Conditions of Sale in the Islamic Economy

06/11/2016| IslamWeb

1. Consent:

A sale is not valid unless there is mutual consent between the two parties. In the Quran, Allah Almighty says (what means): {But only [in lawful] business by mutual consent.} [Quran 4:29]

But, how can the consent condition be met between the two contracting parties?

Scholars have three different opinions on how the consent condition is fulfilled in sale. This issue is important, given the new relevant fiqh-related issues in this age. For example, a person can now put coins into a soft drinks machine which, in turn, brings out what he wants. Is there consent here between the seller and the buyer? Also, a person can buy goods via visa card through the Internet. Is there mutual consent here?

There are three scholarly opinions regarding this issue:

a. Mutual consent can only be expressed by speech, through what is known as 'offer and acceptance'. This is a problem in this age of ours, for some large financial transactions are run in the stock market without verbal offer or acceptance. Instead, they are run through the computer which is connected to an international web, through means that have the force of verbal offer and acceptance, and even with greater force and better documentation.

b. Mutual consent should basically be expressed by speech, and it may also be expressed by action in the things that are frequently contracted. This ruling is issued out of tolerance on the part of some jurists who adopt the first opinion. An example of this is a person who gives money to a baker and he gives him bread while both of them are silent. Also, a person takes a taxi and pays the fare, which is known, while he is silent. Similar to this are the soft drinks machines referred to above. The Islamic jurists call such dealings mu‘atah. They maintain that the sale of such things as frequently contracted in daily life can be made via mu‘atah, without requiring verbal offer and acceptance.

c. Mutual consent can be achieved by anything that indicates it, whether by words or deeds. This opinion was held by Shaykh Al-Islam Ibn Taymiyyah who was exceptionally intelligent and was always ahead of events, as if he was living in a later age.

Another example is transactions made through the stock exchange, which occur in moments according to a system agreed upon between companies and contractors, which denotes consent. All these transactions are valid and there is nothing wrong with them. Moreover, this ruling – i.e. the validity of sale by mu‘atah through anything that denotes consent whether by words or actions – includes all forms that are not yet known to us and that will emerge in the future.

Prior to this, however, there should be an agreement between the companies and between the seller and buyer over a specific system that signifies consent, such as the visa number on the Internet, which represents its holder. If the buyer does not agree to the deal, he will not enter his visa number upon purchase of the commodity. In some other dealings, one may give this number over the phone, indicating his consent, and so on. What is important here is that there should be some means whereby this condition can be fulfilled between the contract's two parties. It is not necessary that the principle of 'offer and acceptance' be expressed verbally.

2. Rationality:

Scholars exclude, from the condition of rationality, the sale concluded by a discerning child regarding matters that are customarily accepted. For example, if a discerning boy says to his father: "I have sold our house to so-and-so," this is not valid. However, there is nothing wrong if he sells sweets in his father's grocery shop. This is valid according to custom.

A foolish person does not meet the condition of rationality, so his sale is not valid. A fool is such a person who disposes of his wealth in a way that denotes irrationality, and thus he should be placed under another person's guardianship. In brief, dealing should be conducted between two rational parties. If a question is posed regarding the dealing with a machine, as to how the condition of rationality can be met in such a deal, the answer is that the deal in such cases is originally with the company that uses the machine, which is a mere method for payment.

3. What is sold should be property:

Property is everything that is regarded, in Islam, as permissible and whose ownership is lawful. Everything that is declared unlawful in Islam is not accorded any respect and cannot be regarded as property and, thus, may not be contracted. Even if a person breaks or spills something unlawful, he is not held liable for this, according to the sharia. This is because such a thing is worthless, as is the case with musical instruments. The condition that the sold commodity should be lawful property is of great significance in contemporary dealings.

Examples of this include the following:

• Selling human organs, which is an active trade nowadays, for which international companies are operating through selling and buying in poor countries. Each commodity has its price. Is that right? In fact, that is not right, as organs are not property, but a gift from Allah Almighty.

But, there is an important point here. Namely, the Council of Senior Scholars in Saudi Arabia received a question on buying corpses for learning medicine, which is an urgent necessity. This is one of the important new fiqh-related issues that need Muslim scholars who are well acquainted about two things:

First: The general sharia-rules that form the framework of the Islamic sharia.

Second: Texts.

This is because understanding texts in the context of the sharia-rules differs from understanding them separately. The former manner produces a sound understanding, whereas the latter yields an erroneous understanding.

The senior scholars replied that it is not permissible to buy the dead body of a Muslim or use it for learning, given the inviolability of the Muslim. But, they said, it is permissible to use the corpse of a disbeliever for learning, in line with the principle of doing the lesser of two evils. This fatwa is correct, for a disbeliever does not enjoy the sanctity of the Muslim.

It is also not permissible to sell blood, for it is impure, so it is not property. Likewise, it is not permissible to sell dogs, for they are forbidden, and whatever is forbidden cannot be lawful property. However, some hold that it is permissible to sell dogs in cases where using them is permissible.

4. The sold item should be owned by the seller:

There has been a very common error as far as this condition is concerned. Many, or even most, people buy their cars and even their houses, among other things, by means of al-murabahah in some Islamic banks.

What is meant here is the sale of al-murabahah which does not meet the condition of the seller's ownership of what he sells. The seller here is the Islamic bank. It is not permissible for it to sell what it does not own.

