Both the buyer and the seller are subject to the law of fraud. Either the buyer or the seller may claim that they were defrauded. The buyer may claim that the seller overcharged and the seller may claim that the buyer underpaid.
Just as the ordinary person is subject to the law of fraud so too is the merchant. Rabbi Judah said: “The law of fraud does not apply to the merchant.” According to the first opinion, the laws of fraud apply to everyone. According to Rabbi Judah the law of fraud does not apply to a merchant. Since a merchant should know the value of the products which he sells, he is not allowed to later claim that the buyer underpaid.
He who has been subjected to [fraud] has the upper hand: if he wants he may say to him, “Give me back my money or give me back the amount you defrauded me.” The person who has been defrauded, either the seller if the buyer underpaid, or the buyer if the seller overcharged, can decide between one of two options. The first option is to annul the sale. The second option is to return the amount of the fraud to the one defrauded. In other, words if the buyer underpaid he would pay the remaining amount to the seller. If the seller overcharged he would return the amount of the overcharge to the buyer. In this case the sale would remain valid.
Questions for Further Thought:
Mishnah four, section two: Why, according to the first opinion, does the law of fraud apply even to the merchant?