The Book of Sales Transactions

The ruling on selling Products on delayed (Credit) Payment for more than its current Price

Q: A man sells a product for an up-front price of 10 pounds for example, and for payments to be paid in monthly installments at a price greater than this price (10 pounds). Is this extra increase in the price considered Riba (interest), or is there a percentage that the seller must stick to if he wants to sell by installments?

A: If the matter is like what is mentioned, it is permissible to sell the product for a delayed (credit) payment for more than its current price. It makes no difference whether the person pays the price in installments or all at one time when the time for payment comes. However, this is under the condition that the two parties do not separate until they make the type of sale specific and they agree on it being for cash up front or a payment to be made later. The increase is not Riba and there is no text in the Islamic law to limit the amount of the increase in sales for delayed (credit) payment in place of the sale for cash up front. However, the Messenger (Salallahou 'aleyhi wa salam) encouraged leniency in buying and selling, and in paying and seeking payment.

The Permanent Committee

There is no Limit for the increase in Sales for delayed (Credit) Payment

Q: If a man has a bag of sugar that is sold up front for 80 riyals, and the buyer request to buy it by paying later, so he sells it to him for 150 riyals to be paid later, is there a limit that the increase must stop at?

A: The sale that is to be paid up front or paid later is legislated and there is no prohibition concerning it. The basic principle regarding prices is that there is no limit, regardless of whether it is regarding the sale that is made up front or for a delayed payment. The prices are left to the effects of supply and demand. However, the people should be merciful among themselves and they should practice leniency between them in matters of buying and selling. They should not seize opportunities to force each other into difficult circumstances in their dealings. The Prophet (Salallahou 'aleyhi wa salam) said: "May Allah have mercy on a man who is lenient when he sells and when he buys" (Al-Bukhari no. 2076).

If a person seizes the opportunity of hardship and his brother's severe need for what he possesses, and he cannot find it with anyone else or he finds it but the salesmen in the market have all marked up the prices seeking more profit and making it expensive, this is wrong. It is forbidden for the person who has a product, to sell it to the one who has an extreme need for it for more than the price of what is similar to it on the current value in an up front sale, and the price of what is similar to it for delayed payments in a deal of delayed payment. Whoever is present at the time of this transaction should help in assuring fairness and preventing injustice. Everyone must act according to his situation and his position that is befitting him from the matters of commanding the good and forbidding the evil. The pledged time at the time of buying and selling is that which limits the suitable price. Thus, every market has its price and every time has its price. Also, every situation of increased supply and limited supply, and limited demand and increased demand has its price.

The Permanent Committee

The Price and the Condition must be known

Q: What is your opinion about selling a car for 10,000 in cash or 12,000 on installment payments, as is a well-known practice now in the auto dealerships?

A: If a person sells another a car or anything else for 10,000 riyals in cash, for example, or 12,000 riyals to be paid later, and they part from the sitting of the contractual agreement without agreeing on one of the two options — the up-front payment or delayed payment — the sale is not permissible. This sale is not appropriate due to the unknown price and unknown condition as to what type of sale it is -payment up front or payment made later. Many of the scholars have used the Prophet's prohibition of two sales in one as a proof regarding this. This (the Prophet's prohibition), was recorded by Ahmad, An-Nasa'i, and At-Tirmithi who graded it authentic. So if the two dealers agree to one of the two prices before leaving the sitting of the contractual agreement by them specifying a price in cash payment or a price for a payment to be made later, then they part after specifying, the sell is permissible and correct due to the price and condition being known. May Allah send blessings and peace upon Muhammad, his family and his Companions.

The Permanent Committee