Torah.org Home Subscribe Services Support Us
 
Print Version

Email this article to a friend

Chapter 66:1-3
Investment Contracts

[Though lending money at interest is forbidden, under certain conditions it is permissible to invest money in a business venture and receive a share of the profits. This arrangement is called a heter iska and is discussed in the following laws.]

1. When a person entrusts money to a colleague to invest in a business venture, with the stipulation that they will divide equally all profits and losses, this arrangement is referred to as an iska and is forbidden. The rationale is that half of the money is considered to be a loan to the recipient, since he is responsible for it. He derives profit from it and he incurs any losses suffered. The other half is considered to be a deposit, because the investor is responsible for it. He benefits from its profits and incurs the losses suffered. The recipient does business and troubles himself with the portion which is a deposit and belongs to the investor only because he has given him the other portion as a loan. Undertaking those efforts on the investor's behalf is considered interest, and hence the arrangement is forbidden.

Nevertheless, such an arrangement may be permitted if the investor pays the recipient a wage for the work and effort involved in doing business with his share. The wage should be stipulated or paid when the investment is made. Payment of even a nominal amount is sufficient to remove the prohibition.

2. The investor may stipulate that the recipient's word will not be accepted should he claim that the investment suffered a loss, unless he supports his statements with the testimony of trustworthy witnesses. Similarly, he may stipulate that his word will not be accepted regarding a profit made by the investment unless he supports it with an oath.

3. It is also possible to stipulate that the recipient will have the choice of giving the investor a specific amount instead of the latter's share of the profits, and thus any profits remaining will belong to the recipient.

This is proper, because most likely the recipient will not desire to take an oath and give the investor the share agreed upon. This is the basis of the heter iska, which is commonly used at present.

Even if the recipient knows that no profit was made - and even if he suffered a loss - he may pay the investor the principal and the amount of profit stipulated. No prohibition is being transgressed; since he is obliged to take an oath, he has the right to pay money to free himself from that obligation.

   Investment Contracts
Paragraphs 4-6
Next
Table of Contents

Halacha-Yomi, Copyright (c) 2000 ProjectGenesis, Inc.

 






ARTICLES ON DEVARIM AND THE THREE WEEKS:

View Complete List

The Usual Suspects
Rabbi Mordechai Kamenetzky - 5762

Elusive Allusions
Rabbi Yaakov Menken - 5764

Flight to Freedom
Rabbi Pinchas Avruch - 5763

Looking for a Chavrusah?

9th of Av: Reasons for Fasting - Part 2
Rabbi Yehudah Prero - 5758

Forgotten Oaths
Rabbi Aron Tendler - 5764

The Way to a Person's Soul is Through His Dignity
Rabbi Yisroel Ciner - 5757

Frumster - Orthodox Jewish Dating

Of Prophets and Teachers
Rabbi Aron Tendler - 5761

Kamtza and Bar-Kamtza
Rabbi Yisroel Ciner - 5758

You Gotta Believe
Rabbi Raymond Beyda - 5765

ArtScroll

Small Favors
Rabbi Yissocher Frand - 5772

The Purpose of the Fifth Book
Shlomo Katz - 5767

Shabbos Chazon
Rabbi Pinchas Winston - 5762

> How We Suffer
Rabbi Yehudah Prero - 5758

Parshas Devarim - Eichah?
Rabbi Pinchas Winston - 5758

Body Language
Rabbi Yochanan Zweig - 5771

Rebuilding the Temple with Devotion
Rabbi Yehudah Prero - 5757



Project Genesis

Torah.org Home


Torah Portion

Jewish Law

Ethics

Texts

Learn the Basics

Seasons

Features

TORAHAUDIO

Ask The Rabbi

Knowledge Base




Help

About Us

Contact Us



Free Book on Geulah!




Torah.org Home
Torah.org HomeCapalon.com Copyright Information