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When Does Property Transfer Ownership In A Transaction

The Shulhan Aruch (Hoshen Mishpat 204:1) establishes the Halachic principle of "Ma'ot Einan Konot" – transfer of ownership over purchased goods does not take effect at the time of payment. Even once a buyer renders payment for goods, the goods remain under the legal ownership of the seller until the buyer takes possession. (We deal here strictly with moveable goods, as opposed to real estate, which is subject to different laws. Additionally, we are only discussing transactions whose transfer of ownership is not stipulated in an agreement.)

The Sages enacted this rule out of concern that once a seller receives payment, he will not exert any effort to protect the item. Having already received his money, the seller no longer has any incentive to protect the goods and ensure their successful delivery to the buyer. He might therefore be lax in caring for the goods, since it does not belong to him in any event. The Rabbis thus legislated that purchased goods remain in the seller's possession until they are handed over to the buyer. If the goods are damaged or lost after the buyer rendered payment but before he received them, the seller must return the money to the buyer.

Notwithstanding this Halacha, neither party is permitted to withdraw from the deal once payment has been rendered. Even though the goods have yet to be transferred to the buyer and thus still belong to the seller, nevertheless, neither is permitted to revoke his agreement. The Shulhan Aruch (204:4) rules that if one of the parties does revoke his agreement, the Rabbis of the Bet Din (Rabbinical Court) declare a curse on the individual. In this curse they warn that just as God exacted retribution from the generation of the flood, the builders of the Tower of Bavel, the people of Sedom, and the Egyptians at the Sea of Reeds, so will He deliver punishment upon those who don't keep their promises. This expresses the gravity with which Halacha approaches the value of honesty and keeping one's word when dealing in business.

This Halacha often becomes relevant when a seller receives a higher bid after having already agreed to sell the item at a lower price. For example, if a person agrees to sell his car to somebody and receives a down payment, but before he delivers the car to the buyer he is approached with a higher bid, he may not revoke his agreement with the buyer. If he does revoke his agreement, he becomes subject to the curse of Bet Din warning of harsh retribution, Heaven forbid, for not keeping his word.

Summary: Once a buyer renders payment for goods, neither he nor the seller can revoke the agreement. If the item is damaged or lost before it is handed over to the buyer, the seller must return the money to the buyer.