FIQH of BUSINESS

Halal Rizq(sustenance) is very important & has an effect on all other Ibadaat & the general spiritual status. BEFORE doing Business the person is required to know the Islamic Laws applicable. This will enable him to earn Halal rizq for himself & his family. EVEN in Halal business there may be Transactions/ Situations where there is a possibility of overstepping HIS laws.

Some examples are :-
1. Import & Export - Dealing with customs in terms of 'Law Of Land'. If a person does not understand this concept either he will stop doing business or he will end up doing the business through committing haram.

2. Currency, stocks, options, speculation, banking, etc. - One should know in & out about interest, Islamic way of banking, exchanges, etc.

3. Shop-keeping - One should know the Islamic rules of Purchase /sale ..marketing, displaying, goods return, etc.

The examples are numerous. The line between haram and halal is thin in businesses. In most cases, a momin should (ie it is wajib) have proper religious training on 'how to do business - the Islamic way'. .This was demonstrated by Imam Ali (as) when he ordered flogging of a Fish Merchant who was selling fish w/o scales & pleaded ignorance.

Question: Kindly, explain to me what I am required to know by way of Shariah before I start a business of my own and if there is any formula of purchase and sale to be pronounced?

Answer: It is recommended for a business man to learn the rules of daily transactions. In fact, if due to ignorance there are chances that he may contradict the laws of Shariah, then it is obligatory upon him to learn.

Imam Ja’far Sadiq (a.s) is reported to have said: A person who wishes to engage in business should learn its rules and laws, and if he makes any transaction without learning them, he may suffer because of entering into a void or doubtful transactions”.

Some Extracts of these Rules are given below:-

R u l e s   r e g a r d i n g   p u r c h a s e   a n d   s a l e

2059. It is recommended for a business man to learn the rules of daily transactions. In fact, if due to ignorance, he may necessarily contradict the laws of Shariah, then it is obligatory upon him to learn. Imam Ja'far Sadiq (A.S.) is reported to have said: "A person who wishes to engage in business, should learn its rules and laws, and if he makes any transaction without learning them, he may suffer because of entering into a void or doubtful transactions".

2060. If a person is not aware, because of ignorance about the relevant laws, whether the transaction made by him is valid or void, he cannot have any discretion over the property which he has acquired, unless he knows that the other party has no objection to it. In any case, the transaction remains void.

2061. If a person does not possess any wealth, and it is obligatory on him to maintain his dependents, like, his wife and children, he should start earning. Moreover, to earn is recommended for Mustahab acts like providing better means of livelihood to one's family, and helping the poor persons.

H a r a a m   t r a n s a c t i o n s

2063. There are many Haraam deals and businesses, some are mentioned below:

1 - To sale and purchase intoxicating beverages, non-hunting dogs, pigs, an unslaughtered carcass (as a precaution). Besides, if a permissible use of Najisul Ayn is possible, like, excrement and faeces being converted to manure or fertilisers, its transaction is permitted, but as a precaution, such sale and purchase should be avoided.
2 - Sale and purchase of usurped property.
3 - As a precaution, it is haraam to sell and purchase those things which are not usually considered to be merchandise, like, the sale and purchase of wild beasts, if it does not involve any substantial gain.
4 - Any transaction which involves interest.
5 - Sale and purchase of those things which are usually utilised for haraam acts only, like, gambling tools.
6 - A transaction which involves fraud or adulteration, like, when one commodity is mixed with another, and it is not possible to detect the adulteration, nor does the seller inform the buyer about it, like, to sell ghee mixed with fat. This act is called cheating (ghish) or adulteration.

The holy Prophet of Islam (s.a.w.a) said: "If a person makes a deceitful transaction with the Muslims, or puts them to a loss, or cheats them, he is not one of my followers. And when a person cheats his fellow Muslim (i.e. sells him an adulterated commodity), Allah deprives him of Blessings in his livelihood, closes the means of his earnings, and leaves him to himself."

2064. There is no harm in selling a Pak thing which has become najis, but can be made Pak by washing it. And if it cannot be made Pak with water, and its use does not require it to be Pak, like some oils, its sale is permissible. In fact, even if its use requires it to be Pak, if it has substantial halal benefit, its sale is permitted.

