If two parties verbally agree to a transaction, but no payment has yet been rendered and no contract has been signed, may one of the parties retract his consent?

The Shulhan Aruch (Hoshen Mishpat 204:7; listen to audio for precise citation) rules that although one is legally permitted to withdraw from a verbal commitment, he bears a moral obligation to stand by the agreement. Thus, for example, if a wholesale distributor and a retailer agree verbally to a certain transaction, but before payment is rendered the wholesaler is approached with a higher offer for the goods, he is nevertheless morally bound to his agreement with the first retailer. Even though the sale has yet to be effectuated and no contract has been signed, it is deemed unethical for either party to break the agreement.

There are, however, two exceptions to this rule. First, if the parties clearly stipulated when finalizing the agreement that it is not yet binding, then they may retract their consent. It is therefore advisable when making a verbal agreement to make a clear condition that the parties can still withdraw from the deal, so as to avoid the ethical problems involved in rescinding one's agreement.

Secondly, if after the agreement the buyer or seller receives an offer that is significantly higher or lower than the agreed-upon price, then he may retract his consent. As Rabbi Shmuel Wosner (contemporary scholar in Bnei-Brak) rules in his work Shevet Ha'levi (4:250), in such a case we may assume that it was implicitly understood that the agreement is subject to revocation should one of the parties come upon a significantly more profitable opportunity. Therefore, the parties are not bound by any moral obligation to forego on the better offer in deference to their verbal commitment.

If a person commits to give somebody a gift, such as if an uncle tells his nephew that he will be purchasing him a certain gift for his bar-mitzva, is he bound by this verbal commitment?

The Shulhan Aruch (Hoshen Mishpat 204:8) distinguishes in this regard between large and small gifts. In the case of a small gift, one must, in fact, fulfill his verbal commitment to purchase such a gift. If, however, a person committed to purchasing an expensive gift, the intended recipient does not assume that the gift will be given until he actually receives it, and hence no real commitment has been made. As such, one may retract an offer to purchase an expensive gift.

In the case of the Bar-Mitzva gift, then, a person who commits to purchase the boy a set of Humashim (a relatively inexpensive gift) must fulfill the commitment, whereas somebody who commits to purchase him a gold watch may rescind the offer.

Once again, it is recommended in all such cases that one make an explicit stipulation when committing to purchasing a gift, in case he later changes his mind.

(Based upon Dayan Shlomo Cohen's work "Pure Money," pp. 53-55)

Summary: Two parties who verbally commit to a transaction are morally bound to fulfill their commitment, unless an explicit condition was made, or one of the parties receives a substantially better offer. In the case of a commitment to purchase a gift, one who commits to buy a small gift must fulfill the commitment, whereas one who commits to purchase an expensive gift may retract his offer. In all situations, it is advisable to make an explicit condition that one does not commit himself to the given transaction or gift.