Contracts

  • Rav Chaim Navon

YHE-HALAKHA: TOPICS IN HALAKHA

 

 

Contracts[1]

Rav Chaim Navon

 

 

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Mazal Tov to Rav Chaim and Yael Navon on the birth of a daughter,
she-tizku le-gadla le-torah le-chupa u'le-maasim tovim

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This shiur is dedicated in memory of Israel Koschitzky zt"l, whose yahrzeit falls on the 19th of Kislev. 
May the world-wide dissemination of Torah through the VBM be a fitting tribute to a man
whose lifetime achievements exemplified the love of Eretz Yisrael and Torat Yisrael.

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I. The Problems

 

1. Kinyan Devarim

 

            There is an acute problem in Jewish law regarding the laws of contracts. The problem stems from the law relating to "kinyan devarim."

 

Mishna – If joint owners agree to make a mechitza in a courtyard, they should build the wall in the middle…. (Bava Batra 2a)

Gemara - …How then have you explained the Mishna? As applying to a courtyard in which there is no right of division.[2] If it is speaking of one in which there is no right of division, even if both owners consent, what does it matter? Either of them can retract! Rav Asi answered in the name of Rabbi Yochanan: We assume that each made a formal contract with the other, by means of a kinyan [the handing of a small article, usually a piece of cloth, by one of the contracting parties to the other, as a symbol that the object transferred has passed from the ownership of the one to that of the other]. But even if they made such a contract what does it matter, seeing that it relates only to a kinyan devarim (verbal agreement) [that is to say, that of which ownership is acquired by the kinyan is only a verbal promise (i.e., to divide), not any concrete article]? (Bava Batra 3a)

 

            The Meiri explains that the term kinyan devarim relates to what we today call a "contract":

 

This kinyan devarim which we have ruled is not a kinyan refers to any case where nothing is actually acquired at the present time, but rather the one party promises that he will do something, and they perform a kinyan on that. For example, where he promises to sell him a particular piece of land tomorrow or some time in the future – the buyer doesn't acquire the object of the sale itself, for [the seller] is not selling that right now, but rather he acquires from him [the promise] that he will sell it [to him] in the future; or that he will enter into a partnership with a certain person; or that he will betroth the daughter of a certain person, or that he will divide up a certain piece of land that is jointly owned by them. (Meiri, ad loc.)

 

            It follows from the Gemara that without a valid kinyan, there is no way to bestow binding force on an agreement reached between joint-owners to divide their shared property between them, and each of them can retract his agreement. In such a case, an act of kinyan does not suffice, for it falls into the category of kinyan devarim, mere verbal agreement. Rather, what is needed is an actual kinyan of a concrete article, and only that has legal force. Roman law recognized the principle: "pacta sunt servanda" – agreements must be kept. This rule became a basic axiom in modern legal systems. According to Jewish law, however, it is not at all easy to understand why in fact a contract must be honored, when that contract does not involve a concrete kinyan.

 

2. Asmakhta

 

            Another problem arising with respect to contracts is that of asmakhta – the lack of deliberate intention (gemirat da'at) on the part of one of the persons entering into the contract. Even when we manage to overcome the problem of kinyan devarim, an additional problem is introduced into the realm of contracts by the conditional "if." When one of the parties is sure that the condition will not be fulfilled, and thus the sanctions that fulfillment of the condition would incur will never be realized, the contract is deemed an asmakhta, i.e., an agreement entered into with only partial and imperfect intention, and therefore not binding.

 

Mishna: [In the case] where [a person] paid a part of his debt and the bond was deposited with a third party to whom [the borrower said]: If I will not pay you [the balance] between now and a certain date, give him his bond, [and] the date arrived and he did not pay, Rabbi Yose said: He shall give [it]. Rabbi Yehuda said: He shall not give [it].

Gemara: Wherein [lies] the difference between them? Rabbi Yose holds that asmakhta conveys possession, and Rabbi Yehuda holds that an asmakhta does not convey possession… The law is not according to Rabbi Yose. (Bava Batra 168a)

 

Asmakhta – If someone promises something to another person on condition that he will do something in the future, and he is confident in his heart at the time of the stipulation that he will be able to fulfill the stipulation when the time arrives, but when the time arrives, he is unable to fulfill it owing to circumstances beyond his control.

Does not convey possession – He is not caught by his stipulation, and is not made to suffer a loss. (Rashbam, ad loc.)

 

            It is easy to understand that the laws of asmakhta seriously limit the use of contracts, for oftentimes contracts speak of a conditional future obligation, e.g., sanctions for breach of contract.

