Halachic Analysis of an eBay Blunder


By Rabbi Baruch Levin

I partnered up with a friend of mine to purchase a wholesale lot of merchandise to sell on Ebay. The merchandise cost $10,000, however since I was tight with money my friend agreed to lay out $7,000 and I put up the remaining $3,000. A little while later our Ebay account got terminated and we ran into some other difficulties as well. To make a long story short, we ended totaling only $2,000 in sales – a net loss of $8,000. Our question is how do we distribute this loss between ourselves?

A. The Shulchan aruch (1) states that when two people partner up together for a business, even if one invested more money than the other, the profits and losses get split equally between them unless they specifically made up otherwise. The reasoning behind this is that if one of the partners expected to receive a larger share of the profits or a smaller share of the losses he should have spoke out such a clause. By not doing so, we assume that he has agreed to create an equal partnership.

This same concept would apply when one partner accepts upon himself to do more work than the other. There too he would not be able to claim a greater share in the profits unless he stipulated so at the onset of the partnership (2).

In your case, splitting the losses equally would technically mean that each of you lose $4,000. This would mean that in addition to your partner getting the full $2,000 left in the account, you would also have to pay him out $2,000. This is in fact the shita of the Bach (3).

The Ramah on the other hand rules there is never basis to require one partner to pay out of pocket to another. A partner’s loss is always limited to the money he put in. Accordingly, your partner would get the $2,000 in the account but no more (4).

In all likelihood a Bais Din would follow this shita of the Ramah and not require you to pay out of pocket (5).

It is important to note that there are some exceptions to this leniency of the Ramah. One exception would be if your partner had laid out the entire 10,000. In such a case, because it is illogical that one partner would agree to accept all the risk for only half the profits, we assume that your partner was not actually putting up $10,000 himself but rather lending you $5,000 for you to invest in the partnership. Therefore when the partnership loses money you would be required to pay your partner out of pocket, not because of your responsibility for the partnerships losses but rather as repayment because of the loan he made to you (6).

A similar exception would be if you and your partner had put in equal capital for the initial investment and only later when additional capital was needed, your partner put up a greater amount than you did. In such a case, since the partnership started off with an equal investment on both your parts, we assume that this arrangement remained in effect, only that your partner lent you money towards your investment. Here too you would maintain full responsibility for this loan (7).

In your case however, there is another shita of how to split the loss. The Sma makes a distinction between profits and losses generated from inseparable assets, such as real estate or service providing businesses, and those generated from separable assets such as the lot of merchandise in your case. He explains that in the case of inseparable assets, the entire asset was used to generate every dollar of profit or loss, therefore regardless of how much equity each partner has in the asset, they are each equal partners in the profits and losses. It is in this case where the Shulchan aruch rules that the profits and losses are split equally. In the case of separable assets however, we can allocate the profits and loses to specific percentages of the assets. Therefore whoever has more equity in the assets is allocated that much more profit or loss. In such a case the Shulchan aruch would rule that the profits and losses are not split equally but rather according to the percentage of capital that each one put in (8).

Applying this shita of the Sma to your case would dictate as follows: your partner who put up 70% of the capital would be assigned a loss of $5,600 (70% of $8000) and you who put up %30 of the capital would be assigned the remaining $2,400 (30% of $8000). This would mean that you still get to keep $600 of the remaining $2,000 (to bring your total loss to $2,400) and your partner gets the remaining $1,400 (bringing his total loss to $5600).

The Nesivos however argues on the Sma and makes no such distinction (9). In your particular case I believe is it unlikely that a Bais Din would go with the Sma’s shita rather they would award the full $2,000 to your partner in accordance with the Nesivos’s shita. However as mentioned before, they would not require you to pay any money out of pocket, in accordance with the Ramah’s shita.

  1. חומ קעו סו

  2. שם סי

  3. דכשנפסד מחמת מומ הולכין לפי מעות, והובא דבריו בשך סקיג

  4. שם סו

  5. עיין פתש סוסקח דקשה להוציא מעות עפ הבח מאחר דהטז והפרישה חולקין עליו

  6. חידושי רעא שם

  7. חידושי רעא שם

  8. סמע סקטו