The Laws Governing the Prohibition Against Taking Interest and the Laws Governing Iska (1-40)

The Laws Governing the Prohibition Against Taking Interest and the Laws Governing Iska (1-40)

One must take the utmost care not to transgress the prohibition [against taking] interest, whether [the transaction] involves a loan to a poor person or [a loan] to a wealthy person. [The severity of this prohibition is reflected by the fact that] there are several Scriptural prohibitions and admonitions [against loans with interest] that even apply to the borrower.1 By contrast, with regard to other monetary laws, if a person is willing to allow [someone] to steal from him, [the owner of the property] may do so.2

[However,] regarding interest, because of the severity of the matter, the borrower was also warned, as it is written,3 “Do not give interest to your brother,” i.e., do not give [any form of] interest to your brother, “neither interest of money, nor interest of food, [nor] anything given as interest,”3 not even wood or stones. [This prohibition applies] whether the interest [paid] was of the same type of entity that was loaned or [whether] it was something else. [The prohibition applies] if [the interest paid] was not even worth a perutah.4

Whoever extends loans with interest is considered as if he denied the [existence of the] G‑d of Israel5 and the Exodus from Egypt.6 [Such a person] will not arise at the time of the Resurrection of the Dead7 and even in this world, his resources will falter and become wholly depleted.5

It is forbidden to be involved [in arranging a loan] with interest between a borrower and a lender. Anyone who brokers [such a loan], assists either [the borrower or the lender], or directs [one of them] to a place where he could lend or borrow [at interest] violates [the prohibition against] placing a stumbling block before the blind8 provided the prohibited [loan] would not have been made were it not for [his assistance.9 Even] if [the forbidden loan] would have been made without [his assistance,] it is [still] forbidden [to offer such assistance] by Rabbinic Law, because one [who offers such assistance] is facilitating the acts of transgressors.10

A person who serves as a witness or a guarantor [to the loan], and similarly, the scribe [who draws up the contract for the loan] violates a Scriptural prohibition,11 as it is written,12 “Do not impose interest upon him.” [The prohibition applies] even if the loan would have been made without him. (Even if [the guarantor] guarantees only the principal [and not the interest], if the loan would not be given without [his guarantee], he violates the prohibition against [placing a stumbling block] before the blind. And [even] if [the lender] would have given the loan regardless [of his involvement], there is a prohibition [against acting as a guarantor] by Rabbinic Law, as explained.)

The general principle regarding [the prohibition against taking] interest is [that it applies to] anyone who takes any form of compensation for granting additional time [to a debtor to repay] a debt that he owes him.13 If [the lender] takes [any additional payment] merely for granting further time [to repay] a debt when there is no commercial transaction involved, [the lender is considered to have taken] interest, [which is forbidden by] Scriptural Law.

[The above applies] even when [the agreement to pay extra] was not made when the loan14 was given, but [only] afterwards, when [the creditor] comes to demand [repayment] and [the borrower] gives him [something extra] to extend the duration [of the loan.15 The same law applies] if [a creditor] demands [repayment of] a different debt that did not originate through a loan,16 and [the debtor] gives him [something extra] to delay [payment of the debt]. If [the person] takes compensation [for deferring payment regarding a debt that results from] a business transaction,17 this is [considered] avak ribis [i.e., “the trace of interest”],18 and [and charging such a payment] is forbidden by Rabbinic Law.

If one transgresses or errs and takes avak ribis, he is required to return it if he desires to fulfill his moral and spiritual obligation.19

[The fact that the debtor agrees to] give [the interest] as a present or to waive [his right] is not effective in permitting [giving or taking] any [form of] interest, even [interest that is forbidden merely by] Rabbinic Law. Even if the borrower says, “I am giving [the interest] as a present,” [the borrower] is forbidden to give it and [the lender] is is forbidden to accept it. [The rationale is that] all forms of interest
that exist involve waiving [one’s rights] and giving a gift, for merchants and farmers who always need to borrow [money] will pay the interest as an outright gift with a full heart so that they will always be able to borrow, and yet the Torah did not waive it and forbade such a waiver or present. Similarly, the Sages forbade [such payments as] interest [prohibited] by Rabbinic Law. It is even forbidden to pay interest in the form of a present [that is given] on the condition that it [will] be returned [to the borrower at a later date].20

Nevertheless, if [a creditor] already took interest, [the debtor’s] waiver [of the obligation that it be repaid] is effective and [the interest] need not be returned, even to fulfill one’s moral and spiritual obligation. [This applies] even regarding interest forbidden by Scriptural Law.

[The prohibition against taking] interest [also applies] with regard [to performing] work, for example, telling another person, “Perform this easy task for me and I will perform a more difficult task for you,”21 or [saying], “Perform [a full day’s work] for me on a short day and I will perform [a full day’s work] for you on a longer day.”

Similarly, it is forbidden to tell [another person], “Lend me a maneh22 for a month and I will lend you a maneh for more than a month,” or, “[I will lend you] more than a maneh for a month.” There are authorities who maintain that even saying, “Lend me a maneh for a month and [later,] I will lend you a maneh for a month” is [considered charging] outright interest [forbidden] by Scriptural Law. [The rationale is that] a loan is not the same as work for
which a wage is paid [where one could argue] “What difference does it make if he compensates [him] with money or with work,” as long as it is worth the same as the work he initially [performed. Thus, making such an exchange is not considered interest.] This is not true regarding a loan. [In that instance,] whenever one receives any compensation for [giving the loan,] be it even a loan of an identical amount, [receiving] that [benefit] constitutes [accepting] interest according to Scriptural Law, provided the agreement [to receive the benefit] was made at the time the loan was given or at the time the duration [of the loan] was extended.23

(If [the borrower later] agrees to extend a loan to the lender on his own initiative, [but] is only doing so because [the lender] originally gave him a loan, this [second loan] is forbidden by Rabbinic Law, as belated interest, as will be explained.24)

Regarding [the practical application of] the law, [the general principle is that concerning matters involving questions] of Scriptural Law, [one must] follow the more stringent view. (With regard [to matters that are] of Rabbinic Law, [one may] follow the more lenient view.25 [However,] may blessings be granted to one who acts stringently.)

There is [a concept of] preliminary interest as well as [a concept of] belated interest.21 Initially, it is forbidden for [the borrower] to give and for [the lender] to accept [such payments]26 by Rabbinic Law.27 However, if one transgressed and did accept [such a payment, after the fact] he is not obligated to return it, even to fulfill a moral and spiritual obligation.

What is the case? [A prospective borrower] sought to receive a loan from [a prospective lender]. He sent [the prospective lender] a present so that he would [regard the prospective borrower favorably, and] extend the loan to him. This [present] is referred to as preliminary interest. [Conversely, if a borrower] took a loan from [a creditor] and returned [the creditor’s] money and [subsequently] sent [the creditor] a present in consideration of not having had the money available to him, [but rather] in his possession [i.e. the possession of the borrower], it is referred to as belated interest.21

If [however, the borrower] had been accustomed to sending presents [to the lender] before [taking the loan], it is permitted [for him to send the lender a present,] provided he is not currently sending [the gift] because of the loan.21

There are authorities who permit [the borrower] to give [the lender] a small present [as long as] he does not explicitly state that he is giving [the present] because of the loan, even though this was his intent. [This leniency applies] even if [the borrower] had not frequently sent [the lender] presents before [receiving the loan. The rationale is that] people often send small presents to others. Thus, it is not apparent that [the present] is [a form of] interest. [These authorities maintain that the Sages] forbade preliminary and belated interest only when it is explicitly stated by the [borrower’s] agent or by the borrower himself that [the present] is being given because of the loan. [Similarly, these authorities maintain that the Sages forbade the borrower from giving the lender] a large present, in which instance it is obvious that it is not being given without a reason, but rather because of the loan, since people do not give large presents without a reason.

[These authorities maintain that] even if [the borrower] was previously in the habit of giving [the lender] large presents, he should not give [him
such a present directly] before [receiving] a loan or shortly after repaying it, even [if he does so] without any explanation. [The rationale is that a large present] is something that is spoken about and becomes public knowledge. [Thus,] it is forbidden [for the borrower to give the lender such a present] because of the impression created, for it will appear [to others that the borrower gave this present] as a form of interest [on the loan].

However, [according to these authorities, if the present is given] a long time after [the loan] is repaid, it does not appear to be interest [on the loan], even if it is a large present. [Thus, in such an instance, gifting is permitted] even if [the borrower] was never accustomed to giving any presents to [the lender. Furthermore,] even if [the borrower’s] intent [is to give the present as a form] of interest, [as long as the present] is given without any explanation, and it is not explicitly stated that [the present] is being given because of the loan, doing so is permitted according to this reasoning.

