Question # 520: Selling something not owned with Salam Sale and then further delivering the item to buyer via 3rd party (manufacturer/wholesaler):
bismi-llahi r-raḥmani r-raḥīm, Assalamu ‘laikum warahmatullahi wabarakatuh, Provided that all other conditions of Salam transaction are fulfilled: (1) exact eight/measurement/quantity along with (2) its type/specifications are specified/displayed to buyer, and (3) the product is not specific of its kind and (4) full price of product has been paid in advance (5) exact date and place of delivery is specified.
is Salam transaction valid if 3rd party (manufacturer/wholesaler) delivers that product instead of seller and seller has not taken possession of the item since it is to be delivered directly from manufacturer/wholesaler to buyer and seller is not the manufacturer of the item but seller takes the full liability (and provided the option of refund to buyer)?
for example: I list a product on my website that I don’t have possession of and neither I am manufacturer of that item, Also I am not an agent to neither parties (manufacturer/ wholesaler or buyer). When a buyer comes to my website and orders the product I enter Salam transaction with him/her – provided that all conditions of Salam transaction are fulfilled do I need to take possession of product personally and deliver it to buyer by myself? and secondly, do I need to be the manufacturer of a product myself for a Salam transaction to be valid?
bismi-llahi r-raḥmani r-raḥīm,
Assalamu ‘laikum warahmatullahi wabarakatuh,
All praise and thanks are due to Allah (سبحانه و تعالى), and peace and blessings be upon His Messenger (صلى الله عليه و سلم).
First of all, we implore Allah (سبحانه و تعالى) to help us serve His cause and render our work for His sake.
Shorter Answer: As-Salam is one of the permissible sales, it allows the sale of goods that do not exist at the time of the contract, while payment of the full price is made in advance. It is permissible for the seller to use the dropshipping method wherein he transfers the orders and their shipment details to either the manufacturer or a wholesaler, which then ships the goods directly to the customer.
The general terms and conditions of Salam should be binding for its permissibility, and Q2P2T be followed. The first Q stands for the quantity of the goods to be supplied. The second Q stands for the quality, variety, and workmanship of the goods. The first P stands for the price to be paid in advance by the buyer, and the second P stands for the place of delivery. Finally, T stands for the time of delivery. The goods should have an established market demand and not a rare commodity; they should be in existence at the time of delivery.
Further, in the case of Salam, Muslim jurists disallow the option condition that allows one of the parties to cancel a contract within a specified number of days; however, after taking delivery, the buyer has the option to cancel the contract if any defect is discovered in the goods (khiyar al-aib) or the goods are not of the quality or specification as agreed at the time of contract (khiyar alwasf), in which case the seller should refund the amount of the price received in advance.
For a detailed understanding of the conditions of Salam transactions, please refer to ‘Basic Features and Conditions of Salam’ below.
Long Answer: [In general,] it is not permissible to sell an item before taking possession of it and moving it from the manufacturer’s/wholesaler’s place because of the report narrated by an-Nasa’i, Abu Dawood, and at-Tirmidhi from Hakeem ibn Hizaam, who said: I asked the Prophet (صلى الله عليه و سلم): O Messenger of Allah, a man may come to me wanting to buy something that I do not possess, so I sell it to him then I buy it for him from the marketplace. He said: “Do not sell that which you do not possess.” (The hadith was classed as saheeh by al-Albani in Saheeh an-Nasa’i)
Also, Ad-Daraqutni and Abu Dawood narrated from Zayd ibn Thabit that the Prophet (صلى الله عليه و سلم) forbade selling an item where it was bought until the merchants move it to their own places. (The hadith was classed as hasan by al-Albaani in Saheeh Abi Dawood)
However, the following are among the permissible and acceptable ways in which the goods can be sold even when the seller does not own them:
- The seller promises the customer that he will buy the item and, take possession of it, then sell it to him. When the seller has bought it and taken possession of it, then he enters into the sale transaction and sends it to the customer.
