Instruments Sale of Goods

Instruments Applicable In Islamic Sale Of Goods

By: Prof. Dr. Mohd. Ma’sum Billah masum2001@yahoo.com applied-islamicfinance@yahoo.com

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Introduction

There are many definitions of sales given by scholars. Though they are mostly similar in meaning, some gave a more precise and explicit explanation. Basically, a sale is an exchange of one form of goods or property for another property with mutual consent. It also refers to the transfer of ownership of property in consideration for a price in the form of money. Ibn ‘Arfa on the other hand defines sales as a contract of obligation by which each party transfers to the other the property or something for other than simple usage or pleasure.[1] Other jurists describe sales as the exchange of one commodity for another in which one of it is the object and the other is the price.

Islam encourages Muslims to participate in sale and trade activities and it is in line with the will of Allah as mentioned in the Holy Quran. In fact, there are many verses in the Quran about sales and trade which mostly are injunctions inclined towards the application of doctrinal and ethical norms rather than legal commands, under which certain transactions were allowed or forbidden.[2] It is also in the Quran that Allah has declared sales legal,[3] trading with mutual consents is legal,[4] commands man to have witnesses for sale contracts[5] and that man is advised to seek a living through the means that Allah has granted upon them: (Al- Baqarah:198)

ليس عليكم جناح أن تبتغوا فضلا من ربكم فإذا أفضتم من عرفات فاذكروا الله عند المشعر الحرام واذكروه كما هداكم وان كنتم من قبله لمن الضالين

“It is no crime in you if you seek the bounty of your Lord (during pilgrimage). Then when ye pour down from (Mount) ‘Arafat, celebrate His praises of God at the Sacred Monument, and celebrate His praises as He has directed you, even though, before this, ye went astray.” In Surah al Naba, it is encouraged that Muslims use the day for profit- making occupations as Allah will us to do and in Surah al- Mulk, Allah said that He has created the earth so that man can very well use all the richness of the world to make a living. Even the Prophet approved of the trade contracts conducted during his time by saying, as narrated by al-Bokhari and Muslim:

“Two people conducting a sale agreement are in choice until they part”. The Prophet also said” Sale is but by mutual consent”. When asked of which kind of earning is the best, he replied by saying “From man’s working with his hand and from a blessed and legal sale”.

Sale takes on many forms but there are four kinds of sale according to the Moohummadan Law with reference to the things sold.[6] The first is the sale of a specific thing for a specific thing, sale of indeterminate for a determinate thing, sale of indeterminate for a specific thing and sale of a specific for an indeterminate thing.

CONDITIONS of SALES

Before a sale can take place, there are some conditions that need to be fulfilled by the seller and the buyer, as well as the saleable merchandise itself. According to the Quranic statement, a sale or trade should be done with mutual consent otherwise it is invalid as there is an element of force on the possession of the things sold. (Surah al- Nisa’: 29):

يا بها الذين ءامنوا لا تأ كلوا أموالكم بينكم بالباطل الا أن تكون تجارة عن تراض منكم ؤلأتقتلؤ انفسكم ان الله كان بكم رحيما

“O ye who believe! Eat not up your property among yourselves in vanities: but let there be amongst you traffic and trade by mutual good-will: nor kill (or destroy) yourselves: for verily God any hath to you Most Merciful!” Moreover, the sale should be properly constituted or contracted either by the use of appropriate words or reciprocal delivery. The appropriate words here refer to the offer and acceptance from both parties. There should also be separate contracting parties except when the situation requires only one contractor for both sides, for example when a father sell his own property to a minor or his own child.

There are different views on the parties that are allowed to enter a contract of sale. Both parties should have an understanding and adequate judgment that he is conducting or involved in a contract of sale.[7] Some said that a sale made by a person lacking of the capacity to do so, e.g., an insane person is invalid. However, according to the Hanafis school of thought, a sale made by a crazy person or a three-year old with the permission from his guardian and with the condition that they have an understanding of the essence of sale, is considered valid.