[Although this is indeed the law, however, one] should be stringent regarding his own conduct and follow the first opinion.

Even according to the latter opinion, it is permitted to give only a small present [just before the loan is given or just afterwards] when it is not widely known, and when even those who know [about the present] do not know that [the borrower] would not give [such a present] to [the lender] were it not for the loan. However, [for the borrower] to journey as [the lender’s] agent or to perform a task for him that everyone knows he would not have performed were it not for the loan is considered as [if he were giving] a large present [to the lender,] and is forbidden, whether just before the loan [is given], or shortly after its repayment.

At the time of repayment, all authorities agree that it is forbidden for [the borrower] to give and for [the lender] to accept26 even something small aside from the [actual] debt, whether it be money or anything else.28 [This applies] even if [the extra item] is given without explanation, and even if [the borrower] does not intend to give it [in connection with] the loan, and even if [the borrower] previously would frequently give [the lender] presents. [The rationale is that] anything more than the debt that [the borrower] gives at the time of repayment appears to be interest.

All of the above applies with regard to a loan. However, when a commercial transaction is involved, all authorities agree that it is permitted for [a seller] to give [a purchaser] a little more merchandise than what he would be obligated to [give him.29 This applies] even if his intent is to compensate [the purchaser] for waiting [for the delivery of the merchandise,] as long as [the seller] does not say so explicitly, but [rather] gives [the purchaser the extra amount] without [any] explanation. [The rationale is that] it is not evident that [the purchaser is receiving more merchandise] because he is waiting [a bit longer] for [its delivery]. Rather, it appears that [the seller] is merely reducing [the price of his] merchandise. All authorities agree that as long as it is not obvious that interest is involved, [the Sages] did not institute decrees with regard to commercial transactions. However, if [the seller] adds a large amount [of merchandise] – in which instance it is apparent that he is doing so because [the purchaser] waited for [delivery of the product] – it is as if it was explicitly stated [that he is doing so because of the delay,] and it is forbidden [for the purchaser] to accept [the extra merchandise] from him.

All the above applies regarding preliminary or belated interest. However, throughout the entire time that the borrower is indebted to the lender, all authorities30 agree that it is forbidden for the borrower to give [the lender anything] or to do any favor for him because of the loan. [This applies] even [if the gift is given or the favor is granted] without any explanation, and even [if the borrower only gives] a small [present or does a small favor for the lender].

[The prohibition applies] even if [what the borrower gives the lender is a] matter concerning a mitzvah,31 for example, [if he would agree] to study the Written Law or even the Oral Law32 with the son of the lender, if the father would [otherwise] be paying a fee to another teacher. [This ruling applies] even though [a father] is not obligated by law to hire a teacher [to teach his son] the Oral Law. Nevertheless, since [it has become] customary for everyone to hire [teachers for that purpose as well, it can be assumed that] the lender would have hired [a teacher for his son. As such,] by teaching [the lender’s] son free of charge, [the borrower] is providing him with a benefit.

It is even forbidden to speak positively [to or on behalf of the lender] because he gave him the loan
or extended its duration. For example, [the borrower should not] greet [the lender] first if he would not ordinarily [have] greeted him first before [having received the loan].33 Needless to say, [the prohibition applies] to praising [the lender] in his presence or thanking him and showing appreciation to him or blessing him34 in his presence for the loan or for extending its duration.

[This prohibition is derived from] the phrase,35 “[nor] anything given as interest.” [The word davar used in the verse and translated as “anything,” also means “word.” Thus, we can understand that] even words are forbidden [as interest. Therefore, if [the prospective borrower] must ask the lender to lend him [something else] or to extend the duration [of the existing loan], he should ask solely with words of supplication and not with words of praise or adoration or other forms of flattery.

Similarly, the lender is warned against [accepting] interest in the form of words. For example, he should not tell [the borrower], “Inform me if so-and-so from such-and-such a place will come,” if he [i.e., the borrower] was unaccustomed [to provide him with such a service] before, even though [the lender] is only troubling [the borrower] to speak. This is considered interest [because the lender is taking the liberty of] commanding [the borrower to do something]. He is counting on [the borrower] feeling subservient to him [and doing his bidding] because of the loan he gave him.

[The verse,36] “A borrower is a servant of the lender,” [is interpreted by our Sages37] as applying only to an instance [when] the lender says, “Let us go to the High Court and [have our dispute] judged there,” and the borrower responds, “[Let us have it] judged here.” [In that instance,] the borrower is compelled to follow the lender and go to the High Court. [Conversely,] the borrower cannot compel the lender to follow him [and have the dispute judged in] the High Court, [as implied by] the verse, “A borrower is a servant of the lender.”

All [the restrictions mentioned above] apply regarding actions [that the borrower was not accustomed to doing for the lender] before [receiving] the loan. However, everything that [the borrower] was accustomed to do for [the lender] before [receiving the loan] is permitted [after receiving the loan], provided he presently does not intend [to perform the activity] because of the loan [he received]. It is even permitted for [the borrower] to teach [Torah to] the lender himself without charge if he was accustomed to teach him [Torah without charging a fee for the service] before [receiving the loan]. It is even permitted for [the borrower] to [provide the lender with a] benefit [free of cost] in instances where [the lender] benefits, while [the borrower] suffers a loss, provided he was accustomed to do so [free of cost] beforehand, even though other people are not accustomed to do so [gratis]. For example, [the borrower] may lend [his creditor] a horse [for a journey], even though [making such] a journey will damage [the horse]. Needless to say, [the borrower] is permitted to lend [his creditor] other articles that will not be damaged, provided he was accustomed to lend [his creditor those articles] beforehand.

However, [the borrower] is forbidden lend [the creditor] a house in which to dwell. [This applies] even if the situation is such that [the borrower] does not suffer a loss and [the creditor] does not benefit, for example, the house is not for
rent and the creditor has another house in which he could dwell without charge, and would not have to rent [a house to live in].38 And [this rule] applies even if [the two] have been [close] friends for a prolonged period, to the extent that one would have lent [the other] his house if he needed it [at any time] prior to the loan. [Even so,] they are forbidden [to do so] after the loan, because [the lender’s dwelling in the borrower’s house] is a matter of public knowledge and is evident to all. [By contrast,] not everyone knows that they were such [close] friends beforehand. Thus, [allowing the lender to dwell in the borrower’s home] appears to them to be [a form of] interest. Similarly, [it is forbidden for the lender to] use a servant [employed by the borrower because the servant’s employ] is a matter of public knowledge, similar to dwelling in [someone’s] home.38

Similarly, [it is forbidden for the borrower] to honor [the lender] with [the opportunity to perform] a [special] mitzvah in the synagogue, for example, to call him [for an aliyah] to the Torah scroll, to give him [the right to perform] the mitzvah of rolling close the Torah scroll [gelilah], or anything similar. Even though [the borrower] would honor [the lender] in such a manner without [having received] the loan, it is forbidden [to do so after receiving the loan] because this is a matter of public knowledge. The only [exception to the above] is when it is known to everyone that [the borrower] is not acting in this manner because [he received] the loan ‒ for example, [the borrower] would frequently honor [the lender in this manner] beforehand. Similarly, with regard to a home, if [the lender] dwelled in [the borrower’s home] with his knowledge, without charge before [granting] the loan, it is permitted [for him to dwell in his home] even after [granting] the loan.

All the above applies when the borrower knowingly provides a benefit for the lender. However, it is forbidden for the lender to derive [any sort of] benefit from the borrower without his knowledge – even [taking] very slight benefit [the borrower] would frequently [give the lender] willingly before [having received] the loan. [Nevertheless,] since [the lender] is now benefiting [from the borrower’s property] without permission, it appears that he is doing so because of the loan he granted [the borrower], i.e., he is relying [on the fact] that the owner, [i.e., the borrower,] will [probably] tolerate this because of [the loan he received].

(If the [borrower and the lender] are [close] friends to the extent that they would [have] offered each other such a benefit even without [the recipient asking] permission39 before the loan was given, [the borrower] may [benefit without permission] after the loan [was given. The rationale is that] it does not appear that [the lender] is relying on [the borrower’s indebtedness due to] his loan at all, since he was accustomed to [take such benefits without permission even] beforehand.)

It is even forbidden for the lender to benefit from [actions that] the borrower performs willingly, provided [the action] is one that the borrower is forbidden to perform on behalf of [the lender. In such an instance], it is forbidden for the lender to receive [the benefit] from [the borrower.]

[The following principle applies] if [the lender] receives [some] benefit from [the borrower, even though] he performed the act willingly: In a situation where, had [the lender] not given [the borrower] a loan, he would be exempt from paying [the borrower] for his effort according to law, [in this instance,] since [the lender did] give him the loan, [the lender] should pay [the borrower] a wage for his trouble. [In this way, the lender will] fulfill his moral and spiritual obligation to remove avak ribis from his possession.

