Guaranteed Low Prices and Interest

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Payments in Advance, Future Contracts (Poskin)

  1. Generally it is forbidden to sell something for cheaper when the buyer pays in advance. This is also called a future contract of a commodity.[1]
  2. It is forbidden to pay in advance for the later delivery of a commodity since it is possible that the price of the commodity will rise. The two ways to permit this is if the seller has the commodity already or the marketplace price is already fixed.[2]
  3. If the price of the commodity drops the buyer can renegotiate his part of the deal and buy it for cheaper.[3]
  4. If a person is making a down payment for later delivery of a commodity in a permitted fashion the buyer can not benefit from the sale in other ways. Therefore if there would be storage costs upon the seller the buyer would have to pay for those.[4]
  5. A person can borrow money in order to repay it with commodity later if he actually has that commodity.[5]
  6. You can buy gourds that are small in the field when they’ll ripen even if the price is cheaper when you pay now.[6]
  7. If you specify that if the price goes up then it is an investment and if it goes down it is a loan, that is invalid and is considered a loan with ribbit.[7]

Has a Position of that Commodity (Yesh Lo)

  1. If the seller of the commodity already has the commodity at the time of the transaction it is permitted. Since the seller has the commodity at the beginning we can view the transaction as though he sold the commodity immediately for the fair marketplace price.[8] Even though they didn't formally have the buyer acquire that commodity at the beginning of the sale since this is only rabbinic interest it is permitted.[9]
  2. The seller has to have the full quantity of the commodity to fulfill his end of the deal at the time of the transaction for this leniency to apply.[10] It isn't similar to the rules of seah bseah since this is considered a sale and not a loan. Therefore, it is necessary for the seller to sell his commodity to the buyer and having part of the commodity is insufficient, whereas for a loan, it is possible to view it as though the borrower lent out his commodity multiple times since something that he lent out remains in his property.[11]
  3. The seller is believed to say that he has the commodity he is transacting.[12]
  4. This leniency is specific to where the seller has the commodity and doesn't extend to where the seller has cash with which he could use to buy the commodity.[13]
  5. It is permitted to charge a lower price than the marketplace price if the seller has the commodity at the time of the transaction. This isn't similar to relying on the leniency of Yatza Hashaar.[14]
  6. If the seller has the entire quantity of the product that he is selling and the buyer is prepaying it is permitted to charge a lower price for the commodity.[15]
  7. If a seller has the entire volume of the commodity that he is selling he can sell it with a down payment and deliver later and even offer a discounted price.
  8. If the seller has the commodity but it isn't fully processed as long as it is only one or two steps away from being processed it is considered like he has the commodity.[16]
  9. Pesika with Yesh Lo one can even charge a price that is evidently cheaper for the early payment, however, when it isn't completely Yesh Lo but the item is almost ready one do pesika but only at the fair price at the time of the sale.[17] Some allow charging a cheaper price with Yesh Lo even if it isn't ready as long as it is only one or two steps away from being processed.[18]
  10. Once there is an established price there is no prohibition to pay now for future delivery of a commodity since it is like a sale.[19] According to Ashkenazim, if the price generally doesn't change for a few days then it is considered an established price. According to Sephardim, if the price generally doesn't change for two to three months then it is considered an established price.[20]
  11. A price is considered established even if there's a range of prices as long as it is reasonable that it is possible to be able to get the item in local stores at the price that they used for the futures sale (pesika).[21]
  12. Pesika is only permitted when the price in the market is established for the quantity that one is purchasing. However, if the price is set for buying in bulk one can't use that when buying a future of individual items.[22]
  13. Pesika is permitted if it is done for a Talmid Chacham and it is evident that the money isn't needed by the supplier and the purchaser could have asked for it as a favor each time and instead it was done up front for convenience then it is permitted since it isn't for the time-value of money.[23]
  14. Some say that if the item is readily available in stores, such as fruit or vegetables that are in season, silverware, kitchen ware etc, it is considered Yatza Hashaar even though the price fluctuates.[24] This opinion is contested.[25]
  15. Yatza Hashaar only applies if the specific item being bought has an established price and not if there's a similar product or raw material which is made into the product with an established price.[26]

