Common Rules
for all businesses and transactions

The Holy Quran 17-35

“Give full measure when you measure, and weigh with a balance that is straight…”

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Summary

• Avoid prohibited activities                 

• Give just measure and weight

• Be just and fair            

• Avoid ambiguity and speculation

• Avoid excessive risk 

• Make contracts

• Do not withhold what is due to others

• Do not commit evil on the earth

• Be contented with the profit from Allah

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Details

• If a thing is prohibited in Islam, then its trade is also prohibited. For example, trade of wine, swine, dead bodies of animals and idols are all prohibited.

• All interest-based transactions are prohibited

• Gambling and similar transactions are prohibited

• The seller should sell lawfully acquired goods, and the buyer should pay lawfully acquired money.

• The thing that is being sold should be known clearly.

Reference Hadith Muslim (1513) narrated that Abu Hurayrah said: The Messenger of Allah (blessings and peace of Allah be upon him) forbade transactions involving ambiguity.

• Seller cannot sell goods that are not yet in his possession (except the special cases where goods are yet to be manufactured)

• Buyer should get ample opportunity to examine the goods before the sale is finalized.

• If goods sold are defective, then the seller shall clearly point the defects to the buyer before the sale.

• Goods must be sold in the open market where the seller is aware of the market conditions and prices. Buyers shall not take advantage of seller’s lack of knowledge of the market conditions.

It was narrated that Ibn Hizaam said: O Messenger of Allah, people come to me wanting to buy something that I do not possess; should I buy it for them from the marketplace? He said: “Do not sell that which you do not possess.” Narrated by at-Tirmidhi (1232), Abu Dawood (3503), an-Nasaa’i (4613) and Ibn Maajah (2187); classed as saheeh by al-Albaani in Saheeh at-Tirmidhi.

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It was narrated that ‘Abdullah ibn ‘Amr said: The Messenger of Allah (blessings and peace of Allah be upon him) said: “It is not permissible to arrange a loan combined with a sale, or to stipulate two conditions in one transaction, or to make a profit on something that is not under your control, or to sell something that you do not possess.” Narrated by at-Tirmidhi (1234), who said: It is hasan saheeh. Also narrated by Abu Dawood (3504) and an-Nasaa’i (4611).

•  Monopoly is prohibited (where the supply is concentrated with one seller and he exploits the buyers)

• Speculative strategies are prohibited (where an artificial scarcity of goods is created to exploit the buyer)

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Prohibited types of sales

• Sale at an uncertain price is prohibited.

• Sale of uncertain goods is prohibited- e.g., all fruits that will grow in the next 3 years.

• Sale of an uncertain quantity of goods is prohibited- e.g., fruits that are still on a tree.

• Sale of a randomly selected item is prohibited, like throwing a pebble on a set of things to decide which item is given to the buyer.

• Sale of unripe fruits and raw dates is prohibited

• Buying a thing forcibly when its seller is compelled under stress to dispose it off.

• When one seller has sold the goods, another seller should not upset the deal by offering lower rates or pointing out defects in the goods of the first seller

• The delivery of the sold commodity to the buyer must be certain. It should not depend on a contingency or chance.

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Ingredients of a valid contract

• The parties should be capable of entering into a contract.

• The contract must take place with free consent of the parties without any duress, fraud or misrepresentation, etc.

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Reference Hadith of the Prophet (peace be upon him), “All the conditions agreed upon by the Muslims are upheld, except a condition which allows what is prohibited or prohibits what is lawful.”

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