Resolution No.(102) by the Board of Iftaa`, Research and Islamic Studies: "Ruling of Sharia on some Dealings of the American Stores Company"
Date: 5/4/1427 A.H, corresponding to 3/5/2006 A.D
We have received the following question:
What is the ruling of Sharia concerning the dealings of the American Stores Company (ASC)?
The Company`s dealings are as follows:
The Company may take part in an auction and during the bidding process it may be offered a sum of money in return for withdrawing. Is accepting that offer and taking that money lawful or unlawful?
Moreover, the Company concludes joint indemnity and investment contracts whereby an agreed upon condition sets a certain amount of indemnity e.g. 20% from the overall sales, with a certain minimum stipulated in the contract. Is conditioning a minimum in these contracts lawful or unlawful?
Also, the Company deals with non-Islamic banks, but is currently dealing with the Jordan Islamic Bank. Is dealing with the latter bank through Islamic Murabaha lawful, taking into consideration that, in essence, the dealing is similar to that carried out with non-Islamic banks?
Would you kindly clarify the position of Sharia on the above so as to adhere to its provisions when dealing with the Islamic banks?
The Board is of the following view:
1- It is forbidden to offer or take any sum in return for withdrawing from a bid because this leads to defrauding people`s goods. Allah, The Almighty, Said (What means): "So give full measure and weight and do not defraud people’s goods." {Al-A`araf/85}. Also, the Prophet (PBUH) said: "There should be neither harming nor reciprocating harm." {Ibn Majah}.
2- Having reviewed a sample of the above contracts which the Company concluded with other parties, the Board realized that they don`t adhere to the provisions of Sharia in the following aspects:
The juristic framing of these contracts is that they are Ijarah (Hiring) contracts because one of the parties offers a specific place to the other party in return for a certain wage. What counts in these contracts is their implied meaning, not their phrases and structures.
The wage in an Ijarah contract should be specified, because the Prophet (PBUH) said: "Whoever employs a person should inform him of his wage." In these contracts the wage is not specified. It is either: e.g. 20% from the overall sales or a certain defined sum, and the higher is collected by the company.
Defining the wage as 20% from the overall sales makes it unspecific because both parties are unaware of what will be sold, and this annuls the contract because it becomes an aleatory contract. The Prophet (PBUH) has forbidden aleatory sale. He said: "If anyone makes two transactions combined in one bargain, he should have the lesser of the two or it will involve usury." {Sunan Abu-Dawud}.
In conclusion, dealing with the Jordan Islamic Bank through Islamic Murabaha is lawful so long as the Bank complies with its conditions stipulated in Sharia.
A key condition is that the Bank must purchase the commodity upon the purchaser`s request, collect it, possess it, guarantee it, then sell it to the purchaser because the Prophet (PBUH) told Hakeem Bin Hazim: "If you purchase food, don`t sell it until you collect and take possession of it." {Musnad Ahmad}. And Allah Knows Best.
* Murabaha means selling an object while informing the purchaser of its original price and the profit he is getting in this deal. The conditions of the validity of this sale/transaction are the same as the other sales/transactions, i.e. the sold item itself should be lawful, pure, useful, in the possession of seller, and the seller should be able to hand it over to the purchaser.
Chairman of the Iftaa` Board, Chief Justice, Izzuldeen Attamimi
Dr. Yousef Ghyzan/ Member
Dr. Abdulmajeed Assalaheen/ Member
Sheikh Sa`eid Hijjawi/ Member
Sheikh Abdulkareem Al-Khasawneh/ Member
Dr. Ahmad Hilayel/ Member
Sheikh Nae`im Mujahid/ Member
Dr. Wasif Al-Bakri