Chapter VII - Sale And Usury
Sale in the language of the Muslim Law signifies an exchange of property with the mutual consent of the parties. In its ordinary acceptance, sale is a transfer of property in consideration of a price in money. The word has a comprehensive meaning in the law, and is applied to every exchange of property for property with mutual consent. It, therefore, includes barter as well as sale and also loan, when the articles lent are intended to be consumed and replaced to the lender by a similar quantity of the same kind. This transaction which is truly an exchange of property for property is termed as qard in the law, i.e. loan.
According to the Muslim Laws of contracted trans action of sale and barter, etc., things are divided into: (a) Similars; and (b) Dissimilars:
Similar things are those which are sold by weighing and measuring; and dissimilar things which are different in quality but sold in exchange, such as wheat for its price in coin. In the case of similar things as wheat for rice, when sold after being measured or weighed delivery should take place at once. When these are sold unconditionally, the buyer has no right to choose the best part of it from the whole, unless the seller consents and desires to please him. Things sold or exchanged cannot remain undelivered or unadjusted on the mere responsibility of the parties. But if a thing is sold against its value in money, time is allowed in receiving money. Among similar things, there are similars of capacity weight and sale. The seller must express clearly the quantity and quality of the thing exactly as it is, so that any doubt or misunderstanding may not arise in regard to it later on. He must fix the price and say that he is willing to sell to so and so such a thing of so much value and on such terms and conditions (if there be any); the buyer must accept the offer in clear language. If the seller himself cannot do this, he must appoint an agent, with sufficient authority to dispose of his goods. If a contract takes place through a broker, it must be ratified by the actual buyer. Option is allowed to the buyer and seller for three days (in case a thing is not removed from the seller’s premises) to avoid the transaction. If a thing is purchased without inspection or examination and afterwards a difference is found in the quantity or the quality specified by the seller, or asked for by the purchaser the latter may refuse to take delivery of it. Of the various kinds of recognized kinds of sale, the following are the most important:
- Sale of a specific thing for a price or by way of barter.
- Sale of silver for silver or gold for gold or banking in which the exchange of coins, either silver or gold, must be exact in weight or quality, so that there may be no chance of resorting to usury.
- Sale in advance when the price is deposited before taking delivery of goods.
- Loan, etc.
The quality of the thing, when lent, is specified and the thing to be given back should be of the same quality.
One can mortgage his property, but here also usury is avoided. The theologians have permitted only such bargains in which a lender of money can be benefited without transgressing the law, e.g. by the use of a thing or property which has been mortgaged; or make a condition precedent that if, with a specified time, the money is not repaid, delivery of possession of the property mortgaged will be given to the lender, etc. Riba or usury is strictly prohibited under Islamic Law. It means taking advantage of an individual in distress by giving him momentary relief, with the intention of bringing more misery upon him. One is forced to ask for a loan on the condition that it would be repaid, as agreed, to the lender; often much more has to be paid to the lender than he has actually paid. In some cases it may be deemed harmless, but often it brings ruin to whole families, of which the lender is conscious. Such exaction is against the spirit of Islam. The lender may intentionally lend money to possess the property of one who may, owing to hard circumstances, be forced to seek his help. Islam inculcates moderate socialism and with it prescribes a rational and just mode of dealing as between members of the Muslim community. Each individual has the right to possess what is his own property and to enjoy what is his own wealth, but only to the extent that by that he does not injure others’ happiness or interests. He may amass wealth, but the surplus wealth, of which he is not in need of immediate use, must be used for helping those who are badly in need thereof. Usury as practised in the time of the Prophet was against such principles and was, therefore, prohibited. It is difficult to say whether the modern method of banking and charging of interest on amounts lent out is based upon the doctrine of mutuality, service and mutuality of benefit between lender and borrower. If the benefits are deemed to be one sided, it cannot be said to be permitted by the Islamic Law. If, on the other hand, there is mutuality of service, it would, in the judgment of Muslim theologians, be permissible as it would be held by them to be a kind of transaction.
sury, as an illegal transaction, is occasioned, by rate, united with species, and it includes all gain upon loans, whether from the loan of money, or goods or property of any kind.
