The Basic Islamic Rules for Trading

In the Name of Allah---the Most Beneficent, the Most Merciful.


The Basic Islamic Rules for Trading

Author: Sajid Mahmood Ansari

All praise is due to Allah Almighty, the Originator, the Sustainer of the universe and be His blessings upon His last Messenger Muhammad bin Abdullah Al-Hashimi Al-Qurshi. And His all Apostles.

Islam is a complete code of life that provides appropriate guidance for all spheres of life.  Economics affects human life most of all social activities. Islam has given a perfect,  unparalleled, and well-balanced economic system that ensures the equity of rights for all human beings in the field of economics.

1. Islam versus Capitalism

Capitalism has encompassed the majority of human beings today. It gives free hand to the capitalists to exploit the natural and human resources for their own interests. The majority of humans are like toys in their hands and they are free to grab the money by hook or crook. The worst strategy they are following is to make money by taking interest on loans.  Contrary to this, Islam ensures a justified flow of liquidity in society. It emphasizes the welfare of every human being, whether be his race, color, language, or creed. Islam commands the Muslim state to govern all the activities taking place in the open market and does not allow anybody to deprive others of their rights.

2. Islam versus Communism

Communism deprives individuals of their right of owning their own property. It unnecessarily interferes in the personal life of the citizens and causes to concentrate all the liquidity in the hands of the regime. The concentration of liquidity in a few hands in communism deems worse than capitalism. The Islamic economic system neither deprives the people of their property rights nor allows the liquidity to condense in hands of the regime. In a Muslim state, people are free to have commodities according to their needs, and traders can perform all activities under the umbrella of the government, following a particular set of laws. This paper should not be treated as a Fatwa (verdict), but simply as an effort to explain one major aspect of the Islamic economic system.

The detailed comparison of Islam, capitalism, and communism is beyond the scope of this paper, though, a brief comparison is deemed necessary to understand the beauty of the Islamic system of economics.

3. The Lawfulness of Trade & Commerce

Trade and commerce is one of the major needs of life, while a society can’t exist without trade. So Islam has permitted the trade in general, except for a few unlawful transactions.

Allah Almighty said:

That is because they say, "Trade is [just] like interest." But Allah has permitted trade and has  forbidden interest.” [2:275]

4. The Lawful Transactions

Islam, particularly, the Hanbali Fiqh, one of the four major schools of law, grants maximum freedom of transactions, unless one is not deprived of his rights or nobody can exploit the needs of the people through his money. Here are given certain rules that manage the  Islamic economic system. 

Generally, all the trading contracts are lawful and permissible that fulfill the following seven  pre-requisites:

(i) Free consent of the parties:

Allah Almighty says:

“O you who have believed, do not consume one another's wealth unjustly but only *in lawful] business by mutual consent. And do not kill yourselves [or one another]. Indeed,  Allah is to you ever Merciful.” [4:29]

Abu Saeed Al-Khudri (May Allah be pleased with him) reported that the Messenger of Allah  (صلى الله عليه وسلم (said, “The trade accomplishes with the consent of the parties.”

[Sunan Ibni Majah: H.2185, 

The Holy Qur’an and the Prophet (صلى الله عليه وسلم (did not mention any specific words or statements  to show consent, so whatever is considered ‘consent’ in the customary trade, is sufficient;

though offering and acceptance, either verbally or in written form is preferable to avoid any dispute. The aforementioned Ayah alludes to this preference. So a transaction that is accomplished by forcing someone unlawfully, is not a lawful transaction.

*Kashaful Qina’a: V.2,P.459+

(ii) Sanity of the Parties

The buyer and the seller should be sane and cognizant at the moment of the transaction.  Transaction operated by insane, drunken or a minor (child) is invalid. So a person who is unfamiliar with the commodity to be sold, the measuring scale, the market value or even the consequences of the transaction, then the transaction is void.

*Kashaful Qina’a: V.2, P.463]

Allah Almighty said:

“And let him fear Allah, his Lord, and not leave anything out of it. But if the one who has the  obligation is insane or weak or unable to dictate himself, then let his guardian dictate in  justice.” [2:282]

Ali bin Abu Talib (May Allah be pleased with him) reported that the Messenger of Allah  (صلى الله عليه وسلم (said, “The pen (of the commandment) has been taken away from three persons, i.e the  child until he reaches the age of puberty, the sleeping person until he awakes and the  mentally retorted until he recovers.”

