher Ben Yehiel, Germany-Spain, 1250-1327), the Shulhan Aruch writes that if the defect does not detract from the item's inherent functionality, and the object still serves its basic purpose, then the seller has the option of paying compensation rather than voiding the sale. The Rosh addresses the case of a person who purchased a residence and when he arrived he saw that vandals had broken the windows and doors. Since the house still retained it basic definition as a residence, and merely required some refurbishing, the sale was not voided. The seller was therefore entitled to maintain the transaction and simply pay for the repairs. If, however, vandals had toppled the house's walls, then it loses its status as a viable residence and the buyer can demand that the sale be voided. Since he did not receive that for which he paid the money a viable residence the sale is null and void and he is entitled to a complete refund of his payment.
A modern application of this principle pertains to the sale of used electrical appliances. If the buyer discovers an unsightly mark or scratch on the appliance that has no effect on its operation, then he cannot demand a full refund; he is entitled only to compensation for having paid for a higher-valued item than what he in fact received. If, however, the appliance does not work properly, then he can certainly declare the transaction null and void and the seller must refund all the money he had paid. (But if the seller allows a refund even for a scratch, then of course one may return it.)
Needless to say, in all such cases one must consult with a competent Halachic authority to determine whether the defect is inherent to the object's operation or but a minor imperfection.
Summary: If a buyer purchases an object and discovers that it is inherently defective, such that it cannot serve its basic function, he can declare the sale void and demand a full refund. If, however, the object functions properly but has a minor defect, such as an electrical appliance with external scratches or marks, then the seller has the option of refunding part of the payment as compensation, rather than voiding the sale.
See the book- "Pure Money" by Dayan Cohen, pages 150-151.