 

II. The Moral Force

 

            From a moral perspective, our Sages severely condemned anybody who does not keep his word and breaches a contract to which he had agreed, even when that contract does not have binding legal force:

 

As to him who transacts business by mere oral agreement, it is proper that he keep his word, even though he has not taken any money or left any pledge; and whoever retracts, whether the buyer or the seller… he is considered as one lacking in honesty, and the mind of the Sages is not pleased with him. (Rambam, Hilkhot Mekhira 7:8)[3]

 

            Regarding the moral force of the obligation to honor a contract, one of the Acharonim, R. Elazar Moshe Halevi Horowitz, writes as follows:

 

Anyone with eyes in his head will clearly see in the Torah, the Prophets, and the Writings, and in countless places in the words of Chazal, the enormity of this obligation, where one person promises his fellow, so that he clearly relies on him… What is the making of a covenant mentioned in many places, and which applied even before the giving of the Torah, but is not one of the Noachide laws. And furthermore, all the laws of our holy Torah, even the most severe – their foundations were only laid in Israel when they entered into a covenant. How does entering into a covenant help without the Torah?… Surely every intelligent person must agree that the matter of trust and promise is the seal of the ring of He who created the world for His service, and without it there can be no commandments. Therefore it is not counted among the commandments given to the descendants of Noach or to Israel, like the commandment to believe in God (blessed be He) and his Torah… But one person's promise to fulfill another person's desire… is an ancient obligation, from the day that man was created on earth. (Ohel Moshe, II, no. 138)[4]

 

            Sometime breach of contract leads to a concrete legal sanction, the curse of "mi she-para" ("He who punished, etc."):

 

If one has paid another for a movable article, but has not drawn it, so that title to the article has not been acquired thereby, as we have explained above, he who retracts, whether the buyer or the seller, has nevertheless committed an act not befitting an Israelite and must submit to the curse expressed by the formula, "He who punished."…

How is the curse expressed by the formula, "He who punished," administered? A curse is pronounced against him in the court of law, saying, "He who punished the people of the generation of the flood and the people of the generation of the dispersion and the people of Sedom and Amora and the Egyptians who were drowned in the sea, will punish him who does not stand by his word," and then the money is refunded. (Hilkhot Mekhira 7:1-2)

 

            However, the law of "mi she-para" is limited to very specific cases, and is not a general sanction for any breach of contract. And, furthermore, even "mi she-para" does not include the right to enforce fulfillment of the contract. Thus, we are still left with a difficulty in the strictly legal realm.

 

III. Obligation To Sell In The Future

 

            The Rishonim in Ketubot ask how is it possible for a bridegroom to obligate himself at the time of his marriage to pay his wife huge sums of money as her ketuba and tosefet ketuba, should he die or divorce her. Surely we are dealing with a future undertaking which has no legal force unless it is reinforced with a concrete kinyan! When the groom has assets of great value, it is possible to say that he can subjugate these assets to the woman for this obligation, and the lien is like a kinyan performed at the present time. But most bridegrooms do not have such extensive assets, and therefore their undertaking should be regarded as mere kinyan devarim:

 

If he wishes to add even a hundred maneh, he can add – This is puzzling, for now it is customary for the groom to write to his wife a hundred litras, even though he has not even a peruta. Granted when he has, he can subjugate his assets to this debt, and since he became obligated, even if he lost these assets and purchased others, they become subject to the lien, even though a person cannot transfer title of something not yet in existence, he can subjugate something not yet in existence to a lien… But if a person has nothing, how can he subject assets that he will later acquire to a lien – since he did not become obligated, this is something that is not yet in existence! Ri posed this question to R. Eliyahu and he answered him that we find something like this in chapter Ha-Sokher et ha-poalim. For a Tanna taught: And a paid bailee may make a condition to be liable like a borrower. And the Gemara asks: How? With words? And it answers: Where he acquired from his hand, i.e., where the bailee performed a valid kinyan. The implication is – in all cases, even if he doesn't transfer title to any assets, but rather he subjugates himself personally to this obligation from now, and when he will have assets, the entire lien is from now. And this is not merely kinyan devarim, for kinyan devarim is only like the case at the beginning of Bava Batra, where they agreed to divide a courtyard regarding which there is no right of division. But where he obligates himself personally to an obligation – this is not kinyan devarim. (Tosafot, Ketubot 54b)

 

            Here we are dealing with a conditional future obligation: if the husband divorces his wife or dies, he will be obligated to pay the tosefet ketuba.[5] At first glance we might say that we are dealing here merely with a lien on his assets. But R. Eliyahu implies that even when a person accepts a conditional obligation upon himself, we can relate to the situation as if he had obligated himself personally to the debt, even though there is no immediate debt (as in the case of a loan), and therefore the obligation takes effect immediately, and it is not an instance of kinyan devarim. So too explains the Penei Yehoshua:

