Al-Barak Bank: Features of Murabaha and Leasing: Basic Rules of Sale

Some Basic Rules Of Sale

‘Sale’ is defined in the Shariah as the exchange of a thing of value by another thing of value with mutual consent. Islamic jurisprudence has laid down comprehensive rules governing the contract of sale and the Muslim jurists have written a large number of books, in a number of volumes, to elaborate upon them in detail. It is intended in this paper to give a summary of those rules only which are relevant to the transactions of murabaha as carried out by the financial institutions:

1. The subject of sale must be existing at the time of sale.

Thus, a thing which has not yet come into existence cannot be sold. Is a non-existent thing has been sold, even by mutual consent, the sale is void according to Shariah.

Example:  A sells the unborn calf of his cow to B. The sale is void.

2. The subject of the sale must be in the ownership of the seller at the time 
    of sale and he must have a good title to it.

Thus, what is not owned by the seller cannot be sold. If he sells something before acquiring its ownership, the sale is void according to Shariah.

Example:   A sells to B a car which is presently owned by C, but A is hopeful
                that he will buy it from C and shall deliver it to B Subsequently.
                The sale is void.

3. The subject of sale must be in the physical or constructive possession of
    the seller when he sells it to another person.

Examples:  (i) A has purchased a car from B. B has not yet delivered it to A
                 or his agent. A cannot sell the car to C. If he sells it before taking
                 its delivery from B, the sale is void.

(ii) A has purchased a car from B. B has placed the car in a garage where A
    has free access and B has allowed him to take the delivery from that place
    whenever he (A) wishes. The car is in the constructive possession of A. 
    If A sells the car to C without C acquiring physical possession, the sale is
    valid.

Explanation 1: The gist of the rules mentioned in paragraphs 1 to 3 is
                         that a person cannot sell a commodity unless:

(a) it has come into existence;
(b) it is owned by the seller; and
(c) it is in the physical or constructive possession of the seller.

Explanation 2: There is a distinct difference between an actual sale and 
                         a mere promise to sell. 

The actual sale cannot be affected unless the above three conditions are fulfilled, However one can promise to sell something which is not yet owned or possessed by him. This promise initially creates only a moral obligation on the promisor to fulfill his promise which is normally not enforceble in Shariah. Nevertheless, in certain situations, especially where such a promise has burdened the promise with some liability, it can be enforceable through the courts of the law.

However, the actual sale will have to be effected only after the commodity comes into the possession of the seller. This will require a separate offer and acceptance and unless the sale is effected in this manner the legal consequences of the sale shall not follow.

Exception: The rules mentioned in paragraph 1 to 3 are relaxed in respect of
                   two types of sale, namely;

(a) Bai’Salam (b) Istisna’ 

The rules of these two types of sales will be discussed later under separate headings.

4. The sale must be instant and absolute. Thus, a sale attributed to a future
    date or a sale contingent ion a future event is void. If the parties wish to
    effect a valid sale, they will have to effect is afresh when the future date
    comes or the contingency actually occurs.

5. The subject of sale must be a property of value. Thus, a thing having no
    value according to the usage of trade cannot be sold or purchased.

6. The subject of sale should not be a thing which is used for a haraam
    purpose, like pork, wine etc.

7. The subject of sale must be specifically known and identified tot he buyer.

Explanation: The subject of sale may be identified either by physically
                      pointing it out to by detailed specification which can
                      distinguish it from other things which are not being sold.

Example: There is a building comprising of a number of apartments built in
               the same pattern. A, the owner of the building, says to B “I sold
               one of these apartments to you “B accepts. The sale is void unless
               the apartment intended to be sold is specifically identified or
               pointed out to the buyer.

8. The delivery of the sold commodity tot he buyer must be certain and should
    not depend on a contingency or chance.

Example: (1) A sells his car which was subsequently stolen by an anonymous
                   person and the buyer purchases the car under the hope that A
                   will manage to get it back. The sale is void.

9. Certainty of price is a necessary condition for the validity of the sale. If
    the price is uncertain, the sale is void.

Example: A say to B “if you pay within a month, the price is Rs 50/- but if
              you pay after two months, the price is Rs55/-“. B agrees. The price
              is uncertain and the sale is void unless anyone of the alternatives 
              is agreed upon at the outset between A and B.

10. The sale must be unconditional. A conditional sale is invalid unless the
     condition is recognized as part of the transaction according to the usage
     of trade.

Example: (1) A buys a car from B with a condition that B will employ his (A’s)
                   son at his firm. The sale is conditional and therefore invalid.

Example: (2) A buys a refrigerator from B with a condition that B undertakes
                   to service it free of charge for 2 years. The condition, being
                   recognized as a part of the transaction, is valid and the sale 
                   is lawful.

This piece is taken from the website of Al-Baraka Bank.

See on-line at: http://www.albaraka.co.za/Islamic_Banking/Features_of_Marabaha_and_Leasing/Basic_Rules_of_Sale.aspx

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