Is Ownership Required Before Negotiation or After Closing a Deal When Selling Products?
Answered by Shaykh Muhammad Carr
Question
A product costs $80 from the supplier. X and Y agree on $100, Y pays X $100, and X then buys the product for $80, delivering it to Y for a $20 profit.
A product costs $80 from the supplier. X and Y agree on $100, but X buys the product first and then sells it to Y for $100, making a $20 profit.
Answer
In the Name of Allah, the Most Merciful and Compassionate.
Thank you for your question.
In a sales contract (bay‘), ownership and possession of the goods are required at the point of sale. The Prophet (May Allah bless him and give him peace) said, “Do not sell that which is not with you”.
In a legitimate and formal sales contract, the item is identified in rem, ensuring it is specific and distinct, and, therefore, the above conditions apply.
On the other hand, if the item is described as part of the seller’s liability (dhimma), it may be non-existent, let alone meet the condition of ownership or possession.
The first scenario sketched above would be valid as a sale described in the seller’s liability while the latter fits the criterion of a sale as it is in rem.
The Evolution of Contractual Goods
In the agrarian societies of the past, most industries were manual, and the products created in these industries varied significantly. In such a context, the precise identification of the object of a contract was of paramount importance.
In contrast, in modern times, where the production of most goods and commodities has become mechanized, the need for specifying the exact object of the contract has diminished. This is because goods produced mechanically have become fungible, whereas many were previously non-fungible. Fungible items can be replaced with their equivalent in cases of damage, destruction, or unavailability in the marketplace.
For instance, when you purchase a refrigerator from a shop, you see a model on display, approve of it, and pay the price. The refrigerator is then delivered to your home or collected from the shop’s storage. In either case, the refrigerator you receive is not the exact one you saw on display. However, this does not concern you, as you perceive it to be the same. From a legal (Shar‘i) perspective, such a transaction is categorized as a salam sale.
Most transactions conducted on online platforms under the label of “buying and selling” adhere to this same pattern. While we commonly refer to them as sales, they are, in reality, valid only as salam transactions.
Salam Contract
Salam is essentially a contract in which the price is paid upfront, while the goods are delivered later. It is defined as “the sale of goods described as being under the seller’s liability (dhimma) using the term salam.” An example would be: “I pay you this R100,000 for 1,000 bags of Basmati rice, each weighing 1kg, to be delivered at such and such a time and place.”
The most significant condition of a salam contract is that the price must be handed over in the contractual sitting.
If the above contract is concluded using the term sale (bay‘) instead of salam, then taking possession of the price in the contractual sitting is not stipulated. However, the price must be fixed to avoid the prohibition of selling one liability (dayn) for another.
In Scenario 1 above, a product costs $80 from the supplier. X and Y agree on a price of $100. Y pays X $100, and X then purchases the product for $80, delivering it to Y for a $20 profit. This transaction falls into this category because the term salam is generally not used.
Sale Contract
In a sale contract, it is not permissible to sell something that you have not yet taken possession of. In the scenario above – A product costs $80 from the supplier. X and Y agree on $100, but X buys the product first and then sells it to Y for $100, making a $20 profit – the sale agreement amounts to a non-binding promise, according to the majority of scholars. Based on this, you proceed to purchase the goods and then sell them to the buyer. Since you have taken possession of the goods, the sale is valid.
It is narrated from Hakim ibn Hizam (Allah be pleased with him) that he said, “I asked, O Messenger of Allah, I buy various items—what is lawful for me from them, and what is prohibited for me?” He said, “If you buy something, do not sell it until you have taken possession of it.” [Ahmad]
It is narrated from Zayd Ibn Thabit (Allah be pleased with him) that the Prophet (Allah bless him and give him peace) forbade the sale of goods at the place they were purchased until the merchants had moved them to their own locations. [Abu Dawud]
Ibn ‘Umar (Allah be pleased with them both) reported that they used to buy food in bulk at the upper market, and the Messenger of Allah (Allah bless him and give him peace) forbade them from selling it until they moved it. [Bukhari]
Ibn ‘Abbas (Allah be pleased with him) narrated that the Prophet (Allah bless him and give him peace) said, “Whoever purchases food, let them not sell it until they have received it.” Ibn Abbas added, “And I consider everything to be like this.” [Bukhari]
Based on these hadiths, our scholars have stated that it is not permissible to sell a purchased item before taking possession of it. This is because the buyer’s ownership before taking possession is considered weak, and thus the sale becomes void if the item perishes before possession.
I pray this is of benefit and Allah guides us all.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Dr. Muhammad Abu Bakr Badhib
Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefitted from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door to students. As an imam, he has the unique opportunity to serve his community in daily life.
In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.