[Musnad Imam Ahmad:H. 940,956,1183, Jami At-Tirmidhi:H.1423]

However, a transaction is valid from a minor or an adolescent with consent of his Wali  (custodian), for the trade of inexpensive commodities in a lesser amount. *Kashaful Qina’a:  V.2, P.463]

Allah Almighty said:

“And test the orphans [in their abilities] until they reach marriageable age. Then if you  perceive in them sound judgment, release their property to them.” [4:6]

(iii) Merchandise and price should be a lawful commodity

The commodity or service to be sold and its price or fee should be a lawful commodity,  without a state of inevitable necessity. *Kashaful Qina’a: V.2,P.464]

 

Allah Almighty said:

“O you who believe! Intoxicants (all kinds of alcoholic drinks), gambling, Al-Ansaab  (stone altars for sacrifices to idols, etc), and Al-Azlaam (arrows for seeking luck or decision)  are an abomination of Shaytaan’s (Satan’s) handiwork. So avoid (strictly all) that  (abomination) in order that you may be successful” [5:90]

The last part of the mentioned Ayah “So avoid (strictly all) that (abomination) in order that you may be successful” leads to the conclusion that one should avoid the forbidden things in all cases, including trade. This fact has been mentioned in the following Hadith evidently:

A man gave the Messenger of Allah (صلى الله عليه وسلم (a small skin full of wine, and the Messenger of  Allaah (peace and blessings of Allaah be upon him) said to him: “Do you know that Allaah,  may He be exalted, has forbidden it?” He said, No, then he whispered to another man. The  Messenger of Allaah (peace and blessings of Allaah be upon him) said: “What are you  whispering about?” He said: I told him to sell it. He said: “The One Who has forbidden  drinking it has also forbidden selling it.”

[Sahih Muslim:1579]

Abdullah bin Abbas (May Allah be pleased with them) reported that I saw the Messenger of  Allah (صلى الله عليه وسلم (sitting near the Black stone (or at a corner of the Ka'bah). He said: He (the  Prophet) raised his eyes towards the heaven and laughed, and he said: “May Allah curse the Jews! He said this three times. Allah declared unlawful for them the fats (of the animals which died a natural death); they sold them and they enjoyed the price they received for them. When Allah declared eating of thing forbidden for the people, He declares it price  also forbidden for them.”

[Musnad Imam Ahmad:H.2221, Sunan Abu Dawood:H.3488]

However, a few forbidden things have been exempted by the Prophet (صلى الله عليه وسلم (including the beast of burden like donkey or mule, beast or birds of prey for security or hunting like tiger,  cheetah, eagle, falcon etc and the skin of the dead animals, is lawful to sell and buy because benefitting from these things is permissible. *Kashaful Qina’a: V.2,P.464-465]

The pieces of evidence for which the aforementioned commodities have been exempted are the  following Hadiths:

Amir (May Allah be pleased with him) reported that I saw the Messenger of Allah (صلى الله عليه وسلم (at  Mina giving the sermon on a mule and wearing a red garment, while Ali was announcing.

[Sunan Abu Dawood: H.4073]

 

Anas bin Malik (May Allah be pleased with him) reported that the Messenger of Allah (صلى الله عليه وسلم ( used to visit the sick, attend funerals, accept the invitations of slaves and ride donkeys. On the day (of the battle) of Quraizah and Nadir, he was riding a donkey. On the day of Khaibar he was riding a donkey that was bridled with palm fibers and beneath him was a packsaddle made of palm fibers.

[Sunan Abu Dawood: H.4178]

Abu Hurairah (May Allah be pleased with him) reported that the Messenger of Allah (صلى الله عليه وسلم ( said: "Whoever acquires a dog - with the exception of a dog to guard livestock, a hunting  dog, or a farm dog - each day a Qirat is deducted from his reward."

[Sunan Abu Dawood: H.1490]

Abdullah bin Abbas (May Allah be pleased with them) reported that the Messenger of  Allah passed by a dead goat and said: "Why didn't the owners of this sheep makes use of its  skin?"

[Sunan Abu Dawood: H.4261]

This Hadith indicates that tanning is not a condition for using a skin of the dead animals. The trade of dogs is unlawful for the following authentic Hadith:

Abu Said Al-Ansari (May Allah be pleased with him) reported that the Messenger of Allah  (صلى الله عليه وسلم (forbade to take the price of dogs.

[Sahih Bukhari:H.2237, Sahih Muslim]

(iv) Transaction should be accomplished by the owner or his/her agent.

One can’t sell the property of another person without his consent, even in his presence and silence. However, an agent can sell a person’s property on his behalf with his consent, even in the absence of the owner.

Hakeem bin Hizam (May Allah be pleased with him) reported that the Messenger of  Allah (صلى الله عليه وسلم (said, “Don’t sell a thing that is not yours.” 

