Business Ethics: A Verbal Agreement in Jewish Monetary Law - Rabbi Shlomo Cohen

[Music] [Applause] Shalom welcome to you all we're doing a short series of shim on Jewish monetary law Jewish business law you could call it you could call it my name is schlomo Coen I'm a Diane in a private bathing in Jerusalem um I also give lectures on Jewish monetary law and Jewish business ethics Aton at the technological Institute of hon and at the samish Shimon Institute in as and I teach and at other places around Jerusalem today I wanted to start open opening this series with speaking about a verbal agreement about the the validity of a verbal agreement in Jewish monetary law let's say you're selling your car and you've decided that the price that you want is 60,000 you've advertised it and a guy comes along to see the car looks it over it looks fine for him he says look I want to buy it I'm prepared to pay you the 60,000 fine but says the buyer I don't have the money on me right now I'll come back tomorrow morning with the cash and then we'll do all the the the legal procedur that needs to be done changing the name of the owner of the car so I'll be back tomorrow morning at 10:00 with the money you the seller he seems think thinks this guy seems to you a trustworthy guy you say fine okay I'll meet you tomorrow morning after he's gone you get another phone call from someone else this other guy's also interested in buying your car you haven't yet sold it so you tell him to come along and have a look he comes along looks the car over pulls out 60,000 shekels from his pocket and says I want to take the car right now what do you do are you allowed to go back on the verbal agreement that you made with the first guy and sell to the second guy or no do you have an obligation maybe you have a maybe it's more than just a moral obligation maybe you that you don't have any choice about it and you have to now sell to the first guy that came to you the is in such a situation that a verbal agreement is not a transfer of ownership so the first guy hasn't bought the car but you've had a verbal agreement that you'll sell it to him to go back on your word is unethical immoral and the IT hasic ramifications to it the Hala says that someone who's made a verbal agreement and then goes back on their word is considered as as someone who is that means an Unfaithful person someone that can't be relied upon even though basedin don't have the the the the the the K they don't have the strength they don't have the power to force you to Stand by Your Word because there hasn't been an actual change of ownership there's just been a a promise on your behalf that you're going to sell to them but nevertheless someone who goes back on their word is considered as someone who's Unfaithful he gets this stamp on his forehead from from kazal that he's an an untrustworthy person and someone that business should not be done with we're told by the pokim that in previous times when when when bason had more power someone who who went back on his word would be poled for as as being for being a witness he wouldn't be allowed to give witness in a Jewish Court he wouldn't be allowed to be a witness at a wedding in our time times between we announced the times of the ding they in in previous times they used to announce the names of people that had done business and hadn't stood by their word there every so that everyone in the community would know that these were untrustworthy people but you shouldn't be careful of and not do business with them so you can see that a moral obligation is certainly created when you make a final verbal agreement with with someone we have to emphasize that I'm talking about a final verbal agreement we're not talking about where you're in the middle of negotiations if negotiations had broken off between you and the first buyer and he'd said listen I'm going to go home and think about it I don't know what I don't know if I want to buy I have to think about this then you have no obligation whatsoever towards him because there has been no final agreement when we talk about the the the obligation that's created the moral obligation that's created with a final verbal agreement we're talking about where a final agreement has become to all the details of the sale have been finalized so that's the the the the halic look on a verbal agreement but what's going to happen in what's maybe a more a more common situation that after you've made the verbal agreement with the first guy you've agreed to sell the car for 60,000 to him he's going to come tomorrow morning with the cash someone else comes and they offer you 65,000 now what are you going to do now is it the same problem or is it now considered a seeing as there's a new situation so the verbal agreement you made with him before is no longer no no valid not valid and you can go back on your word the post can talk about this situation what do we do where there's a change in the situation either the buyer finds out that he can buy the same thing cheaper or the seller finds out that he can sell for for more money do you still have a moral obligation to stand by your word and sell to the first person that you agreed to or now are you allowed to go back on your word there are more pascan there are more says he doesn't pascan like this there are more says that there's an opinion that where there's been a significant change where there's a significant change in the situation between the verbal agreement and the actual contractual act the actual change of ownership that you can go back on your word even though there are more actually right that that's not the the is not like that opinion in nevertheless there's a famous true of the the writes um a lengthy truver and he permits you where there's been a significant change in circumstance ances between the first agreement and making the the final contractual act after which there is certainly no going back that one of the parties can go back on their word and they won't be considered as someone who is Unfaithful the custom in Bim today is that they allow someone to go back on their word where there's being a where there's been a significant change in the circumstances between the verbal agreement and the contractual act what's going