Yesh Lo when the Item Naturally Matures

  1. If someone buys a certain amount of quantity of a commodity and it will mature naturally such as if someone bought gourds that were growing it is permitted for him to pay in advance even though when the gourds mature they would be more expensive.[27] The seller should then make sure to give him from the crop that he had when they arranged the sale.[28] As to the details of responsibility and insurance see footnote.[29]
  2. This leniency to advance cash to buy unripe produce only applies if it is normal for it to be sold in the market at that stage.[30] If it isn't normal for it to be sold that way then it is forbidden to pay less for buying it in advance. For example, one may not speculate and buy a vineyard of unripe grapes or grapevines for when they will ripen.[31]

Marketplace Price Fixed (Yatza Hashaar)

  1. If the price of the marketplace is fixed it is permitted to pay in advance for the later delivery of a commodity. The reason is since the marketplace price is fixed it is possible for the seller to purchase the commodity immediately with the funds of the buyer. Therefore, it is as though the commodity is already in the position of the seller.[32]
  2. This leniency works independent of the leniency of the seller owning the commodity (Yesh Lo).[33]
  3. It is forbidden for the seller to charge less than the marketplace price since the buyer is paying in advance, even though the marketplace price is fixed.[34]
  4. A product that is price regulated by the government is considered to have a fixed price such that it would be permitted to pay upfront for a discount.[35]

Undetermined Price

  1. If there is no fixed price in the market for an item it is permitted to pay for it in advance and have it delivered later.[36][37] Even so if the seller specifies that if you pay in advance there is one price and a higher price when buying later it is forbidden.[38] Additionally, if the price difference clearly indicates that it is because of interest it is problematic. The amount that is considered a small amount and not indicative of interest depends on the type of merchandise and the market. If it frequently is on sale then having a prepayment for that sale price is permitted since it doesn't look like there's a cheaper early price because of interest.[39]

Subterfuges

  1. It is forbidden for the perspective lender to counter the request of a loan with a subterfuge of having the lender borrow a commodity to then resell it to the lender for a cheaper price. Since the borrower originally requested a loan the borrower may not sell the commodity for a cheaper price when when the price is unclear in the marketplace.[40]

Buying All of the Producer's Product

  1. Even if the producer doesn't have the product available it is permitted to make an advanced payment for all of the producer's product since there is risk involved and it is considered an investment as opposed to a loan.[41]
  2. It is permitted to buy a calf and advance the cash and only collect the cow later if the buyer assumes responsibility if the cow dies or depreciates after he pays the money.[42]

Repaying a Loan with a Future in Commodities

  1. When a person purchases a commodity at a future date by making an advanced case payment there are two possible leniencies: if the seller has the commodity or if the marketplace price is fixed. However, if the original transaction is a result of a loan that the seller owed to the buyer and he is using that loan to purchase a future of commodities this transaction can only be permitted when the seller owns the commodity.[43] The reason for this distinction is because the leniency of having a marketplace price fixed is that it is possible for the seller to cover his obligation by purchasing the commodity in the marketplace at the time of the transaction. However, if he is doing this transaction as a repayment of a loan that unpaid debt can't possibly be used to buy a commodity in the market.[44]
  2. A person purchased a commodity at a future date with a preexisting loan that the seller owes him. As explained this is only permitted if the seller has that commodity. If later at the time of the delivery date they renegotiate that the seller will exchange the first commodity with another one, it is only permitted if the seller has the second commodity.[45]
  3. A person purchased a commodity at a future date by making an advanced cash payment. Later when the commodity is due to be delivered he renegotiated with the seller to exchange the commodity he was supposed to acquire with another commodity for the current value of the commodity he is owed. This transaction according to some is only permitted if the seller owns a position of the second commodity that is sufficient to cover paying out this transaction. However, according to others it is permitted as long there is a fixed marketplace price.[46]

