Lecture for 3rd year Medical Students on 4th November 2000 by Professor Omar Hasan Kasule, Sr.
A.BUYING and SELLING, buyu'u
GOODS AND SERVICES
Halaal, haraam, & mutashabih: What is permitted, halaal, and what is prohibited, haraam, are clear but
there are grey areas between them, mutashabihaat (MB 985-988). Extra care has to be taken when dealing with the grey areas
lest one falls into the prohibited. Doubtful matters are better avoided. Some general principles guide us in matters of halaal
and haraam. The original or default position is permissibility, al asl fi al umuur al ibaahat. Thus all transactions are permitted
unless there is specific text on prohibition. Only Allah decrees what is halaal and what is haraam. Prohibiting halaal and
permitting haram is the same as shirk.. What is halaal is sufficient and what is haraam is superfluous. Prohibited things
are impure and harmful. Whatever is conducive to haraam is itself haraam. It is prohibited to represent haraam as halaal.
Good intentions do not make haraam acceptable.Haraam is prohibited to all people
with no exceptions. Necessity dictates exceptions in some prohibited things.
Individual and community property: Individual ownership of property is a basic human right in Islam. The
Law specified fire, water, and pasture are considered community property (BG 784). Air could be added to this list because
it is the most precious community resource endangered by industrial pollution. Fire stands for energy resources and pasture
stands for agricultural resources. If an individual expends effort in developing community property, he or she acquires rights
of private ownership to it. Government property is in a special category with special considerations. It is neither individual
property nor is it community property that any citizen can use at will. The concept of legal personality, dhimmat, could be
extended to include government and joint stock companies thus giving them the same rights of ownership as individuals. Lost
or unclaimed property does not automatically become the individual property of the finder. If property is lost it must be
announced for a year (BG 801, BG 802).
Trade goods/articles: All articles are halaal for commercial transactions unless specifically prohibited.
The following articles cannot be bought or sold in normal commercial transactions. Intoxicants,
khamr, considered filth, najasat, should not be exchanged in transactions
(BG 649). Also prohibited from transitions materials that will be used to make intoxicants (BG 684). The prohibition of transactions
involving pictures (MB 1045) and Idols (MB 1047, BG 649) is based on their misuses for worship. The prohibition
does not cover pictures for beneficial purposes such as passport photographs. Free humans cannot be sold or bought
(MB 1046, BG 772). Humans can voluntarily sell their labour and not their person, dhimmat. The prohibition includes minor
children who cannot be sold for any reason. Sale of brides is also prohibited. Marital transactions are valid only on payment
of mahr, which becomes the property of the wife. The wife in marriage retains
her full legal personality, dhimmat, and her full civil rights and is not property of anyone. Dead animals are considered
filth and so cannot be bought or sold (MB 1047, BG 649). The fat of dead animals cannot be sold (BG 649). A dog cannot
be sold or bought (MB 1048, BG 651). This restriction applies when the dog is going to be kept as a pet. The hunting dog (BG
656) is excepted from the prohibition. Also excepted are dogs that perform police work or that lead the blind. The pig
is considered filth and can therefore not be sold (BG 649). The semen of animals cannot be sold for purposes of fertilising
other animals (BG 690). Stolen property cannot be sold or bought.
Intellectual property: Knowledge cannot be sold. However an author and publisher sell the labor and material
involved in manufacturing a book. The purchaser of the book has full rights to the use of the knowledge including teaching
it to others for a fee. It is however illegal to reproduce and resell the book.
Professional services: Professional services are performed in return for a fee. Halaal services can be sought
and can be offered. It is prohibited to seek, pay for, or offer haram services. The Law mentioned the following services as
halaal: cupping, hijaam (MB 1004 and MB 1005),ruqyat (MB 1058), teaching Qur'an
(BG 773), and tailoring (MB 1001). By extension we can say that all services that do not involve handling prohibited material
or violation of morals are halaal. The Law specified the following services as haraam: prostitution (MB 1048, BG 651) and
soothsaying (MB 1048, BG 649). By extension all services that involve prohibited articles or involve infraction of the law,
violation of public morals, or exploitation of other humans are haraam.
Rights: Rights are a form of intangible property. As the economy becomes more sophisticated, the number
of rights also increases. Some rights can be acquired and can be sold. Debts for example are considered rights than can be
sold or transferred. It is prohibited to sell the right of inheritance (MB 663).
Scales and measures: The Law prescribes measures to ensure fair play and prevent cheating in business transactions.