The thing or object sold should be made known by the seller to the purchaser by sight or description. This is to ensure no future dispute, to prevent the seller from cheating the buyer as well as to protect the buyer and his interests. At the same time, the price should also be known to both parties all for the same purpose of avoiding future conflict. Any illegal and legal thing should be properly defined and explained as in between the two are doubtful things that should be avoided.[8] The Prophet has said that:

“Both legal and illegal; things are obvious, and in between them are doubtful matters which are not known by many people. So whoever is wary of those doubtful things, he purifies himself for his religion and his honor”.

The merchandise should also be in existence and there is no contract of sale if the object sold is not in existence. Likewise, the object should also be duly owned by the owner or the seller. The seller should be the real owner with the ownership in the sense of full and absolute right. According to the Prophet:

“He who buys foodstuff should not sell it until he takes possession of it and until he (has paid for and) accepted it”.[9]

Furthermore, the object of sale should be considered to be ritually and legally clean, as well as marketable and are of legal value. Therefore, properties such as liquor and pigs are not lawful merchantable objects in Islam. The object should also carry legal benefit and is no longer needed by the owner. A very important condition is that there should be similarity among the things exchanged otherwise it is considered as riba’. Similarity here implies that the weight and capacity of the object should be distinguished.

When one article of weight is sold or exchanged for another article of weight, or one measure is sold or exchanged for another measure, the delivery of both must be immediate from hand to hand. If the articles exchanged is of the same kind, e.g.: wheat for wheat, then there must not only be immediate delivery, but also absolute equality of weight and measure for both the objects.[10] Thus, this concludes that the object of sale should be capable of being delivered or handed over to the buyer.

COMMON INSTRUMENTS in ISLAMIC SALES of GOODS

2.1- Contract of Salam

Bay’ al-Salam is a sale of an object which it is not available during the time of the conclusion of the sale but it will be delivered in the future on a specific or fixed future date. However, the price should be paid immediately during the session of the contract. [11] In other words, this kind of contract is also known as forward sale in which the price is paid at the time of contract but delivery of the object is postponed to a later date.[12] This kind of sale is allowed in Islam though it is a sale of unavailable goods and this has been approved by the Hadith of the Prophet, which allowed the sales of the future goods.[13] Sale of Salam is lawful in relation to the goods, which can be weighed or measured or counted by number, which do not very much differ in their units such as eggs, because the uncertainty of goods of this nature is immaterial.

It is also allowed with respect to articles of longitudinal measurement for example are clothes, carpets etc. It is argued that it is possible to define these sorts of articles exactly by specification of genus, species quality, length and breadth. Meanwhile, sale of Salam is not allowed when it has a dissimilarity in term of quantity unit which the difference between units may be great and, thus involves excessive uncertainty. For example are animals, fruits, etc. According to Hanafi school; the condition of the validity of the sale of Salam is that the delivery of the goods should be postponed to a future date and immediate delivery renders such sale invalid.[14] This is based on two reasons; first, the Hadith of the Prophet “Whosoever enters into a sale of with you, let him stipulate a definite weight and measurement and a definite period of delivery.”[15] Second, the immediate delivery of the subject matter of salam sale may cause dispute between the parties, because this is the sale of the future goods which implies that the seller is not in a position to deliver the goods to the purchaser immediately demand, and when the dispute arises it may lead to the dissolution of the contract.

While, according to the Syafi’i school, the delivery of the goods in the sale of salam need not necessarily be postponed to a future time but it can be immediate.[16] It is because the future delivery of the goods is to be authorized in order to facilitate the seller to acquire the subject matter of the sale and deliver it to the purchaser. Regarding to the extent of the period for the delivery, Hanafis and Hanbalis fixed the period at least one month and Malikis fixed a period of month, because this period is considered reasonable.