to be considered as a significant difference is a very difficult and a very subjective question I heard from um the son of a famous Diane from the previous generation who is a Diane in in in in in Iraq um from the previous generation that there they had a rule of thumb that if there was a difference of a sixth between the price that was agreed upon and what happened afterwards the change in prices then they would allow you to go back on your word without being considered as someone who was unfaithful and someone who was unreliable that means in our case of the car if you were selling the car for 60,000 if some would to come along someone would to come along and offer you 65,000 after you've already agreed with someone to sell for 60 so that's less than sixth so you wouldn't be able to go back on your word that would be considered as less than a sixth you'd still be considered as Unfaithful if you were to go back on your word in such a situation but where the second buyer were to offer you 70,000 and above which is more than a sixth there's more than a sixth of a difference so there you would be able to go back on your word of course you have to realize that that that rule of thumb of a six is a very very subjective thing if you're talking about someone who selling a company for 6 million and someone comes and offers them after they've CL made a verbal agreement with someone to sell someone offers them 6 and a half million so you can't say that that's not a significant difference it's certainly a very very significant difference and so you have to be careful in any situation of coming to a decision by yourself and we need to you need to discuss the case with with a Diane when it comes up but that's the rule of thumb that they had that a sixth is considered as a sign ific change and that's something you'd be allowed to then go back on your word even after you've made a verbal agreement again as long as there was not yet the final contractual act I was once asked a question by a guy who was renting out an apartment and just to make the the math easy let's say he was renting it out for $600 a month a guy came along looked over the apartment seemed to be good for him he said listen tomorrow morning let's sit down and write out the contract sign it I'll give you give you some money and we'll close the deal but when they met that night they didn't close the deal they just came to a final verbal agreement about the deal later on that evening the guy got a phone call from a widow who really needed an apartment urgently and she was really stuck for a place to live and she wanted to know if she could rent this apartment which she had already heard about she had already seen it and she knew that it was suitable for her the guy the owner of the apartment said listen I've already promised to sell it to someone else I have a verbal agreement with someone he's going to be coming tomorrow but you know what seeing as this is a special situation let me speak to him and see what he says so he phoned up the guy and he said listen there's a widow sitting with me right now a widow with and uh she needs the apartment urgently you're a healthy guy you're a businessman you can find something else easily maybe would you you be prepared to give up on the apartment I have a verbal agreement with you and I won't break that but maybe you'd be prepared to go back on the deal and and find somewhere else so I can rent this apartment to this poor Widow that needs a place to live urgently the guy as soon as he heard that he started swearing and shouting and cursing this guy saying how could you dare how how could you dream of of canceling the deal that we've made between us and now the owner of the apartment suddenly starts realizing wow I'm going to do business with this guy the this guy seemed so nice when he came to see the apartment but now I'm seeing what he's really like the guy's a monster I want to do business with him I want to have a contract with him and through throughout the whole next year I'm going to have to deal with this guy thank you very much I don't really don't want to deal want to want any more to do with this this guy can I go back on the deal not just because of the Widow can I go back on the deal now that I've realized what sort of a guy this person is we've said that where there's a change in the circumstances you can go back on the deal where it's a significant change in the circumstances the question is how are we going to judge what's a significant change here so we said as far as money's concerned we can talk about a sixth that's a general rule of thumb right is not something that's written in the post schem it's a general rule of thumb you can talk about around a six would be a significant change but in this situation where you've just found out that the guy you going to close a deal with is a is a sort of person that you really don't want to do business with and you really don't want to have a contract with him for the next year so how are we going to decide in such a case so when I we I discussed this case with a particular Rabbi and he told me that here we're look at it in the same way as as as with the rule of thumb of a 6 would you be prepared we're going to ask the owner of the apartment would you be prepared to rent the apartment to someone else for $500 rather than rent to this guy that's going to be difficult for you to do business with for $600 would you be prepared to rent it for a six less just so that you don't have to do business with this difficult to deal with guy if the answer is yes then it's considered if there's a significant change here where there's a significant change we can allow you to go back on your word and you would not be considered as a as an unreliable person but generally generally where you've made a verbal agreement you have to stand by your agreement you have to stand by Your Word you have a moral ethical obligation to stick by the deal that you verbally agreed to again baon don't have the power to force you to do that it's a moral obligation and someone who doesn't would get this stamp on their forehead from the Basin that they're considered as an unreliable person that's the validity of a verbal agreement in Jewish monetary law thank [Music] you