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“It’s an open and shut case,” said Mr. Neuman. “I lent Mr. Pincus money, and he hasn’t paid me back. He owes me $11,000.”

“I do not,” said Mr. Pincus.

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“I have a loan document, signed by witnesses,” said Mr. Neuman.

“The document is invalid,” said Mr. Pincus.

“What’s wrong with it?!” exclaimed Mr. Neuman.

He presented the document to Rabbi Dayan, who examined it and frowned.

“I see that the initial loan was only for $10,000,” Rabbi Dayan said. “This agreement calls for an interest payment of 5 percent per annum. But you are not allowed to collect ribbis.”

“Well, Mr. Pincus still owes me the $10,000 principal, then,” insisted Mr. Neuman.

“Do you have any other evidence that this loan occurred?” asked Rabbi Dayan.

“No,” said Mr. Neuman.

“Do you admit to borrowing the money?” Rabbi Dayan asked Mr. Pincus.

“Yes,” Mr. Pincus said. “But since the loan document is invalid, I shouldn’t have to pay the loan.”

“That makes no sense!” argued Mr. Neuman. “Even if the ribbis clause is invalid, the rest of the document remains intact. There are signed witnesses on it.”

“Once the document is problematic,” replied Mr. Pincus, “those witnesses are meaningless.”

The two turned to Rabbi Dayan to hear his ruling.

“There is a dispute between tanna’im [Bava Metzia 72a] regarding a loan document that includes ribbis,” Rabbi Dayan began. “R. Meir maintains that we fine the lender so that he doesn’t even collect the principal, whereas the Sages maintain that he collects the principal.”

“Many Rishonim, followed by the Shulchan Aruch, explain that the Gemara is discussing a document in which the ribbis is mentioned separately,” continued Rabbi Dayan. “If it isn’t, and is included in a lump sum, the Sages agree that the document is completely disqualified, lest the lender collect the ribbis based on it. Even so, if the borrower admits to having borrowed money, he must pay the principal according to almost all authorities.” [Choshen Mishpat 52:1, Shach 52:4, Yoreh De’ah 161:11]

“But how can we rely on the document?” asked Mr. Pincus. “Aren’t the witnesses disqualified?”

“Tosafos says, “replied Rabbi Dayan, “that the witnesses do not become disqualified since most people are unaware that they are doing something wrong by signing such a document. Alternatively, the Ketzos [52:1] explains that the witnesses do not become disqualified until after they sign, so the document remains valid.” [Yoreh De’ah 160:1; Pischei Choshen, Shtaros 3:34-36]

“The Shach quotes other Rishonim who explain that the Gemara is actually discussing a document in which the ribbis is not listed separately, so that the witnesses are not disqualified since they were unaware that the document included a ribbis payment,” continued Rabbi Dayan. “However, if it was listed separately, the witnesses and the document would be disqualified.”

“The Shach concludes that it’s a sefeka d’dina (unresolved dispute). Thus, if the borrower admits to borrowing money, we are forced to rely on the document, and it’s questionable whether we can extract money from the borrower regardless of whether the ribbis is listed separately or not. [Sma and Shach 52:1; Mishneh l’Melech, Malveh v’Loveh 4:6]

“Mr. Pincus, however, does admit to borrowing money,” concluded Rabbi Dayan, “so Mr. Neuman can collect his principal.”

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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.
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