Compared to Shafi’is, they did not fix the period because it is not a condition.[17] It should be allowed to be determined by the parties. All other conditions essential for the validity of the normal contract of sale are applicable to a salam sale with equal force, such as the legal qualification of parties concerned, i.e. that are capable of understanding the implication of the sale contract, that they are free to use their own discretion and that they are in position to dispose their property and that the contract item be lawful from the Shari’ah perspective.

It may be inferred that the salam contract is not an absolute sale of non-existent goods, it is rather a special sale of non-available goods of the session of sales, but it will be available at the delivery time.

2.2- Contract of Istisna’

The Istisna’ contract, like salam contract is a contract in which the purchaser charges the seller to manufacture or produce an object on certain conditions at an agreed price to be paid either in advance or on completion. In this contract, no specification of time for delivery or passing consideration is required.[18] The subject matter is non-existent goods during the contract but it is treated as valid the principle of istihsan or equity and on the basis of customary practice. The equitable concept of istihsan has provided for the legality of a contract to manufacture, due o its necessity, by giving the object a fictional existence at the time of the contract.

Actually, the contract of future delivery of manufactured good is valid due to time is required by the manufacturer to produce and deliver the prescribed article. The time of the production, which has been agreed, must be adequate. The vendor can revoke in this istisna’ contract if he has not yet received payment in advance. Equally, the buyer may cancel his order before the product is completed. But in this case, Abu Yusuf has stated that, the buyer cannot revoke the contract once the manufacturer starts to produce the goods in accordance with the order, because this would be detrimental to the seller who might not be able to dispose of the goods elsewhere.[19] However, in such a case, there are different views among the schools.

Based on Hanbalis and Shafi’es, the manufacturer and his customer or client should take oath whether or not the article is already manufactured and if the oath is contradictory, the contract is rescinded.[20] Similar to the Hanafis when the goods are not yet produced, but once it has been produced then the manufacturer is to be believed provided he takes the oath.[21]. While, according to Malikis, the manufacturer is also to be believed when the order is in the recent past, otherwise the client’s word is taken into consideration.[22] In this contract of istisna’, the subject matter should be well- defined without ambiguity in term of its quality, quantity and others in order to validate the contract.

The object also must be normally used by the people. There is no substantial difference between salam contract and istisna’ contract. It is mere legal technical difference. Both transactions concern the salt of fixture goods required by the one who needs and is interested in a definite thing, with the agreed price, which will be paid in advance. In both contracts, the subject matter of the contract is non- existent at the time of the contract, but must be available in the future. However, in salam contract, the subject matter is legally considered as debt which binds the seller, because the price must be paid in advance.

Meanwhile, in istisna’ contract, the payment must be paid when the manufacturer has completed producing the goods. The majority of Muslim jurists maintained that istisna; contract was not binding contract but Abu Yusuf disagree with the majority view due to the cancellation of the contract might cause damages to the manufacturer, who might no be able to sell the article or to the buyer who might suffer the loss.[23]

3.0- OTHER TYPES of SALES

3.1- Bai’ al-‘inah Sale

Bai’ al-‘inah sale is a contract when one person buys a property from another and the price is paid immediately and later sells it back to the seller with the higher price to be paid in the future.[24] This contract also is known as ‘ajal’ contract Malikis and Hanbalis have stated that this contract is void due to the intention in this type of sale is illegitimate i.e. to prevent the prohibited riba. While Shafi’es and Hanafis allowed this sale which they argue that the necessary elements of bai’ al-I’nah sale are satisfied and the intention is irrelevant.[25]

3.2- Jizaf Sale

Jizaf is a whole sale where the quantity of the goods is not exactly known. It is also defines as something which is unknown in detail.[26] The majorities allow this contract of sale on all types of articles regardless of whether the quantity is big or small except Abu Hanifah, which only approves this sale on big quantity of article for fear of gharar or uncertainty. The majority argues that there is no gharar in this sale, for the object of sale is known to the buyer and he can guess its quantity.[27] However, they also impose certain conditions for the validity jizaf sale.

