It is very commonplace today to offer people early bird discounts to incentivise people to pay in advance. For example, a merchant importing limited-edition whiskies may offer a reduced price to purchasers who pay before the goods arrive. This raises an important halachic question whether such a practice involves a concern of Ribbis (the prohibition of charging interest between Jews)
Introduction: The Basic Prohibition
A classic case of Ribbis, prohibited on a biblical level, is when one person lends money to another, and they agree from the outset that he will repay more than the principal.
However, the prohibition extends beyond direct interest. There is a broader category known as Ribbis derabonan, rabbinically proscribed interest, which includes indirect benefit received in exchange for granting credit or advancing payment.
Accordingly, the transaction may still be prohibited if one party gets extra benefit due to delayed or early payment, in a manner that resembles interest.
The Case of the Wax (Gemora)
This is best illustrated by a case given in the Gemora1 . Rav Nachman addresses the case where a purchaser pays in advance for wax. At the time of payment the value of 4 blocks of wax was 1 zuz2 . The merchant says that due to the fact that the purchaser paid early, he will receive an additional block of wax. Rav Nachman says that the propriety of such action would depend as follows:
If all the wax is already in the possession of the merchant, even if it is temporarily inaccessible (e.g. locked away), the transaction is permitted. Since the goods exist and are in the possession of the merchant, the sale is considered complete at the time of payment, although at a cheaper price.
However, if the blocks of wax are not in the possession of the merchant at the time of the sale, then both the merchant and the purchaser have violated the prohibition of Ribbis derabonan. The reason is that the purchaser is effectively extending a loan by paying in advance, and the extra wax received later resembles interest on the money that was received in advance, making it akin to Biblical Ribbis.
The novelty of Rav Nachmans Ruling
Although one may presume that such a scenario is no different to when the vendor possesses the wax but is unable to access it, Rav Nachmans novel ruling indicates otherwise. Since the merchant does not yet have the goods in his possession, the prohibition of Ribbis derabonan applies.
Codification in Halacha
This is indeed codified in ShulchanAruch3 who rules that if one acquires an item whose market value is 12 and he pays 10 due to early payment, such a transaction is only permissible if the item being acquired is already in the possession of the merchant, even if currently inaccessible.
However if the merchant does not yet have the merchandise in his possession at the time of sale, even if it is in the possession of the supplier, one would violate the prohibition of Ribbis derabonan.
This is also codified by the Rambam4 .However the Rambam adds an additional case in which one would transgress the prohibition of Ribbis derabonan:
If the purchaser pays a selah (ancient currency) for 4 seah (a Talmudic measure) of grain and receives 5 seah instead, this is perfectly legal. However, if at the time of receiving payment, the grains, though extant, were in the possession of a debtor to the merchant, giving 5 seah of grain once the debtor has returned it would be a violation of Ribbis derabonan as it is similar to one paying in advance and fixing a later time when the goods will be received at a discounted rate due to the delay.
The Machaneh Ephraim’s understanding of the Rambam
The MachanheEphraim5 infers from this additional ruling of the Rambam that any time one sets a fixed time for receipt of the goods, in lieu of which one would receive a more favourable price, would be a violation of Ribbis derabonan, even if the goods are in the possession of the merchant at the time of sale. However, the Hagahot on the Machaneh Ephraim notes that both Rashi and Tosafot argue on the Rambam and hold that even if a fixed time is set, nonetheless, if the asset is in the possession of the merchant, one would not violate the prohibition of Ribbis derabonan.
Accordingly, in our case of early bird discounts, it would emerge that according to the Rambam, one has violated the prohibition of Ribbis derabonan, as one is receiving a discount for paying in advance to receive the goods at a fixed time. Whereas according to Tosafot, fixing a time for receipt will not lead to a violation of this prohibition, on condition that the merchant has possession of the merchandise at the time of sale.
Goods in Transit: A Practical Question
Would the same law apply if the merchant has already purchased the goods and is thus the legal owner, but has yet to actually receive the goods himself? For example, if the product is in transit from his supplier. Would these items be considered in the possession of the merchant or not?
