1-Contract of Sale
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Transcript of 1-Contract of Sale
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The Contract of Sale (Bay')- Literally means مبادلة mubadalah or exchange- Technically it refers to an exchange of one property for
another (item for money, item for item...)- Legality: • The Quran says: } َب�ا َم�} الِّر� ِّر َّل الَّلُه� ال�َب�ْي�َع� َو�َح� َأ�َح� َو�
“But Allah has permitted trade and forbidden usury” )2:275(.
The Hadith says: “ َوٌر� َو�َع�َم�َّل� َب�ِّر� اَل� َب�ْي�َع� َم� َق� ِب� َف� َّل� ال�َك�ْس� َأ�َف�َض��َّل� َب�ْي�ِد�ِه ُج� “الِّر
“The best earning is where a person earns through his own efforts and all sale transactions that are free from deception and cheating” (Ahmad).
The effect of a sale contract is to transfer the ownership of the property from one to another (seller and buyer).
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1) Conditions for the conclusion of Sale - Conditions related to contracting parties:1) Legal capacity2) Should be more than one person except in case of guardian
or a judge selling his own property.- Conditions related to the expression2) Unity of session:1) Acceptance must correspond with the proposal
- Conditions related to the counter-values:1) Must valuable properties2) Subject matter must be in existence3) Deliverability4) Specification (prescription or sight) 5) The price and type of currency should be known
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2) Conditions for the Execution of Sale
1) Complete ownership.
But a contract concluded by fudhuli (unauthorized agent):
- Hanafis and Malikis: depends on approval of the owner.
- Shafi’is and Hanbalis: not valid.
2) None other than a seller has right in the sold item
If a sold item found to be pledged at the time of contract:
- Majority of Schools: not valid.
- Hanafis: Mowquf (dependant) on permission of the pledgee
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3) Conditions for the Validity of Sale
1) No time limit for a sale (ex: for one year…)
2) Both subject matter and price should be specified
3) A sale should be free from coercion (ikrah), mistake, and fraud.
4) A sale should be free from vitiating (spoiling) or invalidating conditions.
5) In sales on credit, the terms of payment should be known, otherwise it is invalid.
4) Condition to render a sale binding• In the absence of options a contract of sale is made
obligatory.
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• Conditions that may be put by the parties- According to Hanafis, Malikis and Shafi’is conditions are
either valid or invalid:- Categories of valid conditions:
a) Conditions which are harmonious with a contract (ex: down payment; the item should be delivered by seller..)
b) Conditions the particular effects of which agree with the purpose of the sale contract (ex: a seller may require pledge or a guarantor if the price to be paid later)
c) Customarily accepted conditions (ex: stipulating a guarantee period for the sold item).
- Hanafis allowed it on basis of Istihsan- Shafi’is and Malikis find it as a matter of principle.
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Prohibited SalesThey contain uncertainty (gharar): quarrel, conflict, litigation..
A)Bay’ al Hasat (ilqa’ al-hajar) = throwing pebbles on items, clothes, camels, sheep...
B)Bay’ al-Mulamasah: sale of folded cloth by mere touching without inspection
C)Bay’ al Munabadhah: throwing folded clothes to each other without inspection and saying: “This is for that”
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Prohibited Sales
A) Bay’ al-Muwasafah: by mere description without inspection and delivered later.
B) Bay’ al-Muzabanah: exchange of the unknown amount of unripe fruits for specific amount of ripe fruits (in bulk)
C) Bay’ al-Mukhabarah: selling unripe fruits. Hadith says: “Do not purchase fruits till their quality is evident.”
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H) Bay’ al-Haml: sale of foetus of extent she-camel or future foetus of the extent foetus of she-camel
I) Two sales in one sale: sale of the same property to one person and then to another. Or: “If you pay after one month: RM 50 and if after two months: RM 100..”: “I will see whether I can pay after one month or two...”
J) Concealing Defects and Cheating: ““ َفَّلْيس غشنا َمنَمنا
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K) Sale of Things which are not Owned: resale of things is not allowed until they are possessed
L) Najash or Fraudulent Overbidding: usually it is pre-arranged between the seller and the 3rd party.
M) Talqi al- Rukban: taking advantage of sellers ignorance
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Classification of Sale
A)1) Immediate exchange of subject matter and payment
2) Subject matter with deferred payment
3) Immediate payment with deferred subject matter (salam)
B)1) Bargain sale (musawamah): seller and buyer agree upon a
price without any reference to the cost, because a seller is not obliged to reveal it.
2) Trust sale (amanah): it is when the cost is revealed.- There are three types of trust sales (buyu’ al-amanah):
1) Murabahah 2) Tawliyah 3) wadi’ah .
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1) MurabahahLiterally: Profit, which comes from a root word: ربح
Technically: Murabahah is the resale of a thing at some profit added on the original cost.
Ex: wholesaler and retailer (in bulk): original price + cost of maintaining + storage + transportation...
- 10% is considered as a relative profit
- Murabahah is a trust transaction, therefore, if a buyer is cheated he has right to cancel the contract.
- So, in case of sale on credit the seller should inform a purchaser about the fact that the price is necessarily higher than the cash price
- Murabahah is a short term contract (no instalments)
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• Conditions for Murabahah1) The purchaser has to know the original price.2) The purchaser should know the amount of the profit (ex:
fixed amount or a percentage of the cost price).3) The first sale contract must be valid. (Ex: if the first seller
was bankrupt or sold a pledged property the murabahah sale is void).
4) A seller should inform a buyer about defects, however, he also should not betray his buyer. Otherwise he can ask for a compensation or a cancellation of the sale.
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2) Tawliyah or Non-profit sale- Tawliyah means appointment as a Wali or delegation as the
seller is delegating ownership to the buyer. It refers to non – profit sale or resale at cost price without any addition.
- In case of deception, the purchaser may deduct the amount from the price.
3) Al-Wadi’ah- Wadi’ah refers to a sale with some loss to the seller
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Sale for Deferred Payment (Bay’ Bi-thaman Al-Ajil) = BBA
- BBA is defined as an instalment sale (ex: the commodity is delivered immediately and the price is paid by instalments or paid by deferred payment)
- The seller in BBA is not obliged to reveal the cost price - The longer deferment is asked the higher price is paid…..- So, Murabahah is used for short-term transactions while
BBA is used for longer term transactions.
Two views about BBA:
-Opponents: it resembles riba, therefore, it is Haram.
-Proponents: there is no clear evidence to prohibit it, besides, the principle in transactions is permissibility, so it is Halal.