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The Contract of Sale

At its core, a sale (bayʿ) is one of the most fundamental financial transactions. It refers to the process by which ownership of wealth in one’s possession is transferred to another in exchange for a different form of wealth. As an indispensable mechanism for fulfilling human needs, this transaction has manifested in various forms throughout history.

In principle, all forms of sale are deemed permissible except those specifically prohibited. The Qurʾānic statement, “Allah has permitted sale and prohibited usury” (Qurʾān 2:275), has been explained in this light by exegetes of the Qurʾān as well as jurists of Islamic law[1].

Classical jurists defined bayʿ with slight variations:

• Ḥanafī scholars: The transfer of ownership of wealth from one party to another with mutual satisfaction[2].
• Mālikī scholars: The exchange of ownership of wealth in return for another form of wealth[3].
• Shāfiʿī scholars: A contract that establishes permanent ownership of an object or usufruct in exchange for wealth[4].
• Ḥanbalī scholars: A permissible exchange that is neither usury nor a loan, but rather a permanent transfer of wealth or usufruct for its equivalent[5].

The essential components of a valid sale contract include:

1. The contracting parties (ʿāqid) – the seller and the buyer.
2. The subject matter (maḥall al-ʿaqd) – the object of sale and the price.
3. The formula (ṣīghah) – consisting of the offer (ījāb) and acceptance (qabūl), signifying the consent of both parties.

As outlined in the earlier article, each of these elements is governed by specific rules. Furthermore, expressions of consent are not restricted to spoken words alone; any customary practice or recognised form within a community that clearly conveys satisfaction and agreement is considered valid.

The object of sale must fulfil certain conditions: it must be under the complete ownership of the seller, capable of being delivered, recognised in Islam as lawful and beneficial wealth, known with sufficient clarity to both parties, and pure in nature[6].

According to the Ḥanafī school[7], however, impure items that nevertheless provide utility to people may still be sold. Yet, in Islam, the sale or income derived from intoxicants such as wine, narcotics, and other harmful substances is strictly impermissible for believers[8]. Even selling lawful items such as grapes or dates to one who intends to manufacture wine from them is prohibited[9]. The underlying rationale is that Islam does not allow facilitating actions that directly lead to what the religion itself has declared unlawful.

If the subject matter is a specific, identified object, then it should be seen (physically inspected). For example, when one says, “the computer near me,” this refers to a particular object. The Shāfiʿī school requires that such an item be viewed before concluding the contract. In such cases, the other three schools of law and a group of additional jurists[10] permit sale by description, provided that the features and measurements are clearly known. According to this view, if the buyer, upon eventually seeing the item, is not satisfied, he has the right to withdraw from the contract. On the other hand, if the subject matter is not specific—such as saying, “a Toshiba computer of this particular model”—then it is not a defined object, and it can be sold without physically seeing it, as per all schools.

The rules governing the sale object apply equally to the price. The price must be clearly determined within the contract. If the payment is deferred, then the time frame for payment must also be explicitly fixed.

Types of Sale

In Islamic jurisprudence, sales have been categorised in various ways. Based on the price and the object of sale, sales may be broadly divided into four types.

The most common form is the exchange where the price is set in currency and the object of sale is delivered immediately. Within this, there are further subcategories:

• transactions where the price is paid on the spot,
• transactions where the price is deferred to a later date, and
• transactions where the price is paid in instalments rather than in a lump sum.

As long as the general conditions of sale are met, all these forms are permissible.

Another category is Salam, where the price is paid in advance while the object of sale is delivered at a later time. This form is subject to a specific set of conditions.

The exchange of one currency for another is known as Ṣarf, which also has its own detailed rulings. Both Salam and Ṣarf will be discussed separately in their respective chapters.

A different form is when both the price and the object of sale remain deferred obligations, to be delivered at a future time. This is referred to as debt sale (bayʿ al-dayn), or “sale of liability.” As a general rule, Islamic law prohibits this type of transaction[11].

