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Conditions of trade transactions

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Conditions of trade transactions

Post by Ithar Ghada Faied on Mon Jan 02, 2012 10:45 pm

Bismillaah, wal-hamdulilaah, was-salaatu was-salaamu 'alaa rasoolillaah, As Salamu 'Alaykum wa Rahmatullaahi wa Barakatuh

Recurrent are the conditions set by a seller or a buyer when concluding a trade transaction. Accordingly, it has become a necessity to study and tackle the different kinds of such conditions, pointing out the legal and the illegal ones among them. The scholars of Islamic Jurisprudence, may Allaah have mercy upon them defined a condition (of a trade transaction) as follows: "It is obligating one of the two parties (of the sale) by the other for the benefit of the latter." According to them, a transactional condition is invalid unless it is made at the time of the transaction and embedded in the transactional contract. In other words, a condition is invalid if made before or after concluding the contract.
In general, the conditions in trade transactions are divided into valid conditions and invalid ones.

First: Valid Conditions

Valid conditions are those that do not contradict the objective of the contract. Such a kind of condition obligates its fulfillment; the Prophet sallallaahu `alayhi wa sallam ( may Allaah exalt his mention ) said: "Muslims must keep to the conditions they make." [Abu Daawood & At-Tirmithi]

Such conditions obligate fulfillment also because all conditions in trade transactions are originally legal except for those invalidated and prohibited by the Lawgiver (Allaah Almighty). The valid conditions are of two kinds:

1- The first kind of valid conditions of trade transactions is that which ensures and consolidates the contract, and benefits the one who sets such conditions. Examples of such valid conditions are those made by the seller such as stipulating taking a security deposit or stipulating surety; this surely makes the seller free from worry. There are similar valid conditions in favor of the buyer, such as stipulating delaying the payment or part of it for a specified term, i.e. to pay it at a specific date. So long as the buyer is committed to this condition the sale is valid. A buyer may set a condition concerning a specification of the commodity, such as requiring a special brand or product, as people have different preferences. In such a case, the sale is legally valid as long as the commodity meets this condition; otherwise, the buyer has the right to cancel the contract or at least get a compensation for the missing stipulated quality. This compensation is estimated by comparing the value of the commodity meeting the required condition and the one lacking it, and then the difference between the two values can be paid to the buyer if he asks for that.

2- The second kind of valid transactional conditions is that in which one of the two parties stipulates benefiting lawfully from the commodity in a certain way. For example, a seller of a house may stipulate staying therein for a specific period, or a seller of a riding animal or a car may stipulate riding it to a certain place. Jabir may Allaah be pleased with him narrated: "The Prophet sallallaahu `alayhi wa sallam ( may Allaah exalt his mention ) sold a camel and stipulated to ride it (and use it) until he reaches Madeenah." [Al-Bukhaari and Muslim]

This Hadeeth states the permissibility of selling an animal and stipulating riding it to a certain place; the same goes for similar transactional cases. Another example is when the buyer stipulates a specific work to be done to the commodity, such as buying firewood stipulating that the seller should deliver it, or buying cloth making a condition that the seller should stitch it.

Second: Invalid Conditions

There are two kinds of invalid conditions:

1- The first kind is the invalid illegal condition that basically nullifies the selling contract, such as when one of the two parties stipulates another contract within the main one. For example, it is an illegal condition when a seller of a commodity makes a condition that the buyer must make him his partner in business, lend him a sum of money, or allow him to share his house, etc., or that he says, "I sell you this commodity on the condition that you rent me your home." Such a condition is legally invalid so it nullifies the original contract. This is because the Prophet sallallaahu `alayhi wa sallam ( may Allaah exalt his mention ) forbade concluding a selling contract based on another conditional contract. (At-Tirmithi & An-Nasaa'i) This Prophetic prohibition was interpreted by Imaam Ahmad Ibn Hanbal may Allaah have mercy upon him exactly as we have pointed out above.

2- The second type of invalid transactional conditions is the one which itself is null and void, yet it does not nullify the contract. For example, a buyer of a commodity may make a condition that he will give it back if he undergoes loss, or a seller of a commodity may make a condition that the buyer must not resell it. Such a type of conditions is legally invalid as it violates the principle of a business contract that absolutely allows the buyer to use the (purchased) commodity in whatever manner he likes. The Prophet, sallallaahu alayi wa sallam, said: "If anyone imposes a condition which is not in the Book of Allaah, then that condition is invalid even if he imposes one hundred conditions." [Al-Bukhaari and Muslim]

The phrase "in the Book of Allaah" in the aforementioned Hadeeth refers to Sharee'ah (Islamic Law) including the Quran and the Sunnah. Still, such an invalid type of conditions does not nullify the contract. To illustrate, in the well-known incident of Bareerah, the one who sold her made a condition that her wala (The freed slave's loyalty by virtue of emancipation) would go to him if she was emancipated. However, the Prophet sallallaahu `alayhi wa sallam ( may Allaah exalt his mention ) declared that the condition was null, yet he sallallaahu `alayhi wa sallam ( may Allaah exalt his mention ) did not consider the contract to be invalid. Then, the Prophet sallallaahu `alayhi wa sallam ( may Allaah exalt his mention ) said: "Verily, the Wala' is for the emancipator." [Al-Bukhaari and Muslim]

A Muslim involved in businesses, purchasing and selling, should learn the legal rulings on trade transactions as well as the valid and invalid conditions of any business deal to be aware of the legal situations in such dealings. Thus, Muslims can find legal solutions to their controversies resulting from trade transactions, most of which result from the ignorance of the seller, the buyer, or both, of such rulings, as well as the invalid conditions they set in transactions.

Ithar Ghada Faied

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