 

Since he formulated the matter as an obligation, and he obligated himself personally to fulfill the condition, and since the basic obligation took effect at the time of the condition, thus his assets became subject to the lien, whether he owned them at the time, or he didn't own them but acquired them later… For this reason, there is a personal lien regarding the sum added to the ketuba, even if he owns no assets at this time. And for this reason the Posekim write that whenever a person formulates an undertaking as an obligation, it is binding, even regarding that which is not yet in existence or not yet in his possession. (Penei Yehoshua, ad loc.)

 

            That is to say: When a person obligates himself to make a certain payment, rather than obligate himself to act in a certain way, we can relate to this obligation as taking force already now (even though we are dealing with a conditional obligation). It is as if in the heavenly records, it is already noted that he is a potential debtor. Since there is a change in his halakhic status already now, it is like a kinyan performed at the present time, and there is no problem of kinyan devarim.

 

From here we see that at least one type of contract enjoys halakhic force – a contract regarding a future payment or lien. This is because such a contract is understood from a halakhic perspective as a personal lien of the person accepting the lien, which takes effect immediately.

 

            Many Rishonim write that a person can also obligate himself to sell something to another person in the future, for in this manner he subjugates himself to this obligation (e.g., Sefer ha-Terumot, sha'ar 64, II, 1). And so too rule the Tur and the Shulchan Arukh:

 

If someone obligates himself regarding something that is not yet in existence or not yet in his possession, he is obligated. And even though a person cannot transfer title of something that is not yet in existence – this applies when he transfers it to him using the term sale or gift. And even if he mortgages his field to it or accepts a lien over all his assets, and even if he gave him a pawn, it is nothing. But if he uses the term "obligation," e.g., if he says: Be my witnesses that I obligate myself to such-and-such to do such-and-such, he is obligated, provided that he performs a kinyan. (Shulchan Arukh, Choshen Mishpat 60:6)

 

            Let us bring an example of a case in which this principle was used to give halakhic force to a commercial contract:

 

Question: A certain deed stated as follows: A certain sage admits that he sold So-and-so four hundred hides at such-and-such sum, and the aforesaid seller obligated himself to supply the aforesaid buyer with the hides by the end of Tamuz, placed alongside the ship. And should he fail to supply the hides in their entirety by the stated time, he obligated himself from now with an absolute kinyan to pay for each hide the sum of four rials, etc. And now the seller retracts, and claims that the hides had not been in existence, and the transaction was not binding, and he is not obligated to sell them, and even though it says in the contract, "the seller obligated himself," this means that he obligated himself to hand them over at the designated time. But now there is no transaction and no obligation of time.

Answer: Even if the hides had not been in existence, and were not purchased, nevertheless he already obligated himself to supply the hides or to pay a certain sum at the designated time, and a person can obligate himself regarding something that has not yet come into existence. (Responsa Maharit, II, Choshen Mishpat, no. 69)[6]

 

            This halakhic logic – that a person can obligate himself personally, and therefore the obligation becomes binding – does not apply in every case of a future contract, but only in a case of an obligation to sell something in the future or to subject his assets to a lien in the future. And even in such a case, there are those who maintain that such an obligation only goes into effect under certain conditions,[7] and if the matter comes to court, one of the parties can claim that he follows this position, and be exempt.[8] Accordingly, we must still clarify the halakhic logic that allows us to draw up contracts on a wider scale.

 

IV. Solutions

 

1. Penalties

 

            The Rambam describes a solution that the Sages in Spain used to solve the problem of asmakhta. This solution can also be used to solve the problem of kinyan devarim:

 

When the Sages of Spain wished to validate a transfer by asmakhta, they made the following arrangement: They made the first party obligate himself by a kinyan that he owed another 100 dinar. After he thus obligated himself, they made the second party bind himself by a kinyan, that as long as certain conditions should obtain, or if the first party should perform a certain act, he, the second party, would remit the obligation as of now; and if the conditions should not obtain, or if the first party should not perform that act, he, the second party, would demand the money for which the first party had obligated himself. This arrangement we regard as applying to all stipulations between husband and wife in negotiations preliminary to marriage and in all similar matters. (Rambam, Hilkhot Mekhira 11:18)

 

            That is to say, if we wish a person to obligate himself, for example, to sell his car to a certain person in a year from now, an arrangement can be made in which the seller unconditionally obligates himself to pay the buyer a large sum of money. This obligation takes effect immediately, for it does not involve any asmakhta or kinyan devarim. The buyer asserts that he will waive the seller's obligation, on condition that he will sell him his car.[9] There is no direct contract that obligates the seller to follow a certain course of action, but there is a heavy sanction if he fails to do so.

