By Rabbi Meir Orlian
Aryeh and Dov were planning to attend a conference at a remote convention center. “How are you getting there?” Aryeh asked him a few days beforehand.
“I’m not sure yet,” replied Dov. “My car is not available, so I’ll probably order a car service. Are you interested in sharing it?”
“I can’t afford a car service,” said Aryeh. “If I can’t get a ride, I’ll go by public transportation.”
“Good luck,” said Dov. “Let me know if you change your mind.”
The morning of the convention, Aryeh met Dov. “Did you find anybody driving?” Dov asked.
“No,” replied Aryeh. “I’ll have to schlep on public transportation. Three trains and a bus. But what can I do? How are you going?”
“I ordered a car service,” said Dov. “He’s picking me up at 4:00 p.m.”
“Is anyone else going with you?” asked Aryeh.
“No,” replied Dov, “just me.”
“Since there’s plenty of space in the car,” asked Aryeh, “maybe you’ll let me come along for the ride?”
“What!” said Dov. “I should pay everything and you come for free?”
“What’s it to you?” argued Aryeh. “You’re paying for the cab anyway!”
“Why should I be the only one paying?” replied Dov. “If you want to come, chip in your share!”
“It’s not worth it to me,” responded Aryeh. “If I don’t get a ride, I’ll have to take public transportation. It doesn’t cost you anything to allow me to come; it just helps me.”
“But if I let you come for free, you certainly won’t pay,” said Dov. “This way, maybe you’ll decide to chip in. I’m willing to cover two-thirds of the cost. “
“I just can’t afford it,” said Aryeh.
Aryeh called Rabbi Dayan. “Dov ordered a car service to a conference and refuses to allow me to join without paying, so I’ll have to go by public transportation,” explained Aryeh. “Is there any reason to require Dov to allow me to come along for the ride?”
“Dov should allow you to come along, especially if you’re adamant about taking public transportation rather than paying,” answered Rabbi Dayan, “but he cannot be forced to do so, according to many authorities.”
“What is this based on?” asked Aryeh.
“This question relates to a concept known as kofin al middas S’dom,” explained Rabbi Dayan. “In S’dom, people refused to let others benefit from their property even when it did not entail any loss to them. This behavior is frowned upon. Sometimes, we even force people not to act this way but to allow others to benefit.”
“Isn’t that exactly what Dov is doing?” exclaimed Aryeh.
“Not exactly,” replied Rabbi Dayan. “Middas S’dom applies when the owner cannot gain at all from his property, yet withholds benefit from others. There is a dispute, however, whether it applies when he withholds the benefit as leverage to make the other party pay. For example, if you asked to join a ride to work on a regular basis, the car owner could, according to the lenient opinion, refuse–even if it didn’t cause him any hardship–with the hope that you might agree to carpool or chip in significantly for gas.” (Rema, C.M. 154:3; 174:1; 363:6)
“But here Dov can’t really gain,” insisted Aryeh. “It’s a one-time ride and he can’t hang out a sign ‘car ride for rent’!”
“Indeed, the Rema (C.M. 363:6), based on the Mordechai, indicates that if the person cannot benefit at all, we would force him to benefit others,” replied Rabbi Dayan. “However, the Noda BiYehudah (C.M. 2:24) and Beis Ephraim (C.M. #49) explain that we apply kofin al middas S’dom only to force someone to allow others indirect benefit from his property. However, we can never force someone to allow actual use of his property without payment, even if he cannot earn from it. Here, also, Dov hired the car service. Thus, we cannot force him to allow you to come along without payment.” (Pischei Teshuvah, C.M. 170:1; Pischei Choshen, Geneivah 8:3)
“It is strongly recommended, though,” concluded Rabbi Dayan, “that you reach an agreement that will benefit you both.”
