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Mr. Stern needed $10,000 to keep his business afloat. He asked a close acquaintance, Mr. Silver, for a loan.

“I’d like to borrow $10,000 for a year to keep my business afloat,” Mr. Stern said. “Are you willing to lend it to me?”


“I’m willing to lend it to you,” replied Mr. Silver. “At the end of the year, though, repay the money to my son, Moshe, who lives across the street from you. He can use the money.” He handed Mr. Stern a check for $10,000.

A year later, Mr. Stern contacted Mr. Silver. “Unfortunately, my business situation worsened,” he said. “As much as I feel indebted, I can repay only $5,000.”

“What do you suggest?” asked Mr. Silver.

“I’d like to repay the $5,000 that I’m able to,” said Mr. Stern, “and humbly ask if you are willing to forgo the other $5,000.”

Mr. Stern thought for a moment. “I’m willing,” he said, “but you have to ask my son, Moshe, if he also agrees.”

“Why should I have to ask Moshe?” asked Mr. Stern. “You lent me the money; it’s your call!”

“Since I told you to repay Moshe, it’s his right,” replied Mr. Silver. “How can I forgo his right?”

“Even though you told me to repay Moshe,” argued Mr. Stern, “essentially, I owe you. Giving to your son is in lieu of giving to you. If you’re willing to forgo, why do we need to involve Moshe?”

The two decided to approach Rabbi Dayan. Mr. Silver asked:

“Am I able to forgo the $5,000?”

“Had the initial agreement been to repay Mr. Silver, and after the loan was already granted, he said to pay his son, Mr. Silver would most likely be able to forgo,” replied Rabbi Dayan. “There are specific rules regarding how a loan can be halachically transferred, and even so, the lender can often forgo (C.M. 66:1,23,32,36; 126:1).

“However, when the initial arrangement was that Mr. Stern pay the son, the issue is complex. The Gemara (Kiddushin 7a) teaches that someone can give another money to benefit a third party. For example, a person can pay a seller so that a third party will acquire (C.M. 190:4).

“Similarly, poskim write that a person can lend someone money or buy an insurance policy and stipulate that the payment be to a third-party beneficiary (Cheishev Ha’efod 3:54,115(2); Pischei Choshen, Yerusha 1:[65]).

“When the borrower commits himself directly to the beneficiary, the beneficiary acquires that right, so that the lender cannot revoke it unless it was initially stipulated or there was clearly evident intent that he can change the beneficiary.

“For this reason, some Achronim write that if a woman specified when she got married that her kesubah be paid to a third party, she cannot forgo it to her husband, since he obligated himself directly to the beneficiary (Pischei Teshuva E.H. 105:3).

“Similarly, regarding vows, if Reuven banned (konam) Shimon from benefiting from him unless Shimon gives barrels of wine to his independent son, many Rishonim rule that Reuven cannot say, ‘It is as if I received’ the barrels in order to allow Shimon to benefit from him without annulling the vow; the son would have to forgo (Rashba, Ran, Meiri Nedarim 24a; Y.D. 232:20; see, however, Levush, ibid.).

“Thus, if Mr. Stern initially was mischayev (obligated himself) directly to Moshe, Mr. Silver cannot forgo the payment to Moshe.

“However, in our case, it is very possible that you never intended that Mr. Stern obligate himself directly to Moshe, especially if Mr. Silver holds the loan document,” concluded Rabbi Dayan. “The intent was likely that the debt is towards Mr. Silver, and the repayment to Moshe was just a practical means of fulfilling this obligation. Bottom line: Beis Din would have to evaluate, based on the specific circumstances, to whom Mr. Stern obligated himself (see Nesivos 60:19).”

Verdict: If an agreement between two people stipulates an obligation directly to a third party, they may not forgo the right of the third party. Beis Din would have to determine to whom the recipient obligated himself.


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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 [email protected]. 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 [email protected].