Sale (Bai) is commonly defined in Shari’ah as “the exchange of a thing of value by another thing of value with mutual consent”, For example, “the sale of a commodity in exchange for cash”.
- Valid Sale (Bai Sahih)
A sale becomes valid if the following elements are present along with all other necessary conditions:
- Contract Aqd
- Subject Matter (Mabee’)
- Price (Thaman)
- Possession or delivery (Qabza)
- Void/Non-Existing Sale (Bai Baatil)
SaIe will be void if any one of the conditions of offer and acceptance (1.1) [Refered to elements of valid sale], Conditions of Buyer & seller (1.2), and good for sale or subject matter (2.1 – 2.5) are not complied with. In a void sale, the buyer does not have title to the subject matter and the seller does not have title to the price.
- Existing Sale but void due to defect (Bai Fasid)
The sale will exist but will be void due to defect if the conditions of contract (1.3), subject matter conditions (2.6 & 2.7), and conditions of the price (3.1 & 3.2) are not complied with. However, if the defect is rectified, the sale becomes valid. In a fasid sale, the buyer should not possess the subject matter. If possessed with the consent of the seller, title or ownership will pass to the buyer but the usage of the subject matter will be impermissible. He must return the goods to the seller.
- Valid but disliked Sale (Bai Makrooh)
A sale will be valid but Makrooh when the transaction is complete and one gets possession of the goods but is disliked e.g. saIe after Juma Azaan, sale after hoarding or where a third party intervenes to buy Something which was under negotiation of sale between other parties.
Types of Sale
Following are the common types of Sale:
- Bai Musawamah: It refers to a normal sale in which cost price is not known to the buyer.
- Bai Murabaha: It refers to a sale in which the cost of the goods and profit amount is known to the buyer.
- Bai Muqayada: It refers to a barter sale excluding currency
- Bai Surf: It refers to the sale of gold, silver, and currency.
- Bai Salam: It is a kind of sale in which full payment is in the advance spot while the delivery of the good is deferred to a future date.
- Bai Istisna: It refers to a sale In which commodity is sold before it comes into existence. It is basically an ar order to manufacture.
- Bai Muajjal: It refers to a sale in which delivery of goods is at the spot while payment of the price is deferred to a future date. The cost is unknown in Bai Muajjal.
- Bai Taulia: It is the type of sale where sale price is equal to the cost of goods.
- Bai Waddiyah: It is the type of sale where the sale price is less than the tic cost of goods.
Prohibited Sale Transactions
Some of the major types of sale transactions that are prohibited by Shariah are as follows:
- Short Selling (Qabl as Qabza-Sale before possession)
It is the type of sale where the subject matter is sold by the seller without getting its possession is prohibited as per the following Hadiths of Prophet P.B.U.H.
“Whoever purchases foodstuff, should not sell it until he takes its possession.” (Bukhari)
Short selling in currency markets, equity markets, commodity markets in the current world scenario falls under the same category.
- Sale of Debt (BaI at Dain)
Dain means “debt” and “Bai” means sale. Bai’-al-dain, therefore, denotes the “sale of debt”. If a person has a debt receivable from a person and he wants to sell it at a discount (as normally happens in the bill of exchange), It is termed in Shariah as Bai’- al- dain. The traditional Muslim jurists (fuqaha’) are unanimous on the point that Bai’-al-dain is not allowed in Shariah. In fact, the prohibition of Bai-al- dain is a logical consequence of the prohibition of “riba” or interest. A “debt” receivable in monetary terms corresponds to money, and every transaction where the money is exchanged from the same denomination of money, the price must be at par value.
Similarly, debt cannot be traded at face value since It Includes a greater degree of Gharar as the party to whom the debt is sold is not certain about the delivery of currency since the original debtor may default. Therefore, debt can not be sold, however, it can only be assigned at face value and with recourse i.e assigner of debt will be liable to fulfill its obligations even if the original debtor defaults in paying its obligations.
- Bai AI Kali Bid Kali
It is referred to as a Sale Transaction where both the subject matter and the price are deferred after the execution of sale contract. This type of sale is also not allowed since either price or delivery of the subject matter can be deferred at a time but both these elements cannot be deferred in a single sale transaction. It should be noted that this ruling is restricted to the condition that both price and the sold commodity are fungible i.e. they can be replaced with exact replica if they are destroyed.
- Bai al Innah (Buy Back)
Control of the sale, where a person sells an asset on credit and then buys back at a less price for cash. This transaction Is prohibited since it creates a back-door for earning a profit over a loan transaction. For example: ’A’ asks a loan of $10 from ’B’, ’B’, instead of asking for interest on this loan applies a contrivance. He sells an article to ’A’ for $12 on credit and then buys back from him the same article for cash at $10.
Written by: Dr. Muhammad Imran Usmani
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