Laws of Ribit
By rabbinic decree, it is forbidden to sell an item with advance payment and to receive the item later [that is, one may not pay the seller before the buyer receives the merchandise], because until the time the item is delivered to the buyer, the seller is considered a borrower [-who received money for free] and the buyer a lender. If the item becomes more expensive in the meantime, and the buyer receives the item at the previous price, it emerges that the borrower [-the seller] gave the item at a discount because of the loan, and this involves ribit.
Even if in the end the item did not become more expensive and remained at the same price, the seller and the buyer have violated the rabbinic prohibition of ribit.
However, there are three cases in which Chazal permitted paying in advance before receiving the item.
a) The allowance of “yesh lo” — “he has it”: if the seller has an item identical to the one he wishes to sell now, he may give a discount to one who pays in advance, because we view it as though the buyer purchased the item when he paid for it now, and only the delivery of the item will take place later.
b) The allowance of “yatza ha-sha’ar” — “the market price has been established”: if the item exists in the market and has a known price, it is permitted to pay in advance.
c) The allowance of “ein shumato yadua” [-there is no fixed price]: some are lenient and permit paying in advance for an item that has no known market price, because whatever price the seller sets will not appear to be ribit. Others disagree and hold that there is no allowance for something whose valuation is not known [and it is permitted only if there is “yesh lo” or “yatza ha-sha’ar”]. One who is lenient in this matter has upon whom to rely.
An explicit prohibition in the three cases mentioned above
Even in the three cases mentioned above, the seller may not explicitly say to the buyer, “If you pay in advance I will give you a discount, and if you do not pay in advance you will not receive a discount,” because the transaction thereby appears like ribit: only if you lend me [-pay in advance] will you receive a discount.
Details of the allowance of “yesh lo”
As stated, it is permitted to pay in advance if the item is already in the store, warehouse, and the like. Even though the buyer will not take that very item, but will take what the seller orders later, it is permitted.
If the seller has the item, but does not have the entire quantity that the buyer needs, it is forbidden to pay in advance.
If the seller has the product but it is not yet completely ready, if one or two actions are lacking to complete it, it is considered “yesh lo”; but if three or more actions are lacking, this is not considered “yesh lo,” and it is forbidden.
Details of the allowance of “yatza ha-sha’ar”
As stated, it is permitted to pay in advance if the item exists in the market and has a known price. Therefore, it is permitted to pay in advance for most basic products, since they can be obtained everywhere. However, there is room to question whether the allowance of “yatza ha-sha’ar” applies only to items under government supervision, such as milk and bread, which have a uniform price, or even to anything commonly available. The practical difference in this doubt applies to most common items in our time: every store sells at a different price, yet they are commonly available — whether the allowance of “yatza ha-sha’ar” applies to this.
The allowance of “yatza ha-sha’ar” applies only if it can be obtained at the same price; but if it can be obtained only at a higher price, it is forbidden. Therefore, if one buys at a low price [for example, in a special sale], it is forbidden to pay in advance, since this product cannot be obtained at that low price.
An item whose price constantly changes [for Sephardim, over about two months, and for Ashkenazim, over several days] and has no fixed price, such as foreign currency, is not considered something that can be obtained at the same price, and it is forbidden.
It is forbidden to pay in advance in order to receive products at a certain time [even products that can be obtained elsewhere], if, had one bought them now, they would spoil by that time. Therefore, it is forbidden to pay in advance for fruits and vegetables if the delivery time is after a long period, such that the fruits and vegetables would rot from the time of payment until delivery. But if the delivery time is soon and the fruits will remain fit, it is permitted.
If the buyer is not interested in receiving the item before the agreed time for any reason, ideally one should not pay in advance even though the item can be obtained elsewhere. For example, if he paid for a new closet in order to put it into a new apartment, but the apartment is not yet ready and he is not interested in having the closet delivered now — one should be stringent in this if the seller does not have the closet.
Cases in which the allowance of “yatza ha-sha’ar” does not always apply
An item that has several varieties, and the item itself is commonly available in many stores: if the buyer specifically wants a certain type, and that type exists only in a certain store, the allowance of “yatza ha-sha’ar” does not apply, because he is interested only in that specific type.
An item that is difficult to obtain in the place where he lives, but can be bought in a distant place: if he would not go there in order to buy it, the allowance of “yatza ha-sha’ar” does not apply. But if these are items that people commonly travel to a distant place to buy, such as furniture, electrical appliances, and the like, it is permitted to pay in advance.
Likewise, all products that are difficult to obtain [for example, purchased by special order, or a rare model, or a second-hand item] do not have the above allowance.
Details of the allowance of “ein shumato yadua”
As stated, some are lenient and permit paying in advance for an item whose valuation is not known [meaning that it has no known market price and is sold at different prices], because now any price the seller sets will be a genuine price.
This allowance applies only if no large discount is made in such a way that, at the time the merchandise is received, it is evident that the discount is because he paid in advance.
According to the above, one who orders a bookcase by special order [carpentry work], a garment from a seamstress, or a renovation contractor — according to those who are lenient regarding something whose valuation is not known, it is permitted to pay them in advance [and regarding the allowance of “yesh lo,” it was explained above that one may not permit it if it is lacking three labors].