[Musnad Iam Ahmad:H. 14887, Jami At-Tirmidhi:H.1232, Sunan Abu Dawood:H. 3503,  Sunan Nsai:H 4617, Sunan Ibni Majah:H. 2187]

Jabir bin Abdullah (May Allah be pleased with him) reported that I intended to go (on an expedition) to Khaybar. So I came to the Holy Prophet (صلى الله عليه وسلم ,(greeted him and said: I am intending to go to Khaybar. He said: When you come to my agent, you should take from him fifteen wasqs (of dates). If he asks you for a sign, then place your hand on his collarbone.

[Sunan Abu Dawood: H.3632]

An agent can buy on the behalf of another person with his consent.

Urwah Al-Bariqi (May Allah be pleased with him) reported that the Prophet (صلى الله عليه وسلم (gave him a Dinar to buy him a sheep, and he bought two sheep for him, then he sold one of them for a Dinar, and bought a Dinar and a sheep to the Prophet (صلى الله عليه وسلم .(The Messenger of  Allah (صلى الله عليه وسلم (prayed for blessing for him.

[Musnad Imam Ahmad:H.19571, Sahih Bukhari:H.3652 Sunan Ibni Majah:H.2493]

(V) The seller should be able to produce/provide the  merchandise to be sold.

The transaction is valid only if the seller is able enough to produce or provide on demand the required product or commodity. If he is improbable to produce or provide,  the transaction is invalid. Likewise one should not sell a specific commodity if he does not own it, prior to buying it. *Kashaful Qina’a: V.2,P.469]

Abdullah bin Masood (May Allah be pleased with him) reported that the Messenger of  Allah (صلى الله عليه وسلم (said, “Don’t sell the fish that is still in the water (reservoir) because that is  cheating.”

[Musnad Imam Ahmad: H.3667]

(vi) The parties should clearly know about the commodity to be sold without any ambiguity.

Both parties, the seller and buyer, should know the merchandise to be sold, very well,  either by looking, tasting, smelling, touching it, or by the quality and characteristics mentioned clearly. *Kashaful Qina’a: V.2, P.473-474]

Abu Huraira (Allah be pleased with him) reported that Allah's Messenger (صلى الله عليه وسلم (forbade a  transaction determined by throwing stones and the type which involves some uncertainty.

[Musnad Imam Ahmad:H. 2752, Sahih Muslim:H.1513

 

Abdullah bin Masood (May Allah be pleased with him) reported that the Messenger of Allah  (صلى الله عليه وسلم (said, “Don’t sell the fish that is still in the water (reservoir) because that is cheating.” 

[Musnad Imam Ahmad:H.3667]

This Hadith indicates that operating a transaction of the whole fish in a limited reservoir,  without knowing the exact quantity and weight of fish, is unlawful due to a remarkable  ambiguity. It does not refer to a transaction of a definite amount or weight of the fish prior  to gaming. 

Abdullah bin Abbas (May Allah be pleased with them) reported that Allah's Messenger  (صلى الله عليه وسلم (came to Medina and the people used to pay in advance the price of fruits to be  delivered within one or two years. The Prophet (صلى الله عليه وسلم (said, "Whoever pays money in  advance for dates (to be delivered later) should pay it for known specified weight and measure (of the dates). [Sahih Bukhari:H.2239]

Abdullah bin Abbas (May Allah be pleased with them) reported that the Prophet (صلى الله عليه وسلم ( came to Medina and the people used to pay in advance the price of dates to be delivered within two or three years. He said (to them), "Whoever pays in advance the price of a thing  to be delivered later should pay it for a specified measure at specified weight for a specified  period." [Sahih Bukhari:H.2240]

The price/fee should be clearly decided.

Both parties should know the price of the commodity or the fee for a particular service being provided. *Kashaful Qina’a: V.2,P.481]

Anas bin Malik (May Allah be pleased with him) reported that the Prophet (صلى الله عليه وسلم (loved to pray wherever the time for the prayer was due even at sheep-folds. Later on, he ordered that a mosque should be built and sent for some people of Banu-An-Najjar and said, "O  Banu An-Najjar! Suggest to me the price of this (walled) piece of land of yours." They replied, "No! By Allah! We do not demand its price except Allah."

[Sahih Bukhari: H.428]

Abu Bakra (May Allah be pleased with him) reported that the Messenger of Allah (صلى الله عليه وسلم( said,"Don't sell gold for gold unless equal in weight, nor silver for silver unless equal in  weight, but you could sell gold for silver or silver for gold as you like." 

[Sahih Bukhari:H. 2175,Sahih Muslim:H.1590]

 

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