Islamic Code of Commerce

There is no contention with regard to wealth being essential for the existence of man. Likewise, there is also no difference of opinion that certain methods of acquisition of wealth are advisable whilst others are not. For instance, acquisition of wealth by means of stealing, fraud, cheating, deception, usurpation, etc, is abhorred across the globe.

However, there is no comprehensive code of commerce which can determine with total justice, as to which methods of acquisition are correct and which are not. The code clearly cannot be the law of humans, who are susceptible to greed, bias, etc,. It can only be the law of Allah, The Lord of All the Worlds.

The laws of shariah are Divine. Hence, they are balanced, just, comprehensive, perfect and absolutely flawless just as Allah, the most Wise and Knowledgeable is absolutely perfect and beyond any flaw. Unlike other systems, such as the capitalist, socialist and communist systems, the Islamic code of commerce has maintained complete balance between the needs of people, their property, and extortion and monopolization.

Allah Ta’ala commands in the Holy Qur’an:

“O you who believe! Do not consume your wealth between yourselves unjustly, except that it be (through) trade (which is concluded) with mutual agreement between you”

This verse of the Qur’an has encapsulated all those forms of trade which are impermissible in Islam. It includes stealing, fraud, forcefully expropriating someone’s property, bribery, gambling, lying and deception, and every other impermissible transaction, the details of which have been elucidated in the Ahaadith of Nabi (Sallallahu Alayhi Wasallam).

The Qur’an Shareef has permitted us to acquire wealth by means of lawful trade (or tijaarah) with mutual agreement. It is imperative at this juncture, to understand the meaning of tijaarah in the terminology of the Holy Qur’an.

Tijaarah is the exchange of wealth (maal) for wealth with mutual agreement. From this definition, the following transactions are understood to be invalid according to the Shariah:

One or both Exchanges are not Wealth or not Classified as Wealth in the Terminology of Shari’ah

In such an instance, the exchange will not be a sale in Shar’iah. Rather, this is a form of deception, where one exchanges his wealth for ‘nothing’. For instance, in an interest transaction, money is NOT charged in lieu of any wealth. Likewise, the sale of those things which are not regarded as wealth in Shariah is also impermissible (like pork etc).

Exchange is Indefinite/ Uncertain

An example of this is gambling. One exchange is absolutely certain, whilst the other is indefinite. Another example is selling something which is not yet in existence, such as fruit that has not yet grown or an animal which has not yet been born. The very existence of the item is indefinite. Similarly, a sale cannot be suspended on any condition or event, as the occurrence of that event is indefinite. For instance, X cannot say to Y that he sold him his car only if Y is successful in securing a loan from Z.

Ambiguity

It is absolutely essential that any sale be completely free from any form of ambiguity, whether in the price, subject of sale or term of credit. For example, Zaid sells his watch to his friend in exchange of ‘what he paid for it’, and the sale is concluded whereas his friend has no idea as to what Zaid paid for the watch. The wisdom behind this is to avoid all forms of dispute. Likewise, selling something which a person has no possession of is also invalid. It is highly possible that the item which has already been sold gets destroyed before taking possession. The result being that a person has sold nothing.

Ownership

It will only be correct to trade in something provided one has ownership or authority to deal in it. Otherwise, this will be usurpation which is strongly prohibited in Islam. Supposing Zaid and his major (baaligh) sister jointly inherited a car. Zaid sells the car and keeps the money. In this case, Zaid is guilty of selling that which he does not own and neither has authority to deal in.

Harm to Some Party

The underlying reason for the prohibition of interest is that the entire populace suffers to the advantage of a few individuals. Similarly, a sale will be invalid where certain conditions have been placed which conflict the nature or demands of the sale.

NOTE

Absence of Mutual Agreement

This can be due to compulsion, harm etc. If a person is compelled to purchase some commodity, which is only available from one company, at an exorbitant price, then although outwardly he is purchasing the item out of his own choice, yet this choice of his is, in reality, a result of compulsion. Hence, although this transaction is permissible, it is not in accordance to the Islamic ethics of trade.

When the conditions which Shari’ah has stipulated with regard to sale have been fulfilled, the transaction that was concluded becomes Deen and an act of ibaadah. Hadhrat Mu’aaz (Radiyallahu Anhu) narrates that Rasulullah (Sallallahu Alayhi Wasallam) said: “The best wealth is that which traders earn, provided they speak the truth, fulfil their promises, fully discharge those trusts which have been entrusted to them, they do not (wrongfully) try to point out faults in any commodity when they purchase it (as it is the habit of traders), they do not over praise their items when they sell, pay off their debts without any delay, and are lenient on their debtors”. (Baihaqi #4854)

Hadhrat Abu Saeed Khudri (Radiyallahu Anhu) narrates that Rasulullah (Sallallahu Alayhi Wasallam) said: “The truthful, honest trader will be with the Ambiyaa, Siddeeqeen and martyrs”. (Tirmidhi)

Hadhrat Anas (Radiyallahu Anhu) reports that Rasulullah (Sallallahu Alayhi Wasallam) said: “The truthful trader will be under the Arsh (throne) of Allah Ta’ala on the day of Qiyaamah”. (Baihaqi #8613)

The verse ends off in the following words: “Indeed Allah is most merciful toward you”. Hence, whatever command has been given to you is in essence a mercy from Allah Ta’ala in both this world and the next.

The Qur’an Shareef has permitted us to acquire wealth by means of lawful trade (or tijaarah) with mutual agreement. It is imperative at this juncture, to understand the meaning of tijaarah in the terminology of the Holy Qur’an. Tijaarah is the exchange of wealth for wealth with mutual agreement. If either one or both exchanges are not wealth, then this is not termed as tijaarah. Rather, this is deception and is classified as a baatil sale (sale which is totally null and void). Interest transactions are of this nature. An additional amount is charged for time, whereas time is not a form of wealth. Similar is the case of gambling. One exchange of wealth is definite, whilst the other is not. Selling something which is not yet in existence is also invalid for the same reason. On the one hand, wealth has been given, whereas on the other there is nothing.

However, if wealth is exchanged for wealth, but there is no mutual agreement between the two parties, then this sale is classified as faasid (incorrect form of sale). Thus, if a person is compelled to purchase some commodity, which is only available from one company, at an exorbitant price, then, although outwardly he is purchasing the item of his own choice, yet this choice of his is, in reality, a result of compulsion. Hence, this sale will also be faasid.

Basically, those forms of trade which Islam has forbidden comprise of one of the following elements which impact on the happiness of one of the parties: Either it entails some form of deception or uncertainty (such as gambling, insurance etc.), or one or both of the exchanges are unknown (gambling, insurance etc.), or it entails some form of usurpation, or there is some harm to one party, or there is harm to the general public. The underlying reason for the impermissibility of interest is that the entire populace suffers to the advantage of a few individuals.