One should be very careful regarding interest and not seek any leniency [of receiving benefit or payment] because [interest] is something which attracts a person. [For,] if today, [a leniency] the size of the eye of a needle will open up for [the lender], he will seek to increase it day by day until it is as large as the entrance to the Entrance Hall [of the Beis HaMikdash].

It is forbidden [for the lender] to derive benefit from [the borrower] even if it is not [straightforward] financial benefit,40 for example, the lender is a craftsman and the borrower is not, and [the borrower] hires other craftsmen to perform work for him. If [the borrower] was not accustomed to hire the lender [to perform his work] before [the lender] gave him the loan, [the borrower] is forbidden to hire him after he gave the loan. If [the borrower tried to] hire [the lender], the lender should not accept [his offer].

Needless to say, it is forbidden for a servant or a teacher to lend money to a homeowner so that he would hire him. Even if [the servant or teacher] acts with deception and says that he is giving [homeowner] the loan as an act of generosity, if the homeowner hires him for this reason, this is considered interest in a complete sense.41 Even if [the servant or teacher] gave [the homeowner] the loan without intending to hire him, [the borrower] is forbidden to hire [the lender] afterwards if he would not have hired [the lender] before he was given the loan.

(This same rule applies regarding a borrower giving charity to a poor lender. [This is forbidden] if [the borrower] was not accustomed to giving him [charity] before [the lender] gave him the loan.) Similarly, [the borrower] is forbidden to give any other form of benefit [to the lender] or [perform] an act of kindness for him [although] it does not involve any monetary loss to the borrower, unless each of them [routinely] benefits the other; at times, the borrower [benefits] the lender, and at times, the lender [benefits] the borrower.

If the borrower is a craftsman and he performs work for the lender at a cheaper rate than [he charges] all [his] other [customers] so that [the lender] will extend the term of the loan, this constitutes interest forbidden by Scriptural Law. If [the lender] already extended the term of the loan and is not demanding [payment] at all [because it is not due now], this [i.e., performing work for the lender at a cheaper rate,] constitutes avak ribis.

Similarly, it is forbidden for any person to pay a craftsman a wage before [he performs a task] so that he will charge a lower price. [The rationale is that] it appears [that the employer] is lending [the craftsman] money today so that he will charge a lower rate [for his work. The money the homeowner paid the craftsman before starting the project] is considered like a loan since, according to law, the craftsman may renege on his commitment and not perform the task at all for the homeowner.42 [In such an instance,] the money that he received would be considered a debt that he owes [the homeowner. This applies] whether [the craftsman] was a contractor [who made a commitment to perform a specific task] or he was a day-worker, and he prepaid him for his services before the day on which he [was to] perform the work.

However, [the homeowner] may prepay [the craftsman] on the day he performs the work, so that [the craftsman] will charge him a lower fee, provided [the craftsman] begins the work immediately [after receiving the money.43 This applies] even if [the craftsman] will complete [the task only] at the end of the day, or [even] after several days, [and it applies] even [if the worker] is hired for [an entire] year.44 [Although] a wage [for work] is due only when the work is completed, and [the homeowner] is paying [the craftsman] beforehand so that he will charge him a lesser fee, there is no interest involved at all. [The rationale is that] interest is defined solely as payment for granting additional time [to pay] a debt. However, a profit for paying a debt off early is permitted.45

Nevertheless, if [the craftsman] does not begin the task immediately after receiving the money, [the money he received] becomes a debt, and it appears as if [the homeowner] lent [the craftsman money. Thus,] the reduction in the fee [the craftsman charges] for his work appears [to be] payment for granting additional time [to pay] the debt. By contrast, when [the craftsman] begins the work immediately, it is evident that [the employer] is prepaying him his wages and it does not appear to be a loan.46 [This applies both when the worker] was hired [to work for his employer] for a specific [amount of] time or [when] he is a contractor [who was hired to perform a given task].

When does [the above law] apply? With regard to wages paid to a person. However, [different rules apply regarding] a fee for renting a home, (an animal, or utensils). If [the owner] completes a transaction, formalizing the rental of [one of the above articles] for the [agreed upon] time period immediately when he receives the money, employing one of the standard practices through which a rental is formalized and thus, according to law, neither party may retract (for example, [he formalized the rental of] a house through chazakah, [by performing an act symbolizing ownership, e.g., locking the front door and then unlocking it], or [formalized the rental of] an animal or utensils through meshichah, [e.g., by drawing it into his private domain]), even though [the renter] does not begin to use [the item] until a later time, paying the money beforehand does not appear to be a loan. [Rather, it is considered] paying for the rental in advance. [Although payment for a rental] is [not] due until the end [of the agreed term], lowering the fee for the rental because [the renter] paid [the owner] in advance is not considered interest at all.

Furthermore, it is permitted to charge more for a rental [if payment is delayed. For example, the owner] may tell [the renter], “If you pay me the rental fee now, it will be ten selaim,47 but if you pay me at the end [of the rental period] – or at a later date [within the rental period] – the fee will be twelve selaim.”45 [The reason this is permitted is that] since rent is due only at the conclusion [of the rental period], the amount paid then is considered to be the value
of the rental. When [the renter] pays [the owner at the beginning of the rental period], he is accepting a lower price because he is paying him in advance.48

[Such an agreement is permitted] provided [the owner] tells this to [the renter] before they formalize the rental agreement through one of the means [that rental agreements] are formalized. However, if [the rental agreement] was already formalized through one of the means [that rental agreements] are formalized [with a condition] that [the renter] pay ten selaim now, it is forbidden [for the owner] to increase the fee, saying, “If you pay me at the end [of the rental period], or at a later date [even if the later date is within the rental period], or month by month, [the fee will be] twelve selaim, [i.e.,] one sela per month.” [The reason such an agreement is forbidden is that the rental] was formalized in a manner that, according to law, neither of the parties can retract from [the agreement] that payment be made immediately. [Thus,] the fee due has already become a debt [owed by the renter]. When [the renter] adds to the [agreed upon amount] so that [the owner will let him] delay payment, this is interest in a complete sense. It is possible that [such action] is forbidden by Scriptural Law,49 even though [the extra payment] comes as a result of a rental agreement, i.e., [the renter] is paying a greater amount for the rental.

Similarly, it is forbidden to increase the nidun ya, [i.e., the dowry owed to] a bridegroom after the father of the bride [formalized his obligation
in a contract. For example,] after the marriage contract was written [and formalized,] obligating [the bride’s father] to [pay] a penalty if he does not pay the nidunya [at the time stipulated in the contract], it is forbidden to allow [the groom to] profit [by allowing the bride’s father] to delay payment later than the time mentioned in the marriage contract.

This is interest in a complete sense, [and it is forbidden by] Scriptural Law even though the debt did not arise because of a loan. [Should such a situation occur, an agreement] must be made in a permitted manner, as will be explained.50

Similarly, [the same rule applies] regarding a sale. After [the transaction] was concluded and the purchaser formalized [the sale] through one of the established means [of formalizing a sale with the understanding] that he would pay [the seller a specific amount of money] immediately, [the seller] is forbidden to raise the price in [exchange for delaying the payment], saying, “If you [agree to] pay more for the item, I will allow you to pay me at a later date.”51 This is interest in a complete sense [and forbidden by] Scriptural Law.

Even before the sale was completed, it is Rabbinically forbidden for [a seller] to increase [the price of his] merchandise [in exchange for agreeing to accept the payment at a later date,] i.e., to tell the purchaser, “If you pay me immediately, it is yours for ten dinarim.52 [If you pay] at a [later] time, it [will cost] twelve.”45 Even if the merchandise is indeed worth twelve [dinarim] now, but [the seller] is willing to reduce the price [in exchange for] immediate payment,53 it is forbidden [for the seller to offer such an arrangement, and] it is considered avak ribis.54[The rationale is that] the time [of payment] for a purchase is not the same as the time [of payment] for renting [a home or an article. Regarding the sale of an item, payment is due] immediately when the purchaser buys [the article] if he purchases it without any stipulation, whether he purchases [the item] at a price higher or a lower [than the average market price. When the seller later] tells [the purchaser] that he may pay him more if he delays paying [for the item] until such-and-such a time, it appears that he is accepting [an additional] fee for delaying [the payment of] the debt [the buyer] incurred by purchasing [the item] from him.

