Hilchos Choshen Mishpat

Volume IV : Number 1

Lending Money the Halachic Way

Question:

Is it necessary for witnesses to be present and for a contract to be drawn up when lending money, or is this not required?

Answer:

1. Our Chazal forbade us from lending money to others without witnesses present, or without a contract signed by witnesses. The custom today is to rely on one witness seeing the transaction, or a note either handwritten by the borrower, or signed by him, affirming that he has borrowed money from the lender. It is also sufficient if the borrower gives the lender some collateral to guarantee repayment of the loan, such as a check made out for when the loan is due, or some item equivalent to or greater in value that the loan.

   Without any of the above, even today we may not lend.

2. The above prohibition applies even if the lender is a Talmid Chacham (Torah scholar), a relative to the lender, or a wealthy person about whom there is no doubt that he will easily be able to repay the loan. (1)

   However, if the lender knows the borrower to be a G-d fearing person who would never deliberately lie, and the lender decides that if this borrower should ever deny that he owes the money he will forgive the debt entirely and will not seek recourse in Bais Din, if necessary he may lend the money without witnesses, notes, or guarantees. It is still preferable to follow the words of our Chaza"l even in this case. (2)

3. It is proper that all agreements and obligations between two or more people be put into writing and signed, even if the parties are good friends or relatives. The agreement should be as detailed as possible. This is true even if one of the parties may interpret this to mean that you do not trust him.

   Therefore, all agreements to hire a worker, contractor, or to sell or rent items, etc. should be put into writing with all details and conditions, even the most minute, explicitly spelled out. The purpose of this is to prevent any friction and financial claims that may arise at a later date, due to a misunderstanding, miscommunication, or forgetting what the original agreement actually was. (3)

Sources:

(1) The Gemara in Bava Metziah 75b states: "Rav Yehuda says in the name of Rav, anyone who has money and lends it without witnesses, transgresses the prohibition of (Vayikra 19:14) 'You shall not place a stumbling block in front of the blind'." Rashi explains, because he is giving the borrower the opportunity to entertain the thought of not repaying the loan. The Gemara continues "Reish Lakish says that he causes himself to be cursed, as it is written (Tehillim 31:19) 'Let the lying lips which speak with arrogance and contempt against the righteous be silenced'." Rashi explains, that since the borrower might forget about the loan and deny it, people will accuse the lender of wishing to take money that is not rightfully his, and curse him. The Gemara there states that this is especially true when lending to a Torah scholar. Since he is absorbed in his studies, he can easily forget about any money that he may have borrowed. This is stated as the Halacha in the Rambam (Hilchos Halva'ah 2:7), and in the Shulchan Oruch, Choshen Mishpat 70:1, and agreed to by the Rema, SM"A, and Shach there.

Although there are Achronim (later Halachic authorities) that mention that they themselves are not stringent regarding this Halacha, as stated in the Pilpulei Charifta (on the Gemara there in Bava Metziah) and in the Aruch HaShulchan (on the Shulchan Oruch there), the Teshuvos Pri Yitzchok (Vol. I Siman 48, and Vol. II Siman 49) concludes his discussion on this matter by saying: "Chalila (Heaven forbid) to budge from the conclusion of the Shulchan Oruch, which is the opinion of all Rishonim!"

The Tumim (Siman 70) and the Lechem Mishna (Hilchos Halva'ah Ch. 2) prove that the reason for this Takkana was because our Chaza"l were concerned that the borrower might forget about the loan, not that he would intentionally lie and deny owing the money. Their proof is from the fact that the Gemara says that witnesses to the loan are sufficient. If the borrower wishes to lie, he can admit that the money was borrowed, but claim that it was repaid, since the Halacha is (Choshen Mishpat 70:1) that even if a loan was made in the presence of witnesses, it need not be paid back in their presence! Therefore, it is clear that they did not make this Takannah to prevent lying, but rather to prevent forgetfulness.

According to this, it makes sense that it is also sufficient to have a note handwritten by the borrower attesting to the fact that the money was actually borrowed, to jog his memory and remind him about the loan, if necessary. Also, the presence of one witness is sufficient, which has the credibility according to the Torah to obligate him in an oath. Although there are Poskim that disagree with this conclusion, it is clear from the Shach there (2) that the Shulchan Oruch holds that this is allowed, and this is also the conclusion of the Chofetz Chaim, in his Sefer Ahavas Chessed (1:8).

(2) If the lender knows the borrower to be a G-d fearing person, who will not knowingly deny a debt that he owes, he is not transgressing "Lifnei Iver" by lending without proof, since this borrower has no temptation to deny the debt. If so, the only issue that remains is the problem as stated by Reish Lakish, that the borrower causes curses to be brought upon himself by other people who may hear that he claimed money which is (allegedly) not his. Therefore, if the lender were to decide at the time of the loan that he will never take the borrower to court if a dispute arises, rather he will only discuss it privately with the borrower, he has no reason to assume that others will hear about it and curse him, and he may therefore loan the money without a note or witnesses - if necessary.

If the lender would be willing to go one step further and state that if the borrower would dispute the loan he forgives the loan entirely, and has no claim at all against him, there is no need for any witnesses or proof to be drawn up at the time of the loan at all.

(3) It is an obvious and well known fact that most disputes between people arise from the fact that there are misunderstandings on issues that were not clarified and put into writing before entering the agreement. This is usually because it is unpleasant to make demands and conditions, especially when the two parties are relatives, friends, or one of them is a Torah scholar, as this implies a lack of trust between them. The end result of this is that usually because of a lack of evidence a Bais Din will leave the disputed money with the Muchzak - the person who has control over the money, which results in the other party losing money, and developing a hatred for the other party (and very often for the Bais Din!).

Therefore - "HaChacham Einav B'Rosho!" (Koheles 2:14), a wise person should see what will result, and the parties should put their agreement into writing to the best of their ability, taking into consideration all possible scenarios that might arise and be a cause for a possible dispute. Even if it is too inconvenient to have professional help in doing this, it should still be done by the parties to the best of their abilities.

If doing so results in any unpleasant feeling by the other party, you can explain that the reason that you are insisting on this is because you are concerned that you might forget over time exactly what the agreement was, and you are therefore doing it for yourself, even though you have absolute trust in the other party. You can also add that besides this, you are doing this to fulfill a Takkanah of our Chaza"l, as we've explained above!

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This week's class is based on a column by Rabbi Tzvi Shpitz, who is an Av Bet Din and Rosh Kollel in the Ramot neighborhood of Jerusalem. His column originally appears in Hebrew in Toda'ah, a weekly publication in Jerusalem. It has been translated and reprinted here with his permission and approval. His columns have recently been compiled and published in a three volume work called Mishpetei HaTorah, which should be available from your local Sefarim store.

Feedback is appreciated! It can be sent toatendler@torah.org.

This week's class is based on a column by Rabbi Tzvi Shpitz, who is an Av Bais Din and Rosh Kollel in the Ramot neighborhood of Jerusalem. His Column originally appears in Hebrew in Toda'ah, a weekly publication in Jerusalem. It has been translated and reprinted here with his permission and approval.

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Please Note: The purpose of this column is to make people aware of Choshen Mishpat situations that can arise at any time, and the Halachic concepts that may be used to resolve them. Each individual situation must be resolved by an objective, competent Bais Din (or Rabbinic Arbitrator) in the presence of all parties involved!