2065. If a person wants to sell a najis thing, he should inform the buyer about it, because by not telling him, he might do something contrary to the rule of Shariah. For example, if he sells him najis water which the buyer may require for Wudhu or Ghusl, and to offer his obligatory prayers, or he sells him something which he uses as food or drink - in all such cases, the seller should inform the buyer. Of course, if the seller knows that it is no use informing the buyer who is careless, and does not care about Taharat or Najasat, then it is not necessary to inform.

2066. Although the purchase and sale of najis medicines for internal or external use is permissible, the buyer should be informed about it in situations explained in the foregoing rule no. 2065.

2067. There is no objection to selling or buying the oils which are imported from non-Islamic countries, if it is not known to be najis. And as for the fat which is obtained from a dead animal, if there is a probability that it belongs to an animal which has been slaughtered according to Islamic law, it will be deemed Pak, and its sale and purchase will be permissible, even if it is acquired from a non-Muslim or is a imported from non-Islamic countries. But it is haraam to eat it, and it is necessary for the seller to inform the buyer about the situation, so that he does not commit anything contrary to his religious responsibility.

2068. If a fox, or any other such animal, is not slaughtered according to religious law, or dies a natural death, it is haraam to purchase or sell its hide, as a precaution.

2069. The purchase and sale of hide and skin which is imported from a non-Islamic country, or is bought from a non-Muslim, is permissible provided that one feels strongly that the animal was most probably slaughtered according to Islamic law. And, namaaz with it will be in order.

2070. The fat obtained from a dead animal, and the hide obtained from a Muslim, when one knows that the Muslim has obtained it from a non-Muslim, without investigating whether or not the animal has been slaughtered according to Islamic law, is Pak, and its sale and purchase permissible. But it is not permissible to eat it.

2071. Transaction of intoxicating drinks is haraam and void.

2072. Sale of usurped property is void, and the seller should return to the buyer the money taken from him.

2073. If a buyer is serious about a transaction, but his intention is not to pay the price of the commodity being purchased by him, this intention will not affect the validity of the transaction, though it is absolutely necessary that he should pay the money to the seller.

2074. If a person has purchased a commodity on credit, and wishes to pay its price later from his haraam earning or wealth, the transaction will be valid, but, he will have to pay the amount which he owes from halal property, in order to be absolved of his responsibility.

2075. Purchase and sale of instruments of entertainment like, guitar, lute and harmonium etc., is haraam, and as a precaution, the same rule applies to the small musical instruments made as toys for the children. However, there is no harm in selling and purchasing instruments of common use, like, radio and tape-recorder, provided that it is not intended to use it for haraam purposes.

2076. If a thing which can be used for halal purposes is sold with the intention of putting it to haraam use - for example, if grapes are sold so that wine may be prepared with them, the transaction is haraam, and as a precaution the deal is void. However, if the seller does not sell it with that Niyyat, but only knows that the buyer will prepare wine with the grapes, the transaction will be in order.

2077. Making a human sculpture or that of an animal, is haraam, but there is no harm in purchasing and selling it, though as a precaution, it should be avoided. However, painting human portraits or animals is permissible.

2078. It is haraam to purchase a thing which has been acquired by means of gambling, theft, or a void transaction, and if a person buys such a thing from a seller, he should return it to its original owner.

2079. If a person sells ghee mixed with fat and specifies it, for example, he says: "I am selling 3 kilos of ghee" - the transaction will be void if the quantity of fat is more, to the extent that it cannot be called ghee.
But if the quantity of fat is small, so that it can just be classified as ghee mixed with fat, the transaction will be valid. But the buyer has a right of refusal, based on the deficiency in the quality, and can therefore cancel the deal and ask for refund.

And if ghee and fat are distinct from each other, the deal covering the fat will be void, and the seller will have to refund the price of that fat, and keep the fat for himself.
But in this case also, the buyer has a right of canceling the transaction of pure ghee which is in it. Where the seller does not say that he is selling a particular thing, and just sells, say, 3 kilos of ghee he possesses, and if it turns out to be ghee mixed with fat, the buyer can return it, and ask for pure ghee.

2080. If a seller sells a commodity which is sold by weight or measurement, at a higher rate against the same commodity, like, if he sells 3 kilos of wheat for 5 kilos of wheat, it is usury and, therefore, haraam. In fact, if one of the two kinds of same commodity is faultless, and the other is defective, or one is superior and the other is inferior, or if their prices differ, and the seller asks for more than the quantity he gives, even then it is usury and haraam.
Hence, if a person gives unbroken copper or brass and takes more of broken copper and brass, or gives a good quality of rice, and asks for more of inferior kind of rice instead, or gives manufactured gold and takes a larger quantity of raw gold, it is usury and haraam.