Even if [the seller] does not state this explicitly but sells it to [the buyer] for twelve [dinarim to be paid] on [a specific] date, although at present the merchandise is not worth twelve [dinarim] and the purchaser would only pay twelve [dinarim] because the payment is being delayed, this is avak ribis. [This ruling applies] even if the seller is rich and does not require the funds [immediately] and the merchandise is of the type that would not depreciate if he waits until that specific time, and by that time the merchandise would certainly appreciate in value and be worth twelve [dinarim], and thus the seller derives no profit from selling the merchandise on [this] delayed payment plan. [Nevertheless,] we do not rule leniently, [following the perspective of] the seller. Rather, [we follow the perspective of] the purchaser and rule stringently; [i.e.,] if the purchaser would pay the money now, he would [be able to] purchase [the merchandise] for less than twelve [dinarim], as is its value now. Thus, the seller is adding [to the price] for the sake of delaying the payment.55

[As an extension of the prohibition mentioned in the previous subsection, our Sages also prohibited allowing later payment] even [under the following arrangement. The merchandise] is presently worth twelve [dinarim] in another city and the purchaser will transport it [and sell it] there, receiving twelve [dinarim for it]. He will use that money for his purposes until the time for payment established by the seller. [Now,] the seller [could also have] transported it there at this time had the purchaser not acquired it from him and there he would have received [twelve dinarim] immediately – even so [the transaction] is forbidden.56

[There is an option through which an arrangement resembling the above is permitted, allowing the seller to sell the merchandise in another city for twelve dinarim: The purchaser transports the merchandise to the neighboring city for the seller. For this to be permitted,] the responsibility [for loss and damages beyond his control] for the merchandise while it is transported to that [neighboring] city [and] until it is sold there must be the seller’s.57 [In such an instance,] the purchaser is no more than the agent of the seller [trying] to market his merchandise. After [the purchaser] sells [the merchandise] there, he becomes a borrower [of] the money [from the proceeds of the sale,] and [may therefore] use it for his own purposes until it is time to repay the seller.

For this reason, the seller must pay [the purchaser, who is acting as his agent,] for his efforts, his food, and the other expenses of his journey until the merchandise is sold in that city. [The rationale is that] if [the seller] does not pay him [for those expenses, the purchaser] will have troubled himself
to sell the [other person’s] merchandise so that [the owner of the merchandise] will lend him the money that he will receive for [its sale].

There are authorities who maintain that it is not necessary for [the seller] to pay [the purchaser] the entire amount due for his efforts and [expenses for] food. Rather, it is sufficient for him to pay [his agent] a small amount for his efforts and food, merely for appearance’s sake, [to make it clear] that he is not undertaking the effort [to sell the merchandise in the neighboring city] for the sake of the loan. [The reason for this license is that] interest that comes about through a commercial transaction is only forbidden by Rabbinic decree, [and paying the agent] a symbolic [amount] is sufficient [to clarify that the agent is not undertaking to sell the merchandise because of the loan].58 However, all authorities agree that the travel expenses [incurred when] transporting the merchandise must be considered part of the price of the merchandise itself when [the seller] calculates its value in the other city.

(According to the first opinion, the same law would apply if [the seller] does not sell [the purchaser the merchandise] at a higher price at all, but instead [the interaction between them was as follows: One person] requested a loan from another. [The person to whom the request was made responded that] he did not have money [to lend], but he has an object that he wishes to sell. [He makes the following offer to the person requesting the loan, saying,] “Take [the object], transport it to a place where you can sell it, sell it, and borrow the money [from the sale] until this [specific] time.” [In this instance, the owner of the object] must pay [the person who sells it for him] a full wage for his efforts so that he will not be undertaking the difficulty [of traveling and selling the object in order to secure] the loan. Even though he is undertaking the difficulty for himself, [according to this opinion, it is forbidden for him to do so without receiving full payment for his efforts] since [the owner of the merchandise, i.e.] the lender, receives a benefit from this, because he desired that his article be sold. [Otherwise,] he would have had to undertake the difficulty of selling it himself.

With regard to the [practical] application of the halachah, [since the question is one of] Rabbinic Law, the more lenient opinion may be followed,59 and it is sufficient to pay [the seller’s agent] a minimal amount in all instances.)

When must the owner [of the merchandise]:

a) undertake the responsibility [for loss and damages beyond his control] for the merchandise [while it is transported to that neighboring] city until it is sold there, and;

b) pay [the one who transports and sells it for him] for his trouble and his food?

When [the owner of the merchandise] sells it to [the person transporting and selling the merchandise on his behalf] at present in a conclusively binding sale, [with the understanding that the merchandise] will not be returned, only the price paid for it [will be returned], and [furthermore,] he made it impossible for the purchaser to profit from the sale in any way. For example, [the owner of the merchandise] assessed its value according to the maximum [amount] he could possibly receive for it in [the neighboring] city. [In such an instance,] the purchaser has no benefit from [carrying out] the sale except that he will be lent the money [from the sale] to use for his purposes until the time [when] payment [for the item] is due.

However, [different rules apply] if [the owner/seller] tells [the borrower/purchaser], “Here is [the merchandise] for you at this-and-this price. Anything that you receive for it beyond that sum is yours. Should you not be able to sell it for more than that sum, [and] you wish to return it to me, I will accept it from you.”

[In such a situation,] when [the owner/seller] sells it to [the borrower/purchaser] in a place where its price is less expensive, it is not conclusively sold to the purchaser. Moreover, when [the borrower/purchaser] sells [the merchandise], it is possible that he will profit from the sale. [Hence,] it is permitted for [the purchaser] to accept responsibility [for loss and damages beyond his control] for the merchandise until it is sold. [The owner/seller] need not pay [the borrower/purchaser] for his efforts and his food at all, because the [owner/]seller is leaving him the profit [from selling the merchandise at a higher price as payment] for his efforts and his food. Even though the responsibility [for loss and damages beyond his control for the merchandise] is incumbent upon [the purchaser], it is not considered his [merchandise until the time the payment is due. Therefore,] paying [the owner/seller] more for [the merchandise] than it is worth at [the] present [time] in this city at a later [date] is not considered interest.60 [The rationale is that] the sale was not conclusively completed when [the purchaser] took [the merchandise] from [the seller] in this city. [Rather,] when he sells it at a higher price in another city, it is as if he is selling merchandise belonging to the [original] seller. The same law applies if [the borrower/purchaser] does not transport [the merchandise] to another city, but sells it later in this city when the price of this [type of] merchandise increases.

However, if [the borrower/purchaser] does not sell [the merchandise] at a higher price than what the seller sold it to him, but rather for less [than he bought it for] in order [to be able to] use the money received [from the sale] for his own purposes at an earlier time, [such an arrangement] is forbidden in all circumstances.

All [that was stated above] – that it is forbidden to sell merchandise for more than it is worth at the time of purchase in the city [where it is being sold on the condition] that payment be made later – applies only regarding merchandise that has a fixed and known price, for example, grain, after the price in [major] cities has been established when [that price] will remain fixed and unchanging for an extended period of time. [It is then forbidden] for a person to sell [such merchandise] for more than the fixed price and receive his payment later.

[The prohibition also applies] even if the merchandise does not have a [fixed] market price but its appraised value is universally known, for example, peppercorns or beeswax. [The rationale is that] all peppercorns and beeswax are identical. [Furthermore,] they are continually purchased by all people and [thus] their appraised value is common knowledge. The [seller will only] sell them for more than their appraised value [because he is willing to accept payment for his merchandise later].

[Different rules apply regarding] an entity that does not have a known market price, nor is its appraised value universally known, for example, a cow, a garment, or the like. The same [principles] apply regarding grain [at the beginning of the harvest,] before the market price has been established. [At this time,] some people sell [these articles for a] cheap [price] and some sell them [for a more] expensive [price. Therefore, there is no prohibition against selling such merchandise slightly above the highest price being charged in return for receiving payment at a later date.]

There are authorities who maintain [that this license is granted] even if the [market price] has been established, but has not [yet been firmly] set. [In these instances,] there are times when [such merchandise] is sold at a lower price and other times [when it is] sold at a higher price, because the market price is continually fluctuating. [In such instances,] it is
permitted to sell merchandise for more than what it is worth now for payment at a later date,61 provided [the seller] does not explicitly tell [the purchaser], “If you pay me now, [the merchandise] is yours for ten dinarim, but if you pay at this-and-this date, the price is more than ten.”61 Even though in truth, [the sale is being made under such conditions, as long as it is not explicitly stated, such a sale is permitted. The rationale is that] interest stemming from a commercial transaction is forbidden only by Rabbinic Law62 and [the Sages] did not prohibit [interest resulting from commercial transactions] when it is not obvious that interest is involved, for example, the present instance where [the seller] is selling an article whose value is not known to all at a higher price.

