This week we will continue our discussion of a guarantor – the halachic arev.
Last week we opened the discussion with an outline of whether or not there is a mitzvah to accept arvus, and discussed when a regular arev needs to pay the debt and whether he can retract his commitment.
In the present article we will discuss further details of arvus: What is the halachah of an arev who commits to guaranteeing a loan after the debtor has already received the money? How does this relate to guaranteeing that an investor will receive from an investment company his share of the profits? How does a person become an arev kablan, and what is the custom for this today?
These questions, among others, are discussed in this second of the series on arvus.
Post-Loan Guarantors
Halachah makes a sharp distinction between a guarantor who accepts responsibility for the loan before the money is transferred to the borrower and one who accepts liability only after the loan has already been given.
The reason for this distinction is that unlike a regular debtor who receives money and must therefore repay it, an arev accepts responsibility for a loan that he did not receive. How, then, does the guarantor become liable for repayment of a loan if he never receives money?
For a regular arev, who commits (in writing or orally) before the money transfers to the debtor, the operative mechanism is the handover of the money.
As the Gemara explains, the guarantor derives a benefit from the handover of the money, insofar as his instructions (to hand over the money) are heeded. The Ritva explains that it is considered as though the arev himself receives the money given to the debtor.
Where an arev wants to commit himself after the loan has already been given, the transfer of the money cannot retroactively create his obligation. An alternative mechanism is required (Choshen Mishpat 129:1).
How to Commit for an Existing Loan
A guarantor may obligate himself for a loan that was already given with a kinyan. A kinyan sudar, which is the most convenient method (the guarantor must raise a handkerchief or other item belonging to the creditor or to a third party), is employed. A kinyan can form an obligation or indebtedness, and this is effective even for a guarantor.
Authorities discuss why this kinyan suffices. The problem is that the Gemara (Bava Basra 173b) sees the guarantor’s acceptance liability as a form of asmachta (reliance). He does not really expect to pay the money, but expects the debtor to pay back the creditor. In general, one cannot obligate himself even if he makes a kinyan, if what he is doing is classified an asmachta. Therefore a formal mechanism is required for him to become obligated to repay the money.
An arev who commits before the transfer of money does not encounter this problem. The benefit he receives from the money being handed based on his acceptance of ultimate responsibility renders him as if he was directly invovled (he receives benefit), so there is no asmachta problem. What, however, is the solution for an arev after the event of the loan?
The Ramban (Bava Basra) explains that although the arev relies on the debtor to pay his debt, this falls short of an absolute asmachta, for which a kinyan is not effective. For the arev’s obligation, a legally valid kinyan is sufficient to create his liability for the loan. The Sema (129:4) takes a different approach, explaining that even after the loan was given, the arev derives some benefit from the creditor.
Often, a guarantor will not be aware of the need for a kinyan, and will commit to guaranteeing the loan by signing his arvus on the promissory note. Authorities discuss whether this signature alone is effective to guarantee an existing loan, and the matter remains unresolved (see Shulchan Aruch 129:4; Sema 14; Shach 11-12). The Aruch Ha-Shulchan (129:6) rules that signing is not effective for this purpose.
Questions of guarantors who commit after the loan was given are commonly submitted on our “Ask the Rabbi” site. It is important to realize that a kinyan is required, and that signatures alone should not be relied upon.
Note that when an arev specifies a specific time period, meaning that the creditor will not collect the debt from the borrower for a certain time on account of the guarantee (he extends the credit), the Aruch ha-Shulchan (129:7) rules that this is considered as a guarantor before the loan is given, and there is no need for additional mechanisms to validate the guarantee. This matter is also in dispute among authorities (see Chelkas Mechokek 29:5; Avnei Milu’im 29; Kessef Kodashim 129:1).
Guaranteeing Profits
The Shach (129:12) rules that guaranteeing an investor the profits that accrued on his investment is similar to becoming an arev after the loan exists, and is binding only if a special kinyan is made.
Where an iska arrangement is made (this will apply to most arrangements with a heter iska), the Ketzos Hachoshen (129:2) argues that the halachah is different. He argues that it is always like becoming an arev at the time of the loan.
Based on the ruling of the Ketzos, it follows that a kinyan will not be required. Although it advisable to make sure of the obligation with a kinyan, a signed commitment should be sufficient, because there are two possibilities the signature might be valid: The possibility that signing is enough for every arev even after the loan is given, and the possibility that guaranteeing profits is considered arvus before giving the loan.
Arev Kablan
The distinction between a regular arev and an arev kablan is a central aspect of arvus. The basic difference is that a regular arev acts as a guarantor, but an arev kablan is considered as though he himself borrowed the money from the creditor.
The primary consequence of this distinction is that the creditor is able to collect the debt directly from the arev even before he tries to collect it from the debtor himself (see Shulchan Aruch 129:15). With a regular arev, the creditor must first go to the debtor and, as we saw in the previous article, he must even collect (if he can) from the debtor’s assets, before turning to the guarantor. There are also other ramifications, which we’ll come to later.