However, there are those who disagree and do not accept this allowance. According to them, the manner in which payment would be permitted is if the payment is divided into several parts, meaning that one pays separately for the existing parts and separately for the work; since the parts already exist, it is permitted to pay for them, and if he begins to perform any action for the customer, it is also permitted to pay for the work [there are additional cases in which it is permitted to pay a carpenter or seamstress in advance, as explained below].
Payment by postdated check
One who pays by a postdated check dated for the time of receiving the product is not considered to have paid in advance, and it is permitted.
If the check is postdated to a certain time, but the seller does not know in advance whether the product will have arrived by then, it is permitted to pay with this check. Even if in the end it becomes clear that he paid in advance before receiving the product, there is no prohibition of ribit, because it is evident that the seller did not preserve the price for him because of a loan, since it is possible that he will not receive the money before the time.
Practical examples of payment before receiving the merchandise
Payment for electrical appliances, such as furniture, a refrigerator, an oven, and the like, before receiving the merchandise: if the seller has the merchandise in his possession and the customer is ready to receive it, it is permitted. If not, it must be considered in light of the allowances of “yatza ha-sha’ar” and “ein shumato yadua,” as explained.
Cases in which it is permitted to pay in advance without any concern
a) If one pays only a down payment of ten percent.
b) By giving a postdated check dated for the time of receiving the merchandise.
c) By stipulating that if the price rises, he will pay more [as below].
Payment to a hall / catering service before the event — payment for a zimmer before the stay
One may not pay a wedding hall or catering service before the event, and one may likewise not pay for renting a zimmer or a hotel room before arriving at the place, and this involves a concern of ribit, for it is advance pricing in a case of “ein lo” — “he does not have it.” The hall or the hotel room / zimmer is not called “yesh lo,” because the client cannot use the hall before the wedding; and as for payment for the products, even though the hall and catering service have products in their possession, since there are products that cannot last until the wedding, it is not considered “yesh lo.”
Cases in which, according to all opinions, it is permitted to pay in advance
a) A down payment of 10 percent.
b) A postdated check dated for the time of the event or the time of using the guesthouse.
c) To stipulate that if the price rises, he will pay more.
d) To pay in the form of pricing in dollars, as below.
Payment by pricing in dollars: A person making an event who needs to pay in advance for the event, whose cost is forty thousand NIS — the hall owner must hold dollars in his possession in that amount. When the person making the event pays the hall owner in advance, the payment is for the purchase of the dollars [which are commodities], so that by paying forty thousand NIS, he buys dollars of that value that are in the seller’s possession [-the hall owner’s].
At the time of the event — since the person making the event must pay the hall owner for the event, and the seller [-the hall owner] must give the buyer [-the person making the event] the dollars he bought from him, they will offset one against the other: the person making the event will not pay for the event [because he already paid in advance], and the hall owner will not provide him with the dollars he bought. In this manner there is no concern at all.
Use of the allowance of “yatza ha-sha’ar”
It was explained that it is permitted to advance money if “yatza ha-sha’ar.” Accordingly, it would seem at first glance that there is no need for all four of the above methods when paying a hall owner and the like in cases where it is possible to obtain another catering service and another hall [if he has no particular interest specifically in this hall and catering service].
However, it was explained above that there is room to question whether the allowance of “yatza ha-sha’ar” applies only to something whose market price is uniform, such as products under government supervision, whereas for other products this allowance may not exist.
Use of the allowance of “ein shumato yadua”
Likewise, according to what was stated above, that some are lenient to advance money in a case of “ein shumato yadua,” it appears that it is permitted to advance payment to a hall owner and the like even without any of the four methods mentioned above.
However, since it was explained that there are those who disagree with this allowance, according to their view the permitted cases are only those explained above [as stated, one who is lenient to rely on the allowance of “ein shumato yadua” has upon whom to rely, and may pay the hall owner and catering service in advance even without the four methods mentioned above].
Advance payment of municipal tax
It is permitted to pay the municipality in advance, such as municipal tax payments where one who pays in advance receives a discount, because the prohibition of ribit does not apply to a municipality. However, with regard to the credit card company there is a prohibition, unless there is a heter iska.
Advance payment to an insurance company
It is permitted to pay an insurance company in advance, because one receives the obligation to pay immediately at the time of payment [and an insurance company gives only an obligation, since it is possible that it will not need to pay at all].
Advance payment for a daily newspaper and the like
With newspapers, none of the above allowances apply. Therefore, if the newspaper becomes more expensive in the middle of the month, one must pay the increase, unless there is a heter iska. [The fact that a subscriber receives a discount is not prohibited, because the reason for the discount is that he is a regular subscriber].
Ordering furniture\a refrigerator\an oven\a washing machine\an air conditioner with advance payment
As stated, it is forbidden to pay in advance before receiving the product, unless there is “yesh lo” or “yatza ha-sha’ar,” and some are lenient also in a case of “ein shumato yadua.” When one orders the above from the seller, many times the seller does not have the product and orders it from the supplier to the customer’s home; this does not have the allowance of “yesh lo,” because the seller does not have the product in his possession.
Above were explained the cases in which it is permitted to pay in advance according to all opinions, and as stated, one who pays in advance and relies on the allowance of “ein shumato yadua” has upon whom to rely.
Food stores where it is customary to pay at the beginning of the month
It is permitted to pay in advance to food stores where it is customary to pay at the beginning of the month, since they do not agree what and how much will be bought and at what price, and there is no concern at all.
