The MishnahA collection of rabbinic teachings edited in Israel around 225 CE. Organized in six sedaraim by subject matter and dealing with both ritual and civil law. Both the Jerusalem and Babylonian Talmud are expansive discussions of the Mishnah. defines an unfair price as one more than one-sixth higher than the regular market price of the product in question at the time of sale.

And the Mishnah labels the act of charging an unfair price as ona·ah (“fraud”), a concept derived from the verse at Leviticus 25:14: “When you sell property to your neighbor, or buy anything from your neighbor, you shall not defraud [al tonu, using the verb related to ona·ah] one another.”

This rule applies to both the buyer and the seller, so that either may reasonably retract from a proposed sale if the agreed-upon price differs by more than one-sixth from the value of the article at the time the sale actually is to go through.

Even if the differential is exactly one-sixth, the wronged party may demand repayment of the difference.

The assumption behind the principle of ona·ah is: 

• that both buyer and seller have the same intention, which is an exchange of goods and/or money of more or less equivalent value
• that both parties have as much knowledge as possible of the market conditions that determine the value of the item at the time of the transaction 
• that both understand that the merchant is in business to make a reasonable profit. 

Even after the sale is complete, the possibility of retraction continues to exist in cases where it becomes clear that these assumptions were incorrect.

For buyers, the ability to determine that overcharging has occurred is limited to the time in which the item can be appraised by an expert.

Sellers, on the other hand, have a longer, even unlimited, time to retract the sale if they realize that the price was unfair because, since they no longer have the object in question in their possession, they cannot be constrained to show it to a putative appraiser within a given time limit (M Bava Metzia 4:3–4). 

Thus, despite the fact that we would normally assume that merchants are experts in the value of their own merchandise, the Mishnah applies the principle of ona·ah to both the buyer and the seller.

However, while merchants are given an extended period to discover mistakes, they still must seek redress of errors as soon as they discover that they undercharged, or else the assumption is always that they have forgiven the difference.

The applicability of the ona·ah rule is limited, however.

A merchant may, for example, indicate openly to a customer that the price being asked is higher than normally permitted and, if the customer agrees to pay the price anyway, the transaction is deemed valid. 

In addition, the Mishnah (at M Bava Metzia 4:9) specifically excludes transactions such as those involving promissory notes and real estate from this rule.

The most common explanation for this is that these involve much more subjective and time-sensitive evaluations, thus making it more difficult to set a benchmark value for them. 

Furthermore, Maimonides makes an important distinction between essential goods, called ḥayyei nefesh, and non-essential goods (at Mishneh TorahRefers to the first five books of the Hebrew Bible, the Tanakh, also called the Five Books of Moses, Pentateuch or the Hebrew equivalent, Humash. This is also called the Written Torah. The term may also refer to teachings that expound on Jewish tradition., Hilchot Mechirah 14:1–2).

According to him, a community may set a price for essential goods such as wine, oil, and flour, either by lowering prices that are too high or by raising prices in order to reduce risk to producers and ensure an adequate supply of the commodity in question.

The one-sixth margin is then applied to this price and may be enforced through agents of the communal rabbinical court.

Adapted with permission from The Observant Life.