2081. If the thing, which he asks for in addition, is different from the commodity which he sells, like, if he sells 3 kilos of wheat against 3 kilos of wheat and one dirham cash, even then it is usury and haraam. In fact, if he does not take anything in excess, but imposes the condition that the buyer would render some service to him, it is also usury and haraam.

2082. If the person who is giving less quantity of a commodity, supplements it with some other thing, for example, if he sells 3 kilos of wheat and one handkerchief for 5 kilos of wheat, there is no harm in it, provided that the intention is that the handkerchief is for the excess he is receiving, and also that the transaction is not on credit.
And if both the parties supplement the commodity with something, like 3 kilos of wheat with a handkerchief is sold for 3 1/2 kilos and a handkerchief, there is no objection to it, provided that the intention is that half kilo of wheat with the handkerchief on one side, was given for a handkerchief on the other.

2083. If a person sells something by measuring in meter or yard, like, cloth, or something which is sold by counting like, eggs and walnuts, and asks for more instead, there is no objection, except when the commodity exchanged are of the same kind and the transaction is on credit, then it is not permissible. For example, if he gives ten eggs on a condition that he should receive eleven eggs after a month, it is a void and haraam transaction.
In matters of the currency notes, a person can sell one type of it for another, like toman against dinar or dollar, on credit, and on condition to receive more. But if he sells toman for toman, expecting more, then that transaction should not be on credit; otherwise it will be void and haraam. For example, if a person gives 100 toman cash, on a condition that after six months he should be given 110 toman, that is void and haraam.

2084. If a commodity is sold in most of the cities by weight or measurement, and in some cities by counting, there is no objection if that commodity is sold against the same commodity at a higher rate, in the city where it is sold by counting. Similarly, if the cities are different, and if it cannot be said that the majority of the cities sell the commodity by weight or measurement or by counting, every city will be governed by the custom prevailing in it.

2085. In commodities which are sold by weight or measurement, if a person sells a commodity in exchange of something which does not belong to the same category, and if the deal is not on credit, he can take more. But if it is on credit, it is not permissible. Hence, if he sells one kilo of rice for two kilos of wheat on a month's credit, that transaction is void.

2086. If a ripe fruit is exchanged for the raw fruit of the same type, one cannot take more. And Fuqaha have commonly held that if a commodity taken in exchange is from the same origin, one should not take more. For example, if someone sells one kilo of ghee made from cow milk for one and half kilos of cheese made from cow milk, it will be usury and therefore haraam. But this generalisation is a matter of Ishkal.

2087. From the point of usury, wheat and barley are commodities of one and the same category. Hence, if a person gives 3 kilos of wheat and takes in exchange thereof, 31/2 kilos of barley, it is usury and haraam. And if, a person purchases 30 kilos of barley, on the condition that he would give in exchange 30 kilos of wheat at the time of its harvest, it is haraam, because he has taken barley on the spot and will give wheat some time later, and this amounts to taking something in excess, and therefore haraam.

2088. Father and son, husband and wife can take interest from each other. Similarly, a Muslim can take interest from a non-Muslim who is not under protection of Islam. But a transaction involving interest with a non-Muslim who is under protection of Islam, is haraam. But after the transaction is completed, and the deal is closed, if payment of interest is permissible in the religion of that non-Muslim, a Muslim can receive interest from him

C o n d i t i o n s   o f   a   s e l l e r   a n d   a   b u y e r

2089. There are six conditions for the sellers and buyers:

1 - They should be baligh.
2 - They should be sane.
3 - They should not be impudent, that is, they should not be squandering their wealth.
4 - They should have a serious and genuine intention to sell and purchase a commodity. Hence, if a person says jokingly, that he has sold his property, that transaction is void.
5 - They have not been forced to sell and buy.
6 - They should be the rightful owners of the commodity which they wish to sell, or give in exchange. Rules relating to these will be explained in the following:

2090. To conduct business with a child who is not baligh, and who makes a deal independently, is void, except in things of small value, in which transactions are normally conducted with the children who can discern. But if a discerning child is accompanied by his guardian, and he pronounces the confirmation of the deal, then the transaction is valid in every situation.
In fact, if the commodity or money is the property of another person, and that child sells that commodity or purchases something with that money, as an agent of the owner, the transaction is in order, even if the discerning child may be possessing that property or money on his own.
And similarly, if the child is a medium of payment to the seller, and carrying the commodity to the buyer, or giving the commodity to the buyer and carrying the money to the seller, the transaction is valid, even if the child may not be discerning (i.e. one who can distinguish between good and bad) because in reality, two adult persons have entered into the contract.

