Beit Midrash

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Paying an Overdue Obligation With Linkage

The plaintiff (=pl) hired the defendant (=def) to cater with a fee quoted in dollars. Pl paid late; def sued in secular court, which forced pl to pay with linkage to the CPI (inflation rate). Pl sued in beit din to retrieve the interest payment, which he claims is ribbit (usury).

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7 Nisan 5768
Case:

The plaintiff (=pl) hired the defendant (=def) to cater with a fee quoted in dollars. Pl paid late; def sued in secular court, which forced pl to pay with linkage to the CPI (inflation rate). Pl sued in beit din to retrieve the interest payment, which he claims is ribbit (usury).

Ruling: Acharonim discuss whether linkage to the CPI constitutes ribbit. The Chazon Ish (YD 74:5; see also Igrot Moshe YD II, 114) says that if after one borrowed money, its buying power went down, he pays the same face value. Currency is halachically viewed as such that we always attribute price fluctuation to commodities, unless a coin’s weight changed. Therefore, linking a loan to the CPI is ribbit. One could argue that it here is not ribbit because it is not paying to wait for the money. Rather it is payment for a clear loss of value between the time he was to have paid and the time he did, as def could have put the money in an account linked to the CPI. However, the Rashba (Shut III, 227) says that a borrower may not pay the lender for lost profits; this is not considered damage payments.
However, the Ohr Zarua cites differing opinions as to whether the above is true only for loans but that for withheld worker’s compensation one may demand compensation for the withheld money. The Beit Yosef (YD 160) rejects the lenient opinion, but the Beit Yitzchak and Chatam Sofer support it. The latter explains that the Torah states that ribbit is to protect a borrower whom the lender should be helping but not to protect an employer who owes money to an employee, as, to the contrary, the Torah safeguards the worker’s interest. The Chatam Sofer bases himself on the employer’s responsibility to be concerned for his worker, and this applies only to a sachir, a worker who is paid according to the time he works for his boss. In contrast, the employer of a kablan ("contractor"), who is paid by the job, does not violate the prohibition of paying after the day the work is finished (see K’tzot Hachoshen 339:3). Def is a kablan, who is paid for the job of providing the food. Therefore, even according to the Chatam Sofer’s leniency, one will not be able to link to the CPI and def must return that money.
The Nimukei Yosef says that one can promise to pay for something with something other than local currency. The K’tzot Hachoshen (203:4) says that regarding a worker, who is to be paid in cash, one cannot turn the obligation into something else. The Netivot Hamishpat (203:7) says that the matter depends on the wording one used. In our case, the promise of payment for the food provided is analogous to a sale of the food, and therefore according to both opinions, he could obligate himself to pay in any manner, including a set amount of dollars. Therefore, linkage to the dollars was appropriate. [In those days, the dollar consistently went up.]
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