- The seller is allowed to act as an agent on behalf of the manufacturer/wholesaler, selling the item on behalf in return for a commission, or act as an agent on behalf of the purchaser, buying the item for him at the usual price, and agreeing with him on a fee in return.
- Use the Salam transaction (payment in advance), whereby the seller sells the customer an item that is clearly described and defined in such a way that there can be no cause for dispute and commits to deliver to him at a specified time, on the condition that he receive the money from the customer when drawing up the contract.
[To elaborate,] in this sale, the [seller] agrees with the customer who demands the commodity to sell him a commodity with specific descriptions, which he receives from him at a specific time to which they both agree. The… delivery date is determined… is something [which] required in the Salam Sale. It is also required that the buyer pays the price of the commodity directly in the meeting of the contract. Requesting the goods remain the liability of the seller. Then the seller shall request the described commodity from the factory or from its owner and buys it from him, and then asks him to ship it to the one who is buying it from his site directly so that it can reach him at the appointed time that is agreed upon between both of them. This method is permissible. It exempts the seller from the shipping fees, and it is also a way to avoid selling what one does not possess because it is not a sale of a particular commodity (which is physically present at the time of sale), but it is rather selling a described commodity, the description of which is based on the honesty of the seller (who is describing it). The conditioning of an appointed time is mandatory, such as determining a day for the delivery of the goods to the customer (the one who requested the commodity).
Ibn ‘Abbas (رضي الله عنه) narrated that when the Prophet (صلى الله عليه و سلم) came to Madinah, people were paying one, two, and three years in advance for fruits, so he said: “Whoever makes a Salam sale, let him do that with a known specified measure, a known specified weight, and appoint a known specified period (of time).” (Al-Bukhari and Muslim) It is also narrated on the authority of ‘Abdur-Rahmaan ibn Abza and ‘Abdullaah ibn Abi Awfa (رضي الله عنهما) that they said, “We used to get war booty while we were with the Messenger of Allah (صلى الله عليه و سلم) and when the peasants of Ash-Shaam came to us we used to pay them in advance for wheat, barley, and oil to be delivered within a fixed period.” They were asked, “Did the peasants own standing crops or not?” They replied, “We never asked them about it.” (Al-Bukhari)
In Al-Mughni, Ibn Qudaamah said: “The Prophet (صلى الله عليه و سلم) commanded that a definite term must be specified and his command entails obligation. His commands here are to explain the conditions of the Salam sale without which that kind of sale will be forbidden. Hence, this sale will be invalid if the measure and weight are not specified and similarly if the term is not specified.”
(The above reply is based on various answers on similar topics provided by:
- Islamweb.net, a website belonging to the Ministry of Awqaf and Islamic Affairs in the State of Qatar; and
The permissibility of Salam was an exception to the general rule of sale that prohibits forward sales, where the goods do not exist at the time of contract of sale. While a Salam contract contains the same conditions as that of a sale contract, it has its own special characteristics.
Basic Features and Conditions of Salam
- The seller usually initiates the transaction for the sale of goods.
- Goods not in the possession of the seller at the time of the contract can be sold.
- Goods should not be non-existent in the sense that they can be delivered at a future time.
- Goods should have an established market demand; goods of a rare commodity that cannot be delivered immediately or goods that will not be in season or available at the time of delivery cannot be the basis of Salam. If there is little or no possibility of delivery, then the transaction, according to Muslim jurists, involves gharar (absolute uncertainty) and maysir (gambling on chance), which are both prohibited by the Shari’ah.
- The seller is not required to be the owner or producer of the goods; the contracted goods in Salam are a liability for a debt, the debt being the liability of the seller to deliver the goods at the time of delivery, according to the specifications stipulated in the contract. If the seller is not the owner or producer of the goods and is not in a position to supply the goods directly, then the seller can obtain the goods from another source.