[However, license is granted only when the seller] raises [the price] slightly in a manner that is not evident to everyone. If, however, he raises the price significantly – to the extent that it is evident to everyone that he is raising [the price] in return for delayed payment – it is as if he explicitly [stated this. Hence, such a transaction] is forbidden.

To what does the above apply? [Only] to movable property. However, [different laws apply regarding] real estate. Since [the prohibition against] onaah, [charging significantly more than an article’s value,] does not apply regarding real estate,63 it is permitted to sell [real estate] for much more than its value [in return for delaying payment] as long as [the seller] does not explicitly say that if [the purchaser] pays him immediately,61 he would [sell the land] for less. This [leniency] also applies to any object whose price is undefined and [therefore, the prohibition against] onaah [does not apply.]

All of the above applies when [the seller] establishes a specific price – such-and-such an amount – for the merchandise [on the condition that the purchaser] pay him at [a specific] time. [However, there is an authority who permits a seller] who does not establish a specific price to sell [the purchaser merchandise] when it is inexpensive on the condition that [the customer] pay him at a [future] time based on the going market price for that merchandise at that time – whether [the merchandise is] more expensive or cheaper at that time – [even though] the merchandise would usually be more expensive at that time.64 For example, wine is usually expensive after Pesach.65 [A merchant may] sell [a purchaser] wine [at the end of the summer,] at the time of the grape harvest, when it is inexpensive, on the condition that [the purchaser] pay him after Pesach for every barrel at the market price per barrel [at that time. The reason] that authority grants this leniency even though there is already a known market price for the merchandise and that market price is low, is that [the merchant] is not establishing a fixed price [that the purchaser] must pay him that exceeds the present price, and the possibility exists that the price [of the merchandise] will not increase. [Nevertheless,] there are authorities who forbid [such an arrangement] since the ordinary pattern is that the price [of this merchandise] will increase. Weight should be given to their words.

If [the purchaser] does not take the wine at the time [of the sale, i.e.,] during the grape harvest, but only afterwards, when the price increases, all authorities66 agree that it is permitted to sell [a customer] wine during the grape harvest on the condition that he pay [the seller] at a specific time67 for every barrel that he will take according to the market price at the time he takes it from the seller’s domain. [This is permitted] because the responsibility to pay takes effect at that time and not at the time [the purchaser originally] purchased the wine. [Thus,] there is no profit for delaying the payment of the debt.

Accordingly, even though the responsibility for the wine is the purchaser’s,68 [this arrangement] is permitted. Although the wine is [the purchaser’s from the time the agreement was made], he is not obligated to pay [for it] as long as the wine remains in the seller’s domain. Thus, there is no profit for delaying payment of the debt. Similar laws apply in analogous situations involving all other types of merchandise.

Just as it is forbidden to sell merchandise at more than its present value and receive payment at a later date if [the purchaser] takes it from the seller at the time [of the sale], so too, it is forbidden to purchase [merchandise] for less than its current value in return for paying [the price agreed upon originally] before taking [possession of] it [at a later date.69 The rationale is that] the money received becomes a debt incumbent on the seller to settle [by delivering] the merchandise. [The seller] is selling [the merchandise] for less than its current value because the purchaser [agrees] to wait for [payment of] the debt. Thus, [such an arrangement] is considered as avak ribis.

When does the above apply? When the seller does not possess all of the merchandise at the time he receives the money. However, if he possesses all [of the merchandise at the time of the transaction,70 the arrangement] is permitted. [This ruling applies] even if the merchandise is entrusted to a person in another city [for safekeeping.71 The rationale is that] the Sages deemed paying money as a completely [binding] act of acquisition72 to permit interest forbidden by Rabbinic Law. [As a result,] ownership of the merchandise – wherever it is located – is transferred to the purchaser immediately. [Thus, it is not considered as if the purchaser] is waiting for the debt [to be paid].73

If the seller [does not possess] the merchandise [himself but] paid money to others who do possess it, that is not sufficient for him to be permitted to sell it at a lower price so that he receives the money in advance of delivery.69 Since [the seller] has not yet collected [the merchandise] from [those who have it], it is not considered his to the extent that he may transfer its ownership to a purchaser immediately.69

The seller’s word is accepted74 if he states that [although he does not possess] the merchandise [in the place where he is making the sale], he does possess it in another city,75 unless it is known that he does not possess it [at all] or it can be assumed that he does not possess it. In such instances, his false statements are not effective [in permitting the transaction].

All the above applies when [the seller] sells [the merchandise] at a lower price without specifying [that he is doing so in order to receive the money immediately although he will deliver the merchandise at a later date]. However, it is forbidden for [the seller] to explicitly tell [a prospective purchaser], “If you pay me now, I will give it to you at a [lower] price, but if you [pay] later, I will give it [to you] at a [higher price.” This is forbidden] because it is as if [the seller] is saying that he is reducing the price because he is [able] to delay [delivery of] the merchandise after receiving the payment.76

Whenever the seller does not possess all77 of the merchandise [being sold] at the time he receives the money, he may not sell the merchandise even at its current value. [The rationale is that one may not sell merchandise he does not possess] on the condition that he deliver it later [while charging its] current market price unless it is merchandise that has a set price and is available in abundance in the market place, such as produce, grain, or the like, or is abundantly available in this city to the point that everyone sells it at the same price, such as beeswax78 and the like.79 However, when merchandise does not have a fixed price at present, [but rather] one [merchant] sells it for less and one sells it for more, it is forbidden to [buy this merchandise,] paying at the present time [when it will be delivered at a later date. This prohibition applies] even [if the purchaser] pays the [price commonly charged for the merchandise] at the [present] time, because it is possible that its price will increase afterwards, and the purchaser will have paid [the original] lower price. Thus, [it would be considered as if the seller is] delaying repayment of a debt (the money that the purchaser advanced), since he did not own the merchandise at that time. Thus, [the transaction is considered as involving] avak ribis.

By contrast, when [the merchandise] has a fixed price, the purchaser does not profit at all by paying the money to the seller [in advance] since he could [take] his money and purchase the [same merchandise] from others at this [same] price)69 because there is much of it available. The seller could thus purchase it from another [merchant] at this rate with the money he received now. Accordingly, it is considered as if [the seller] acquired it. [The Sages] ruled leniently, because [there is] much [of this type of merchandise presently] available.80

For this reason, if the local custom is that the purchaser pays the broker’s fee, a purchaser who pays the money before [delivery] must pay [this fee] so that he will not be profiting at all by paying [for the merchandise] early.81

If the produce is of the type that is commonly diminished by being eaten by rats, [the purchaser] must accept the loss that could be expected according to the volume [of the produce] and the [amount of] time from the time [he pays] the money until he receives the produce. Needless to say, it is forbidden to purchase the produce for less than the current market price as long as the seller does not possess the entire amount of the produce.82

“The market price” [mentioned above] must be fixed83 and [the product in question must] remain [at that price] for an extended period of time, as is generally the case in metropolises, i.e., large cities with extensive and vast marketplaces. [Once] a market price is established [in such an area], it does not change within a short period of time.

There are authorities who permit [selling merchandise for later delivery] even when there is no fixed [market price]. For example, in small towns to which large numbers [of merchants] do not bring merchandise frequently, the market price [is not fixed] as [is the practice in] metropolises. For this reason, the market price [in these villages] changes frequently within a short period [of time].83 One may rely on the words of [these authorities and rule] leniently [since a point of] Rabbinic Law [is involved].

When small towns do not have [established] market prices, but are located next to cities that do have [established] market prices, they rely on the price that was set in that city,84 provided that [these small towns] are supplied (with this merchandise) from that [larger] city.

Everything [stated above regarding purchasing merchandise for delivery at a later date when a market price was already established] applies when [the purchaser] gives [the seller] money at the present time when the market price was lower. [Different rules apply] if the seller previously owed [money to the lender/purchaser] and when [the lender/purchaser] demands payment, the seller[/borrower] tells him, “I will give you another type of produce or merchandise at its present [low] market price [as repayment] of [the money I] owe you.” [This is] forbidden85 since the seller would not be able to purchase [other produce or merchandise] at this lower price, since the purchaser is not giving him any money at this time.86

[Such a transaction is permitted] only when the seller[/borrower] currently possesses all the merchandise [needed to repay his debt].87 In that instance, [the transaction] is permitted even if a market price has not been established at all.

Similarly, it is forbidden for a person to lend money to [another person] on the condition that if [the borrower] does not repay [the lender] with money by this-and-this date, he will repay [the lender] with merchandise at the present market price. [Such a transaction is permitted] only when the borrower has all the merchandise at the time [he receives the loan.88 The rationale for the prohibition is that] the transaction [– i.e., the purchase of the merchandise –] is not being concluded at the present time, [i.e., the time when the lender] is giving the money, but afterwards, [when the borrower] does not repay the money [he owes the lender, and instead repays his debt by giving the lender merchandise].

