The Valuation of Intangible Assets in Jewish Law

The strictures of Talmudic law against transferring title of intangible objects not yet in existence (shelo ba l’aolam) or not yet in one’s possession (shelo bershuto) imposed severe limitations on financial contracting and, hence, on the development of trade and economic growth. Although the problems engendered by these restrictions were apparently recognized in the Tannaitic period (10-220 CE), substantive approaches to mitigate these restrictions only began to appear in the Amoraic literature in the context of debt financing. Thus, a debtor could contractually obligate himself to extend a lien on and to pay off the creditor with assets that he planned to acquire in the future but which were not in his possession at the time of debt creation. This contractual “obligation” approach was further extended by medieval post-Talmudic scholars (Rishonim) to gifts and inheritances based on the legal argument that the contractual obligation rests on the existence of the party incurring the obligation rather than on the intangible object not yet in existence. Later decisors (Achronim) further extended this obligation commitment approach to allow for the sale of intangible assets so that the obligation mechanism not only imposes tangible liabilities on the party in question but also can be used to transform intangible assets that cannot be sold into tangible assets that can be sold. This paper describes the legal-economic underpinnings and the historical development of the contractual obligation approach to recognizing intangibles in the Talmudic and post-Talmudic literatures. The objective is to show how economic forces mediate religious stricture in Jewish law.