Stipulations for a Default on a Loan

  1. It is forbidden for a person to stipulate that if the borrower can't repay his own he must give a certain commodity to the lender for the price of the commodity that it was worth at the time of the loan. Since this transaction was conditionally a loan it must follow the rules of a loan exchanged for a future in commodities.[47]

Future Contracts

  1. It is permitted to do a future contract for a commodity or stock when one doesn't buy the commodity now at all and doesn't pay for it but merely pays a margin deposit. That is considered as though one agreed to buy or sell something at a later date and there's no advanced payments.[48]

Difference between a Future Contract and a Sale

  1. When buying a future of a commodity the seller must provide the buyer with the quantity specified irrelevant of the price change or if his wares of the commodity spoiled. That isn't considered interest since it isn't clear which commodity was sold to the buyer from the beginning.[49] However, when the seller says he is buying specifically the wine that the seller owns then there's a greater concern of interest because if it spoils and yet the seller delivers good wine it seems that the buyer is benefiting because of his advanced payment. Nonetheless, it is permitted until the time when it is normal for wine to spoil if it was spoiled before it was sold.[50]
  2. When the buyer specifies a specific barrel at any time it is problematic and is only permitted if the buyer accepts the fact that if the price increases he will receive less commodity than originally specified.[51] It is forbidden for the seller to accept the responsibility for the change in price.[52]