2091. If a person buys something from a child who is not baligh, or sells something to him, in a situation when the transaction is not valid, he should give the commodity or money back to his guardian, if it was the child's own property, or to its owner, if it was the property of someone else, or should obtain the owner's agreement.
But if he does not know its owner, and has also no means to identify him, he should give the thing taken from the child to a poor on behalf of its owner as Radde Mazalim, and in so doing, he should, as an obligatory precaution, seek the Mujtahid's permission.

2092. If a person concludes a transaction with a discerning child (i.e. one who can distinguish between good and evil), in a situation when it is not valid to conclude a transaction with him, and the commodity or money which he gives to the child is lost, he can claim it from the child after he attains the age of Bulugh, or from his guardian. But if the child is not discerning, he will have no right to claim anything from him.

2093. If a buyer or a seller is forced to conclude a transaction, and he concedes after the transaction is concluded (e.g. if he says: I agree), the transaction is valid. However, the recommended precaution is that the formula of the transaction should be repeated.

2094. If a person sells the property of another person without his consent, and if the owner of the property is not agreeable to the sale, and does not grant permission, the transaction is void.

2095. The father or paternal grandfather of a child and the executor of the father and the executor of the paternal grandfather of a child, can sell the property of the child, and if the circumstances demand, an Adil Mujtahid can also sell the property of an insane person, or an orphan, or one who has disappeared.

2096. If a person usurps some property, and sells it and after the sale, the owner of the property allows the transaction, the transaction is valid, and the thing which the usurper sold to the buyer and the profits accrued to it, from the time of transaction, belongs to the buyer. Similarly, the thing given by the buyer, and the profits accrued to it from the time of the transaction, belong to the person whose property was usurped.

2097. If a person usurps some property, and sells it with the intention that the sale proceeds should belong to him, and if the owner of the property allows the transaction, the transaction is valid, but the sale proceeds will belong to the owner, and not to the usurper.

L a w s   o f   P a r t n e r s h i p

2150. If two persons make an agreement that they would trade with the goods jointly owned by them, and would divide the profit between themselves, and if they pronounce a formula declaring partnership, in Arabic or in any other language, or express their intention of becoming each other's partner by conduct, the partnership will be valid.

2151. If some persons enter into a partnership to share the wages from their labor, like, if a few barbers or laborers agree mutually that they would divide between themselves whatever wages they earn, that partnership is not in order.
But if they enter into a mutual compromise that, say, half of what one earns will be given to the other, for a fixed period, in exchange of half of what the other earns, this transaction will be valid, and thus each will be a partner in the wages of the other.

2152. If two persons enter into a partnership, on the terms that each of them would purchase the commodity on his own responsibility, and each would be responsible for the payment of its price, but would share the profit which they earn from that commodity, that partnership is not valid.
However, if each of them makes the other his agent, authorizing that whatever one purchases on credit, the other will be a partner in it, which means that he and his partner are responsible for the debt, then they will be considered partners in that commodity.

2153. The persons who become partners under the rules of partnership, must be adult and sane, and should have intention and free volition for becoming partners. They should also be able to exercise discretion over their properties. Hence, if a feeble-minded person who spends his wealth impudently, enters into partnership, it is not in order, because such a person has no right of disposal over his property.

2154. If a condition is laid down in an agreement of partnership, that the partner who manages, or does more work than the other partner, or does more important work than the other, will get larger share of the profit, it is necessary that he should be given his share as agreed upon. Similarly, if it is agreed that the person who does not manage, or does not do more work, or does not do more important work, will get larger share of the profit, that condition is also valid and it must be fulfilled.

2155. If it is agreed that the entire profit will be appropriated by one person, or the entire loss will be borne by one of them, that sort of partnership is a matter of Ishkal.

