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Mendy decided to enter the arba’ah minim (Four Species) business. He did not have much experience with esrogim and lulavim, so he decided to start simple, with 100 closed sets.

He contacted a wholesaler, who sold whole sets in pre-sorted, closed packages.

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“How much is each set when I buy 100 mehudar sets?” Mendy asked the wholesaler.

“We have a number of purchase options,” replied the wholesaler. “It depends what arrangement you want.”

“What are the options?” asked Mendy.

“If you buy 100 sets and pay up front,” replied the wholesaler, “the price is $40 per set. However, if you plan to pay only after Sukkos, there’s an extra $2 surcharge, $42 per set.”

“Do you have a consignment option?” asked Mendy. “I’m just starting, and don’t know how much I will succeed in selling.”

“We have a consignment option in which you pay after Sukkos only for the sets that you sell,” replied the wholesaler. “That option costs $55 for each set that you sell.”

“Give me a day to consider,” said Mendy. “Be’H, I’ll get back to you tomorrow.”

The first option was clearly the cheapest, but Mendy didn’t have the $4,000 readily available and didn’t know how much he would sell. He considered the other two options and consulted with his chavrusa, who had some experience selling arba’ah minim.

“Personally, I would go for the simplest option,” said the chavrusa, “but you’re just starting. I’m concerned, though, that there may ribbis with the other options, since you’re paying extra for delayed payment.”

“I didn’t think of that,” acknowledged Mendy. “I’ll check it out!”

Mendy called Rabbi Dayan and asked:

“Is there a ribbis problem with the other options?”

“In principle, when purchasing items, payment is due when taking title or possession of the item,” replied Rabbi Dayan. “Therefore, the immediate payment price is usually viewed halachically as the true price. Charging a higher price for payment later or in installments, presents a problem of ribbis, since this is tantamount to a ‘loan’ (credit) to the buyer” (Y.D 173:1).

“Thus, the ‘true’ wholesale price for the sets is $40. The second arrangement, whereby the cost for payment after Sukkos is two dollars higher, is ribbis d’Rabbanan and not allowed (see also Bris Yehuda 22:8).

“Nonetheless, the third arrangement, sale on consignment, is allowed. This is certainly true in the case of ‘true’ consignment, in which case the retailer never takes legal title to the merchandise. He serves as the seller on behalf of the wholesaler, who retains liability for the merchandise, and title transfers directly from the wholesaler to the customer. There is clearly no ribbis in this arrangement, since the retailer doesn’t buy the merchandise and doesn’t owe any money to the wholesaler. The retailer simply transfers the wholesaler’s selling price to the wholesaler, retaining any additional amount that he charges the customer as his own profit (Y.D. 173:14).

“Moreover, even if the wholesaler offered a different “sale or return” option, whereby title and liability is transferred to the retailer, but he pays after Sukkos only for the sets he sold, it would still seem permissible. This is because here the wholesaler is not merely offering delayed payment at a higher price, but is offering the retailer an option to return the unsold merchandise. Merchandise with an option to return what remains is inherently worth more than merchandise without such an option.

“Thus, the wholesaler is essentially offering the retailer not two payment options,” concluded Rabbi Dayan, “but rather two different purchase options: A standard sale, with no option to return, and a sale with the option to return. Although this second purchase option has built-in credit (payment after Sukkos), it is still allowed, since only one price is offered for this sale option” (see Bris Yehuda 22:5,14).

Verdict: Offering one price for immediate payment and a higher price for sale on credit is not allowed. However, a higher price for consignment or “sale or return” option is allowed, since it is a different kind of sale.

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Rabbi Meir Orlian is a faculty member of the Business Halacha Institute, headed by HaRav Chaim Kohn, a noted dayan. To receive BHI’s free newsletter, Business Weekly, send an e-mail to subscribe@businesshalacha.com. For questions regarding business halacha issues, or to bring a BHI lecturer to your business or shul, call the confidential hotline at 877-845-8455 or e-mail ask@businesshalacha.com.