Sources

  1. Shulchan Aruch Y.D. 173:7
  2. Shulchan Aruch Y.D. 163:1
  3. Mishna Bava Metsia 72b, Shulchan Aruch Y.D. 175:7
  4. Shulchan Aruch 175:5. Rosh Bava Metsia 5:9 writes that one can't benefit from the downpayment and so the buyer needs to accept any depreciation because of the storage from the time of the payment until delivery.
  5. Shulchan Aruch Y.D. 173:7
  6. Tosfot 64a s.v. ma says that you could buy wine from the vineyard even though it isn’t produced yet as long as you don’t specify how much and just buy everything. Also once the grapes are small it is permitted to buy the wine that will be produced later. That’s similar to buying gourds when they ripen if they’re now small (64a). However, the Nemukei Yosef 43b disagrees on both points. It is forbidden to buy the wine from the vineyard even if you don’t specify an amount since it isn’t produced yet. Also, since no one buys unripe grapes even when they’re unripe it isn’t like they’re relevant to allow buying wine that is produced from them. However, gourds are sometimes sold unripe. Rama 173:10 accepts Nemukei Yosef.
  7. Tosfot b"m 54a s.v iy explains that since a person accepted the achrayut of the money it is certainly a loan.
  8. Mishna Bava Metsia 60b, Rav Oshiya on 63b, Shulchan Aruch Y.D. 163:1
  9. Rashi writes that once money is paid the seller can't back out and if he does he is cursed with a Mi Shepara. However, the buyer didn't make a formal kinyan but it isn't necessary since this is only rabbinic interest. Bet Yosef 163:1, Taz 163:3, and Shach 163:3 cite this Rashi.
  10. Rambam Malveh Vloveh 10:6, Ritva b"m 63a s.v. veshma mina, Shulchan Aruch Y.D. 163:1. Chelkat Binyamin 163:7 clarifies that even though the Rabbenu Yerucham was lenient even if the seller only had some of the commodity we follow the Shulchan Aruch.
  11. Shach 163:2 and Taz 163:2
  12. Rama 163:1
  13. Shulchan Aruch 163:1. The Rosh b"m 5:7 implies that it is sufficient for the seller to have cash. Bet Yosef 163:1 argues that this is a mistake and obviously it is necessary to have the commodity and cash is insufficient. The Tiferet Shmuel 5:1 and Pilpula Charifta 5:7:30 agree. Maharam Shif 63a s.v. haashri presents an approach to explain the Rosh if he actually meant that money is sufficient. Taz 163:4 argues that the Rashi, Tur, and Rosh hold that money is sufficient but decides that we should be strict. Gra 163:1 points out that the Mordechai and Hagahot Ashri in fact do have this leniency even if one just has cash. He also concludes that the Rambam thinks it is necessary to have the commodity and not just money.
  14. Tosfot Bava Metsia 63b s.v. vamar, Ramban b"m 46a, Shulchan Aruch 173:7
  15. Shulchan Aruch Y.D. 173:7
  16. Rav in Bava Metsia 74a, Tur and Shulchan Aruch Y.D. 175:4
  17. Ri (Tosfot b"m 63b s.v. vamar), Shach 175:7, Chelkat Binyamin 175:39
  18. Rashi 72b s.v. posek, Gra 175:5
  19. The Gemara Bava Metsia 63b explains that once there is a fixed price in the market it is permitted since it is not considered a benefit to the buyer as he could have bought it at that time. Also, since there's a marketplace price it is reasonably possible for the supplier to buy it and in which case there is no interest because it is simply a sale. In essence it is like the leniency of Yesh Lo (Rashi 63b s.v. itnihu, 72b s.v. ein lavin).
  20. Chelket Binyamin 175:4-5. Rabbi Yochanan in Gemara Bava Metsia 72b states that the establishment of the price of the city marketplace is insufficient, it needs to be established in the great metropolis central markets. However, Rava on 63b according to Tosfot 63b s.v uposkim thinks that a city marketplace price is sufficient. Rif 34b thinks that Rava agrees with Rabbi Yochanan as does the Rambam Malveh Vloveh 9:4. However, the Rosh b"m 5:7 and Tur 175:1 are lenient like Tosfot. Shulchan Aruch follows the Rif and Rambam, while the Rama follows the Tosfot and Rosh.
  21. Chelket Binyamin 175:7
  22. Chavot Yair 189, Pitchei Teshuva 175:1, Chelket Binyamin 175:12. Even though the Chavot Yair writes that this is applicable to Yesh Lo as well, see the Yagel Yakov 175 who questions this based on Shach 175:7. He answers based on the Peni Yehoshua b"m 63a s.v. Bpirush Rashi s.v. Yesh Lo that there's an idea of forbidden changing the price when there's yesh lo if it is intentionally a delayed sale. Peni Yehoshua himself explains that Rashi thinks one can't charge a cheaper price even though it is yesh lo if it was bought with a loan and not originally cash.
  23. Chavot Yair 189, Pitchei Teshuva 175:2, Chelkat Binyamin 175:12