Musāwamah and Amānah

With respect to the determination of price, Islamic jurisprudence identifies two broad forms of sale.

Musāwamah (Bargain Sale):
This refers to a transaction where the seller does not disclose the actual cost incurred or any specific benchmark price. Instead, both parties negotiate and agree upon a price mutually acceptable to them.

Amānah (Trust Sales):
These are transactions in which the seller bases the price on his actual cost or on the prevailing market rate and discloses this information to the buyer. The buyer, in turn, relies on the seller’s word in concluding the contract—hence the term “trust sales.”[12]

Within the category of amānah, there are further subtypes:

• Tawliyah: Selling an item at the exact price for which it was purchased, with this clearly stated to the buyer.
• Murābaḥah: Selling at the purchase price plus a clearly defined profit margin, with both the cost and the profit disclosed.
• Muwaḍaʿah / Mukhāṣarah (Discount Sale): Selling at less than the purchase price, again with clear disclosure of the reduced amount[13].

In these forms of amānah sales, if it becomes evident that the seller has engaged in deception concerning the cost, its amount, or other related particulars, the buyer has the right either to withdraw from the contract or to demand an adjustment in the sale price[14].

Simple Murābaḥah

Murābaḥah refers to a sale transaction in which the selling price and a specific profit margin are clearly disclosed. An example will make this clearer.

Suppose Aḥmad sells a mobile phone to his friend Jamāl. If Aḥmad does not disclose the cost he incurred, and both of them agree on a price of ₹5000, this would be a Musāwamah (bargain sale). Such a transaction is valid and free of juristic disagreement.

If, however, Aḥmad says, “I purchased this for ₹5000, and I am selling it to you for the same amount,” this is called Tawliyah (cost-price sale). If Jamāl already knows that Aḥmad purchased the mobile for ₹5000, there is no need for further disclosure, and the sale remains valid. However, if Aḥmad’s claim regarding the purchase price is false, Jamāl would only be liable to pay the actual cost incurred[15].

Now, if Aḥmad says, “I purchased this for ₹5000, and I am selling it to you with an additional 10% profit,” then the sale becomes a Murābaḥah (cost-plus sale). Should Jamāl accept, he is obligated to pay ₹5500 (₹5000 as the original cost plus ₹500 as profit).

Islamic jurisprudence has discussed in detail the validity of such transactions. Imām Ibn Ḥajar al-Haytamī, in the authoritative Shāfiʿī work Tuḥfat al-Muḥtāj, affirms the validity of Murābaḥah and clarifies that there is no reprehensibility (karāhah) in it[16]. He cites the Qurʾānic verse, “Allah has permitted trade and prohibited usury” (Qurʾān 2:275), to show that this form of sale is also encompassed within the scope of permissible trade. Moreover, historical evidence indicates that this practice existed during the time of the Companions.

Nevertheless, since Murābaḥah involves certain sensitive aspects requiring transparency and honesty, some scholars have preferred Musāwamah as the better mode of transaction[17]. In Murābaḥah, profit may be determined either as a fixed amount or as a percentage, and the majority of scholars hold both methods to be permissible[18].

Being a transaction based on trust (amānah), Murābaḥah requires full honesty regarding the purchase price and costs involved. If the seller is found to have lied or engaged in deception concerning these details, the buyer is entitled to annul the sale. Works such as Tuḥfat al-Muḥtāj and other classical references elaborate on this principle.

Institutional Murābaḥah or the Application of Murabaha in Islamic Banks will be discussed in the next article.

