Ribis: A Halachic Anthology
Rabbi Joseph Stern
Contemporary Business Applications
A. Terms of Trade
One of the most common business practices is to offer a
discount for early payment. Perhaps the most popular procedure is
to allow a 2% discount for payment within 10 days. If such prompt
payment is not possible, the full amount is due within a month
(2/10 net 30).
The basic halachic principle concerning terms of trade can be
derived from Tosafot's resolution of two dichotomous Talmudic
Rav Nachman seems to prohibit any type of consideration for
early payment or penalty for delayed payment.
In affect, it is paying a premium for use of his funds, a form of
Ribis. A charge for the debtor's use of the creditor's fund
in the course of trade is Ribis.
As an example of a forbidden transaction, Rav Nachman
suggests the following scenario:
Someone prepays a peddler of wax. As a result of this advance
infusion of funds, the grateful merchant offers 5 cases of wax for
the price of four. This transaction is prohibited unless the vendor
is currently in possession of the merchandise (but is unwilling or
unable to provide for immediate delivery).
However, the following mishna seems to limit Rav Nachman's ruling:
One is not permitted to discount a commodity's selling price
(because of early payment).
For example, a field is sold for 12 maneh if payment is
delayed until the harvest season. If, however, immediate payment
is rendered, the seller specifies that 1000 zuz (a lesser amount)
would be sufficient. Such a practice is considered to be usurious.
The text seems to imply that discounting is only prohibited when
the terms of trade are explicitly mentioned. To compound the
problem, Rav Nachman himself, commenting on the mishna, says
It is permitted to charge more for delayed payment (or
to deduct for early payment), provided these conditions are only
implied, not explicitly mentioned.
Tosafot resolves the apparent contradiction by distinguishing
between commodities bearing a set (fixed) market price and those
having no set value. Items bearing a set market value (in
contemporary times, gold, platinum, anything traded on a
commodity exchange) may not be discounted on the basis of early
payment. On the other hand, anything that has no precise price
(Tosafot's example - a cow, a cloak) may be implicitly discounted.
Under no circumstances may the terms of trade be explicitly
Tosafot's formulation assumes the form of normative halacha
() in the
ShuIchan Aruch's ruling.
In essence, one may only discount items (or charge a premium
for late payment) that have no set market price.
Even then, the terms of trade may not be specified. Are all
terms of trade acceptable? The Shulchan Aruch (citing the
Ramban) only tolerates a small amount of consideration
granted for early payment. If it is apparent to all that the debtor
pays less - that
would be prohibited. Rabbi Yaakov of Lisa suggests that a discount
or premium greater than 1/6 would be excessive.
Rabbi Mordechai Yaakov Breish, in a special section of his
responsa (Chelkas Yaakov) devoted to contemporary Ribis
applications, considers the halachic status of 2/10 net 30.
Seemingly, such explicit consideration (even if not verbalized, the
terms are at least written on the invoice) would be Avak Ribis,
(a rabbinic form of usury). If at all possible, a Heter Iska
should be arranged or the vendor should avoid writing down the
credit terms. Rav Breish's "Mechuten," Rabbi Yaakov Yitzchak
Weisz (author of the responsa Minchas Yitzchok), proposes
restructuring the business transaction to overcome the Ribis
problem. Basing himself on the opinion of the Chavas Daas, he
suggests that the vendor first price the commodity on the
assumption of immediate payment. If the customer then insists on
delayed payment, cancel the initial deal and arrange for a new
transaction, this time at a premium. Similarly, if the customer
desires a discount for each payment, withdraw the first proposition
(e.g. 150 at the conclusion of the month) and substitute a new
offer (130 for immediate cash).
Too often, the above suggestions are not feasible, nor is the
customer (a non-observant Jew) willing to abide by a Heter Iska.
Cognizant of the need for business credit: Rav Breish cites the
opinion of the Imrei Yosher, who considers a premium for delayed
payment to be no more than a hedge against inflation, not Ribis.
He draws an analogy between borrowing money and renting
utensils. The renter is permitted to pay a fee for depreciation -
why not allow a debtor to pay for currency's depreciation? (In a
marginal note, Rav Breish's sons dissent, noting that the debtor
is not liable to reimburse his creditor for inflation - nor should he.
Compensating the lender $120 for a loan of $100 (even assuming a
20% inflation rate) would be tantamount to
prohibition of Ribis). Only if a particular currency has been
removed from circulation (e.g. Confederate money) must the debtor
pay his creditor according to current market values. Rav Breish
himself offers an ingenious solution to the problem. He draws an
analogy between renting real estate and contemporary terms of
trade. The mishna permits a discount for prepayment of rent.
Why is this permissible? Rent is only due at the end of every
month. Charging more for not paying in advance is not a premium
- Ribis - for use of the renter funds, but rather a free market
price. It is the landlord's prerogative to waive some of the rent
for early payment. Most business transactions - at least in
Talmudic times - were payable immediately. Any price differential
for later payment would be, in effect, charging the purchaser for
temporary use of the seller's fund - Ribis. According to the above
reasoning, it may follow that in today's business environment,
terms of trade would no longer pose halachic problems. Few if any
transactions are immediately payable. Credit is an accepted part of
the business milieu. 2/10 net 30 is not a fee for 20 days borrowing,
but rather a partial waiver of the purchase price, a rebate granted
for early payment. Ribis only exists if an obligation to pay is
delayed in exchange for some consideration to the creditor. Here no
financial obligation exists till the end of the month. Yet, despite all
possible justifications for the practice, Rav Breish advocates use of
the traditional Heter Iska wherever possible.
If the year's rent is paid in advance, 10 selaim is
sufficient. On the other hand, if you pay on a
monthly basis, the rent will be one sela per month.
This is permissible.