Thus scales and measures are needed to make sure that the amounts of goods exchanged in a transaction are specified so that
the buyer and the seller know what they are giving and are taking. Measuring is recommended (MB 1015). The seller is responsible
for measuring (MB 1014). The buyer has a right to check the measuring before they separate.
Price controls: The Law does not interfere in the operations of the free market unless there is exploitation
or immoral effects are feared. Thus price control is not legislated. The prophet refused to fix prices in Madina (BG 679).
Action should however be taken to ensure that unfair practices of hoarding and monopoly do not arise.
CONDITIONS OF A VALID TRANSACTION
Witnesses: Business transactions should preferably be witnessed. This will be of benefit later if disputes
arise and a court of law has to adjudicate in the matter. The witness chosen must be one who can understand the transaction.
The evidence of women not involved or familiar with commercial transactions is less valuable than that of men and women who
are conversant with such transactions.
Written contract: A written contract is a permanent reference that can be referred to in case of disputes.
A written contract is preferred to witnesses. It is best to have a written contract that is witnessed. No condition repugnant
to the Law is permitted in the contract (BG 657)
Transfer of ownership: Ownership must be transferred as soon as possible. Ownership can be transferred without
taking physical possession (MB 1077). In case of food, the buyer must take physical possession before selling the food to
someone else (MB 1017, 1018, 1019).
TYPES OF TRANSACTIONS
Permitted transactions: In advance payment for goods, salam, the
buyer pays for goods and services that will be delivered at a future date. The price, weight, and other specifying particulars
of the goods must be mentioned (MB 1049). It is not a condition that the seller has physical possession of the goods at the
time of the payment (MB 1050, MB 1051). In case of fruits and crops, advance sale is permitted only after they have passed
the stage of failure (BG 714, BG 715, BG 716). Purchase on credit, nasiiat, is
allowed MB 992). However any form of usurious exploitation is forbidden. The buyer cannot be made to pay interest. Increasing
the price for deferred payment is considered riba. In auction, muzayadat, goods
can be bought at the price of the highest bidder. Sale of an absent article, ghararat,
is permitted (MB 1022). Its nature, quantity and other specifications must be included in the sale contract to prevent cheating
and later disputes. It is permitted to sell on commission. The commission agent sells goods of an owner on the understanding
that he will get a fixed proportion of the price. The commission agent works for the seller and not the buyer. Araaya is a type
of transaction in which the yield of a date tree is computed in the form of dry dates as the basis for pricing although the
dates are received and are eaten fresh (BG 712, GB 713).
Forbidden transactions: Transactions are based on mutual satisfaction, taraadhi (p. 227 4:29). Even in such
a situation there could be unfairness because one of the transactees may not have full information or the transaction may
be innately loaded against him or her. The Law therefore imposes restrictions on the free conduct of transactions to make
sure that there is fair play. In general, forbidden transactions are those that have uncertainty or a potential for cheating
(BG 664). Mujalafat….. Mukhadharat: is sale of agricultural produce before
its maturity (MB 1040, BG 672, BG 689). It is discouraged because it leads to disputes (MB 1035, MB 1036, MB 1037, MB 1038,
MB 1137). Mulamasat is paying a pre-fixed price for goods chosen when blinded
(BG 673). Munabadhat: is a type of sale in which the eyes of the persons involved
in the transaction are closed. They throw goods at one another with the transaction being accepted whatever goods one manages
to catch (BG 673). Munajashat, used illegally in auctions by pre-arrangement between the auctioneer and the ‘buyer’, is offering
a price with no intention of buying in order to raise auction price (MB 1020). This is sometimes pre-fixed in order to deceive.
Munajashat could be used illegally in auctions. Muzabanat is sale of dried dates
or grapes for fresh ones on the tree (MB 1033, BG 710, BG 672, BG 709). Muhaqalat
is sale of wheat in ears (unharvested wheat in the field) for pure wheat
(harvested wheat) (MB 1033, BG 672). Thunya is selling agricultural produce still
on the trees with the understanding that the seller will keep an unspecified amount at the time of harvesting (BG 672). Riba al fadhl is sale of good quality
dates for poor quality ones. What is permitted is to first sell the good quality dates for cash and then the cash buy the
poor quality ones (MB 1039). Other forbidden transactions are: selling fur while still on the animal (BG 689); selling sadaqat
before it is received (BG 688); buying an animal while it is still in utero, habalat (BG 662, BG 690, BG 687); selling milk
in udders (BG 687, BG 689); selling fish while still in water (BG 688); combining 2 transactions in one transaction (BG 666);
selling what is not in your possession (BG 667); combining a loan and a sale
(BG 667); non-refundable deposit, urban (BG 668); buying and selling on the spot before taking possession of the goods (BG 69); selling debt for debt (BG 711); and riba transactions (2:278-279).