References:

[1] Al-Qurṭubī, al-Jāmiʿ li-Aḥkām al-Qurʾān, vol. 3, p. 356, Al-Nawawī, al-Majmūʿ Sharḥ al-Muhadhdhab, vol. 9, p. 146

[2] Ibn Nujaym, al-Baḥr al-Rāʾiq Sharḥ Kanz al-Daqāʾiq, vol. 5, p. 277

[3] Al-Ḥaṭṭāb, Mawāhib al-Jalīl li-Sharḥ Mukhtaṣar Khalīl, vol. 4, p. 222

[4] Ibn Ḥajar al-Haytamī, Tuḥfat al-Muḥtāj bi-Sharḥ al-Minhāj, vol. 4, p. 215, Al-Ramlī, Nihāyat al-Muḥtāj ilā Sharḥ al-Minhāj, vol. 3, p. 372

[5] Al-Mardāwī, al-Inṣāf fī Maʿrifat al-Rājiḥ min al-Khilāf ʿalā Madhhab al-Imām Aḥmad ibn Ḥanbal, vol. 11, p. 8

[6] Al-Nawawī, Minhāj al-Ṭālibīn, p. 95

[7] Ibn Nujaym, al-Baḥr al-Rāʾiq Sharḥ Kanz al-Daqāʾiq, vol. 8, p. 226

[8] Al-Nawawī, al-Majmūʿ Sharḥ al-Muhadhdhab, vol. 9, p. 227

[9] Al-Nawawī, Rauḍat al-Ṭālibīn wa-ʿUmdat al-Muftīn, vol. 3, p. 418

[10] Al-Nawawī, al-Majmūʿ Sharḥ al-Muhadhdhab, vol. 9, p. 301

[11] al-Mawsūʿah al-Fiqhiyyah al-Kuwaytiyyah, vol. 9, p. 9

[12] al-Mawsūʿah al-Fiqhiyyah al-Kuwaytiyyah, vol. 9, p. 48

[13] Ibn Ḥajar al-Haytamī, Tuḥfat al-Muḥtāj bi-Sharḥ al-Minhāj, vol. 4, p. 423, Al-Khaṭīb al-Shirbīnī, Mughnī al-Muḥtāj ilā Maʿrifat Maʿānī Alfāẓ al-Minhāj, vol. 2, p. 476

[14] Al-Kāsānī, Badāʾiʿ al-Ṣanāʾiʿ fī Tartīb al-Sharāʾiʿ, vol. 5, pp. 225–226, Ibn ʿĀbidīn, Ḥāshiyat Radd al-Muḥtār ʿalā al-Durr al-Mukhtār, vol. 4, p. 163, Al-Dasūqī, Ḥāshiyat al-Dasūqī ʿalā al-Sharḥ al-Kabīr, vol. 3, p. 168, Al-Qalyūbī, Ḥāshiyat al-Qalyūbī ʿalā Sharḥ al-Khaṭīb, vol. 2, p. 223, Al-Bahūtī, Kashshāf al-Qināʿ ʿan Matn al-Iqnāʿ, vol. 3, p. 231

[15] Al-Khaṭīb al-Shirbīnī, Mughnī al-Muḥtāj ilā Maʿrifat Maʿānī Alfāẓ al-Minhāj, vol. 2, p. 480

[16] Ibn Ḥajar al-Haytamī, Tuḥfat al-Muḥtāj bi-Sharḥ al-Minhāj, vol. 4, p. 427

[17] Ibn Ḥajar al-Haytamī, Tuḥfat al-Muḥtāj bi-Sharḥ al-Minhāj, vol. 4, p. 427, Al-Ḥaṭṭāb, Mawāhib al-Jalīl li-Sharḥ Mukhtaṣar Khalīl, vol. 4, p. 488, Al-Mardāwī, al-Inṣāf fī Maʿrifat al-Rājiḥ min al-Khilāf ʿalā Madhhab al-Imām Aḥmad ibn Ḥanbal, vol. 11, p. 461

[18] Ibn ʿĀbidīn, Ḥāshiyat Radd al-Muḥtār ʿalā al-Durr al-Mukhtār, vol. 5, p. 135, Al-Mawwāq, al-Tāj wa-al-Iklīl li-Mukhtaṣar Khalīl, vol. 6, p. 432, Ibn Ḥajar al-Haytamī, Tuḥfat al-Muḥtāj bi-Sharḥ al-Minhāj, vol. 4, p. 428