The Challenge of Wealth

By Rabbi Dr. Meir Tamari

RESPONSA

Unfulfilled Contracts

In all issues of business morality the existence of a commonly accepted culture and ethical value structure is a prerequisite for ethical behavior, even though, in view of human weakness, of itself it is insufficient and requires legislation, judges and policing. Nevertheless, sometimes the public disapproval of unethical and immoral behavior is the only weapon that society has. This may because, although the actions are unethical, they may be legal or the courts and police are unable to do anything about them because of a lack of evidence or because the perpetrator is powerful. One arm of this public disapproval lies in the religious culture created by the homelitical literature of Torah commentary, the Midrashim and the rabbinical thought that constantly argued for and preached the behavior demanded of religious Jews.

Then there are some halakhic moral demands that are not enforceable by human courts but nevertheless they are real ones, therefore their infringements are punishable by G-d. For example an adult gave a child or an irresponsible adult hot coals, which they then fanned and thereby caused a fire. There was no real agency so the sender was not liable for the damage, since it is normal for such coals to cool. The sender could not be obligated to have foreseen that they would fan the coals. However, the sender is liable before the Heavenly court (Mishnah, Bava Kamma, chapter10, mishnah 9).

Then there are the communal edicts reflecting and enforcing acceptable behavior.

Together these all construct an effective pattern of social disapproval and peer displeasure, over and above the effects of the legal-halakhic framework. It must be born in mind that these are often more powerful and effective than monetary fines or even imprisonment. This is especially true in a Jewish framework owing to the communal-national character of our religion and society.

Unfulfilled Contracts

Our business behavior is replete with examples of the unfulfilled contract. Some of them are verbal such as promises made to deliver goods or services at a certain time or pledges to give charity, and even those promises made to ourselves to do or not to do something. Others are deliberate breaches of written contracts such as changes in prices, quality, time schedules and failure to keep to the terms of employment on the part of either the employer or employee. Sometimes the breach of contract, either written or verbal, causes a financial loss, while at other times there is none; nevertheless there is always the spiritual damage suffered by one party of not keeping their word and sometimes of causing the aggravation suffered by the other party. Both of them prevent efficient markets and distort their equilibrium. When they become norms, they are economically dangerous since they destroy the trust required by the market and add to the costs of doing business, as everybody has to be careful to make sure that rights and obligations are properly documented, witnessed and preserved. The non- fulfillment of contracts that cause financial loss is similar to crimes against persons or property, and has to be solved by the courts or police. However they as well as those not causing direct financial damage, require the religious- social-cultural norms of society to prevent them becoming socially accepted norms.

Sanctity and enforceability of contracts in Judaism are not only economic imperatives but they are also spiritual ones. The relationship between Israel and G-d is the contractual one of the brit- covenant and the Lord is consistently described in the Tanach, indeed in all our sources, as One Who Keeps The Covenant- Shomer HaBrit. It is not surprising therefore, that our sources saw all contracts between human parties as having G-d as an additional party. " ' If a person will sin and commit a treachery against G- d' (Leviticus 5:20). Rabbi Akiva asked, 'Why does the text refer to one who reneges or denies contractual obligations as sinning before G-d? Whenever two people make any agreement or condition or sale, then always HaShem is present. Therefore when either of the parties changes their minds or denies the obligation then they are denying His Presence; thereby, they sin before Him" (Sifra).

Commenting on the biblical verse, "Just weights and just measures you shall have, " the Sifra uses the Hebrew hen tzedek, actually just measures, to also denote the word for yes, saying "Let your yes be yes and your no be no" (Sifra Vayikra, 19:36; see also Bava Metzia 49b). "Rabbi Eliezer said, One who changes his mind [alters his undertakings or cancels agreements in economic activities], is as heinous as he who worships idols" (Mechilta Shemot, 22:27). These do not have to be a flagrant abrogation of contractual obligations but may be subtle subterfuges or insidious comments; "One who alters his voice in order to defraud" (Rashi to the Mechilta).

This philosophical disapproval of unfulfilled contracts becomes translated into halakhic decisions, even in those cases where there was no resultant loss. "If the owner hired workers and they wish to cancel their agreement [each may do so and] they have no financial claims against each other, except taromet [resentment. This applies where the work was not commenced since labor contracts become valid halakhically only upon commencement of work or allied actions such as traveling to the place of work]. In those cases where the workers would have been able to find work, and now as a result of the employer's retraction they are unemployed, he has pay them as a poel bateil [that which one would pay to enjoy a day of leisure. The same source rules that where the workers renege and cause a financial loss, monetary compensation has to be paid by them](Choshen Mishpat, section 372, subsec.1).

Elsewhere the Shuchan Arukh rules that, " Where one paid money for an article but did not take possession [as is essential in Jewish law for a transfer of ownership of movable property, thus placing full responsibility for the safety of the goods on the seller], any party who reneges on the agreed transaction does an act not befitting a Jew. This applies both to the seller and the buyer. Whoever reneges on an agreement, even if he only paid part of the purchase price [and therefore the deal may be considered not to have been completed], becomes liable to the rebuke Misheparah- G-d who demanded payment...[shall demand payment from you].

How is the Misheparah ritual performed? The guilty party is arraigned in the Bet Din and publicly rebuked y the Rabbis who say, 'He who demanded payment [for not keeping their word] from the Generation of the Flood, and the Generation of the Tower of Babel, and from the people of Sodom and Gomorrah and from the Egyptians who were drowned in the Red Sea, He will demand payment from whosoever does not keep their word'" (Choshen Mishpat, section 204, subsec. 1-4; see also comments of Hagra).

Copyright © 2004 by Rabbi Dr. Meir Tamari and Torah.org.

Rabbi Dr. Tamari is a renowned economist, Jewish scholar, and founder of the Center For Business Ethics (www.besr.org) in Jerusalem.