Issues regarding Sales

Question :

If a person comes to another person and the first wants a loan from the second (to purchase something), is it permissible for the second to buy the product for him from the market and then sell it to him? If the second person has some of the product, can he purchase the rest from the market and sell it to the person seeking the loan? If the product ends up with the second person, is it permissible for him to set a rate of 1,000 for 1,500? And is it correct for the price to be paid in monthly installments? Is it permissible for him to say 10 is to be repaid at 15, for example?

Answer:

The answer from its various aspects:

The first aspect: The mere previous agreement for the contract does not require that the two parties or even one of them must carry through with it. Each of them may change his mind and cancel if he wishes. Based on this, if the second person purchases the product or the remainder of it from the market, then he possesses it, then sells it to the person who was seeking the loan, then the person seeking the loan takes possession of it, the sale is correct and binding. However, if the person who buys the product really is seeking money, so he buys the product for 100 on credit (to be paid later) and he sells it on the market for 70 for cash, then this is like the statement of Ibn 'Abbas. He said, "This is selling dirhams for dirhams and between them is a piece of silk (i.e., some merchandise is added)." Some of the people of knowledge disliked this transaction, such as 'Umar bin 'Abdul-'Aziz. Thus, this type of dealing should be avoided to be safe and free of any blame, and to avoid the difference of opinion. From those who gave a ruling on this issue from the Imams of the Da'wah, was Shaykh 'Abdullah bin Muhammad bin 'Abdul-Wahhab. He said, "In reference to a sale for delayed payment, it is fundamentally permissible if it is done in an allowed manner." However, if the person's intent is to get cash, so he buys it for 100 on credit and he sells it on the market for 70 for cash, then this is blameworthy and prohibited according to the most obvious of the views of the scholars. This is called At-Tawarruq. 'Umar bin 'Abdul-'Aziz said, "At-Tawarruq is the brother of Riba."

The second aspect: If the intent of the questioner in his saying, "if the product ends up with me", and that he wants to replace the 1,000, so is it correct for him to stipulate upon the person that each 1,000 will be for 1,500? If his intent was to sell it in the manner that was described in the previous question, then its ruling has already preceded. If he means that they agreed that the product whose price was 1,000, its price will be 1,500, and the buyer receives the 1,000 and the seller stipulates that he must pay 1,500 and the product will be only superficial, and in reality the product was not really sold and bought, this is Riba. There is no doubt about it. It is clearly included in the generality of the evidences that prove the forbiddance of Riba from the Book and the Sunnah.

The third aspect: There is no harm in the entire price being delayed and paid at one time (later) or at various different times (i.e., payments). This means that it would be in installment payments, with every payment being given after a month or two, for example. The basis for this is the generality of the Verse concerning debt, for verily there is no restriction regarding it being one payment or a number of payments that are divided from the total price and paid later.

The fourth aspect: It is permissible for to say 10 for 15 if the intent is that whatever's price is 10 up front is 15 on delayed (credit) payment. However, if what is meant is that 10 riyals are sold for 15 riyals, for example, this is not permissible, and this has been previously discussed.

The fifth aspect: What is legislated in regard to the right of the Muslim upon the Muslim if he comes to him seeking a loan from him, is that he should not force him to pay an increased price that is outside of what is known in the generality of dealings that are carried out according to the ways of justice. For verily, Allâh has commanded justice in His Statement:

"Verily, Allâh commands justice and kindness."

Justice is in everything accordingly. For this reason the Islamic law has forbidden the forced sale without a right, going out to meet a sales caravan to buy before others, and the city dweller selling as an agent for the bedouin, except according to well- known conditions and so forth. Therefore, it is incumbent upon the Muslims to be merciful with each other. For verily, whoever shows mercy, will receives mercy (from Allâh).