The giver, the taker, and the writer of riba are all guilty.
Use of currency in trade: It is permitted to quote the price of goods in one currency and receive payment
in another currency provided payment is immediate and in full (BG 670).
CANCELLATION AND DISPUTES
Any transaction can be cancelled before separation (MB 996, BG 692, BG 693). The buyer has the right to return
defective goods (MB 1008). It is forbidden to urge a buyer to return sold goods (MB 1020). Guidelines on return of defective
merchandise can be gleaned from the story of Ibn Omar and the purchase of a defective camel (MB 1003). Any gain or loss is
the responsibility of the buyer during the period when goods can be returned (BG 685). In case of disputes that cannot be
resolved and there are no witnesses, the seller's word is final (BG 650). Disputing when you know you are in error (MB 1123)
ETIQUETTE OF THE MARKET
All transactions must be suspended for salat as soon as adhan
is sounded and can be resumed immediately after the prayer (p. 216 62:9-11). Written transactions provide evidence
in later disputes (p 215 2:282). A written contract is not necessary where there is immediate exchange of money for goods
but if possible witnessed transactions are preferred. Traders should give full measure (83:1-6, 6:152, , 26:181-183). Cheating in measurement is prohibited and has severe penalties. Generosityin recommended in bargains
(MB 994). The transaction is better concluded in a friendly rather than a hostile way. It is better to conclude a transaction
with sufficient good will for future transactions. Leniency is recommended in debt collection (MB 995). The wealthy
could even consider forgiving debts of the poor. The Law requires Full disclosure
by both the buyer and the seller (MB 996) and any form of deception is forbidden. The seller should not try to hide any defects
in the goods. He should honestly point out the good and the bad. For example a seller may keep a cow unmilked for several
days before its sale (MB 1023, BG 681). It is forbidden to cover defective goods with good ones (BG 683). Frequent swearing
is forbidden. Raising the voice is offensive in the market (MB 1013). Hoarding is forbidden (BG 680). Brokerage and middlemen are allowed because they are a necessity in trade. Middlemen
who make quick profits without effort are discouraged (MB 1026 and 1027) because this will lead to unnecessary inflation of
the cost of business and rise of prices. It is forbidden to meet trade caravans outside before they enter the city. This is
a type of black market in which the caravaneers are cheated because they sell their goods before they know the pravailing
market prices (BG 674, BG 675). Town-folk should not be brokers for rural folk because they can cheat them (BG 674). Custom
or precedence, ‘urf, is respected (MB 1041) and is legally binding.
B. PERSONAL LOANS, quruudh
Debts must be written and witnessed (p. 436 2:282-283). If it is not possible to write, a collateral can be taken
(p 515 2:283). A debtor is obliged to pay back (BG 751, BG 752). Delay of debt payment by those with ability to pay is a punishable
offence (BG 728). The property of the debtor can be seized to settle outstanding claims (BG 730)
A collateral ensures that the debtor will endeavour to pay back. It is taken if the debtor fails to pay. A collateral
is needed especially if the debt is not written down in an agreement.
A debtor could get another person who can vouchsafe for his honesty and ability to pay to act as guarantor. The
guarantor of a debt is liable to pay (BG 734) if the original debtor fails to fulfil his obligations.
TRANSFER OF DEBTS, hawala
It is permitted for a debtor to transfer the responsibility of paying the debt to another person. Transfer of a
debt to a rich person is irrevocable (MB 1060, MB 1061, BG 738). Transfer to a poor person may be cancelled and the liability
of the original debtor is maintained. Transfer of a deceased's debt is irrevocable (MB 1060 and 1061). It is also possible
for the creditor to transfer the right of collecting the debt to someone else.
A debtor becomes bankrupt when his assets are less than the liabilities. Creditors can take back property from
a bankrupt debtor (BG 727). They take whatever they find of the debtor's property (BG 729)
INVESTMENT IN PROPERTY
Partnership, sharikat, is in general allowed (BG 742, BG 744). People can jointly own and use articles such as
food (MB 1131). They can buy property such as a house jointly and sell it later for profit. The partner in a joint property
has the right of pre-emption, shuf'at (MB 1042, BG 760, BG 761, BG 762, BG 763, BG 764) and must be informed before any sale
of the joint property is done (MB 1052).
INVESTMENT IN TRADE
Murabahat is pooling of capital that is invested. The partners agree to a fixed proportion of profits or
losses. It is illegal to fix a certain amount as the profit due to a partner because that would constitute riba. Mudharabat
is co-operation between the owner of capital, the worker and the manager. There is a pre-fixed proportion of sharing losses
and profits. In case of loss, outstanding liabilities are deducted from the remaining capital and the worker just suffers
loss of time.
