{"id":34466,"date":"2024-12-18T10:24:00","date_gmt":"2024-12-18T10:24:00","guid":{"rendered":"http:\/\/daruliftabirmingham.co.uk\/home\/?p=34466"},"modified":"2025-01-01T14:49:45","modified_gmt":"2025-01-01T14:49:45","slug":"dropping-and-jualah","status":"publish","type":"post","link":"http:\/\/daruliftabirmingham.co.uk\/home\/dropping-and-jualah\/","title":{"rendered":"Dropshipping and Ju’alah"},"content":{"rendered":"

Fatwa ID: 07795<\/strong><\/span><\/p>\n

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Answered by: Maulana Yusuf Badshah<\/strong><\/span><\/p>\n

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Question:<\/strong><\/span><\/p>\n

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I did a lot of research on dropshipping. The only suitable option I found is doing it through Ju’ala. I’ve read about it from Sheikh ibn ‘Uthaymeen. I have a specific question as all I could find on the internet was general information.<\/span>
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Is it halal to do white-label dropshipping or common dropshipping this way?<\/span>
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Make a contract with a supplier saying:<\/span><\/p>\n


\n<\/span>I’m working only as an agency that does the marketing and selling part.<\/span>
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I’ll handle the chargebacks and refunds.<\/span>
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Every time I make a sale, I get the money in the bank account. I pay the supplier their part, and I keep the rest as a commission.<\/span>
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My website says:<\/span>
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I’m the agency that does the marketing and selling part on behalf of the supplier.<\/span>
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Specific information about the product and delivery.<\/span>
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I believe the contentious part about this is that they are not directly paying me commission. I receive the money, and I give them their part. But they are informed about this, and they agreed to this. Is this problematic?<\/span><\/p>\n

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In the name of Allah, the Most Gracious, the Most Merciful.<\/b><\/span><\/p>\n

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Answer:<\/b><\/span><\/p>\n

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First know that Ju\u2019alah is not permitted in Hanafi Fiqh. Defined as an arrangement where the contractor offers a reward or bounty for the completion of a task in an unspecified time, there is no reason why Ju\u2019alah should be exempt from any of the rules and conditions that apply to every other financial transaction.<\/span><\/p>\n

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In Ju\u2019alah, the one who will accomplish the task is unknown, when they will receive their reward is unknown, whether or not it will be completed at all is unknown, those who permit it claim even the reward itself doesn\u2019t have to be specified, and as the arrangement is unilaterally decided by the issuer with no specified recipient, they are free to change the terms of the arrangement whenever they wish until the task is completed, without informing those seeking to fulfil the contract. It is this Gharar which makes the transaction fundamentally unfair and thus impermissible in Islam [1].<\/span><\/p>\n

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In addition, the narrations used to suggest the permissibility of Ju\u2019alah only indicate towards compensation being paid after hiring for a task or gifts being granted as a reward after the completion of a task, not a binding reward offered before the completion of a task [2]. Thus, such an arrangement can only be seen as the offer of a future gift or transaction and is not valid as a binding contract.<\/span><\/p>\n

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But even if Ju\u2019alah were permitted, in what way does the arrangement you have mentioned resemble Ju\u2019alah? It is not the supplier who chooses the reward, it is you. It is not the supplier who pays for the reward, it is the buyer. It is not the supplier who gives you the reward, you take it yourself. And nowhere in your contract does the supplier stipulate any sort of task for which you are being rewarded. There is a significant difference between the supplier offering you a reward for completing a task, and you rewarding yourself from the supplier\u2019s profits for the completion of a task unbeknownst to them.<\/span><\/p>\n

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Yet beyond all this, even if this transaction were Ju\u2019alah and Ju\u2019alah were permitted, the basic flaws with drop shipping have still not been solved. You still don\u2019t take possession of the item. Without possession you don\u2019t have complete ownership and are thus selling that which you do not own [3].<\/span><\/p>\n