- Unidentified or unspecified goods are not valid for Salam; the goods should be such that their kind, description, quality, and workmanship are exactly specified. It may include any marketable goods with definable features, trademarks, etc., such as raw materials, agricultural produce, and manufactured goods. Goods, the quality of which are not determined or identified by exact specifications, cannot be sold through the contract of Salam. For example, precious stones cannot be sold on the basis of Salam because their physical quality based on size and weight can vary greatly, and defining exact specifications is not generally possible. It is, therefore, necessary that the quality of the commodity (intended to be purchased through Salam) is fully specified, leaving no ambiguity which may lead to a dispute at the time of future delivery. The specifications of the goods should particularly cover all those characteristics that are responsible for variations in price.
- The quantity of the goods must be specified in unequivocal terms to avoid dispute at the time of future delivery. If the goods are quantified in weights according to the usage of their traders, their weight must be determined, and if it is quantified through measures, their exact measure must be known. What is normally weighed cannot be quantified in measures and vice versa.
- Salam cannot be effected on a particular commodity or on a product of a particular place. For example, if the seller undertakes to supply the wheat of a particular field or the fruit of a particular tree, the Salam will not be valid because there is a possibility that the crop of that particular field or the fruit of that tree may be destroyed before delivery, and, given such a possibility, the delivery remains uncertain.
- Salam cannot take place between identical goods, e.g., wheat for wheat.
- Commodity in exchange should in itself not be in the nature of money; Salam cannot take place in money or currencies, this is subject to rules relating to bai al-sarf; according to Shari’ah, the delivery of both be simultaneous or immediate.
- The price is normally less than the spot sale price.
- The buyer is required to pay the purchase price in full to the seller at the time of entering into a sale contract. The idea of Salam is to provide a mechanism whereby the seller has access to liquid funds that would result from entering into the transaction that would allow the seller to arrange delivery of the goods to the buyer at a future time. Muslim jurists agree on the payment of the price at the time of sale; however, they differ in defining the timing. According to the majority of the jurists, the buyer must pay the amount at the time of signing the contract. However, some jurists allow the payment to be delayed, provided the delay is not prolonged so as to make it appear like a financial debt owed by the buyer to the seller. Imam Malik allowed for a delay of up to three days if the need arose to delay payment.
- Goods (for which advanced payment has been made) can be delivered before the stipulated time of delivery if it does not cause the buyer any inconvenience or loss. However, immediate delivery of the goods is not allowed by the majority of jurists as it simply amounts to a cash sale.
- The time and place of delivery must be specified in the contract. In the case of a contract involving multiple goods, the amount and time of delivery for each item should be separately stated. It is also permissible to draw a Salam contract on a single commodity but for delivery to be in parts at different times.
- Goods become the responsibility of the buyer after delivery.
- In the case of Salam, Muslim jurists disallow the option condition that allows one of the parties to cancel a contract within a specified number of days (Khiyar al-shart) because it prejudices the seller’s entitlement to the price of the goods to be supplied later. The buyer also does not have the “option of inspecting” the goods (Khiyar al-royat) that are not available at the time of contract and have to be delivered at a future time, this option is available in the case of normal sales where immediate delivery takes place. However, after taking delivery, the buyer has the option to cancel the contract if any defect is discovered in the goods (khiyar al-aib) or the goods are not of the quality or specification as agreed at the time of contract (khiyar alwasf); in that case, only the amount of the price paid in advance can be recovered, without any increase.
- Goods cannot be sold back to the seller as it would be deemed a sale and buy-back arrangement, which is prohibited by the Shari’ah; some Muslim Jurists allow this but only for the exact price originally paid; in other words, they permit the buyer and the seller to rescind the contract, by the seller returning the whole price (no less and no more).
- The contract is conclusive and final unless it is altered or terminated with the consent of the parties.
(The above reply is based on the Study Material on ‘Forward Sales’ by the Institute of Islamic Banking and Insurance London, UK)
Allahu A’lam (Allah (سبحانه و تعالى) knows best) and all Perfections belong to Allah, and all mistakes belong to me alone. May Allah (سبحانه و تعالى) forgive me, Ameen.