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Making or breaking a binding letter of understanding according to Halacha
By Dayan Yehoshua Wolfe
Businesses cannot run without a sense of certainty that deals or agreements between parties will not be suddenly aborted or changed. To secure this, businesses often rely on a letter of understanding, also known as a letter of intent, which is a formal text, commonly used to confirm the details of a verbal agreement. Drafting a letter of understanding can be a real asset in various transactions such as purchase agreements, joint venture agreements, lease agreements, and more.
What is the Halacha when the two parties do not agree on the letter of understanding? Can the terms of the letter be enforced?
The Silent Landlord
A recent case brought before the Bet Din, involved Reuven who verbally contracted to lease a house to Shimon, in exchange for a sum of money. Reuven and Shimon also casually agreed upon the terms dealing with common landlord-tenant issues. The terms of their verbal agreement were never put into writing.
After consulting with professional legal counsel, Shimon sent a letter of understanding in good faith to Reuven. The letter laid out all of the terms that they had verbally agreed upon. The conclusion of the letter stated that if Reuven did not respond to the letter prior to the commencement of the lease, it would be assumed that Reuven consents to all of the terms in the letter of understanding. Reuven received the letter, and he did not respond.
During the course of Shimon’s tenancy, a disagreement arose between the two parties. Reuven claimed that he was not obligated to shovel snow, as per the terms of their verbal agreement. Shimon disagreed, arguing that the letter of understanding explicitly placed this responsibility on Reuven.
Can we enforce the terms of the letter of understanding because Reuven failed to reply to it, and thus, automatically consented? Can Shimon use the letter of understanding against Reuven in Bet Din?
Shtika K’Hoda’a – Silence as Admission
While, according to Halacha, there are times in which the Poskim will view a person’s silence as an admission (a concept known as “Shetika K’Hoda’a”), however, in most cases, a failure to respond is not viewed as an automatic agreement with the other party.
Generally, in order to determine whether silence can be construed as consent, a Bet Din will consider some of the following points:
1) Has the silent party already expressed a position on the matter?
If the silent party has already expressed their position, there is good reason to believe that they have not responded now, simply because they already established their position on the matter. Therefore, the silence is not viewed as consent.
If the silent party has not previously stated his position, there is reason to interpret his silence as consent. Since his position is not yet known, if he objects to what is being said, he should voice his opinion.[1]
Accordingly, in our case, the terms of the lease have already been agreed upon verbally. Reuven can claim that he already expressed that he does not intend to shovel any snow, thus establishing his position. Therefore, his silence will not constitute consent.
2) Is the silence a failure to respond to an action or a verbal statement?
If the silent party failed to respond to an action affecting his property, there is greater reason to assume that he consented to the action.[2] This is because a person will not remain quiet while there is an intrusion taking place on his property.
In our case, Shimon took possession of the rental house, under the provisions laid out in the letter. This would constitute an objectionable action to Reuven’s property which should prompt a response. This should be a factor in declaring Reuven’s silence as consent.
3) Is the silence before or after the fact?
If it is too late to prevent the other party’s action, it is likely that he remained silent because there is no longer any point in protesting. In such a case, we cannot assume that he consented to the other party’s actions.[3] Therefore his silence after the fact is not viewed as consent.
Since in our case Reuven received the letter before the lease took effect, we may view his silence as consent.
4) Is there a chance that what has been done may be to the silent party’s advantage?
If the action could be to the silent party’s advantage, we cannot declare it to be a proof of consent, because it is possible that he is waiting to see how the deal plays out, and is in no way waiving his rights or consenting to the terms.[4]
In our case, there seems to be no point in Reuven waiting for events to unfold, as he does not wish to shovel the snow at all, and thus should make that clear outright.
Aside from our first point, these final points seem to indicate that Reuven’s silence should be understood as consent. Reuven should have responded to Shimon’s letter of understanding, if he did not agree with it. Therefore, Reuven’s silence will be construed as consent to the letter, and Reuven will have to shovel the snow.[5]
It is important to note that Shimon’s letter was not an attempt to renege on their contract. Rather, the purpose of the letter was to record the agreement.[6] It was never Shimon’s intention for the letter to replace their oral contract. Shimon took possession of the leased premises based on the understanding that Reuven accepted responsibility for shoveling snow.
In view of this disagreement, Shimon (and any other tenant or landlord) would have been better off to insist that a rental agreement or lease be signed by both parties. This would provide clarity to the agreement and the entire discussion would no longer be relevant or necessary.
Sources:
[1] בני אהרן סימן מ והובא בחידושי רעק”א חו”מ סימן קעו סעיף י, ועיין המשנה למלך ריש פ”ה דהלכות שלוחין ושותפין
[2] נתיה”מ חו”מ סימן פא ס”ק ה, ועיין ברמ”א חו”מ סימן רצא סעיף כו ובפ”ת שם
[3] בני אהרן שם
[4] שם
[5] עיין שו”ת תורת חיים חן”מ סימן לה
[6] דאם לא כן, אלא שכוונתו היתה לחזור, יהי’ תלוי במח’ הרמ”א והט”ז חו”מ סימן רכא