2156. If it is not agreed that one of the partners will receive more profit, and if the investment of each of them is equal, they must share profit and loss equally. And if their investment is not equal, they should divide the profit and loss in proportion to their capital.
For example, if two persons become partners, and the capital of one of them is double the capital of the other, his share in the profit and loss will also be double of the other, irrespective of whether both of them do equal work, or one of them does less work, or does not work at all.

2157. If it is laid down in the agreement of partnership, that both the partners will buy and sell together, or each of them will conclude transactions individually, or only one of them will conclude transactions, or a third party will be hired to conclude the transaction, they should act as agreed upon.

2158. If it is not specified as to which of the partners will buy and sell with the capital, neither of them can conclude any transactions with that capital without the permission of the other.

2159. The partner who has been given the right of discretion over the capital, should act according to the agreement of partnership. For example, if it is agreed that he will purchase on credit, or will sell against cash payment, or will purchase the property from a particular place, he should act according to the agreement.
However, if no such agreement is made with him, he should conclude transactions in the usual manner, and carry on in such a way that no loss is suffered in the partnership. He should not carry any property belonging to the partnership, with him while he is traveling, if that is unusual.

2160. If a partner who transacts business with the capital of the partnership, sells and purchases things contrary to the agreement made with him, or concludes transactions in a manner which is not normal, because of the absence of any agreement, the transaction made by him in both the cases will be correct and valid; but if such a transaction results in a loss, or a part of wealth is squandered, then the partner who has acted against the agreement, or the usual norm, will be responsible for the loss.

2161. If a partner who trades with the capital of the partnership, does not go beyond the bounds of his authority, nor is he negligent in looking after the capital, yet unexpectedly the entire capital or a part of it perishes, he is not responsible.

2162. If a partner who trades with the capital of the partnership, declares that the capital has perished, and if other partners trust him, they should accept his word. But if they do not trust him, they can complain against him before the Mujtahid, who will decide the case according to Islamic laws.

2163. If all the partners withdraw the permission, given by them to one another, for the right of discretion over their respective shares held in partnership, none of them will be allowed the right of discretion over them. And if one of them withdraws the permission accorded by him, the other partners do not have the right of discretion; but one who has withdrawn his permission can exercise his right of discretion over the property of the partnership.

2164. If one of the partners demands that the capital invested in the partnership should be divided, others should accept his demand even if the period fixed for the partnership may not have expired yet, except when the division of the capital entails considerable loss to the partners.

2165. If one of the partners dies, or becomes insane, or unconscious, other partners cannot continue to exercise right of discretion over investment held in the partnership. And the same rule applies when one of them becomes feeble-minded that is, spends his property without any consideration.

2166. If a partner purchases a thing on credit for himself, its profit and loss belongs to him. However, if he purchases it for partnership, and if the agreement allows credit dealings, its profit and loss belongs to both of them.

2167. If the partners conclude a transaction with a joint capital investment, and it transpires later that the partnership was invalid, if the validity of the transaction was not dependent on mutual consent, meaning that, if they had known that the partnership was not valid, they would have still been agreeable to having the right of discretion over the property or stock of each other, the transaction will be considered valid, and whatever is gained or lost from the transaction will be shared by them.
But if the partners would not have been disposed to agree to exercise discretion over each others' stock or property had they known that the partnership was not valid, yet they approve the particular transaction, it will be valid - and if they do not, it will be invalid.
And in either case, if any partner has worked for the partnership without the previous intention to work gratis, he can collect the wages for his services at the usual rate, considering the percentage of other partners. But if the usual wage is more than his share of dividend, after having agreed to the validity of the transaction, he should take the dividend only.

Z a k a t   o n   b u s i n e s s   g o o d s

(i)   The owner of the goods should be baligh and sane.
(ii)  The goods should have reached the taxable limit, which is equal to that of gold and silver.
(iii) The goods should have remained for one year ever since the owner intended to invest it for profit.
(iv) The intention of investing it for profit should have remained unchanged throughout the year. If the intention changes, like, when he decides to spend it for maintenance, then he will not pay its Zakat.
(v)  The owner should be actually capable of its disposal throughout the year.
(vi) Throughout the year, the owner should have a buyer of the goods equal to the capital or more. If, during the year, he gets a buyer for the goods for less then capital outlay, it will not be obligatory upon him to pay its Zakat.

BACK TO MAIN PAGE