Q&A: The Difference Between a Loan and a Sale
The Difference Between a Loan and a Sale
Question
The medieval authorities (Rishonim) disagreed in the chapter “Eizehu Neshekh” about whether the law of interest applies to land, slaves, and documents, since this depends on the question: can there be a loan of land? Two explanations suggested by later authorities (Acharonim) to explain why land is not included in the category of a loan are these: (a) a loan is of something that is consumed through use, whereas land is not. (b) In a loan, one returns it without appraisal, unlike land, where its value has to be assessed before it is returned. Therefore, when he returns to the “lender” a different piece of land, this is a sale and not a loan. And I was puzzled by these definitions, which seemingly present technical differences without a clear underlying rationale. So I thought to offer a single explanation that includes both definitions together. And the explanation is as follows: a sale is compensation, while a loan is replenishment. That is, in a loan, the borrower is not obligated to return the very same item he borrowed (as in lending for use), nor something entirely different (as in a sale), but rather to make up something akin to the item itself (or akin to the coins or produce). To return the same kind, in the same measure and roughly the same weight. In contrast to a sale, where one returns compensation for what he received in terms of the monetary value of the product he received, regardless of type, measure, or weight. Therefore, when what is returned must be appraised (as with land, slaves, and documents), this defines the relationship between giver and receiver as seller and buyer, because what is measured is the value transferred to him and what he has to return in exchange, unlike lender and borrower, where it is clear and known between them what he must return, since the obligation is to replenish the same item and not to return compensation for the value he received. And that is also why something consumable is defined as a loan, because the lender would have wanted the return of the very thing he lent, were it not consumable. Lacking that option, he agrees to replenishment with something akin to what he lent. But with land, where he could receive back that very same land and nevertheless chooses to ask instead for other land in exchange, the act itself proves that this is not a loan and not replenishment, because if that were really the case, he would demand that very same land back. Not only can he demand replenishment akin to what he lent; he can demand exactly what he lent. It therefore follows that he is not interested in getting land back as replenishment for what he lent, but as compensation for it.
I’d be interested to hear the Rabbi’s opinion regarding this reasoning.
Answer
That is definitely interesting. But with land, although appraisal is needed, it is still like a loan in the sense that in a land-loan he is required to return land, and not just anything of equivalent monetary value.
Now I’ve thought of another possible explanation. In the past I explained that a loan is essentially a gift. The obligation to repay is a commandment from the Torah (“repayment of a debt is a commandment”). There are several proofs for this: in the Talmudic passage about “driving away a lion,” where one who repays his fellow’s debt is like one who drives away a lion; likewise in Maimonides’ Commentary on the Mishnah at the beginning of chapter 10 of Shevi'it regarding the difference between payment for a purchase and a loan in the context of the remission of debts in the Sabbatical year; and likewise in Maimonides’ laws of sale, where he distinguishes between payment for a purchase and a loan with respect to betrothal and acquisition through a loan, and so on.
If so, perhaps with land, when I “lend” it to you, I certainly do not intend to give it to you as a gift. There it is clear that I expect the return of land, and not merely as a commandment in the abstract. And perhaps that is why this should not be defined as a loan.
Discussion on Answer
But he does not receive the very same thing; rather, he receives something akin to it of the same value. And that is exactly like an ordinary loan. In the sense that it is the same kind of thing, it is exactly like a loan, but also in the sense that even in a regular loan, what must be returned is that same value. You can’t repay a loan with something similar that has a different value.
The definition of a loan is a definition of the Torah, not because of the lender’s intention. But if the lender’s intention is not to give a loan, but to do something else, then it is not a loan.
The rationale of “my property is in your possession” in a loan is different from “my property is in your possession” regarding payment for a purchase. So I am not ignoring that rationale; I am distinguishing between two versions of it. I plan to write a column about this in the future.
I’ll try anyway.
He always receives the same value; the only question is in what form. If we have to measure and appraise how much he is returning, then it is a sale. But if he returns an item, or anything as it is, then we are not looking here at compensation and value, but at the return of an item that stands in place of the item given. Land is an example of something in between. On the one hand, it has the same name as the thing that was lent, and on the other hand, it must be appraised, and perhaps for that reason it is considered like a different kind, which also has to be measured and appraised. I still haven’t fully grasped the depth of the reasoning that defines a loan as a gift. If this is a category defined by the Torah without explanation, then the category should also classify land as a gift. The same is true if we assume that something taken permissibly is a gift, because that is also the case with land taken permissibly. And if it depends on the person’s intention, then the matter really needs clarification. Where exactly does the difference stand between a land-loan and something else? In both cases he gives on condition that it be returned, and in both cases all the data are similar (if we ignore the distinguishing rationales that I suggested).
We’re repeating ourselves. The points have been made, and each person can draw his own conclusions.
A. According to my approach, the definition of a loan is the lender’s desire for the very thing that he lent, and only when he has no choice does he take something akin to what he lent. Therefore, categorically, land cannot be classified as a loan, because as stated, if the lender were interested in it, he would demand that very land itself. Land is more similar to a sale, in that he is interested in its value as compensation, even though that value is limited only to the form of other land. Similar to someone who brings money to a seller in exchange for oranges: the act is defined as buying and selling even though he specifically wants oranges and not just any form of equivalent monetary value. B. Seemingly, the reason a loan is defined as giving a gift is not because we attribute that intention to the lender. Otherwise, why would the Torah obligate the borrower to return it—how is he different from an ordinary giver of a gift? (According to that, the definition also would not include a person who explicitly stated that he wants it returned, or someone who lent a million dollars.) Rather, we consider him as giving a gift because, conceptually, a person is not obligated to return something he received permissibly. (That’s how far I understand this novel idea, which seemingly ignores the rationale of “my property is in your possession.”) So that same rationale applies to land in exactly the same way.