The teaching of the Koran on the subject is given in Chapter 2, verse 275 of which the following is a translation:
“those who swallow down usury shall arise in the last day as he arises whom Satan has infected by his touch. This for that they say “Trading is nothing but the like of usury,’ and yet God hath allowed trading and forbidden usury; and whosoever receives this admonition from his Lord, and abstains from it, shall have pardon for the past and his lot shall be with God. But they who return to usury shall be given over to the Fire – therein to abide.”
The Prophet is related to have said:
“Cursed be the taker of usury, the giver of usury, the writer of usury, and the witness of usury, for they are all equal.” , “Verily the wealth that is gained in usury, although it be great, is of small advantage” () .
Riba, i.e. usury, in the language of the law, signifies “an excess,” according to a legal standard of measurement or weight in one of two homogeneous articles (of weight or measurement of capacity) opposed to each in a contract of exchange, and in which such excess is stipulated as an obligatory condition on one of the parties, without any return, i.e. without anything being opposed to it. The sale, therefore, of two loads of barley, for instance, in exchange for one load of wheat does not constitute usury, since these articles are not homogeneous; and, on the other hand, the sale of ten yards of cloth in exchange for five yards of another cloth is not usury, since although these articles be homogeneous, they are not estimable by weight, or measurement of capacity.
Usury, then, as an illegal transaction is occasioned (according to most distinguished doctors) by rate united with species, where, however, it must be observed that rate, in the law of Islam, applies only to articles of weight and measurement of capacity, and not to articles of longitudinal measurement, such as cloth, etc., or of tale such as eggs, dates, walnuts, etc., when exchanged from hand to hand. Where the quality of being weighable or measurable by capacity, and correspondence of species (being the causes of usury) both exist, the stipulation of inequality or suspension of payment to a future period, are both usurious. Thus it is usurious to sell either one measure of wheat in exchange for two measures, or one measure of wheat for one measure deliverable at a future period. If, on the contrary, neither of these circumstances exists (as in the sale of wheat for money), it is lawful, either to stipulate a superiority of rate or the payment at a future period. If, on the other hand, one of these circumstances only exists (as in the sale of wheat for barley), then a superiority of the rate may legally be stipulated, but not a suspension in the payment. Thus one measure of wheat may lawfully be sold for two measures of barley; but it is not lawful to sell one measure of wheat for one measure of barley, payable at a future period.
Similars of weight and capacity are distinguished from all other description of property in a very remarkable way. When one article of weight or one of measure is sold or exchanged for another of measure, the delivery of both must be immediate from hand to hand, and any delay of delivery in one of them is unlawful and prohibited. Where again, the articles exchanged are also of the same kind, as when wheat is sold for wheat, or silver for silver, there must not only be reciprocal and immediate delivery of both before the separation of the parties, but also absolute equality of weight or measure, according as to whether the articles are weighable or measurable; any excess of either side is also unlawful and prohibited. These two prohibitions constitute in brief the doctrine of riba (usury), which is a marked characteristic of the Islamic Law of sale. The word riba (in Arabic) properly signifies “excess,” and there are no terms in the Islamic Law which correspond to the words “interest” and “usury” in the sense attached to them in the English language; but it was expressly prohibited by the Prophet to his followers to derive any advantage from loans, and that particular kind of advantage which is called by Westerners “interest” and which consists in the receiving back from the borrower a quantity larger than is actually lent to him, was effectually prevented by the two rules above mentioned.
