Fiqh of Trade 1

بِسْم الله الرحمن الرحيم

We need to know all the dealings and form of transactions so we do what's Halal and keep away from the Haraam. There are so many new forms of dealings which every now and then appear in the market. Some of us become victims of these modern systems, and so called "Islamic Banking". So it's important for us to have a background in all this. So the topic of Fiqh of Trade can be sensitive, complicated at times, and difficult to implement. 

Allah only created us for one reason. In [51:56-58]: 

We can't worship Allah while we're dead. We need to be alive. And we can't live without eating and drinking. Eating and drinking doesn't come free, so we have to buy. To buy, we need to have money. And to have money, we need to work. This cycle of life is part of our living in this Dunya. This is why it's important for us to know how to go about that. Allah, in the Qur'an, and the Prophet ﷺ in the Sunnah, pointed this all out for us.

أَنَّ النَّبِيَّ صلى الله عليه وسلم قَالَ " الْبَيِّعَانِ بِالْخِيَارِ مَا لَمْ يَتَفَرَّقَا " ـ قَالَ هَمَّامٌ وَجَدْتُ فِي كِتَابِي يَخْتَارُ ثَلاَثَ مِرَارٍ ـ "فَإِنْ صَدَقَا وَبَيَّنَا بُورِكَ لَهُمَا فِي بَيْعِهِمَا، وَإِنْ كَذَبَا وَكَتَمَا فَعَسَى أَنْ يَرْبَحَا رِبْحًا، وَيُمْحَقَا بَرَكَةَ بَيْعِهِمَا ". قَالَ وَحَدَّثَنَا هَمَّامٌ، حَدَّثَنَا أَبُو التَّيَّاحِ، أَنَّهُ سَمِعَ عَبْدَ اللَّهِ بْنَ الْحَارِثِ، يُحَدِّثُ بِهَذَا الْحَدِيثِ عَنْ حَكِيمِ بْنِ حِزَامٍ، عَنِ النَّبِيِّ صلى الله عليه وسلم.

The Prophet ﷺ said, "Both the buyer and the seller have the option of canceling or confirming the bargain unless they separate." The sub-narrator, Hammam said, "I found this in my book: 'Both the buyer and the seller give the option of either confirming or canceling the bargain three times, and if they speak the truth and mention the defects, then their bargain will be blessed, and if they tell lies and conceal the defects, they might gain some financial gain but they will deprive their sale of (Allah's) blessings." [Bukhari]

If you're selling a car, and know there's a defect, you should inform the buyer. Even if the price is a thousand dollars less, Allah will put blessings in the transactions. 

If the seller is a liar, the بركة in his money will go. If the buyer is the liar, his بركة will go. If both parties lied, the بركة will be destroyed on both sides.

The Permissibility of Trading 

Scholars have unanimously agreed on the permissibility of trading in general. People's needs are interdependent. A person won't give you money or goods in return for nothing. So wisdom necessitates the permissibility of trade in order for people to fulfill their needs.

In  [2:275]:

How can a trade transaction be validated? 

-> A verbal formula. 

-> An actual one; the act of exchange. And this is what takes place most of the time, in our everyday transactions at the grocery shop, etc. There's no negotiation or any verbal declaration that takes place.

It can be a combination of the two: 

E.g. A seller says to the buyer to take this for 1 dinar, and the buyer takes it without a word.

Conditions related to the Seller and Buyer 

1) Mutual Consent

The trade transaction becomes invalid if either the seller or buyer is unjustly forced to go through it. In [4:29]:

If the seller forcefully promotes his product, and the buyer becomes undecided, or feels shy to say no, and ends up buying it, is this considered forced? No. You were just weak in heart at that moment, were generous, etc. But you weren't forced. 

However it's important to note that a transaction concluded through just compulsion is valid, like when the ruler or person in authority forces the bankrupt person to sell property to pay off his debts.

2) Both the buyer and seller have to be free (the slave has to get permission from his master), reached the age of puberty, and sane. 

They have to be Islamically suitable to handle the transaction.

We also know that there are certain norms in society. We have children who are 6 or 7 years old whom we send to buy things. Their transaction doesn't become invalid.

3) You have to own the money/product or be a representative of the owner.

The Prophet ﷺ said to Hakim Ibn Hazm, "Don't sell what you do not have..." [Tirmithi] 

This is why there are a few issues with stock exchange.

Another example of this is when you sell an item you don't own, and then after the buyer has paid for it, you get the stock. You are only allowed to sell what you own. 

Conditions related to the Commodity 

Commodity is the item which is going to be exchanged. The item with which money is going to be given and taken for.

1) It should be absolutely lawful to use

The Prophet ﷺ said, "Allah and His Messenger have prohibited the trade of intoxicants, dead animals, pigs, and idols" [Agreed upon]

Ibn AlHajr said in Fat'h AlBaari (which explains Sahih AlBukhari) regarding the Hadith:

We know that the tanned skin of dead animals is allowed in Islam. And although we aren't allowed to use the dead flesh of animals, we are allowed to feed them to hunting dogs. We can benefit from them, but not use them in transactions. 

The scholars differed in many issues, like in intoxicants. For consumption purposes and dealing with it is all حرام. There are certain kinds of intoxicants used in medicines, and scholars have allowed this - but the percentage differs from one scholar to another. 

2) The price and commodity must be available when the trade transaction is concluded. 

E.g. It's forbidden to sell a fugitive slave, or a runaway camel.

Likewise it is illegal for a Muslim to sell something taken by force, except in the presence of the one who took it forcefully.

3) The price and commodity must be known to the seller and buyer. Hiding it is regarded as fraud, which is prohibited in Islam.

The Prophet ﷺ prohibited "AlMulamasah" and "Munabadhah"