  24. Shevet Halevi 3:109 holds that the dollar in Israel is considered like peirot but still is permitted to be borrowed because it is like Yatza Hashaar since it is accessible anywhere. In his opinion anything which is accessible anywhere is considered Yatza Hashaar even if the price fluctuates. Torat Ribbit 10:4 applies the Shevet Halevi who was discussing seah bseah to the laws of poskin al hapeirot.
  25. Torat Ribbit 19:5 quotes many poskim who argue with the Shevet Halevi including the Brit Yehuda ch. 18 fnt. 15, 20:13, Kitzur Dinei Ribbit of Rav Shternbuch 3:2, 4:6, and Klala Dribita Intro n. 5.
  26. Gemara Bava Metsia 72b, Rambam Malveh Vloveh 9:4, Shulchan Aruch Y.D. 175:2-3. What emerges from the Maggid Mishna Malveh Vloveh 9:4 is that for old grain and new grain that have separate prices and the price of the old grain is established, Rashi allows stipulating for old grain while the Rambam doesn't allow until it is a uniform fixed price for old and new grain. Also, if there's low quality mixed grains and pure grain and the pure grain has a fixed price one can still stipulate for the more expensive price before there's an established price.
  27. Bava Metsia 64a, Shulchan Aruch Y.D. 173:8
  28. Hagahot Mordechai, Shach, and Taz. Chelkat Binyamin 173:112 writes that the Hagahot Mordechai doesn't mean that it is necessary to designate which very specific gourds he is going to sell, it is just necessary to say from his current crop he is going to sell and not going to buy others.
  29. Chelkat Binyamin 173:111 describes that most poskim hold that the mechanism here is a sale and as such it isn't the responsibility of the seller to buy others from the market if these ones spoil. If they were to do that it would be like poskin, stipulating to buy a future of a commodity, which is only permitted when the seller owns the product which isn't the case here. However, in the Biurim he writes that most rishonim indicate that even using the mechanism of pesika to have the seller responsible to ensure the commodity even if he has to buy more from the market. He says that one can rely on this lenient view.
  30. Rama Y.D. 173:10 citing the Nemukei Yosef
  31. Shulchan Aruch Y.D. 173:10-11, Taz 173:16
  32. Mishna Bava Metsia 72b, Shulchan Aruch Y.D. 175:1. Milveh Hashem 1:9:27 has a lengthy piece discussing the reasons why having a fixed market price is reason to permit. One reason is that of Rashi 62b and 63b and Rivash 306 that since the seller could have bought the commodity it is like he has them. Alternatively, from the Gemara bava Metsia 63b it seems that the reason is that since the buyer didn't have to buy and get a delayed delivered and could have bought and received it today he didn't gain anything from this transaction. Milveh Hashem concludes that Rashi's reason has a basis and is supported by the Bet Yosef even though it is challenged by the Rashba b"m 72b.
  33. Shulchan Aruch 163:1. See Gra 163:3 who cites Rashi who disagrees and requires both where the original sale starting with a loan.
  34. Shach 163:4 writes that the leniency of Yatza Hashaar when the contract was set up with a loan doesn't allow charging more than the marketplace price. He is writing this to answer the doubt of the Prisha. Shulchan Aruch 175:1 and 173:7 clarify this point that when using the leniency of Yatza Hashaar one must charge only that price and not a lower price.
  35. Milveh Hashem 1:9:27
  36. Gemara Bava Metsia 65a, Tosfot b"m 63b s.v. vamar, Rama 173:7
  37. Rama 173:7 says you can do poskin on parah or talit even ein lo. That’s based on Tosfot 63b s.v. vamar that says if there’s no shuma then we’re not calling it agar natar we’re calling it tarsha. But what about the fact it might go up on its own like poskin al hapeirot?
    • Bear Hagolah 173:18 and Tiferet Lmoshe on Shach 173:18 answer that fruit will have a market price if not now then at some later point, but a cow will never. Bear Hagolah and Tiferet Lmoshe are slightly different. Bear Hagolah says that there's no concern it'll go up in price because the seller can give the buyer a slightly cheaper cow. Chelkat Binyamin fnt. 173:349 thinks that this reasoning of the Bear Hagolah isn't precise. However, the Tiferet Lmoshe says that there's no concern it'll go up in price since the price isn't establish it never appears as interest. Chida in Birkei Yosef 173 sides with the Bear Hagolah. This approach is supported by many achronim including Shaar Deah 8, Chachmat Adam 139:4, Or Same'ach b"m 64a s.v. bs"a, Avnei Nezer YD 210:4, and Bet Meir on Taz 173:12 cited by Mesivta Yalkut Biurim b"m 63b p. 60.
    • Shach 173:17 answers that parah is yatzah shaar in that the factors necessary to determine its price like per pound is shaar kavuah. See Rabbenu Heshel of Cracow 173:3, the teacher of the Shach, who seems to deliberate between the approach of the Bear Hagolah and Shach.
