The Bunims were excitedly planning for the bar mitzvah of their twins after Sukkos. Mr. Bunim ordered two pairs of high-quality tefillin from a sofer he knew in Yerushalayim, whose son lived near them in the U.S.
“How much are the tefillin?” Mr. Bunim asked the sofer.
“Each pair costs 3,000 NIS,” replied the sofer, “a total of 6,000 NIS.”
“Is there an option to pay in installments?” asked Mr. Bunim. “Also, how can I transfer the money to you? I may have a few shekalim, but I need to pay in dollars.”
“You can pay three monthly installments of 2,000 NIS,” replied the sofer. “If you want, give the dollar equivalent to my son. I’ll settle with him.”
When Mr. Bunim received the tefillin, he paid the first installment, when the exchange rate was 27 cents to the shekel, or 3.7 NIS to the dollar.
The following month, when the time came for the second payment, Mr. Bunim wondered what exchange rate he should pay. Should he continue to pay at the initial rate, or should he use the current rate of exchange – and would it make a difference whether the rate is now higher or lower?
“I don’t want your father to lose out because of the installments,” Mr. Bunim said to the sofer‘s son.
“But I don’t want you to pay more than you owe,” replied the son.
Mr. Bunim called Rabbi Dayan and asked:
“What exchange rate should I pay for the subsequent installments?”
“When someone buys something for a price stated in the local currency but pays later in a different currency,” replied Rabbi Dayan, “the exchange rate is determined by the time of payment. This is because the obligation remains in its initial form until payment, so that is the amount of local currency that is owed” (see C.M. 42:14).
“Thus, if the tefillin were sold in Israel for 6,000 NIS, that is the price, whatever amount of USD is necessary to cover it later, whether the exchange rate went up or down.
“Similarly, when payment is agreed to be in installments of local currency, the cost is in accordance with that currency based on the exchange rate at the time of each payment – whether more or less than the rate at the time of the initial purchase.
However, if the sale was not in Israel, yet stated in NIS, since payment later or in installments is like a loan of the balance, there can be an issue of se’ah b’se’ah (a measure for a measure), as will be explained.
When lending commodities, e.g., borrowing 100 lbs. of potatoes to return 100 lbs., mid’Oraysa there is no issue of ribbis even if the price fluctuates and the potatoes now cost more. However, mid’Rabbanan it is a form of ribbis, termed se’ah b’se’ah. The borrower cannot return more than the initial worth of the 100 lbs. of potatoes, unless certain conditions are met, among them, yesh lo (the borrower has some of the commodity) – i.e., he has some potatoes (Y.D. 162:1-2).
Foreign currency is also considered a commodity, not money, for this purpose, so that the rules of se’ah b’se’ah apply. Thus, if the purchase was made in the U.S., but the price was agreed in NIS, and the exchange rate rose – so that 6,000 NIS require more USD than before – there is a potential ribbis issue unless the buyer has some NIS.
“If merchandise was sent from Israel to the U.S.,” concluded Rabbi Dayan, “and it is unclear where the ‘transaction’ took place (i.e., whether the courier acquired it on behalf of the buyer in Israel, or the buyer acquired it only upon delivery in the U.S.), we can be lenient to consider the agreed currency as money, since the ribbis concern when lending commodities or when ensuing from a sale is d’Rabbanan.”
Verdict: The agreed currency determines the price, and the exchange rate is according to the date of payment. If the transaction was agreed in a foreign currency and payment is delayed, there can be a ribbis issue of se’ah b’seah, unless the buyer has some of that currency.