460. Stipulating Regarding the Profits

66:3 They may also stipulate that, at the businessman’s discretion, he may elect to give the investor a set amount of the profits rather than a percentage, retaining the balance for himself. This is appropriate to do because the businessman would presumably not want to take an oath and will simply give the investor the amount upon which they agreed. This is the principal underlying the “heter iska” that we use. Even if the businessman later realizes that he made no profit – or even that he took a loss – he can give the investor the principal plus the amount they agreed upon. This does not violate any prohibition because the businessman has an obligation to take an oath and, by paying this amount, he releases himself from that obligation.

66:4 On the other hand, it is always prohibited for the businessman to purchase the investor’s share of the profits for some predetermined amount to be paid at a later time. Rather, the businessman must always retain the option.