Devarim 7:2 says:

וּנְתָנָ֞ם יְהוָ֧ה אֱלֹהֶ֛יךָ לְפָנֶ֖יךָ וְהִכִּיתָ֑ם הַחֲרֵ֤ם תַּחֲרִים֙ אֹתָ֔ם לֹא־תִכְרֹ֥ת לָהֶ֛ם בְּרִ֖ית וְלֹ֥א תְחָנֵּֽם׃

and the LORD your God delivers them to you and you defeat them, you must doom them to destruction: grant them no terms and give them no quarter.

Rashi explains:

ולא תחנם. לֹא תִתֵּן לָהֶם חֵן, אָסוּר לוֹ לְאָדָם לוֹמַר "כַּמָּה נָאֶה גוֹי זֶה!״ דָּבָר אַחֵר, לֹא תִּתֵּן לָהֶם חֲנִיָּה בָּאָרֶץ

ולא תחנם means, THOU SHALT NOT ASCRIBE GRACE (חן) TO THEM: it is forbidden to a person to say “How beautiful is this heathen”. Another explanation: thou shalt not grant them a חניה, an encampment (a settlement) in the land.

He's quoting the gemarra in Avodah Zarrah 19b-20a, which lists these two prohibitions. However, the gemarra there lists a third prohibition:

לא תחנם לא תתן להם חנייה בקרקע דבר אחר לא תחנם לא תתן להם חן דבר אחר לא תחנם לא תתן להם מתנת חנם

"Nor give freely unto them" - do not grant them occupation of the land. Alternatively "nor give freely unto them" - do not grant them favor. Alternatively "nor give freely unto them" - do not give them free gifts.

Why didn't Rashi bring the prohibition of giving non Jews free gifts?

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    Which edition of Rashi did you check? – Double AA Aug 6 '17 at 4:39
  • Sefaria has the version quoted by the OP. – DonielF Aug 6 '17 at 4:48
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    @Double-AA I was using an Oz Vehadar Chumash. Sefaria had the same girsa. – robev Aug 6 '17 at 13:03

From R. Ovadya of Bertinoro's Amar N'ke commentary to Rashi here, it is apparent that Rashi did mention all three! He discusses why Rashi lists the three in the order that he does: favour, free gifts, and land. Clearly his version of Rashi had all three. The following is his initial quotation of Rashi which includes all three:

לא תחנם לא תתן להם חן. ד"א לא תתן להם מתנת חנם. ד"א לא תתן להם חניה בקרקע

Alternatively, the Sefer Hazikkaron (early 16th century) to Rashi there writes that Rashi did not quote that opinion since it is not unanimous, or necessarily universally applicable.:

הרב ז"ל לא הביאה דלאו אליבא דכולי עלמא היא כדאמרינן התם בשלהי פרק קמא דעבודה זרה מתנת חנם תנאי היא. ואף קצת הפוסקים שכתבוה התירו בשכנו או מכירו ולכן השמיטה הרב

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  • Nice addition with Sefer HaZikkaron; I didn't remember it was a machlokes. – robev Oct 11 '17 at 14:00

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