According to Rashi and Tosafot it is clear that if the merchant has paid for goods but has not yet received them from the supplier, they are not considered to be in his possession. This is because the halacha is that a transaction is not considered complete until the buyer performs an act of acquisition on the item being purchased, and payment for an item is not considered a final act of Halachic acquisition. As such, the rabbinic prohibition of Ribbis would apply.
This however seems to be contradicted by the Shach 6 who states that if the merchant owns the goods but gave them to a third party for safekeeping or as security, one would not transgress the prohibition of Ribbis derabonan. Yet this appears very similar to the case where the whisky is in transit
– so why is one considered a violation while the other is not?
Understanding the Distinction
This question can be explained as follows.
We stated above that if the goods are in possession of the merchant but the warehouse is locked there would be no prohibition of Ribbis derabonan.
The Rivash7 explains that the reason is because the purchaser has paid in cash and has thereby made enough of a binding acquisition of the goods, at least to the extent that if the seller were to retract, he would receive the curse of Mi ShePara8. Accordingly, it is likewise considered a sufficient acquisition to prevent the violation of Ribbis derabonan between and the merchant and the supplier.
If the merchant pays cash to the supplier, this would not constitute ribbis, as it is a monetary transaction which, as explained above, creates a mi shepara and it mitigates the violation of ribbis derabonon.
However, if the merchant then sells the goods onward to customers while they are still in transit, a concern of ribbis will arise. Based on the Rivash, although the kinyan may be
sufficient to prevent ribbis between the merchant and the supplier, it may not be considered a complete acquisition to allow the merchant to resell the goods without raising issues of ribbis, since it is not a full acquisition.
Accordingly, in our case of limited-edition whiskies, we would need to analyse whether the merchant has acquired the goods from the supplier, and whether they are in customs or on the ship, and the impact those details have regarding ownership of the goods.
What is the Din if the goods are acquired by other means?
However the question arises if the merchant acquires the goods from the supplier via the means of Chalipin (formal symbolic exchange) or Situmta (trade custom acquisition), in such cases Chazal did not enact a decree to prevent the acquisition, and it would be considered complete.
Unlike a standard monetary acquisition, where full possession has not yet been effected, here he is considered to have a sufficiently strong level of ownership; accordingly, there may be no prohibition of ribbis, even for the merchant to sell the goods to customers while they are in transit.
This can be answered by the following question of the Machaneh Ephraim:
What if the merchant has goods in a warehouse, but the warehouse is in another city-Is this more analogous to when he is waiting for his child to bring the key and as such it would be permissible, or more analogous to when the merchant bought from the supplier and the supplier has not yet delivered the goods?
The answer is that this is subject to a dispute between Rashi and Tosafot. According to Rashi, this would be permissible, as it is analogous to the case of the child. However, Tosafot disagrees.
Accordingly, even if one acquires via Chalipin or Situmta, which are considered complete acquisitions, if the goods are in another location, this remains subject to a dispute among the Rishonim.
Conclusion
In conclusion, if the merchant selling the whisky does not make a complete halachik acquisition of the whiskey, according to many poskim it would be prohibited to sell the whiskeys with an early bird discount and would violate the prohibition of Ribbis derabonan.
Even if there is a complete acquisition, since in this case there is a fixed time of receiving the goods which would be prohibited according to the Rambam and additionally the goods are not in his possession which according to Tosafot would be subject to the rabbinical prohibiton of ribbis.
- Bava Metzia 63b
- A form of currency in the times of the Talmudic Era
- YD 173:7
- Hilchos Malve VLoveh 9:6
- Hilchos Malve Vloveh Siman 29
- Yoreh De”ah Siman 173:18
- Shu”t Rivash Siman 306
- Bava Metziah 48a-Mi ShePara is a phrase used by the Gemora to explain a curse pronounced on one who retracts on a deal after money was paid but has not yet taken the item into his possession. Since pay- ment is not a final binding sale, retraction is halachically binding, though not ethical business practice.
