Wednesday, January 13, 2016

THE BAIS HAVAAD HALACHA JOURNAL: Volume 5776 Issue XIV Va'eira HOW TO AVOID CONFUSION IN AGREEMENTS The Letter of Understanding. By Rabbi Yehoshua Wolfe


A letter of understanding is a formal text, commonly used to confirm the details of a verbal agreement. The letter of understanding, also known as a letter of intent, can be used in asset purchase agreements, joint venture agreements, lease agreements, and other cases. What is the halacha when the two parties do not agree on the letter of understanding? Can the terms of the letter be enforced? In one case, Reuvain verbally contracted to lease a house to Shimon, in exchange for a sum of money. Reuvain and Shimon also casually agreed upon 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 Reuvain. The letter laid out all of the terms that they had verbally agreed upon. The conclusion of the letter stated that if Reuvain did not respond to the letter prior to the commencement of the lease, it would be assumed that Reuvain consents to all of the terms in the letter of understanding. Reuvain received the letter, and he did not respond. During the course of Shimon’s tenancy, a disagreement arose between the two parties. Reuvain claimed that he was not obligated to shovel snow, as per the terms of their agreement. Shimon disagreed, and argued that the letter of understanding explicitly placed this responsibility on Reuvain. If Reuvain failed to reply to the letter of understanding, does this mean that he automatically consented to it, and is therefore, bound to its terms? Can Shimon use the letter of understanding against Reuvain in bais din?

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