Chapter 66:7-9
Investment Contracts
7. Under difficult circumstances, when it is impossible to compose a
contract recording the terms of the iska, the above conditions may be
agreed to verbally.
8. If the investor advances money to purchase merchandise [from the
recipient], the following text is suggested for the heter iska:
I, the undersigned, acknowledge that I received 100 gold pieces from Reuven
Weinstock of Ungvar to do business with this money with the equipment that
I possess in the village of Zahan until the first of Nissan - may it arrive
under favorable conditions for us. Any profit that will result from the
investment of this money - once all the expenses are deducted - will be
divided, half to me and half to the said Reuven. Similarly, any loss,
Heaven forbid, will be shared equally.
Immediately upon the arrival of the first of Nissan - may it arrive under
favorable conditions for us - I obligate myself to return the principal and
his share of the profits to the said Reuven. My statement that I suffered a
loss will not be accepted unless I substantiate it will the testimony of
two trustworthy witnesses. Similarly, my statements regarding the profits
will not be accepted unless I support them with an oath.
Nevertheless, we have agreed on this condition: I may, should I desire,
give the said Reuven five measure of concentrated alcohol (spirit) on the
first of Nissan - may it arrive under favorable conditions for us - in
exchange for the principal and his share of the profits. If I choose to do
so, he ha shall have no further claim against me.
All the laws accepting the statements of the possessor of this contract
[i.e., the investor] will apply even after the date when payment is due. I
acknowledge receipt of a wage for my efforts.
Ungvar, Shevat 28,5631 Shimeon Blumenthal
Signed in our presence, the witnesses
Levi Blaustein
Yehudoh Taub, the Levite.
9. It is forbidden for the recipient to give the investor a simple,
promissory note which is binding according to the law of the land, such
that, in the eventuality of the recipient's death or refusal to pay, the
investor will easily be able to collect his due through secular legal
process. This is prohibited even when they make a verbal agreement that the
money should be governed by the terms of an iska arrangement. Such an
arrangement is forbidden even if the promissory note is given only for the
principal, because the investor can collect the entire sum mentioned in the
promissory note he possesses even if the investment suffers a clear loss.
This restriction applies even when the investor is a pious man whom the
recipient trusts.
The above applies when, [in addition to the promissory note,] the recipient
gives the investor a contract which states that the money was given under
the terms of an iska arrangement. There is room to suspect that perhaps the
investor or his heirs will hide the contract mentioned the iska
arrangement, and try to collect [the entire amount mentioned in] the
promissory note.
The following represent possible resolutions of the above difficulty:
a) the contract recording the iska agreement can be entrusted to a third
party [who will produce it should the investor try to collect the full
amount despite the fact that the investment suffered a loss].
b) the investor will also sign the iska agreement and he will leave it in
the possession of the recipient.
c) the fact that the promissory note was given subject to an iska agreement
will be recorded in the promissory note.
d) at the very least, witnesses will be informed that the promissory note
was given subject to an iska agreement.
If any of these provisions is employed, the sum mentioned in the promissory
note may include both the principal and the profit agreed upon.
