Commercial Transactions
Commercial transaction is the exchange of property or benefit in the form of trade which is permissible as long as it happens in a certain frame. It’s preferred to have witnesses especially in large deals.
Commercial Transactions
In Islamic contexts, a ‘sale’ means the permanent exchange of one property or legitimate benefit for another, even for a deferred handing over, provided that it is neither usury nor loan.[1]
Ruling: Sales are permissible in Islam, as Allah says:
‘But Allah has permitted trade and has forbidden interest.’
(2:275)
:Ibn 'Umar reports that the Prophet (peace be upon him) said
‘When two persons make a sale, each of them continues to have a choice as long as they are together and have not parted.’
Related by al-Bukhari, hadith No. 2,112; Muslim, hadith No. 1,531.
It is universally agreed by Muslims that trade is permissible. Moreover, people need trade so that a person can have what is in possession of another, because it serves his interests and he cannot legitimately acquire it except by purchase. This means that sale is permissible because it meets people’s needs.[2]
Essentials: A sale has three essentials: parties, subject of sale, and a formula.[3]
Witnesses:To have witnesses to a sale is recommended, but not obligatory.[4]
:Allah says
‘Have witnesses when you make business deals’
(2:282)
This is a clear order, but it is meant as a recommendation, rather than obligation.
‘'Imarah ibn Khuzaymah reports that his uncle, a Companion of the Prophet (peace be upon him) told him that the Prophet (peace be upon him) once bought a horse from a Bedouin and told the Bedouin to follow him so that he could give him the money. The Prophet (peace be upon him) walked fast, but the Bedouin was slow, and people continued to ask him if the horse was for sale, not realizing that the Prophet (peace be upon him)had already bought it’
Related by Ahmad, hadith No. 21,883; Abu Dawud, hadith No. 3,607; al-Nassa’i, hadith No. 4,647; al-Hakim, vol. 2, p. 21.
This hadith shows that the Prophet (peace be upon him) bought the horse but there was no one to witness the sale. Had it been necessary or obligatory, the Prophet (peace be upon him) would have ensured the presence of witnesses. Moreover, during his lifetime the Prophet’s (peace be upon him) Companions used to trade in the markets, but we have no report that he ordered any of them to ensure the presence of witnesses to a sale. Nor do we have a report that they brought witnesses to their deals. Needless to say, trading is something that goes on all the time, and if people were required to have witnesses for every sale, this would have caused hardship. Never the less, taking witnesses eliminates the possibility of cheating or denying what was agreed upon.
Conditions: The following conditions must be met for the sale to be valid:
1. There must be agreement between the seller and the buyer.
Allah says:
‘Believers, do not devour each other’s wealth illegally, unless it be through lawful trade which you conduct by mutual consent’
(4:29).
:Abu Sa'id al-Khudri reports that the Prophet (peace be upon him) said
‘A sale can only be through mutual agreement.’
Related by Ibn Majah, hadith No. 2,185; Ibn Hibban, hadith No. 4,967; al-Bayhaqi, vol. 6, p. 17
2. Each of the two parties should be a person of age, sane and rational.
3. The seller must be the owner of what is being sold, or someone acting for the owner, such as an attorney, guardian, executor, manager or employee assigned to selling. No person may sell something he does not own. The Prophet (peace be upon him) said to Hakim ibn Hizam:
‘Do not sell what you do not possess.’
Related by Ahmad, hadith No. 15,311; Abu Dawud, hadith No. 3,503; al-Tirmidhi, hadith No. 1,232; al-Nassa’i, hadith No. 4,613; Ibn Majah, hadith No. 2,187
4. What is being sold should be something that is permissible to use in the normal way, not in case of necessity. Jabir reports that the Prophet (peace be upon him) said:
‘Allah has forbidden the sale of wines, carrion, pigs and idols.’
Related by al-Bukhari, hadith No. 2,236; Muslim, hadith No. 1,581.
Ibn [Abbas reports that the Prophet (peace be upon him) said:
‘If Allah forbids people to eat something, He also forbids them to take its price.’
Related by Ahmad, hadith No. 2,221; Abu Dawud, hadith No. 3,488; al-Bayhaqi in Al-Sunan al-Kubra, hadith No. 11,051
5. What is being sold can be delivered to the buyer. What cannot be delivered is considered like something that does not exist, and as such it cannot be sold. It is in fact a form of gharar, which means something deceptive: it has an appearance but its substance is unknown. In such a sale, the buyer may give the price agreed but may not obtain what he bought. Thus, it is not permissible to buy a fish that is still in the water, the stones that are still in the dates, birds flying in the sky, milk still in the cow, the unborn cub, or an animal in the wild. Abu Hurayrah reports:
‘Allah’s messenger has forbidden any gharar sale.’
Related by Muslim, hadith No. 1,513
6. The subject of the sale must be known to both parties, either both seeing it at the time of the sale or by describing it in a way that distinguishes it from other things. Lack of knowledge of what is being bought and sold counts as gharar, which is forbidden. To buy something one has not seen, or one has seen but does not know, and it is not present at the time of the deal is wrong.
7. What is being sold should be defined and the price should be clearly stated.
references
- Al-Nadawi, Al-Fiqh al-Muyassar, p. 211.
- Al-Zuhaili, Al-Fiqh al-Islami, vol. 5, p. 3,306.
- Al-Shawkani, Fath al-Qadir, vol. 5, p. 74; al-Bahuti, Kashshaf al-Qina', vol. 2, p. 3.
- Al-Nadawi, Al-Fiqh al-Muyassar, p. 214.