INVESTMENT IN AGRICULTURE
The owner of the land may work it himself. He can use hired labour who are paid wages and have no share in the
produce. The landowner may let a farmer cultivate unused land for free or in return for a fixed rental. The farmer is entitled
to all the produce of the land. The Law allows sharecropping, muzara'at (MB 1079, 1080, and 1083). The landowner and the farmer
agree to share the produce according to agreed formula. The formula must state a proportion of the produce. It is haraam to
fix each partner's share by weight. The landowner may contribute agricultural inputs like seeds and fertilizers. Sharecropping
was agreed between the prophet and the Jews at Khaybar (BG 767, BG 768). Mukhabarat, a form of gambling that is letting a farmer use land in return for the produce of a delineated portion of
the land, is forbidden because it will be a source of dispute when the delineated plot does not produce well (BG 672).
DEPOSITS & TRUSTS, wadii'at
The trustee does not pay if the trust is destroyed accidentally. He pays for depreciation due to his use of the
property (BG 823). The concept of wadii'at has been employed in modern Islamic banking schemes.
Insurance is accepted if presented in the form of a joint investment. Islamic financial institutions have developed
an Islamically-acceptable insurance scheme called takaful.
D. OTHER TRANSACTIONS
Appointing an attorney or an agent is permitted (BG 746, BG 747, BG 748, BG 749). The prophet had an agent in Khaybar
(BG 745). The agent can take measures to prevent property under his care from getting spoiled or getting lost (MB 1065). The
agent can pay debts on behalf of the owner (MB 1060). Illegal transactions by the agent are not binding on the owner (MB 1069).
WAGE EMPLOYMENT, ijarah
Ijarah is employment in return for wages. Living on earnings of one's labor is honor MB 993. Agreed wages should
be paid in full. Early payment of wages is required (BG 774). If the employer invests unclaimed wages, he will have to pay
the employee the profits earned. Non-payment of wages is a serious crime (BG 772).
Iarat is when you lend someone an animal to benefit from the milk and he returns the animal after that (MB 1173).
Waqf is continuous charity (BG 785, BG 786). The endowment consists normally of fixed property whose income is
used for a fixed purpose. The income is used and the endowed property is never sold. Sometimes the endowment may be a building
or a well that is used directly by the needy.
The following sports and those like them are allowed: foot racing, wrestling, archery, spear play, camel racing,
and horse racing. Prizes for winners are allowed (BG 1130, BG 1131, BG 1132).Any
form of gambling associated with sports is forbidden (BG 1133).
Gifts express mutual love (BG 795, BG 796, BG 797). Gifts can be accepted and something is given in return (MB
1160). A gift can be witnessed (MB 1161) especially if future disputes are anticipated. It is an offence to ask for return
of a gift (MB 1162, BG 789, BG 790). The recipient of a gift has the right to give it away (MB 1167) without getting permission
from the gift giver. Life tenancy, umri, is a type of gift (BG 793). Gifts to officials are discouraged (BG 791, BG 792) because
they may encourage bribery and corruption.
E. MODERN CHALLENGES
Stock exchange: Stocks bought in a company are an infusion of capital. The buyer of the stock benefits when
the company profits thus raising the value of the stock. The stock can also fall in value if the company performs poorly.
Stocks can be sold and bought from others at any time. Stock transactions involve al element of speculation but unlike riba
transactions they do not guarantee any profit, both profit and loss are likely. The consensus of scholars is that stock transactions
are permitted unless the company involved is trading in forbidden goods or is undertaking prohibited activities.
Commodity exchange: This is a highly speculative activity involving buying and selling commodities like
oil and crops that are not yet produced. There are special exchanges where commodity contracts can be sold or bought with
loss or profit.
Currency trading: Currency exchange is allowed of no delay in involved (MB 989 and MB 1028). Exchange of
the same amount of currency must be done at once (MB 1029). Gold can be sold for silver in any way you like (MB 1029 and MB
1030). A dinar can be exchanged for a dinar if the transaction is carried out on the spot (MB 1031). Gold cannot be sold for
silver on credit MB 1032.
Public debt: Government expenditure can by design or unpredictably exceed the revenues necessitating borrowing
to cover the deficit. The citizens, including those not yet born, will be responsible for paying this debt in the form of
Free trade: Freedom
of exchange of halaal goods and services within the country is highly desirable because it produces an efficient economic
system. Free trade at the international level may not serve national or ummatic interests in some cases and care must be taken.