Bechoros, Chapter 2, Mishnah 4. In the first Mishnah of the chapter, we learned that a partnership with a non-Jew - whether in the mother or in the offspring of a cow, goat, or sheep - exempts the animal from the laws of bechor, and even if it is a male that opens the womb, it is not a bechor in the halachic sense. Our Mishnah expands this principle and applies it to a specific type of financial arrangement.
Two Ways to Share Business Profits:
Equity partnership: Joint ownership, where both parties share in the profit and loss alike. This is the situation presented in the first Mishnah of the chapter.
Debt: A lender-borrower relationship, where the capital of one is handed over to the other in exchange for a fixed return.
In a standard loan, a business in need of money receives one hundred from the lender, to keep in its possession for ten years. The lender expects a return - ten per year - and at the end of the period, the principal is returned to him in full.
The "Tzon Barzel" Arrangement:
A person who has capital - in this case, a sheep - and does not want to engage in raising animals, hands it over to his friend to care for. Usually, this arrangement is made with a flock, hence its name, but it can also apply to other assets, such as a car or a machine. Let us assume that an adult sheep is worth one hundred and a lamb is worth ten: The provider gives his sheep for ten years, expects to receive a lamb worth ten every year - this is his profit - and at the end of the ten years, the recipient must return the full principal to him, one hundred, which is the value of what was initially handed over.
This arrangement is essentially identical to a loan agreement, and therefore it is forbidden for two Jews to enter into it, since those ten percent per year constitute forbidden interest. However, it is permissible to enter into it between a Jew and a non-Jew.
The Meaning of "Barzel":
"Tzon" means a flock, and "barzel" (iron) indicates absolute permanence: The value is now set in stone, and the recipient commits to returning the amount agreed upon today. The non-Jew says: I do not want the sheep itself in ten years - a sheep only lives about ten years, and who wants an old sheep - rather, let us evaluate it now at one hundred, and at the end of the period, one hundred will be returned to me in cash or its equivalent. And there is no room for excuses: The sheep was lost, or it did not give birth as expected. The commitment is to return the full principal.
This concept is also known from the laws of dowry: A woman entering a marriage with assets she received from her father's house, such as a farm worth one hundred, evaluates them at the time of the marriage and stipulates that if they divorce, she will not get the farm back - since its value may go up or down depending on the husband's management - but rather the one hundred dinars agreed upon now. Today's value is fixed and immune, and this is the idea of "barzel".
The Extreme Case in the Mishnah:
The non-Jew says to the Jew: Here is my sheep for the next ten years. I do not want the sheep itself, but rather the one hundred it is worth, and along the way I want one lamb per year worth ten - this is my profit in the transaction. And he even adds and says: You too need to make a living, therefore take for yourself the first offspring that is born and give me the second, provided that I receive one per year for ten years, and at the end of them, a total value of one hundred will be returned to me.
Seemingly, in this situation the sheep itself was given to the Jew and there is no intention of returning it to its owner, and the first offspring expressly belongs to the Jew. If the first offspring is male and opens the womb, one might have thought that it is a full-fledged firstborn, since both the mother and the offspring are in the Jew's possession, and therefore it is obligated in the laws of a firstborn.
The Mishnah establishes that this is not the case, and the reason is the law of a lien. For a creditor who lent for a business where the borrower does not have the means to pay - neither the annual return nor the principal at the end - descends into his properties and collects from whatever he has, until he completes his debt. So too in an iron sheep arrangement: if the Jewish farmer does not meet his obligation, the gentile collects back his sheep and all the lambs that were born, taking whatever he can to compensate himself.
Since the mother and the offspring - and even those that were supposed to belong to the Jew - essentially serve as a guarantee for the repayment of the debt of the gentile creditor who was the source of the capital, he has a lien and a claim on all of them, including the firstborn. Thus the gentile has a sort of share in them, and it is not a mother or offspring fully owned by a Jew, and therefore they are exempt from the laws of a firstborn. This is the foundation of our Mishnah.
The Mishnah brings disputes regarding the way the arrangement works, but they do not touch on the principle itself, rather on the extent of the guarantee: when a general iron sheep arrangement is made - it is clear that the gentile is entitled to collect the sheep itself, but is he entitled to collect its offspring as well? Is there limited liability, where what was allocated to the Jew remains in his hands and is not subject to a lien for the debt? The answer to this depends mainly on what is accepted in that time and place, or on an explicit condition that was stipulated, and this is a secondary point. The principle itself remains intact: anything that serves as a guarantee for the gentile's debt in an iron sheep arrangement is not fully owned by a Jew, and therefore the mother or offspring is exempt from the laws of a firstborn.
The text of the Mishnah:
"Velados peturin" - if a Jew receives a sheep from a gentile in an iron sheep arrangement, its offspring are exempt from the laws of a firstborn. And even if the gentile told him, "The mother is yours," and even if he said, "The first offspring is yours," and a male was born - since he has the power to claim it as a pledge if the Jew does not repay his debt, it is exempt.
"Veladei velados chayavin" - according to the Tanna Kamma, in a regular iron sheep arrangement, as long as it was not stipulated otherwise, the gentile has no claim on the second generation. If the offspring that remained in the Jew's hands is a female and gives birth, it is like a grandchild of the original sheep, and the gentile has no claim of a pledge on it - and therefore it is obligated in the laws of a firstborn.
"He'emid velados tachas iman" - if the agreement was that the gentile is entitled to claim even the grandchildren, then "veladei velados peturin" - the offspring of the offspring are exempt, since he has a claim on them. But "uveladei veladei velados chayavin" - the third generation, the great-grandchildren, are obligated in the laws of a firstborn, since they are not subject to a lien for the debt.
"Rabban Shimon ben Gamliel omer, afilu ad asarah doros peturin she'acharayasan lenochri" - according to him, when the guarantee extends over more than one generation, it does not stop at the second generation but continues without limit. "Ten generations" is merely a figure of speech, and his intention is even a million generations, since once the guarantee extends to the next generations, it has no boundary at all. Therefore, all those generations are exempt from the laws of a firstborn, because the gentile has a claim on them as a guarantee for the repayment of the Jew's debt within the framework of the iron sheep arrangement.
In summary: In this Mishnah we learned the law of 'iron sheep' - an arrangement in which an animal is handed over at a fixed valuation, in exchange for an annual return and the return of the full principal, an arrangement that is forbidden between two Jews due to the prohibition of interest and is permitted between a Jew and a gentile. Since the animal and its offspring are subject to a lien by the gentile as a guarantee for repayment, the Jewish ownership is not complete, and therefore they are exempt from the laws of a firstborn. The Tannaim disagree regarding how far the lien extends: according to the Tanna Kamma it stops at the generation following the generations included in the agreement, and according to Rabban Shimon ben Gamliel it has no limit at all, and even ten generations are exempt, as they are a guarantee for the gentile.