The goods must be seen at the time of or before the conclusion of the contract. If the buyer is blind, the contract is not allowed.[28] The goods must be sold as whole not as individual units. Either party must not know the volume of the goods. Thus, if either party knew before the sale, the other party has the right to continue or stop the sale. If the goods are placed on the ground, it must be flat. When it is covered that the ground is not flat which affects the position of the goods, the buyer has the right the option.[29]

3.3- Bay’ al-Tawliyah Sale

This is a sale of goods at the same price, which was paid in the first place for its purchase. It is stated that the time when the Prophet went to Medinah from Mecca, Abu Bakar, offered him one of his camels but Prophet refused to accept it without payment, so he paid him the same price. Abu Bakar first paid for their purchase.[30] It is allowed that all expenses spent on the goods are to be included in the principal price. The main consideration in this sale is the original price. When it is discovered that the seller lied by imposing a price higher than the actual original price, the buyer has the right of option to give back the goods and recover the price or precede the sale.

But according to Abu Yusuf if the goods have been consumed destroyed, the buyer has no option and according to Muhammad bin al-Hassan, there has the option to recover the price and pay market value of the goods.[31]

3.4- Murabahah Sale

Murabahah is the sale of goods at the same price paid in the first place for its purchase with a markup or surcharge; this surcharge is considered as a profit. This type of sale is allowed in Islam due to the condition that the original price and the amount of profit are known to the second buyer. If it is discovered that the seller (first buyer) had lied to the second buyer about the real original price, the second buyer has the right of option to return back the goods and recover the price if he had paid or to pay the original price and the profit.[32]

3.5- Wadiah Sale

Wadiah sale is the sale of goods at a price less than that paid in the first place. It is allowed in Islam due to the original price is known to the buyer.

3.6- Ishrak Sale

Ishrak sale is the sale of goods, where the buyer is considered a partner in the ownership. This is due to the proportion of what he pays and the actual price, which the price paid in the first place. This sale is allowed in Islam.

3.7- Wafa Sale

Wafa sale is the sale between the seller and the purchaser, but the seller has the right to take back the object contracted with paying the price. Actually, this kind of sale has been rejected by the majority because it is similar to riba and the transaction involves two transactions in one contract, which is selling and buying back. But they had proposed to change this type of sale to mortgage, which means the buyer cannot draw benefit from the sale object.[33] Art. 118 of the Majallah provide that: “Bay’ bil Wafa is someone selling a property to another for so much money, on the condition of his giving it back when the price is returned.

It has the effect of lawful sale from the point of view that the buyer receives benefit from the goods sold. But it has the effect of a defective sale because the two parties are able to annul it. It has the effect of a pledge or rahn which the buyer cannot sell the thing sold to another”.[34]

3.8- Talji’a Sale

The Talji’a sale is when a person disposes off his goods with the intention of preventing them from being seized.[35] He therefore, makes an agreement with a potential buyer to have the right of possession transferred and it is only when the threat have passed away will the original owner regain back his property. This contract is not of the intention of contract of sale but more of a pledge or deposit. The Hanafis and Shafi’s validate the contract even though the contract assumes the appearance of a sale and the intention of the sale is absent.

This is because, according to them, as long as the object of contract is in existence and being no form of any defect, then it is permissible.

3.9- Bay al -Araya

Bay al- Araya is a contract of barter in sales of dates by estimation. In this sale, the owner is allowed to sell the fresh dates even when they are still on the palms. This type of sale had been practiced widely during the pre-Islamic times and even though it contains an element of gharar, this sale has been permitted by the Prophet SAW. The Prophet allowed the barter of dates on the palm according to the amount of dried dates that the owner estimated the palm would produce up to only five awsuq at a time.

Another reason for the permissibility of this sale is because it is falls under the category of al-tawliyah (resale at the stated original cost with no profit or loss to the seller) as it is estimated while still being on the palm.[36]

Conclusion

As a conclusion, sale contract is needed in preservation of humankind as man needs to exchange what he owns with other things. Otherwise, that person will have to acquire what he needs by force and through conquest. Sale and trade is highly encouraged in Islam and Islam has even laid down the conditions that need to be fulfilled before a contract of sale can be concluded.

