Question :

A small trader works with a big trader in car business. The latter deals with the former according to the following mechanism: The small trader is given the right to sell a certain car within a period of one month in return for a thousand JDs given to the big trader as guarantee against any future loss resulting from this transaction. The small trader tries to sell that car within that period, and whatever profit he manages to make is his. If he makes no profit, he gets nothing, and when that car is sold for less than a thousand from its market price, he loses the thousand, which he had already paid. In addition, the big trader, so as to bear no loss, has the right to sell the car immediately in case its market price drops. If the month ends, the car is either sold for its market price, or the small trader pays another thousand to extend that deal for another month, and the car remains at the big trader`s dealership where he takes care of it in return for fifty JDs. What is the ruling of Sharia on this?

The Answer :

Praise be to Allah, the Lord of the Worlds.

The above transaction doesn`t have one specific legal framing. Rather, it goes in between the following transactions: Non-refundable deposit sale, brokerage, Ji`alah (Conditional payment), and loan. However, it doesn`t meet all the conditions of any.

A careful examination of this transaction shows that it involves uncertainty and gambling as the small trader isn`t sure whether he will collect his thousand JDs or not. Reserving the right to the big trader to sell that car, in case he felt that its market value will drop, and burdening the small trader with paying the difference is what makes this transaction involve risk and gambling for him.

In conclusion, the above transaction is prohibited because it violates the teachings of Sharia. And Allah knows best.