[The following law applies] whenever [a purchaser] gives [a seller] money for merchandise before [the time of delivery], even if a market price was established and even if the seller has all [of the merchandise] at the time [of the sale]: If the price [of the merchandise] increased [before the seller delivered it to the purchaser], should the seller desire to give the purchaser money because he is reneging on [the sale]89 or [because] he [no longer] possesses the merchandise because he already sold it to someone else, [the purchaser] should not take [an amount of] money equivalent to the present price [of the merchandise, i.e.,] a higher price [than he paid] because [doing so would] appears as [if he is taking] interest. [After all,] he gave [the seller] money and is [now] taking money [from him], and he is taking more than he gave. However, it is permitted for [the seller] to give [the purchaser] other merchandise [equivalent to the present price of the merchandise originally sold].85

Just as it is permitted to pay at an earlier time for produce or other merchandise in the manner explained above,87 so too, it is permitted to deliver earlier produce or merchandise [that was evaluated and designated] as payment for other produce or merchandise in the manner explained.

Similarly, [one may] make an early delivery of coins [of one type] for coins [of another type] as an exchange or a sale. [However,] in this
regard, there is a difference between the laws regarding a sale involving [selling] coins [of one type] for coins [of another type and one] involving [the exchange] of coins for produce or produce for [other] produce. When one gives coins or produce for [other] produce [before taking delivery of the] produce [being purchased], it is permitted for the seller to significantly reduce the price [of his produce] from the present market price because of the early payment, provided he has the entire amount of produce [being sold at the time he is paid]. By contrast, when one is making an early [payment of] coins for [which he will receive] other coins [at a later date] – although [the coins] are of different types, for example, [the person] is selling silver [coins for] gold [coins] – it is forbidden for the seller to reduce the price [of the coins being sold] from the present market price because of the early payment,90 even if the seller has all the coins [he is selling] in his home.91 [The prohibition applies] even if [the seller] gives [the buyer the other coins almost] immediately, [delaying] only a brief while, [for example,] until he finds the key to the chest [where he keeps the coins].85

[The rationale for this stringency is that] since [originally the buyer] gave [the seller] coins that are legal tender and he is [receiving from the seller] coins that are legal tender, [the transaction] resembles a loan. [Hence,] it is governed by the laws that govern an actual loan, [for which reason, paying interest to delay payment even slightly] is prohibited as interest [forbidden by] Scriptural Law. The fact that [the seller] has [all the coins in his home] is only effective to permit interest forbidden by Rabbinic Law [i.e., instances clearly involving business transactions. In this instance, however, the interest in question is interest forbidden by Scriptural Law, and therefore this leniency does not apply].

Even [when making an exchange, trading] produce for produce, [the Sages] only permitted [one of the parties] to give [his produce] early [and receive the other produce at a later date] when [the exchange is made] without specifications and thus, it resembles a business transaction. However, [the transaction is forbidden] if [the exchange was made] explicitly as a loan, [i.e., one party] lent [the other party] this type [of produce] on condition that he be repaid with another type [of produce] later.

For example, it is forbidden [to loan] a seah of wheat [in return] for a seah of millet under all circumstances, even though at the time [the agreement was made] the market price of both [grains] was the same. [This prohibition applies] even though at the time [the agreement was made] there was a fixed price for millet and the borrower, [i.e., the one giving the millet,] does not reduce its price at all, and [even though] he possesses all the millet [needed to repay the loan] at this time. [Our Sages] only permitted [arrangements] like all [of the above] when they are made in the context of a business transaction and not as an explicit loan [involving] two types of produce or [two types of] other merchandise. (Needless to say, an explicit loan of [one type of] coins for [another type of] coins [is forbidden].92) [The rationale is that our Sages feared] that after [the loan was taken out] the market price would fluctuate and the type [of produce or merchandise] being repaid will be worth more than the type that was lent. This would constitute avak ribis.

Nevertheless, it is permissible to borrow one type [of produce] when the market price is low and repay it when it is high, provided the borrower possesses this type [of produce] at the time of the loan.93 [Moreover, the borrower need not possess the entire amount he receives from the lender.] Even if he has only one kernel of wheat or one drop of wine, he is permitted to borrow many measures.93 [The rationale is that] every kernel of wheat [or drop of wine] that [the lender] loans [the borrower] is considered [individually. It is as if it is being exchanged for the specific kernel of wheat or drop of wine owned by the borrower. For each measure of produce, it is as if] that particular kernel [or drop of wine] that [the borrower originally possessed] entered the lender’s domain [in exchange for the measure lent to the borrower]. Afterwards, when the value [of the wheat or wine] increased, it increased while it was in [the lender’s] possession.94 [Our Sages] ruled leniently in this instance since interest as forbidden by Scriptural Law is not involved.

Similarly, if there is a fixed market price for wheat – for it is easily available to purchase – it is as if [the borrower] possesses [a measure of wheat]. It is [therefore] permitted [for him] to borrow [such a measure] when the market price is low and repay [the lender] when the market price has risen.95

If [the borrower] does not possess wheat [at the time payment is due, the lender may] take the monetary value [of the wheat] at the time of payment, whether it increased or decreased [during the term of the loan].

When a city does not have a fixed market price for wheat, we rely on the market price of the [next] nearby city [that does have a fixed market price,] provided that city supplies [the first city] with (wheat or another type of [produce or merchandise] that [the lender] loaned,) as stated above.96

If there is no fixed price for wheat in the marketplace and the borrower does not possess even one kernel of wheat, the lender or another person should first give him a kernel of wheat as a present.97 Afterwards, [the lender] may lend [the borrower] as much [wheat] as he desires. Similarly, if [the lender] lends [the borrower] another type of [produce or merchandise that he does not possess, the lender] should first give him a little of that type of [produce or merchandise] as a present.

If the borrower possesses some of the type of [produce or merchandise he would like to borrow, but it] was entrusted [to another person] for safekeeping,98 it is considered as if he possesses it in his own domain. However, if other people owe him the same type [of produce or merchandise], it is not considered as if he possesses it,82
as stated above.99 [Moreover,] even [produce or merchandise] that was entrusted for safekeeping may not be used to borrow against it unless it is in the same city as the lender and the borrower. [However, it may] not [be used to borrow against it if it is] in another city, unless the lender is likely to be traveling there for his own purposes. Nevertheless, if he is not likely to be traveling there, he is forbidden to lend [the produce or the merchandise] although [an arrangement of a similar nature] involving a sale would be permitted.99

[The word of] the borrower, however, is accepted, [if he says] he possesses [the produce or merchandise], for the reason explained above.99

Whenever the borrower possesses the type [of produce or merchandise he is borrowing]100 or the lender gives it to him as a present, [the lender] may stipulate that [the borrower] should not repay him until a specific later date – and not before that – because [most likely] this type [of produce or merchandise] will be more expensive at that date. However, [different rules apply] if the borrower does not have any of this type [of produce or merchandise], but it does have an established market price. [In such an instance, although the lender] is permitted to lend [the borrower the merchandise or produce] at a time when it is inexpensive and [the borrower] may repay him when it is expensive, [the lender] is forbidden to specify that the borrower is forbidden to repay him until a specific later date because this type [of produce or merchandise] generally appreciates in value by that date, or for another reason. [In such an instance,] it is forbidden to make a stipulation that [the borrower] repay [the loan] at a specific date that is to [the lender’s] advantage, [i.e.,] that he is forbidden to pay him before [that date].

[The rationale is that the permission to repay a loan in kind despite the fact that the borrowed object may appreciate in value because] a market price was established for this type [of produce or merchandise] and that it is continually possible to purchase was granted only when [the borrower has the option of] purchasing [the produce or merchandise] and repaying [the lender] as soon as he desires.

Whenever the borrower does not possess any [of the produce or merchandise being borrowed,] and there is no fixed market price for it, he is forbidden to loan him [the produce or merchandise]93 even for a very brief time lest it immediately increase in value. [The exception to this rule is if the borrower and the lender] establish a monetary value for the item being borrowed, in accord with its present value. Thus, even if the value [of the item being lent] appreciates, [the borrower] will pay only the value [agreed upon at the time the loan was taken].