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What you are essentially suggesting is that the manufacturer will offer you an unknown reward from the profits in exchange for you finding a buyer at an unspecified time in the future, although there is nothing in the contract to make the supplier aware they are entering into a Ju\u2019alah contract or why they are rewarding you. You will then find a buyer and, acting as an agent or hired hand on behalf of the supplier, secure their purchase at an amount not agreed upon by the supplier. You will then reward yourself with a portion of the supplier\u2019s profits in an amount unknown to them, before returning to them the agreed-upon wholesale price on the buyer\u2019s behalf yet fulfilling the transaction at a price lower than that agreed upon and paid for by the buyer, and finally shipping the item from the supplier to the buyer without ever possessing the item yourself.<\/span><\/p>\n

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Considering the delay between payment and delivery of the item and the possibility that the item may have not been produced yet at when you receive the payment from the buyer, this transaction would therefore need to be performed as a Bay\u2019 As-Salam, which itself has multiple conditions that must be fulfilled. Namely, the item you are selling must be generic and mass-produced such that it can be exactly specified in terms of type, properties and quantity at the point of sale leaving no room for ambiguity, payment must be made in full without instalments or deferred payment, the date and location of delivery of the product must be specified and agreed upon, and the product itself cannot be from those items in which delayed transactions are impermissible such as silver or gold [4].<\/span><\/p>\n

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But most importantly, in Bay\u2019 As-Salam the money received cannot be spent or distributed between multiple owners until the product has been delivered, lest the supplier fail to deliver the product as specified and refunds are required. This already raises an issue, since your model requires that you divide the money paid by the buyer between you and the supplier before the product is delivered, and you have no control over how the supplier will utilise that money prior to the fulfilment of the delivery [5].<\/span><\/p>\n

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Now given the above, your attempt to act as an agent so as to circumvent the need for taking possession does not hold. You claim to be an agent of the supplier, yet your contract is not specific as to what capacity you are being made agent. Namely, it does not state that you are to be tasked with selling the product to any potential buyer at a price of your choosing.<\/span> The price offered by you to the buyer does not match the price offered by the supplier to you, and the profit you make is not agreed upon by the supplier. But above all, it is not permissible for one to act as an agent in taking possession of the payment in Bay\u2019 As-Salam, since in collecting the payment the responsibility to hand over the product falls on him [6]. Thus, even as an agent, you would be deemed the primary seller in this transaction, and therefore your possession of the product would still be required for the transaction to be valid.<\/span><\/span><\/p>\n

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It would also be incorrect to suggest that you are acting as a hired hand on behalf of the supplier since hiring would not be permissible for an unspecified period of time or for an irregularly paid wage [7].<\/span><\/p>\n

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Thus, none of this suffices in combining the two transactions into one. There is a clear gap between the supplier and your selling price. The supplier\u2019s selling price is different from the buyer\u2019s purchasing price. The supplier\u2019s offer never reaches the buyer, and the buyer ends up agreeing to an offer the supplier didn\u2019t offer. Rather you pay the supplier\u2019s offer, and the buyer agrees to your offer. Thus, you are still purchasing the product from the supplier, and you are still selling it to the buyer, regardless of whether you deem yourself an agent or hired hand in the process. Both transactions are performed by you, and thus your ownership remains a condition [8].<\/span><\/p>\n

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Given these are two separate transactions, the problem then arises that the transaction of Ju\u2019alah has been predicated upon you undertaking the underlying agency arrangement, which has itself been predicated upon your purchase of the product from the supplier. Similarly, the buyer\u2019s purchase from you is also predicated on your purchase from the supplier. One transaction cannot be predicated upon you undertaking another [9].<\/span><\/p>\n

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Handling the chargebacks and refunds, even if from your own finances, does not remove the problematic absence of ownership, it only seeks to treat some of its symptoms. The transaction remains open to exploitation due to your lack of control over the product and inability to guarantee its properties or quality when advertising the product and making the sale.<\/span><\/p>\n

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To summarise:<\/span><\/p>\n