 

This is a stratagem that is often used in actual practice, and finds expression in the Shulchan Arukh:

 

When we wish to provide security to an engagement, we do it in a way that does not involve asmakhta. That is, we draw up a contract in which the one party obligates himself to pay the other a maneh, and after he obligates himself to the maneh he stipulates with the father of the bride that if he marries his daughter the debt will be waived. We then draw up a contract in which the other party obligates himself to pay him a maneh, and he stipulates with him that if he gives his daughter in marriage to the groom the debt will be waived. The two contracts are then deposited in the hands of a third party. (Shulchan Arukh, Even ha-Ezer 50:6)

 

            It would seem, however, that in such a case, if one of the parties prefers to pay the penalty and not uphold the contract, there is no way to compel him to honor his word.[10] For this another means is necessary – an oath.

 

2. Oaths

 

            A second stratagem that was used to bestow halakhic force upon contracts was an oath. If a person swears that he will do something, the oath is valid and binding, and the court will coerce him to fulfill it, so as not to violate the prohibition of swearing falsely.[11] Regarding such an oath, there is no problem of asmakhta.[12]

 

            There is, however, a problem with using an oath, for we are dealing with a very severe tool: some authorities maintain that there is a problem with the very use of an oath, even a true oath.[13] Great care must be taken so that the person not violate the prohibition of swearing falsely, even regarding some small detail of the contract (and therefore some authorities say that he should take the oath only with regard to the fundamental elements of the contract).

 

            Another problem regarding an oath relates to the limited ability of the court to coerce fulfillment of the contract. When a person takes an oath to fulfill a contract, the court can put him under a ban until he fulfills it, but it cannot collect from his assets. And if the person who took the oath dies, the obligation does not pass down to his heirs. Already the Rivash noted these limitations:

 

Even if by strict law he is not obligated to complete what he stipulated, nevertheless in order to fulfill his oath, he must complete what he had stipulated, and the court can compel him to do so. The practical difference is that if he died without completing what he had stipulated, his children are not obligated to do so, for it is an asmakhta. And so too there is a practical difference in that even during his lifetime the court cannot collect from his assets… only that the court can place him under a ban if he fails to fulfill his oath. (Responsa ha-Rivash, no. 335)

 

            It is possible to make use of both solutions – a penalty and an oath – and thus make use of the advantages of each of them.

 

(Translated by David Strauss)

 

[1] This shiur is based primarily on A. Wahrhaftig's book, Ha-Hitchayevut, Sifriyat ha-Mishpat ha-Ivri, Jerusalem 5761, and on Rav D. Bass's article, "Chozim al pi Dinei Torah," in: Sh. Ishon and Y. Bazak (ed.), Keter – Mechkarim be-Kalkala u-Mishpat al pi ha-Halakha, 1, Kedumim 5756, pp. 17-229.

We shall not deal here with the issue of labor contracts, which constitutes a rich and broad realm of its own.

[2] In a situation where from a halakhic perspective the one cannot compel the other to divide the courtyard between them.

[3] The law has been decided that the rules governing "those lacking in honesty" apply even to things title over which cannot be transferred in the normal manner, e.g., kinyan devarim. See: Rema, Yoreh De'a 264:1.  See also Wahrhaftig, p. 411, note 20.

[4] Cited by Nachum Rakover, Zekhut ha-Yotzerim bi-Mekorot ha-Yehudiyyim, Jerusalem 5751, p. 414. The case relates to people who signed an agreement to purchase a set of Talmud that was to be published, and now they wish to retract and purchase a different, less expensive set.

[5] The nature of this obligation is emphasized by the Rosh ad loc. (Ketubot, chap. 5, no. 1).

[6] He also proves that in this case there is no problem of asmakhta.

[7] For example, the Ketzot ha-Choshen (203, 2; 206, 1) argues that the obligation is only binding if the person obligates himself even in a case where something happens to the merchandise.

[8] Bass, p. 47.

[9] When the waiver is done from now, there is no problem of asmakhta (Bass, p. 83).

[10] See Bass, p. 52, note 73, where he tries to infer otherwise from the Chatam Sofer, but his inference is not at all necessary.

[11] Bass, p. 54.

[12] Shulchan Arukh, Choshen Mishpat 204:19.

[13] Bass, p. 56.