Because of this important distinction, it is crucial to determine whether an arev who committed to guarantee a loan is a regular arev or an arev kablan.
Using the Right Words
According to the basic halachic ruling (based on the opinion of Rava in Bava Basra 174a), only very specific wording renders a guarantor an arev kablan. The guarantor must say: “Give him (the debtor), and I will give you (the creditor).” By using the same word for both (“give”; Some explain that this is true only for the word “give,” which implies that the debtor himself cannot be relied upon to pay the debt.), the guarantor demonstrates his absolute commitment to repaying the loan.
All other expressions are not effective (Shulchan Aruch 129:17-18).
What about somebody who says or writes: “Give him, and I am a kablan“? Rishonim discuss this case, and it is the matter of a dispute. According to the Rif, the Rambam, and others, this is not sufficient to become an arev kablan. This is also the ruling of the Shulchan Aruch (129:18).
Other authorities argue that this does suffice for the arev kablan commitment, and this is the ruling of the Rema.
The Rosh (Bava Basra 10:41), explains that when we see the words, “I am an arev kablan,” in a document, we assume that the guarantor used the appropriate procedure (and the right words) to become an arev kablan, and this is therefore sufficient. It is noteworthy that based on this explanation, the Chacham Zvi (51) writes that where we know (or should assume) that the right words were not actually said, the guarantor will only be a regular arev.[1]
The Aruch Ha-Shulchan (129:12), however, recommends using the simple expression: “[Name] arev kablan.” Based on the Rema, this formula is effective.
The Custom Today
Today, regular promissory notes that include a guarantor use the formula recommended by the Aruch Ha-Shulchan: “[Name] arev kablan.” Some major free loan funds use this formula, and are not careful to include the statement: “…and I told the creditor, ‘Give him and I will give you.'”
Because this is clearly the common formula used to create a kablan-type guarantee, it follows that this custom also has halachic force. In legal documents, halachah clearly validates following the common custom (see, for instance, Choshen Mishpat 42:15).
However, since this ruling is contingent on the custom, it is important to clarify the custom itself.
The clear and apparently universal custom is that a creditor – or, commonly, a free loan fund – will not approach the guarantor before trying to collect from the debtor himself. The creditor will first approach the debtor and try, a number of times, to collect the loan. If this doesn’t work, the creditor will send a warning to the arev (or arevim), whose purpose is to induce him to pressure the debtor into paying. Only when this doesn’t work will the creditor actually try to collect the debt from the arev.
Therefore, according to some authorities, by force of the custom, the ramification of the guarantor’s becoming an arev kablan (with the simple expression “[name] arev kablan“) is not that the creditor will turn to him first, but only that the creditor will not have to collect the debt from the debtor’s assets. Upon failing to collect from the debtor, he may turn to the arev rather than turn to the courts to collect from assets.
Rav Yehuda Silman shlita disagrees. He argues that the custom to attempt first to collect from the borrower, does not influence the normative halachah: The point of an arev kablan is not that the creditor must turn to the arev before claiming the debt from the debtor, but only that he reserves the right to do so. The fact that he generally refrains from doing this in practice therefore, does not influence his halachic right.
When Must an Arev Pay
Another common ramification of the arev-arev kablan distinction is when an arev has to pay the debt after being approached by the creditor.
A regular arev has 30 days to pay, from the time he becomes obligated to pay (Rambam, Malveh 26:2). The Bach (Choshen Mishpat 129) explains that the arev is similar in this to the borrower he is covering for: if the borrower has 30 days to pay, the arev, too, receives a thirty day grace period.
The Shach (129:23), however, argues (based on the Rambam) that the even if the borrower’s time to pay has passed (he would have to pay immediately), the arev’s 30 days only begin when the payment of the debt becomes incumbent upon the arev. Even if he has money (so that the borrower under similar circumstances would have to pay immediately), he has time to make the payment.
Yet, this ruling does not apply to an arev kablan. As we mentioned above, an arev kablan effectively takes upon himself the responsibilities of a borrower. Therefore he does not deserve any extra time beyond that given to the borrower. In the practical realm, since the borrower can extract payment from him without first trying the lender, he should not be surprised if the payment falls upon him and he should be prepared to pay immediately.
In practice, when a borrower says he needs more time to pay the loan, Beis Din will usually give him time, provided the request is reasonable (see Rema, Choshen Mishpat 100:1) – so that even an arev kablan will have some time to pay, depending on circumstances.
We will, please G-d, continue our discussion of arvus in next week’s article.
[1]
[1] See also Rashba (1:892), who writes that the words themselves (he refers to the words, “I am an absolute kablan“) are effective, and we do not require an assumption that the correct formula was said (“Give him and I will give you”).
