Fatwa ID: 07382

 

Answered by: Alimah Saleha Bukhari Islam

 

Question:

 

A person I know is involved in a business where it’s like drop shipping but it follows this criteria. He sells products through his website where people place the order thinking he has stock, he then would reach out to his supplier and purchase from the supplier and then send the item to the customer. He’s asking if this is like drop shipping also asking if this is not allowed what should he do with the wealth he accumulated, if this is allowed can he continue working like this? The brother has made quite a bit doing this, and this money is now supporting his parents house, his car payments, his tuition and bills.

 

 

In the name of Allah, the Most Gracious, the Most Merciful

 

Answer:

 

Ordinarily, the conditions of a valid retail transaction are that the product must be in the ownership of the seller so that he can sell directly from himself (and not a third party). ¹ [Fatawa Hindiyah, Vol 3, Pg 3]

 

Drop shipping is when goods are provided by direct delivery from the manufacturer to the retailer or customer, upon agreement of a sale. The seller does not have possession of the product and the product does not exist when the contract for purchase is being agreed upon.

 

This poses a problem Islamically since it is a condition for the seller to have the commodity in their possession when the sale is agreed upon and the commodity must already be in existence. Ownership alone is not enough, rather the commodity is required to be in the possession of the seller.

 

However, there is an exception to this known as Bai’ As-Salam which Prophet Muhammad ﷺ permitted, subject to certain conditions to meet the needs of farmers wanting to sell their crops in advance. ² As-Salam is therefore a contract by which ownership is established through paying the price early and the product paid for is delivered later. ³ [Fatawa Hindiyah, Vol 3, Pg 178]

 

Bai’ As-Salam has the following conditions:

 

1. It is necessary for the validity of Salam that the buyer pays the price in full to the seller at the time of effecting the sale. If the price is not paid to him in full, the basic purpose of the transaction will be defeated.
2. Salam can be affected in those commodities only whose quality and quantity can be specified exactly.
3. Salam cannot be affected on a particular commodity or on a product of a particular field or farm. It is necessary that the quality of the commodity (intended to be purchased through Salam) be fully specified leaving no ambiguity that may lead to dispute. All the possible details in this respect must be expressly mentioned.
4. It is necessary that the quality of the commodity is fully specified leaving no ambiguity which may lead to a dispute. All details must be expressly mentioned.
5. It is also necessary that the quantity of the commodity be agreed upon in clear terms. If the commodity is quantified in weights according to the usage of its traders, its weight must be determined, and if it’s quantified through measures, its exact measure should be known. What is normally weighed cannot be specified in measures and vice versa.
6. The exact date and place of delivery must be specified in the contract.
7. Salam cannot be affected in respect of those goods that must be delivered on the spot. For example, if gold is purchased in exchange of silver, it is necessary, according to Shariah, that the delivery of both be simultaneous. Similarly, if wheat is bartered for barley, the simultaneous delivery of both is necessary for the validity of sale, thus a Salam contract would not be allowed. ⁴

 

Additionally, there are certain other conditions, which have been a point of discussion between the different schools of the Islamic jurisprudence. Some of these conditions are discussed below:

 

1. It is necessary, according to the Hanafi school, that the commodity (for which Salam is affected) remains available in the market right from the day of contract up to the date of delivery. Therefore, if a commodity is not available in the market at the time of the contract, Salam cannot be affected in respect of that commodity, even though it is expected it will be available in the markets at the date of the delivery. However, all the other three schools of Fiqh (i.e. Shafi’i, Maliki, and Hanbali) are of the view that the availability of the commodity at the time of the contract is not a condition for the validity of Salam. What is necessary, according to them, is that it should be available at the time of delivery, only. This latter view can be acted upon in the present circumstances.
2. It is necessary, according to the Hanafi and Hanbali schools that the time of delivery is, at least, one month from the date of agreement. If the time of delivery is fixed earlier than one month, Salam is not valid. Their argument is that Salam has been allowed for the needs of small farmers and traders, therefore, they should be given enough opportunity to acquire the commodity, and they may not be able to supply the commodity before one month. Moreover, the price in Salam is normally lower than the price of spot sales. This concession in the price may be justified only when the commodities are delivered after a period that has a reasonable bearing on the prices. A period of less than one month does not normally affect the prices. Therefore, the minimum time of delivery should not be less than one month. ⁵

 

If the above conditions relating to Bai’ As-Salam are met by the person in his business, then the transactions will be considered permissible. We advise him to model his business on Bai’ As-Salam to keep it halal.

 

 

Only Allah (عز و جل) knows best.

Written by Alimah Saleha Bukhari Islam

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

 

 

 

 

 

1 أن يكون ملك البائع فيما يبيعه لنفسه

 

2 An Introduction to Islamic Finance, p 185-187 (Maktaba Ma’ariful Quran, Karachi)

 

3 أَمَّا تَفْسِيرُهُ فَالسَّلَمُ عَقْدٌ يَثْبُتُ بِهِ الْمِلْكُ فِي الثَّمَنِ عَاجِلًا وَفِي الْمُثَمَّنِ آجِلًا.

ص178 – كتاب الفتاوى العالمكيرية الفتاوى الهندية – الباب الثامن عشر في السلم وفيه ستة فصول – المكتبة الشاملة

 

4 An Introduction to Islamic Finance, p187-189 (Maktaba Ma’ariful Quran, Karachi)

 

 

5 An Introduction to Islamic Finance, p189-191 (Maktaba Ma’ariful Quran, Karachi)