If [the borrower] makes such a stipulation with [the lender, the lender] is permitted to receive the initial value [of the produce or merchandise] even if its value depreciates. This is not the case when a person lends [produce or merchandise] without a stipulation and then its value depreciates,93 as will be explained.101

This prohibition102 applies regarding all [types of] produce, because the value of all [types of] produce appreciate and depreciates. [The only exception to this rule is] when one lends a small item regarding which people [are generally] not concerned about its appreciation or depreciation, for example, [when] a woman borrows a loaf of bread from a friend. [In such an instance,] the Sages were not that stringent to concern themselves about [applying] the Rabbinic prohibition against interest [which they established].93

All types of articles that exist are referred to as “produce” in this context, for the value of all of them can appreciate or depreciate, with the exception of silver coinage103 that is accepted as legal tender in the city [where the loan is taken], for its value never appreciates or depreciates. [Such coinage] is never considered as merchandise, 104 but is rather [considered] “coinage,” [i.e., legal tender]. True, the value [of silver coinage] sometimes depreciates with regard to copper coinage or gold dinarim, and sometimes it appreciates. [Nevertheless, it is not the silver coinage that appreciates and depreciates, but rather] it is the copper coinage or gold dinarim that appreciate and depreciate. [The rationale is that copper coinage and gold dinarim] are considered “merchandise” in relation to silver coinage.

For this reason, it is permitted to borrow silver dinarim and repay [the loan] in silver dinarim, even [to borrow silver] selaim105 and repay [the loan] in [silver] dinarim, or the opposite. [The rationale is that all] silver coinage is considered “currency” and not “merchandise.” However, it is forbidden to borrow gold dinarim and to repay [the loan with] gold dinarim or [to borrow] copper coins and to repay [the loan with] copper coins,103 even [if
the repayment is made] immediately,106 except in the manner explained [above].107

In the present era, it has become customary to be lenient and lend gold dinarim to be repaid in gold dinarim in all circumstances.108 There is an authority who has justified this custom, explaining that gold dinarim that are used in business transactions are not considered “merchandise” in relation to silver coinage unless [the coinage] is pure silver – or at least, the majority of [the coins] is silver, and only a minority is copper. Thus, [such coinage] has two advantages ‒ it is commonly used as legal tender, and it is also precious. Therefore, [such silver coins] are considered coinage even in comparison to gold, which is more precious, because [gold coins are] not as commonly used as legal tender. However, in the present age, when all silver coinage is primarily copper and contains only a small amount of silver, it is not important to the extent that they will be regarded as coinage in comparison to gold, even though it is more commonly used as legal tender.

(However, according to the authorities109 who maintain that [even] a coin of pure silver is considered merchandise in comparison with a coin of silver mixed with copper – since the [latter coins] are more commonly used as legal tender, for the majority of commercial transactions are conducted with them, as stated by those authorities110 – there is no clear license to lend gold dinarim [with the stipulation that they] be repaid with gold dinarim in a city that does not have a fixed market price for gold dinarim even [in relation to] silver coins that are very commonly used as legal tender. [The rationale is that] gold dinarim are not very commonly found in this city. Moreover, they do not have an established market price even in the nearby city from which this city obtains its gold dinarim and [finally,] the borrower does not possess even one gold dinar. [Thus, there are grounds to forbid such a loan].111 The same [applies regarding loans made] with copper coinage [to be repaid with copper coinage]. Every G‑d-fearing person should be stringent regarding his own conduct.)

All of the above applies with regard to [the borrower] repaying [the debt] in the coinage which was lent. However, it is forbidden in all instances to lend [one type of coinage] on the condition that [the borrower] will repay [his debt] with a more valuable coin. [This ruling applies] even if [the two coins] are from the same type [of metal] – it is only that one is slightly superior to the other. [This prohibition applies] even if one would not give more produce for [a purchase made with one coin] rather than the other, it is just that [the preferred coin] is of a purer grade of silver than the other [type of coin].

Similarly, it is categorically forbidden to lend produce with the stipulation that if its value will depreciate by the time the payment is due, [the borrower] will add to the measure [that he is repaying] so that it will be equivalent to the value [of the produce he borrowed] at the time of the loan.93 [The rationale for this limitation is that the fact that] a market price [was established] and[/or the borrower] possessed [some of the type of produce he borrowed when taking the loan] is only effective [in allowing the loan to be made] when [the borrower is expected to] repay the amount that he borrowed without any [quantitative] addition at all. [The lender can only profit from such a loan when] the produce appreciated in value. The profit [the lender derives] from this appreciation is only considered as interest according to Rabbinic Law and [the Sages deemed] it appropriate to be lenient regarding this aspect of interest when either [the borrower] possesses the [type of] produce [he is borrowing] or there is an established market price [at the time the loan is taken out]. However, when [the borrower] repays [the lender] more than the amount that [the borrower] lent him, this is interest in a complete sense, even if the extra amount [paid] is very minimal.112 Similarly, if the value of the produce depreciates, [it is forbidden for the borrower] to repay [the lender] the amount of money the produce was worth at the time of the loan unless, at the outset, he established the financial value [of the produce and stipulated] that he would repay him [the amount of] money equivalent to the value [of the produce] at the time of the loan.101 In such an instance, it is considered as if [the lender] loaned [the borrower] money.

[The above applies provided the borrower] specified that he would pay [the lender] the financial value of the produce at the time the loan was made, whether its value will later depreciate or appreciate. However, if [the borrower] specified that if the value [of the produce] will depreciate, he will pay [the lender] the financial value [of the produce] at the time of the loan, but if its value appreciates, he will pay him in produce, [the arrangement] is categorically forbidden, even if there is an [established] market price [for the produce], and [even if the borrower] possesses some [of that type of produce. The rationale is that] the borrower is accepting responsibility for the depreciation [of the produce] in order to receive the loan [and this is considered interest]. True, [in the case of a loan,] the responsibility for loss due to factors beyond control is the borrower’s. Nevertheless, if responsibility for the depreciation would also be the borrower’s and the profit for the appreciation [of the produce] would be the lender’s, the lender would [most likely] profit from having given the loan and [the possibility of incurring] a loss [due to the loan] would be unlikely.

When do [the restrictions mentioned in the previous subsection] apply? Regarding a loan, for the lender may not profit at all from giving a loan. However, [it is permitted for a purchaser to] give money [to a seller] for merchandise [to be delivered at a later time], paying him the established market price [of the merchandise at the time of the agreement or another price the two agree upon] when the seller possesses the entire amount [of the merchandise.113 The purchaser] does not have to accept responsibility [for the merchandise] until the seller delivers it to him. [He need not] even [accept] responsibility for the depreciation [of the merchandise]. In other words, [the purchaser] is permitted to stipulate that if the price of the merchandise will be less at the time of delivery than it is at present, [the seller] will return his money to him114
if [the seller] will not want to sell [the purchaser] the merchandise at the lower price [at which it is selling at that time. This is permitted because] the merchandise is entirely in the domain of the seller. He can sell [the merchandise] to another person and purchase other equivalent [merchandise] in the marketplace and give it to [the original purchaser]. Therefore, the purchaser does not [have to] accept any responsibility for it.

However, if [the seller] is unable to purchase [equivalent merchandise] in the marketplace because the purchaser stipulated that [the seller] give him what he possesses in his domain at present because it is of high quality, the purchaser must accept the responsibility for the depreciation of the value [of the merchandise due to a drop in price. When the purchaser accepts this responsibility,] although the remainder of the responsibility for the merchandise – [i.e.,] even the responsibility for [the depreciation due to] common factors beyond his control, for example, wine that sours – is the seller’s,115 [such an agreement] is permitted, since the responsibility for the depreciation of the [market value of the] merchandise is the purchaser’s. (The same law applies if the responsibility for other factors is the purchaser’s, even though the responsibility for [the drop in the merchandise’s price] is the seller’s and the profit for [the merchandise’s rise in price] is the purchaser’s.)

However, if the entire responsibility is the seller’s, [such an arrangement] is forbidden even if the purchaser moved [the merchandise] to his domain immediately, and the seller accepted responsibility for it (until the time when there are grounds for concern that the value of the merchandise will appreciate). [This is forbidden] because it is likely that the purchaser will profit through such a transaction and unlikely that he will lose,115 and any transaction from which it is likely [that a purchaser] will profit and unlikely that he will lose because the seller accepts the entire responsibility is forbidden116 according to Rabbinic Law. [The rationale is that such an arrangement] is no longer a commercial transaction, but [is rather] classified as a loan.117 [The rationale is that] whenever the entire responsibility is the seller’s, the merchandise is still the seller’s, and the money which he received is considered a loan. [Thus,] when the purchaser profits from the transaction because the value [of the merchandise] appreciated, he is deriving profit from something belonging to the seller because of the loan [the purchaser] gave him.118

When is the acceptance of responsibility only for the depreciation [of the merchandise] effective so that a transaction is not considered [prohibited because it is] likely to bring the profit and unlikely to cause a loss? With regard to an outright sale. However, in a rental agreement – for example, one rented out an animal or a utensil to another person – [if] the renter accepted responsibility for loss and damage119 due to factors beyond [his] control, even if the responsibility for depreciation is the owner’s, [the arrangement is considered] as likely to bring profit [to] and unlikely to cause a loss [to the owner. The owner] is only permitted to take a [rental] fee because the value of the utensil will decrease and diminish due to its being used by the renter119 and the animal will become weaker because of the work [it performed for the renter]. However, if it is a utensil that does not become diminished in value at all, for example, a gold utensil120 (or a silver one), [the arrangement] is forbidden because [the money the owner receives] is considered a loan121 since [the possibility that he will suffer] a loss is unlikely.