imilars of weight and capacity have a common feature of commodities, and marks with further peculiarity their treatment in the Islamic Law. There are aggregates of minute parts, which are either exactly alike or so nearly resemble each other, that the difference between them may be safely disregarded. For this reason they are usually dealt with in bulk, regard being had only to the whole of a stipulated quantity, and not to the individual parts of which it is composed. When sold in this manner, they are said to be indeterminate. They may, however, be rendered specific in several ways. Actual delivery, or production with distinct reference at the time of contract, is sufficient for that purpose in all cases. But something short of this would suffice for all similars, excepting money. Thus flour, or any kind of grain, may be rendered specific by being enclosed in a sack, or oil, or any liquid, by being put into casks or jars; and though the vessels are not actually produced at the time of contract, their contents may be sufficiently particularized by description of the vessels and their locality. Money is not susceptible of being thus particularized. Hence, money is said to be always indeterminate. Other similars, including similars of tale (number), are sometimes specific and sometimes indeterminate. Dissimilars, including those of tale, are always specific.
When similars are sold indeterminately, the purchaser has no right to any specific portion of them until it be separated from a general mass, and marked and identified as the subject of the contract. From the moment of offer till actual delivery, he has nothing to rely upon but the seller’s obligation, which may, therefore, be considered the direct subject of the contract. Similars taken indeterminately are accordingly termed dayn or obligation in the Islamic Law. When taken specifically, they are classed with dissimilars under the general term of ‘ayn. The literal meaning of this term is “substance or thing”; but when opposed to dayn it means something determinate or specific. The subject or traffic may thus be divided into two classes: specific and indeterminate; or if we substitute for the latter the word “obligation” and omit the word “specific” as unnecessary when not opposed to “indeterminate,” these classes may according to the view of Islamic lawyers, be described as thing and obligation.
It is a general principle of the Islamic Law of sale that credit cannot be opposed to credit, namely that both the things exchanged cannot be allowed to remain on the responsibility of the parties. Hence it is only with regard to one of them that any stipulation for delay in delivery is lawful. Price admits of being left on responsibility, and accordingly a stipulation for delay in the payment of the price is quite lawful and valid. It follows that a stipulation for delay in the delivery of the things sold cannot be lawful. And this is the case, with the exception of a particular kind of sale, hereafter to be noticed, in which the things to be sold is always indeterminate, and the price is made in advance. It may, therefore, be said of all specific things when it is a subject of sale, that a stipulation for delay in their delivery is illegal, and would invalidate a sale. The object of this rule may have been to prevent any change of the thing sold before delivery, and the disputes which may in consequence arise between the parties.
There is kind of sale known as salam in the Islamic Law. This word literally means an “advance”; and in a salam sale the price is immediately advanced for the goods to be delivered at a future fixed time. It is only things of the class of similars that can be sold in this way, and as they most necessarily be indeterminate, the proper subject of sale is an obligation, while, on the other hand, as the price must be actually paid or delivered at the time of the contract, before the separation of the parties, and must, therefore, even in the case of its being money, be produced, and in consequence be particularized or specified; a salam sale is strictly and properly the sale of an obligation for a thing, as defined before. Until actual payment or delivery of the price, however, it retains its character of an obligation, and for this reason the price and the goods are both termed “debts,” and are adduced as examples of the principles that the sale of a debt, i.e. of the money or goods which a person is under engagement to pay or deliver before possession, is invalid.
There is another transaction which comes within the definition of sale; it is that which is called qard in Arabic and “loan” in English. The borrower acquires an absolute right of property in the things lent; and comes under an engagement to return an equal quantity of things of the same kind. The transaction is, therefore, necessarily limited to similars, whether of weight, capacity, or tale, and the things lent and repaid being of the same kind, the two rules mentioned for the prevention of riba or usury must be strictly observed. Hence it follows that any stipulation on the part of the borrower for delay or forbearance by the lender, or any stipulation by the latter for interest to be paid by the former are alike unlawful.
