The Book of Sales Transactions

Issues regarding Sales

Q: If a person comes to another person and the first wants a loan from the second (to purchase something), is it permissible for the second to buy the product for him from the market and then sell it to him? If the second person has some of the product, can he purchase the rest from the market and sell it to the person seeking the loan? If the product ends up with the second person, is it permissible for him to set a rate of 1,000 for 1,500? And is it correct for the price to be paid in monthly installments? Is it permissible for him to say 10 is to be repaid at 15, for example?

A: The answer from its various aspects:

The first aspect: The mere previous agreement for the contract does not require that the two parties or even one of them must carry through with it. Each of them may change his mind and cancel if he wishes. Based on this, if the second person purchases the product or the remainder of it from the market, then he possesses it, then sells it to the person who was seeking the loan, then the person seeking the loan takes possession of it, the sale is correct and binding. However, if the person who buys the product really is seeking money, so he buys the product for 100 on credit (to be paid later) and he sells it on the market for 70 for cash, then this is like the statement of Ibn 'Abbas (Radiyal Lahou 'an-um). He said, "This is selling dirhams for dirhams and between them is a piece of silk (i.e., some merchandise is added)." Some of the people of knowledge disliked this transaction, such as 'Umar bin 'Abdul-'Aziz. Thus, this type of dealing should be avoided to be safe and free of any blame, and to avoid the difference of opinion. From those who gave a ruling on this issue from the Imams of the Da'wah, was Shaykh 'Abdullah bin Muhammad bin 'Abdul-Wahhab. He said, "In reference to a sale for delayed payment, it is fundamentally permissible if it is done in an allowed manner." However, if the person's intent is to get cash, so he buys it for 100 on credit and he sells it on the market for 70 for cash, then this is blameworthy and prohibited according to the most obvious of the views of the scholars. This is called At-Tawarruq. 'Umar bin 'Abdul-'Aziz said, "At-Tawarruq is the brother of Riba."

The second aspect: If the intent of the questioner in his saying, "if the product ends up with me", and that he wants to replace the 1,000, so is it correct for him to stipulate upon the person that each 1,000 will be for 1,500? If his intent was to sell it in the manner that was described in the previous question, then its ruling has already preceded. If he means that they agreed that the product whose price was 1,000, its price will be 1,500, and the buyer receives the 1,000 and the seller stipulates that he must pay 1,500 and the product will be only superficial, and in reality the product was not really sold and bought, this is Riba. There is no doubt about it. It is clearly included in the generality of the evidences that prove the forbiddance of Riba from the Book and the Sunnah.

The third aspect: There is no harm in the entire price being delayed and paid at one time (later) or at various different times (i.e., payments). This means that it would be in installment payments, with every payment being given after a month or two, for example. The basis for this is the generality of the Verse concerning debt, for verily there is no restriction regarding it being one payment or a number of payments that are divided from the total price and paid later.

The fourth aspect: It is permissible for to say 10 for 15 if the intent is that whatever's price is 10 up front is 15 on delayed (credit) payment. However, if what is meant is that 10 riyals are

sold for 15 riyals, for example, this is not permissible, and this has been previously discussed.

The fifth aspect: What is legislated in regard to the right of the Muslim upon the Muslim if he comes to him seeking a loan from him, is that he should not force him to pay an increased price that is outside of what is known in the generality of dealings that are carried out according to the ways of justice. For verily, Allah has commanded justice in His Statement:

"Verily, Allah commands justice and kindness" (An-Nahl 16: 90).

Justice is in everything accordingly. For this reason the Islamic law has forbidden the forced sale without a right, going out to meet a sales caravan to buy before others, and the city dweller selling as an agent for the bedouin, except according to well-known conditions and so forth. Therefore, it is incumbent upon the Muslims to be merciful with each other. For verily, whoever shows mercy, will receives mercy (from Allah).

The Permanent Committee

The ruling on Debt

Q: A man wanted to get married, but he did not have a sufficient amount to cover the cost of the dowry. So, he went to an owner of a business to seek a loan from him. The owner of the business said to him, "I will sell you a car for 17,000 Saudi riyals as a debt, and you will pay it off completely after a complete year." Is this Riba, since the value of the car in cash is only 10,500 Saudi riyals? This car is what the condition is based upon, and the condition between this seller and the man who wants to get married is centered on it.

A: If the matter is like what has been mentioned of a person buying a car from another to be paid for later at a greater price than what it is sold for in cash up front, and so the buyer can sell it to whomever he wishes other than who sold it to him initially and whoever has his ruling, then that is not Riba. Rather, it is a correct sales agreement that is permissible. However, if he bought the car, for example, from a person to be paid for later in order to sell it back to him for cash up front at a lower rate than what he bought it for, then that is selling cash for cash with an increase, which is the Riba that Allah and His Messenger (Salallahou 'aleyhi wa salam) forbade. The sales agreement for the car is superficial and it is only intended for deceit and to use trickery to practice Riba and devour wealth in falsehood. Likewise, if the buyer sells the car to a person who knows that it is to be sold to the original seller in his action or a person who is a middle man who works with the original salesman so that the car will return to him in the end, all of that is deception and deceitful Riba. May Allah send blessings upon our Prophet Muhammad, his family and his Companions.

The Permanent Committee