For example, a person comes to you and says that he wants to buy the car of your friend and you say to him "I have sold it to you," intending thereby to buy the car from your friend and then sell it to that person who would say: "I have bought it." This contract is invalid, for the owner of the car may refuse to sell it to you. For this reason, the Prophet is reported to have prohibited such a sale, saying: "Do not sell what you do not possess." [Ahmad, Abu Dawood, An-Nasa’i, At-Tirmithi and Ibn Majah on the authority of Hakeem ibn Hizam]

When some Islamic banks sell cars or the commodities of other companies, do they sell what they do not possess?

It is known that when a client comes to the Islamic bank to buy a car, for example, the Islamic bank says to him "I sell to you," meaning that it sells to him what he chooses from among the cars offered in companies in the market. But, from where does the bank bring it? Does it sell what it possesses?

Some jurists tried to get the Islamic bank out of this problem through the following:

First: The client should promise the Islamic bank that he will buy the commodity; and the Islamic bank in turn should promise the client that it will sell it to him. Then, both parties sign the written promises. This signed paper means that the bank is yet to sell the commodity, but it has merely promised to do so after buying it, and the client has only promised to buy it from the bank.

Second: The bank should make this paper binding. When a person comes to the Islamic bank and signs the written promise of purchase, he becomes committed to completing this process. They should declare that this is not a sale contract to avoid falling into the error of selling what the seller does not possess. Rather, it is only a promise, and the Muslim is obliged to fulfill his promise.

Third: After this step, the Islamic bank gives the price of the commodity to the company in cash and then hands the commodity over to the client, by installments at a known profit. Thus, it guarantees that the buyer will not withdraw from the deal and also guarantees its profit from it.

Shaykh Muhammad Al-Ashqar wrote a treatise on the invalidity of such a dealing and the impermissibility of obliging the client to buy the commodity on account of his promise, for this puts the bank in a position similar to selling what one does not possess. He also said that a promise is not binding. He settled this issue by the question: Is a promise of purchase binding legally or religiously? In other words, if I promised you to buy a commodity, yet I did not, and then you file a complaint against me to the judge, will the judge oblige me to buy it? On the other hand, if I am not obliged by the court, will I be sinful for breaking my promise and thus have to repent?

He explained that the promise of purchase here is not binding, and that the Islamic bank is required to buy the commodity from the company and own it through a formal contract, bringing the commodity in its possession, and then it sells it to the client by installments and receives a profit from this. The Islamic bank should not oblige the client to buy the commodity for merely promising to conclude the deal, for this would actually be a sale, albeit in the form of a promise.

But some dodged this problem and adopted another method: The Islamic bank does not buy the commodity by a formal contract with the company. Rather, the contract is represented by possessing the commodity; and they only conclude the 'offer and acceptance' process over the phone. Then, the bank signs the sale contract with the client and sells it to him by installments. Thereafter, the Islamic bank completes the deal with the company.

This method is also not sharia-compliant. It is nothing but circumvention aimed at changing the form only, thereby distinguishing between the dealing of the usurious facilities companies and that of the Islamic banks. In an authentic hadith narrated on the authority of Zayd ibn Thabit the Prophet forbade selling the goods where they are bought until the tradesmen take them to their houses. [Abu Dawood]

This means that a tradesman should have the commodity in his possession, after owning it, before he can resell it. The meaning of possession depends on the thing in question. It does not necessarily mean transferring the commodity to the place of the buyer, for the commodity may be planes, ships, or many cars, which cannot be transferred by the purchaser. What is intended here is that the commodity should become his property and in his possession. This can be done through official documents with a legal force, which prove that the commodity is now in the possession of the bank and registered in its name. In this way, even if the buyer withdraws from the deal, the commodity remains in the full possession of the Islamic bank.

We notify here that one of the forms of selling the commodity before possessing it is what sometimes takes place in tawarruq sale. For example, a person in need of money goes to buy a quantity of cement by installments and signs the sale contract. Then, he immediately sells the cement to a contractor at a lower price in cash – before possessing it. He may even not know where his commodity is situated. Such sale, in which the dealer sells the commodity before he possesses it, is prohibited. However, if the commodity is separated from the buyer and given to the purchaser, who then sells it to a contractor, then this is the issue of Tawarruq over which the scholars are known to have differing opinions. As some scholars deem it impermissible altogether, some others regard it as generally permissible, if the condition of possession is fulfilled. Still, other scholars regard it as permissible after first possessing the commodity, provided that there is a need for this.

We all remember that the crisis of Al-Manakh market took place because of the violation of this condition, i.e. possessing the commodity before selling it. Shares of illusory companies were sold on credit, with the purchaser desiring to resell them and receive profits until the fixed time for repaying the debt comes. What happened, however, was that this illusory market collapsed and the debts remained unpaid. As a result, the state shouldered a huge crisis that endured for years.

5. The seller should be able to deliver the commodity:

This is a fundamental condition, for if the commodity cannot be delivered, the purpose of the sale will not be fulfilled. For example, it is prohibited to sell fish while it is still in the water or birds while they are in the sky, or to sell a commodity that is located in a country at war, which thus cannot be delivered. This is all invalid.

6. The price should be known:

The price of the commodity should be fixed through seeing or describing.

7. The commodity should be known:

This happens by seeing it or knowing its description. For example, if a person says to another "I have sold you a car", and the other replied "I have bought it". This sale is invalid, for neither the car nor its price has been defined. Similarly, if a person says to another "I have sold you a car for five thousands." This sale is invalid too, since the currency has not been designated. The price should be fixed clearly. But, there is nothing wrong if it is commonly understood which currency is intended. However, on the internet, for example, the currency should be designated.

Seeing the commodity can be done through audio-visual media. This is enough with regard to buying commodities, if the medium is reliable. The buyer remains in a position to accept or reject the commodity if he finds it different in reality.