Notwithstanding the stringency of the rules for preventing usury, or the taking of any interest on the loan of money, methods were found for evading them, while still keeping within the letter of the law. It had always been considered lawful to take a pledge to secure the repayment of a debt. Pledges were ordinarily of movable property; when given as security for a debt, and the pledge happened to perish in the hands of the pawnee, the debt was held to be released to the extent of the value of the pledge. Land, though scarcely liable to this incident, was sometimes made the subject of pledge, and devices were adopted for enabling the lender to devices were adopted for enabling the lender to derive some advantage from its possessions while in the state of pledge. If repayments were made at the assigned term, the lender was obliged to recovery; but if not, the property would remain his own, and the difference between its value and the price of sum lent might have been made an ample compensation for the loss of interest. This form of sale which is called bay-ulwafa’i, in Arabic, a term given to a sale of something that may be reconveyed by the seller on repayment at a fixed period of the price or sum given. This form of sale seems to be strictly legal according to the most approved authorities, though held to be what the law calls abominable, as a device for obtaining what it prohibits.
In constituting sale, there is no material difference between the Islamic and other system of law. The offer and acceptance which are expressed or implied in all cases, must be so connected as to obviate any doubt in one being intended to apply to the other. For this purpose, the Islamic Law requires that both shall be interchanged at the same meeting of the parties, and that no other business shall be suffered to intervene between an offer and its acceptance. A very slight interruption is sufficient to break the continuity of a negotiation, and to terminate the meeting in a technical sense, though the parties should still remain in personal communication. An acceptance after the interruption of an offer made before it would be insufficient to constitute a sale.
As personal communication may be inconvenient in some cases, and impossible in other, the integrity of the meeting is held to be sufficiently preserved when a party who receives an offer by message or letter declares his acceptance of it on receiving the communication and apprehending its contents.
When a sale is lawfully contracted, the property of the things exchanged passes immediately from and to the parties respectively.
In a legal sense, delivery and possession are not necessary for this purpose. Until possession is taken, however, the purchaser is not liable for accidental loss, and the seller has a lien for the price on the thing sold. Delivery by one party is in general tantamount to possession taken by the other. It is, therefore, sometimes of great importance to ascertain when there is a sufficient delivery; and many cases real or imaginary, on the subject, are inserted in the books of detailed theology () . It sometimes happens that a person purchases a thing of which he is already in possession, and it then becomes important to determine in what cases his previous possession is convertible into a possession under the purchase. Unless so converted, it would be held that there is no delivery under the sale, and the seller would of course retain his lien and remain liable for accidental loss.
Though possession is not necessary to complete the transfer of property under a legal sale, the case is different where the contract is illegal; for here property does not pass till possession is taken. The sale, however, though so far effectual, is still invalid, and liable to be set aside by a judge, at the instance to the fact of the person complaining being able to come before him with what in legal phraseology is termed “clean hands.” A Muslim judge is obliged by his law to interfere for the sake of the law itself, or, as it is more solemnly termed, for the right of God, which is the duty of the judge to vindicate, though by so doing he may afford assistance to a party who personally may have no just claim to his interference.
Relating to Trade and Usury
“They (the unbelievers) say that trading is just like usury, (tell them that) God allows trade and forbids usury.”
“God does not bless usury but He blesses charity and makes it fruitful.”
“When ye contract a debt for a fixed time record it in writing; let a scribe record it between you (two parties) in term of equity. But if a debtor is a minor, weak (in brain) or unable to dictates, call two men to witness; if not, one man and two women …. Do not be averse in writing the contract whether small or great and record the term.”
“If a debtor is in a strained condition, postpone claim for payment until he finds it easy pay back the debt, or, better still, if you can remit the debt as almsgiving.”
(This in case of extreme poverty and inability on the part of a debtor who instead of persecution and imprisonment deserves sympathy and help).
“If ye are on journey and cannot find a scribe a pledge with possession may serve the purpose and if one of you deposits a thing on trust with another; let the trustee faithfully discharge his trust.”
“When measuring, make the measure perfect and weigh with a right balance.”
“Keep up the balance with equity and never make the measure deficient.”
“Woe to the defrauders who when they take they demand in full measure, but when they give they measure less.”
) ) “Sahihu Muslim,” Chapter on “Riba” (usury).