The instruments listed down in this assignment are some of the permissible instruments, which have been practiced during the pre-Islamic period, the time of the Prophet and even up to now. Even though some may contain an element of gharar or uncertainty, as long as the elements are duly avoided and certain standard and conditions are set, then the instruments are allowable in Islam.

----------------------- [1] Dr. S. E. Rayner. The theory of contracts in Islamic law, (1st edition). London [2] Abdullah Alwi Haji Hassan. Sales and contracts in early Islamic commercial law. New Delhi. [3] Al- Baqarah: 275 [4] Al- Nisa:29 [5] Al- Baqarah:282 [6] Neil B.E. Baillie. A digest of Moohummadan Law. Pakistan. [7] Ibid [8] Abdullah Alwi Haji Hassan. Sales and contracts in early Islamic commercial law. New Delhi [9]Ibid [10] Neil B.E. Baillie. A digest of Moohummadan Law. Pakistan [11] Razali Hj.

Nawawi, Islamic Law on Commercial Transactions, CT publications, Malaysia, 1999, p. 91 [12] Hashim Kamali, Islamic Commercial Law; An Analysis of Future and Options, Ilmiah Publishers, 2002, p.131 [13] Ibn al-Athir, Jamic al-Usul, Vol. ii, p. 17 [14] Al-Kassani, Bada’ic al-Sana’ic, Vol. V, p.212. [15] Ibn al-Athir, Jamic al-Usul, Vol. II, p. 17 [16] al-Sharbini, Mughni al-Muhtaj, Vol. II, p.105 [17] Ibn Rushd, Bidayah al-Mujtahid, Vol II, p.201 [18] Kasani, Al-Bada’i, op.cit, V. p.2; and The Mejelle, (Transl.

Tyser et al; Cyprus, 1901) p. 53 [19] Al-Zuhaili, Wahbah al-Fiqh al-Islami wa Adilatuh, Vol.IV. p.634 [20] Al-Sayuti, Al-Ashhah wa al-Naza’ir, p.89; Ibn Qudamah, al-Mughni, Vol. IV, p.302. [21] Al-Kasani, Bada’ic al-Sana’ic, Vol.V p.3. [22] Ibn. Juzay, al-Qawanin al-Fiqhiyah, p.269; al-Baji al-Andalusi, al- Muntaqa Sharh al-Muwatta. Vol. IV, p.300. [23] Al-Zuhaili Wahbah, Al-Fiqh al-Islami wa Adillatuh, Vol. IV, pp. 633 [24] Al-Hattab, Muwahib al-Jalil, Vol. IV, p.390. [25] Al-Shaa’rani, al-Mizan al-Kubra, Vol.

II, p. 70. [26] Al-Shawkani, Nayl al-Awtar, Vol. V, p.196. [27] Al-Kasani, Bada’i al-Sana’i, Vol.II, p.16 [28] Al-Dardir, Sharh al-Kabir, Vol.III, p.157. [29] Ibn qudamah, Al-Mughni, Vol. IV, p.133 [30] Al-Shawkani, Nayl-al-Awtar, Vol. V, p.199 [31] Al-Zuhaili, Wahbah, Al-Fiqh al-Islami wa Adillatuh, Vol. IV, p. 711 [32] Al-Zuhaili, Wahbah, Al-Fiqh al-Islami wa Adillatuh, Vol. IV, p. 711 [33] Al-Khafif, Ali, Ahkam al-Muamalat al-Shari’ah, p.284 [34] Nawawi, Razali(1999),Islamic Law on Commercial Transaction, CT Publications, Malaysia, p.111.

[35] Dr. S. E. Rayner. The theory of contracts in Islamic law, (1st edition). London [36] Abdullah Alwi Haji Hassan. Sales and contracts in early Islamic commercial law. New Delhi.