Rules of Selling in Islam

 “An honest Trader will be with Prophets, Shuhadaa and Saaleheen on day of Judgement”. Hadeeth

‘Sale’ (Bai in Arabic) is defined in Shariah as ‘the exchange of a thing or service of value by another thing of value with mutual consent’. Selling is an essential part of everybody’s life therefore Islam has provided detailed rules and guidance in this regard. This is a huge topic which can not be covered in one article. Below is just a summary of important basics.

Selling of an item begins with an Offer from the seller, which is then accepted by the buyer. For that matter both seller & buyer must have to be sane, adults and capable of completing the Offer & Acceptance. As such a child or mentally incapable person cannot conduct the Sale. Honesty & fairness on both parties is fundamental to selling in Islam.

“Whosoever sells a defective product without disclosing its defect to the purchaser, shall earn the permanent anger of Almighty Allah and the angels continuously curse such a person.” – Hadeeth

Needless to say here, selling with cheating, lying, forcing, hiding a fault, or dealing in stolen or snatched have no place in Islam.

“Whoever buys stolen goods, knowing such goods to have been stolen, becomes a party to the act of theft.” – Hadeeth

Rules for a Sale to be Considered Valid in Islam

Rule 1: The subject of Sale must ‘Exist’ at the time of Sale.

Thus, a thing which has not yet come into existence cannot be sold. If a non-existent item has been sold, even by mutual consent, the sale is void according to Shari‘ah.

Example: A sells the unborn calf of his cow to B. The sale is void.

Rule 2: The Seller must Own the item at the time of Sale. Anything not owned by the seller at the time of sale cannot be sold. If he sells something before acquiring its ownership, the sale is void.

Rule 3: The subject of Sale must be in Physical or Constructive Possession of the seller when he sells. “Constructive possession” means a situation where the possessor has not taken the physical delivery of the commodity, yet the commodity has come into his control, and all the rights and liabilities of the commodity are passed on to him, including the risk of damages to it.

Example: A has purchased a car from B. B, after identifying the Car, has placed it in a garage to which A has free access and B has allowed him to take the delivery from that place whenever he wishes. Thus the risk of the Car has passed on to A.. The car is in the constructive possession of A. If A sells the car to C without acquiring physical possession, the sale is valid.

Selling vs Promise to Selling:

There is a big difference between an actual sale and a mere promise to sell. The actual sale cannot be affected unless the above mentioned three conditions are fulfilled.

However one can promise to sell something which is not yet owned or possessed by him. In this case seller is under a moral obligation only.

Exception to Rules 1 to 3:

There are two types of sale which have exemption from rules of Existence, Ownership & Possession:

(a) Bai‘ Salam: Seller agrees to supply specific goods to the buyer at a future date in exchange of a cash price fully paid on the spot. Item that is sold must be measureable exactly in quality & quantity. So it does not apply on crops of a particular field because one never knows how much crop will yield in future from a specific piece of land. It is applicable on ordinary items bought for cash, not on exchange of currencies, gold or precious metals.

Note, Bai Salam is applicable on ordinary items bought for cash, not on exchange of currencies, gold or precious metals.

(b) Bai Istisna’: This is the sale of a product that does not exist but needs manufacturing. For example, a chair to be made by a carpenter.  The Quantity & Quality is agreed upon and the material is used by the seller. Price can be paid on spot or in instalments.

Rule 4: The sale must be agreed & finalised on that place & time. Payment of Price & Delivery of goods could be in future however.

Example: A says to B, “If party X wins the elections, my car stands sold to you”. The sale is void, because it is contingent on a future event.

Note: Both parties have the right to change their mind before departing. Once left the place, the sale becomes binding on both.

Rule 5: The subject of sale must be a property of value.  An item having no value according to the usage of trade cannot be sold or purchased.

Rule 6: The subject of sale should not be a thing which is used for a Haram purpose only, like pork, wine etc.

Rule 7: The subject of sale must be specifically identified and known to the buyer. For example, a specific apartment in a multi-storey building.

Rule 8: The delivery of the sold commodity to the buyer must be certain and should not depend on a chance or unforeseen event.

Example: A sells his car stolen by some anonymous person and the buyer purchases it under the hope that he will manage to get it back. The sale is void.

Rule 9: The certainty of price is a necessary condition for the validity of a sale. If the price is uncertain, the sale is void.

Example: A says to B, “If you pay within a month, the price is Rs. 50. But if you pay after two months, the price is Rs. 55”. B agrees. The price is uncertain hence the sale is void.

Rule 10: The sale must be unconditional. A conditional sale is invalid, unless the condition is recognized as a part of the transaction according to the usage of trade.

Examples:

(i) A buys a car from B with a condition that B will employ his son in his firm. The sale is conditional, hence invalid.

(ii) A buys a refrigerator from B, with a condition that B undertakes its free service for 2 years. The condition, being recognized as a part of the transaction, is valid and the sale is lawful.

Please note this article is just a summary of a vast subject. You should read it as a first step and then expand upon this knowledge by further reading.

There are two types of Sale due to seller declaring the actual cost of the item:

Murabahah: Seller declares the actual cost to the buyer and then sells the item at some profit.

Musawamah: The seller does not declare the actual cost of the item.

Also, the concept of Writing Contract &  Keeping Witnesses is important

Next we explore the concept of Companies in Islam.