Accordingly, since the rental fee is being paid for the damage to the utensil, [when a renter accepted responsibility for loss and damage by forces beyond his control], even when the utensil depreciated because of his use, if [at a later time during the rental period] it was lost or damaged by forces beyond [the renter’s] control, he is responsible to pay only what [the article] was worth at the time it was lost or damaged by the forces beyond [his] control. [This means the renter must repay only the value of the item] after it was damaged because of its use and not what it was worth at the time he rented it. For this reason, when a person who rents an animal tells [the owner], “If it will die [during the time I am renting it], I will pay you,” he should [stipulate to pay him] what it will be worth at the time of its death, [and not its value at the beginning of the rental period. The rationale is that] if he would pay [the owner the animal’s] worth at the time the rental [began], the outcome would be that from the time the rental [began, the animal] was considered his, and it was in his domain that it deteriorated. Thus, the fee [he paid for the rental] would be considered interest.122

There are authorities who differ regarding this [ruling. However,] it is desirable to be stringent [and follow] the first opinion.

Similarly, when one enters into an iska arrangement – i.e., [the lender/investor] gives [the recipient/manager] merchandise or money to use [for commercial purposes,] with half the profits [going to the lender/investor – the lender/investor’s] acceptance of responsibility for [the merchandise’s] depreciation in value is not sufficient to prevent [the arrangement] from being considered as being likely to lead to a profit and unlikely to lead to a loss [– and thus being forbidden –] if the recipient[/manager] accepts responsibility for any loss due to causes beyond his control for all of the [merchandise or money]. Instead, the responsibility for losses due to causes beyond his control [must be shared.] Half the responsibility for [the merchandise or money] must also be the [lender/investor’s] and similarly, he must accept responsibility for half [its] depreciation in value123 [if that, in fact, occurs].

[The rationale is that] every iska arrangement involves half [of the amount] being a loan to the recipient – and thus half the profit is his. [The second] half [of the amount] is entrusted to [the recipient] for safekeeping, [but remains the lender’s/investor’s]. Thus, half the profit belongs to [the lender/investor]. Consequently, the responsibility for depreciation and loss due to forces beyond one’s control must also be borne by the [lender/investor], at least for the half [of the merchandise or money] that is considered an entrusted object.124

[The rationale is that] if a portion of the responsibility for losses due to forces beyond his control and/or for depreciation [in the value of the merchandise] is incumbent on the recipient, even [if only] for a minor portion of the half of [the merchandise or money] that is considered an entrusted object, this portion will also be considered as a loan [to the recipient. As such, the lender/investor] should not receive [a full] half of the profit even if he pays the entire wage for the recipient’s work and labor involved in this iska arrangement.

Nevertheless, the responsibility for theft and
loss [of the money or merchandise] is [entirely] the recipient’s – even for the half [i.e., the portion] considered as an entrusted object – because he is considered a paid watchman with regard to it.125

Even if the [the lender/investor] accepts responsibility for losses due to forces beyond one’s control and the depreciation [in value of the merchandise or money,] or even [if he accepts] responsibility for theft and loss for the half considered as an entrusted object, [the lender/investor] must [nevertheless] pay the recipient [of the loan/investment] a wage for his work and effort because he worked and was busy126 with that half [of the merchandise or money that is classified as] an entrusted object. [The rationale is that] if [the investor/lender] does not pay him [a wage, the recipient] will be working [also127 for the lender/investor] in order to [receive] half [the merchandise as] a loan. This would constitute avak ribis.

How much should [the lender/investor] give him? If he makes the arrangement at the outset, [i.e.,] when he [first] gives [the recipient the merchandise or money as] an iska, it is sufficient to give [the borrower/manager] a minimal amount as remuneration for his labor.128 If [the lender/investor] already gave him [the merchandise or money] and did not arrange [to pay] him a minimal amount, he must give [the borrower/manager] two-thirds of the profit, and if there is
a loss, [the recipient] will [be responsible] only for half the loss.129 Thus, the [fact he can earn] an extra sixth130 as profit is compensation for his work.

The recipient must be careful not to give up anything of his own while [working in] the iska [arrangement.] For example, [the borrower/manager] possessed merchandise that he purchased with his own funds when the market price was low, and [later], at the time he received the money for the iska from [the lender/investor], the price [of that merchandise] had appreciated. [If he uses his own merchandise for the iska, when calculating the profit,] he should not [consider it as if] he had purchased [his merchandise] with the money from the iska [at the same low price at which] he [originally] purchased [it]. Rather, [the profit should be calculated] according to [the difference in value between the higher price at which the merchandise was available at the time of the iska and] its present price.131

Similarly, if [the investor/ lender] gives [the recipient] merchandise under an iska arrangement and the ordinary practice is to hire a porter to transport [the merchandise] to the marketplace, the porter’s fee must be included in the principal [investment]. When it comes to dividing the profits [the recipient] must take back [the sum paid to the porter] before [he and the investor/lender] divide the profits.129 [Only] what exceeds this amount is profit and [may] be [equally] divided.132 [This applies] even if [the recipient] did not hire a porter, but transported [the merchandise] himself. Even though [the recipient] received a full wage for his work, the porter’s fee is not included in that amount in a place where it is not customary for the recipient to transport [the merchandise] himself. He is not permitted to waive any [of this fee] to [the investor/lender] because of the prohibition against [paying] interest, for [the recipient] is a borrower in a complete sense regarding the half [of the merchandise that is considered] a loan133 since the responsibility for loss is his.134 Therefore, [the recipient] must be careful not to offer any type of benefit to [the investor/lender], just as every borrower must be careful [not] to do for the person who extended him a loan.135

Whatever profit [is earned], whether great or small, must be divided equally [between the borrower and the lender]. It is forbidden to establish a fixed amount of profit for [the lender/investor, regardless of] whether [the actual profit ends up being] large or small, or even if there is no profit at all. True, [according to the letter of the law, such an arrangement] is a sale; [the lender/investor] is selling his entire share of the profit – even if it will be very great – [to the borrower/manager in exchange] for a [guaranteed] fixed amount, as he would be permitted to sell [his share of the profits] to another person in this manner. Nevertheless, if [the borrower/manager] who receives the money from [lender/investor] specifies an explicit amount as profit [to pay the lender/investor], it appears that he is borrowing from [the lender/investor] at interest. This is forbidden according to Rabbinic Law, although in truth, he is not a borrower with regard to half [the money or the merchandise] which is [classified as] an entrusted article [and it is for that portion] that he is specifying an explicit amount of profit.

[Moreover, there are times when the manager] is not [considered] a borrower at all, for example, in an instance where the responsibility for all the money is that
of [the investor/lender], whether due to losses beyond his control or losses involving the investment having been [sold at] a low price,133 or even when the responsibility for theft and loss of all the money is [borne by the investor/lender. In such an instance, the borrower/manager] is merely an agent of [the investor/lender] who runs his business with [the investor/lender’s] money in order to earn a profit, [and the lender/investor is considered to] have purchased the profit from [the borrower/manager] for a specific [pre-agreed] sum. Nevertheless, [to an ordinary observer,] it appears as if [the borrower/manager] is one who borrows at interest, since he is giving [the lender/investor] a specific [sum as his] profit while the possibility of loss is not that common a factor.

There are authorities who permit [such an arrangement] if the entire responsibility for all the funds is borne by the investor/lender [including the responsibility] for theft and loss. [These authorities rule that in such an instance, the borrower/manager] does not appear to be a borrower at all, and it is permitted [for the lender/investor] to sell him the profit, just as [he would be permitted to sell it] to another person. [This leads to a more far-reaching leniency, because] the same [principle] can be applied in all instances of interest forbidden as result of Rabbinic decree. According to this logic, [such an arrangement] should be permitted, provided the person receiving the interest accepts responsibility for any [type of shortfall], including loss or theft, since, as a result, [this arrangement] does not appear to be a loan at all and it is permitted to profit from the arrangement. One may rely on their words and rule leniently [because the matter concerns] Rabbinic Law.136

(However, if [the investor/lender] who gives money [in exchange for] half the profit does not accept the total responsibility [for any possible loss], only that for half the funds, [the arrangement] is forbidden according all opinions.)