    • Taz 173:12 argues on rama and says its only if it didn’t go up.
    • Chavot Daat 173:11 there’s no shiybud haguf here if you give them a specific item, but there is for the general fruit which you can give them any fruit.
    • Rav Chaim Soloveitchik (on shas n. 75 cited by Mesivta Yalkut Mefarshim b"m 63b p. 60) explains that once the commodity is promised to the supplied even though he doesn't own it it is partially yesh lo and we're not concerned about the price fluctuation.
    • Chelkat Binyamin 173:108 concludes that one can be lenient like the Bear Hagolah's approach and generally give a prepayment to receive more if the price of the item isn't readily determined and isn't going to become readily determined by people.
  38. Rama 173:7
  39. Chelkat Binyamin 173:110
  40. Taz 163:6
  41. Bava Metsia 64a, Shulchan Aruch Y.D. 173:9. The example of the Gemara and Shulchan Aruch is a person selling all of the milk he will get from his cows, sheering from his sheep, or honey from his bees in one day. The Gemara explains that this isn't permitted based on the factor of yesh lo or the factor that naturally the product is produced like an immature gourd because there's nothing tangible from which the milk is created at the time of the sale which the buyer can acquire. Shach 173:21 and Taz 173:21 cite the gemara.
  42. Shulchan Aruch Y.D. 173:10
  43. Bava Metsia 63a, Shulchan Aruch 163:1. Rabba in b"m 62b and Rav Oshiya on 63a explain that when a person pays the lender with a commodity at a future date there is a concern for ribbit since the price of the commodity might rise. This problem isn’t solved by the fact that there is an established market price since the borrower wouldn’t be able to buy the commodity with the pre-existing loan. Therefore, if the borrower wants to pay with a commodity at a later date and there is a concern that the commodity will change prices in between it is forbidden to do so since the transaction began as a loan and he might be repaid more than he lent. This is forbidden even if the price of the commodity is established in the marketplace.
  44. Shach 163:4, Taz 163:4.
    • Rashba 62b clarifies that although when discussing seah bseah it is sufficient to have some of the commodity and halachically we consider it as though there were multiple sales using this commodity. However, in the case of a loan that was exchanged for a commodity it remains a loan and in order to permit the potential interest it is essential that it is viewed as a real sale. It is only possible to consider the exchange a real sale if the borrower has the quantity he is offering the lender at the time of the agreement to exchange for the commodity.
  45. Mishna Bava Metsia 60b, Shulchan Aruch Y.D. 163:2
  46. Rif bava metsia 34b, Nemukei Yosef 34b quoting Rabbenu Chananel and Rav Hai Goan, Rashba 62b s.v. vki, and Gra Y.D. 175:10 are lenient. The Rif explains that as long as the initial transaction was a sale in the future of a commodity and not a loan it is permitted to switch over the first commodity to the second even if the borrower doesn’t have the commodity.
  47. Bet Yosef 163, Shach 163:4
  48. Ribbit Btachnit Chischon Lkol Yeled p. 33 writes that buying a future contract isn't considered like pesika since it is only an arrangement that one promises to later buy something when the contract is due. The fact that money is paid for the contract in advance is purely a deposit and that is why there is no interest paid for buying a future contract. He cites Mishpat Shalom cm 209 in his support.
  49. Tosfot b"m 64b s.v. hay, Rashba 64a s.v. haylech, Taz 173:18, Chelkat Binyamin 173:146. Tosfot 64b asks what is the difference between buying a barrel of wine which is problematic for interest and pesika? Tosfot explains that in pesika the seller takes all responsibility if it goes down or spoils. Since it wan’t specified which fruit he'd provide it doesn’t look like ribbit, while for a barrel of wine it looks like ribbit since the seller specifies which one.
  50. Chelkat Binyamin 173:146
  51. Gemara Bava Metsia 64a, Shulchan Aruch Y.D. 173:13, Chelkat Binyamin 173:146
  52. Shulchan Aruch Y.D. 173:13, Shach 173:24, Taz 173:17. Netivot Moshe on Taz 173:17 explains that essentially the Shach and Taz forbid the buyer to accept responsibility for the change in price and say that they're in disagreement with the Drisha who allowed this. However, the Netivot Moshe argues that the Drisha only allowed the buyer to accept responsibility for the change in price if the seller accepts another responsibility such as if it spoils. Chavot Daat 173:18 holds it is forbidden even in such a case.