What Makes A Business Transaction Valid In Islam?

For a business transaction to be rendered valid and permissible in Islam, certain conditions must be fulfilled. The conditions are divided into the parties involved and the property being transacted.

The Parties Involved

The first three conditions are focused on the parties involved in the business transaction.

#1. At-Taraadhee (Mutual Agreement)

There should be mutual agreement between both parties involved for a business transaction to be considered valid in Islam. The Prophet SAW stated that “Verily business transactions are only (valid) by way of mutual agreement.” (SaheehSunan Ibn Maajah (#2185)).

None of the parties involved should be forced or coerced into entering the business transaction lest it deemed null and void by Islamic law. But there is an exception to this rule however, ShaykhSaalih al-Fawzaan stated “And if someone was justly forced into a sale, then it is legitimate. An example of this is when a judge forces someone to sell his property to pay his debt.”(al-Mulakh-khas al-Fiqh-hee (2/9))

#2. JawaazTasarruf al-‘Aaqidayn (Both Participants are Eligible to Engage in Transactions)

Both parties involved in the transaction should be eligible to engage in a business transaction. They must be free (not slaves), of sound mind (not insane), adults (reached the age of puberty) and rational.

Shaykh ‘Uthmaan an-Najdee said, “So the buying and selling of a child or a fool without the permission of his caretaker is invalid. If he gives permission, then it is valid, however, it is not permissible to give permission without any benefit. And their transactions involving small things take effect even without permission.”

 #3. Milk al-Ma’qood ‘Alayhe (Ownership of Property Being Traded)

A business transaction cannot take effect in Islam if both parties are dealing in something that is not their property. This is due to the saying of the Prophet SAW “Do not sell what you do not have.”(Hidaayatur-Raaghib (p.468))

However, if a person is given permission by the owner to sell a property on his behalf then it is valid for that person to sell the property.

The Property Involved In The Transaction

Now we are going to concentrate on the property or item involved in the transaction and what conditions should be met to render it void

 #4. Ibaahah al-Intifaa’ bil-Mabee’(Permissibility of the Goods)

The item must be something that is halal and not haram. The Prophet SAW stated that “Verily Allaah has prohibited the sale of maytah, intoxicants, and idols.”(Saheeh al-Bukhaaree (#2236) and SaheehMuslim(#4024))

If the items in question are haram, therefore the sale of it or its price is also haram. As the Prophet SAW stated in another hadith “He has prohibited intoxicants and their price, and He has prohibited maytah and its price, and He has prohibited pork and its price.”(SunanAbee Daawood (#2485); it was declared saheehby Al-Albaanee)

Maytah means meat that is not slaughtered the halal way.

 #5. Maqdoor ‘alaaTasleemihi –Dispensibility

The item in question must be something readily available to be exchanged in the time of sale. The owner of the property must be sure that he can hand over the item to the buyer for the transaction to be completed. For example, the seller cannot sell a bird in the sky or a fish in water unless both the bird and the fish are captured or enclosed in a place where they can’t escape.

 #6. Adm al-Jahaalah (The Absence of Anonymity)

For a business transaction to be effected in Islam both parties should be completely aware of an item being sold and its price. Both parties should have a clear knowledge of the item involved like for example a specific chair not “a chair in the room” and the price should also be explicitly stated for example $100 not “a bag of money”. Both the good and the price should be known and clearly stated and there should be no form of anonymity.

In the same way, you can’t sell a baby animal in the womb of the mother as you are not sure of its sex, health, weight etc. or if it will even deliver.

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