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To Guarantee or Not to Guarantee: Definitions and Halachos of Arvus (3)

 

After introducing the principal halachic issues underlying the concept of arvus, in this third and final installment of the series we will discuss a number of concrete questions that often arise in the context of arvus. These are issues that come up fairly often, as reflected by questions received on the din.org.il and dinonline.org sites.

We will thus discuss cases where the creditor asks the guarantor for payment when there is a possibility that the debt has already been paid off. Another case of interest is where the creditor decided to extend the time period of the loan: Does the guarantor remain liable for payment? And what is the halacha for an arev who signed arvus before the borrower even approached a creditor for a loan?

We will deal with these, and other significant issues, in the present article.

Signing Arvus in Advance

It is common today for an arev to accept responsibility even before the borrower has approached the creditor for a loan. The reason is that the borrower wants to prepare himself even before he approaches the creditor, so that when he requests the loan he already has the arvus document.

The reason why this arrangement may create complications is that according to a number of authorities (see Ketzos Hachoshen 129:1) in general the lender is considered an agent of the arev. In other words, the guarantor, as it were, appoints the creditor to lend money to the borrower. However if the arev accepts the arvus before the identity of the creditor is known, this model is clearly not applicable.

Indeed, according to the Ketzos and a number of other authorities (see Shaar Mishpat 132:1; Aruch HaShulchan, Choshen Mishpat 129:8), the arev has to use an expression of agency, explicitly appointing the creditor as his agent to lend money to the borrower. On these grounds, Shaar Mishpat disqualifies a minor from acting as a guarantor, because he is not qualified to appoint an agent.

Likewise, even if the arev writes that he is prepared to guarantee the loan for whoever lends money to the borrower, this will not be valid according to this opinion.

Other authorities, however, argue that there is no need for formal agency in becoming an arev (see Tumim, 129:2; Nesivos Hamishpat 129:1; Erech Shai, Choshen Mishpat 131:14). According to these authorities, there is no problem in signing the arvus document even before the creditor is known.

Because of the doubt involved in this matter, it is better to avoid the situation and  to arrange the arvus only after a specific creditor has been identified.

Has the Debt Been Repaid?

What happens when the creditor wants to collect the debt from the arev while the debtor is away, and cannot be reached? The principle in such cases is that the arev has the right to make any claim that the borrower can make—in this case, the primary claim being of course that the debt was already paid. Even if he (the arev) does not make the claim himself, Beis Din may make the claim on his behalf (a procedure called taaninan). In practice, making this claim will depend on the particular circumstances of the case.

Where the creditor produces a promissory note countersigned by witnesses, there is no possibility to claim that the debt has been repaid: it is as though the countersigned witnesses are testifying to an extant debt. Even if the debtor is away (and cannot be reached) when the creditor claims the debt from the arev, the arev cannot claim that perhaps the debt has already been paid up.

This, however, is not the case when the creditor does not have such a document, but only a document in the handwriting of the debtor. In this case, if the debtor would be present he would be believed if he claimed that the debt had been paid (Shulchan Aruch, Choshen Mishpat 69:2). This being the case, in the debtor’s absence, Beis Din claims on behalf of the arev that perhaps the loan has been repaid, and the creditor cannot collect the debt.

The same is true for a loan that was given in front of witnesses, but without any written document. In this, case, too, the debtor is believed if he claims that the loan was repaid. In his absence, and given the guarantor’s ignorance of whether the loan was repaid or not, the arev will not have to pay the debt.

This will not apply to all cases. If the debtor, were he present, would not be believed to claim that the debt was already paid, the arev cannot make the claim in his absence (and, of course, we do not make the claim on his behalf). For instance, if the borrower died before the time of collection arrived, we assume that the debt has not been paid, since as a rule a person does not pay his debts early (Shulchan Aruch, Choshen Mishpat 78:1). The arev will therefore not be able to claim that the debt has been paid.

Arvus When the Borrower Denies the Loan

What is the halachah when the borrower claims that the loan was never given, yet the arev concedes that the loan was given? Is he liable to pay the loan? Or do we say that an arev accepts responsibility only for cases in which the borrower refuses or cannot pay, but not for a case in which he denies the very existence of the loan.

The debate over this question begins with the Baal HaTerumos (Shaar 35, Part 1, No. 26), who addresses (citing an earlier authority) a case in which somebody agreed to guarantee a loan to a non-Jew, and later the non-Jew denied receiving the loan altogether. The Baal HaTerumos leaves the ruling as a matter of doubt.

The Beis Yosef (Choshen Mishpat 129) writes that he does not understand what doubt there can be—meaning that the arev is liable to pay even in this case: The borrower’s denial of the loan is in effect an admission that the debt is still extant. Based on this, the Rema (129:8) rules that the arev has to pay even where the borrower denies the loan altogether.

However, the Bach (3) and the Shach (19) explain that this remains a matter of doubt, for perhaps the arev never intended to accept liability when the borrower denies the loan (see also Ketzos HaChoshen 49:9). Concerning the possible distinction in this matter between a Jew and a non-Jew, the Ketzos argues strongly that there is no distinction to be made.

For this matter there is no difference between a regular arev and an arev kablan. If a creditor wants to ensure the arev’s liability even when the borrower denies the entire loan, he should write this explicitly into the promissory document signed by the arev.

Arvus After Time Extension

The Tur (Choshen Mishpat 131) writes as follows:

“The Ramban writes further: An arev who approaches the creditor at the time of repayment, and warns him before witnesses that he should collect his money from the borrower, and if not he will be exempt from liability, yet the creditor did not wish to do so and gave the borrower an extension—the arev is not exempt from liability.”

This ruling implies that if a creditor extends the time of the loan, this does not affect the liability of the arev for repayment: Even if the arev was aware of the extension and warned the creditor against it, he remains responsible for paying the debt if the borrower defaults.

The Beis Yosef expresses wonder at the ruling. Surely, the arev should not be responsible for the creditor’s decision to give the borrower a grace period—especially where the arev warned the creditor to collect the money while he can! In the Shulchan Aruch (131:4), the ruling of the Ramban is cited as one opinion, with the caveat, “One has to be cautious in judgment.” The Rema adds that the reason for this caution is that other authorities dispute the ruling (see Sema 7).

A number of acharonim, most notably the Chacham Tzvi (51; cited by Rabbi Akiva Eiger and the Pischei Teshuvah), write that because the Ramban’s ruling is disputed, the arev will not be obligated to pay the debt. Rav Mendel Shafran adds that this will apply even if the arev also agrees to extend the time period: The arev’s liability expires with the term of the original loan, and to extend the liability requires a new kinyan.

However, all of the above is only true concerning a regular arev. With regard to an arev kablan, who effectively accepts upon himself the same status as the borrower, extending the time will not affect his liability. This will be true even if he warns the creditor to collect the loan on time.

Conclusion

We have tried, over the course of three articles, to outline the fundamental principles of arvus, and the halachos pertaining to common and significant circumstances.

At the same time, the laws of arvus extend far beyond this synopsis, and are the subject of an extensive Torah literature.

A general rule is that one should be careful to make all terms as explicit as possible—always good advice for financial transactions—though of course many eventual twists and turns are difficult to foresee.

At the same time, an arev kablan, for which it is sufficient to simply sign “[name] arev kablan” at the end of the creditor’s promissory note, will generally provide the creditor with reasonably complete protection if the borrower defaults.

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