Payment On Iska
Q. A friend wanted to borrow $30,000 and we drafted a heter iska that obligated him to pay 7% on the loan until the loan is repaid. Our agreement was that he has one month to repay the loan from the time that I call the loan due. Ten years have passed and he owes $51,000 in principal and “interest.” I contacted him and explained that although I realize he does not have the means to repay the entire owed amount, I want him to pay me the “interest” that has accrued. He is prepared to repay me $20,000 but wants that payment to be applied to the principal to lower the amount of “interest” that continues to accrue. Should the money be applied to the outstanding principal or to the “interest”?
A. Shulchan Aruch (C.M. 83:2) addresses the circumstance in which there are two outstanding loans and the lender and borrower disagree which loan should be repaid first. For example, if one loan has a guarantor and the other does not, the lender prefers to apply the current payment toward the non-guaranteed loan so that if the borrower ultimately defaults on the other loan, he will be able to collect from the guarantor. The borrower, on the other hand, wants this payment to cover the guaranteed loan so as to remain on good terms with the guarantor. The halachah favors the lender. Rema adds that even if the lender was silent when he took the payment, he can subsequently claim that his intent was to apply the money he received to the non-guaranteed loan. The rationale behind this ruling is that the borrower becomes “subservient” to his lender (eved loveh l’ish malveh) and thus the lender has the upper hand (Tur).
There is a disagreement whether this principle applies to other types of debts (e.g., unpaid rent) so that a landlord could apply payments to the oldest debts (Shaar Mishpat 83:1), or whether it is limited to loans that create obligations of “subservient” character to the lender (Kesef Kodashim and Mishpetei Tzedek 148).
It would appear that your case, in which the disagreement is whether the payment should be applied to the principal or the “interest,” is subject to the above dispute. Meaning, since the lender does not want the money to be applied to a “loan” and is seeking to collect the “profit” he earned on his investment (iska), he loses his leveraged position and is subject to the dispute regarding who has the upper hand.
It seems that in your case all opinions would agree that you, as the lender, have the leveraged position. Even though a “heter iska” is drafted using investment terminology rather than loan terminology, the purpose of this arrangement is to avoid ribbis-related issues, but in character, it is understood that it will be treated as a loan.
Therefore, it is logical that, similar to the structure of repaying a loan to a bank, the borrower first pays the interest before payments are applied to the principal; so too when using a heter iska, the borrower pays the “interest” before paying the principal. Consequently, you are correct that the $20,000 that the borrower is prepared to pay is applied to the “interest,” and the principal that is owed remains due, so that “interest” will continue to accrue on that amount.
Q. I bought a bedroom set secondhand, paid the seller cash, and arranged to come by the next day to collect the items. Does either side still have the possibility of backing out?
A. In a famous statement, Rabbi Yochanan teaches that according to Torah law, cash payment finalizes the transaction (B.M. 47b). However, for transactions between Jews, the Sages revoked the effect of cash payment, and enabled retraction until an act of transaction (kinyan) is performed, as stated in the Mishnah (B.M. 44a). In the case of a bedroom set, this would require picking up or dragging the beds out of the seller’s property (C.M. 198:1).
Thus, both sides still have the legal ability to back out before the items are collected. However, the Sages strongly discouraged doing so and imposed a curse (mi shepara) on one who does not uphold his commitment. The sale can easily be made binding though performing a kinyan sudar, whereby the buyer hands his handkerchief or pen to the seller in exchange for ownership of the beds (C.M. 204:1,4; 195:1). Nowadays, cash payment might be considered a kinyan based on the concept of situmta, a common business practice. v
This article is intended for learning purposes and not to be relied upon halacha l’maaseh. There are also issues of dina d’malchusa to consider in actual cases.
Rabbi Meir Orlian is a faculty member of the Business Halacha Institute, which is headed by HaRav Chaim Kohn, shlita, a noted dayan. For questions regarding business halacha issues, or to bring a BHI lecturer to your business or shul, please call the confidential hotline at 877-845-8455 or eâ€‘mail firstname.lastname@example.org. To receive BHI’s free newsletter, Business Weekly, send an eâ€‘mail to email@example.com.