Fatwa ID: 07804
Answered by: Maulana Yusuf Badshah
Question:
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.
Is it halal to do white-label dropshipping or common dropshipping this way?
Make a contract with a supplier saying:
I’m working only as an agency that does the marketing and selling part.
I’ll handle the chargebacks and refunds.
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.
My website says:
I’m the agency that does the marketing and selling part on behalf of the supplier.
Specific information about the product and delivery.
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?
In the name of Allah, the Most Gracious, the Most Merciful.
Answer:
First know that Ju’alah 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’alah should be exempt from any of the rules and conditions that apply to every other financial transaction.
In Ju’alah, 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’t 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].
In addition, the narrations used to suggest the permissibility of Ju’alah 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.
But even if Ju’alah were permitted, in what way does the arrangement you have mentioned resemble Ju’alah? 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’s profits for the completion of a task unbeknownst to them.
Yet beyond all this, even if this transaction were Ju’alah and Ju’alah were permitted, the basic flaws with drop shipping have still not been solved. You still don’t take possession of the item. Without possession you don’t have complete ownership and are thus selling that which you do not own [3].
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’alah 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’s profits in an amount unknown to them, before returning to them the agreed-upon wholesale price on the buyer’s 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.
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’ 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].
But most importantly, in Bay’ 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].
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. 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’ 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.
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].
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’s selling price is different from the buyer’s purchasing price. The supplier’s offer never reaches the buyer, and the buyer ends up agreeing to an offer the supplier didn’t offer. Rather you pay the supplier’s 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].
Given these are two separate transactions, the problem then arises that the transaction of Ju’alah 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’s purchase from you is also predicated on your purchase from the supplier. One transaction cannot be predicated upon you undertaking another [9].
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.
To summarise:
- Ju’alah is impermissible in Hanafi Fiqh due to the excessive amount of uncertainty.
- Your suggested model does not take the form of a Ju’alah transaction given the lack of involvement of the supplier, and so does not permit you to reward yourself from the supplier’s profits as you will.
- Your transaction would have to fulfil the conditions of Bay’ As-Salam given your lack of possession of the product at the point of sale, yet this requires the transaction money to remain intact under the sole ownership of the seller until the delivery of the product.
- You cannot act as an agent in Bay’ As-Salam, nor is your contract clear enough in what capacity you would be acting as an agent.
- You are not under a secure enough contract to be deemed a hired hand.
- The two transactions cannot be deemed one given the invalidity of your agency and the supplier’s lack of involvement in your selling price, and thus your possession of the item is required to establish your ownership, since otherwise you would be selling to the buyer that which you do not own.
- Finally, one transaction cannot be predicated upon another, yet many of the transactions involved are predicated upon your purchase of the product from the supplier.
- Handling the chargebacks and refunds does not mean your possession and ownership is no longer required, nor does it rectify all of the issues that result from your lack of possession.
Ju’alah is not a free pass to circumvent any inconvenient restrictions set by the Shari’ah. It is those rules which prevent people from binding others in unfair contracts.
Either way, it is clear that there is no consensus amongst scholars as to whether a method exists by which drop shipping may be formed into a permissible transaction in its current state. Thus, we should endeavour to avoid any such matters in which there is doubt [10].
[1] Jami’ At-Tirmidhi 1230:
حَدَّثَنَا أَبُو كُرَيْبٍ، أَنْبَأَنَا أَبُو أُسَامَةَ، عَنْ عُبَيْدِ اللَّهِ بْنِ عُمَرَ، عَنْ أَبِي الزِّنَادِ، عَنِ الأَعْرَجِ، عَنْ أَبِي هُرَيْرَةَ، قَالَ نَهَى رَسُولُ اللَّهِ صلى الله عليه وسلم عَنْ بَيْعِ الْغَرَرِ وَبَيْعِ الْحَصَاةِ
Bada’ius Sana’i, vol. 5, pg. 163, Darul Kutubul Ilmiyyah:
«وَنَهَى رَسُولُ اللَّهِ ﷺ عَنْ بَيْعٍ فِيهِ غَرَرٌ» وَبَيَانُ تَمَكُّنِ الْغَرَرِ أَنَّ الْغَرَرَ هُوَ الْخَطَر
[2] Surah Yusuf 72:
{قَالُوا نَفْقِدُ صُوَاعَ الْمَلِكِ وَلِمَن جَاءَ بِهِ حِمْلُ بَعِيرٍ وَأَنَا بِهِ زَعِيمٌ}
Sahih Al-Bukhari 5736:
حَدَّثَنِي مُحَمَّدُ بْنُ بَشَّارٍ، حَدَّثَنَا غُنْدَرٌ، حَدَّثَنَا شُعْبَةُ، عَنْ أَبِي بِشْرٍ، عَنْ أَبِي الْمُتَوَكِّلِ، عَنْ أَبِي سَعِيدٍ الْخُدْرِيِّ ـ رضى الله عنه ـ أَنَّ نَاسًا مِنْ أَصْحَابِ النَّبِيِّ صلى الله عليه وسلم أَتَوْا عَلَى حَىٍّ مِنْ أَحْيَاءِ الْعَرَبِ فَلَمْ يَقْرُوهُمْ، فَبَيْنَمَا هُمْ كَذَلِكَ إِذْ لُدِغَ سَيِّدُ أُولَئِكَ فَقَالُوا هَلْ مَعَكُمْ مِنْ دَوَاءٍ أَوْ رَاقٍ فَقَالُوا إِنَّكُمْ لَمْ تَقْرُونَا، وَلاَ نَفْعَلُ حَتَّى تَجْعَلُوا لَنَا جُعْلاً. فَجَعَلُوا لَهُمْ قَطِيعًا مِنَ الشَّاءِ، فَجَعَلَ يَقْرَأُ بِأُمِّ الْقُرْآنِ، وَيَجْمَعُ بُزَاقَهُ، وَيَتْفِلُ، فَبَرَأَ، فَأَتَوْا بِالشَّاءِ، فَقَالُوا لاَ نَأْخُذُهُ حَتَّى نَسْأَلَ النَّبِيَّ صلى الله عليه وسلم فَسَأَلُوهُ فَضَحِكَ وَقَالَ “ وَمَا أَدْرَاكَ أَنَّهَا رُقْيَةٌ، خُذُوهَا، وَاضْرِبُوا لِي بِسَهْمٍ ”.
Musannaf Ibn Abi Shaybah 21939:
حَدَّثَنَا أَبُو بَكْرٍ قَالَ: حَدَّثَنَا وَكِيعٌ، عَنْ سُفْيَانَ، عَنْ عَبْدِ اللَّهِ بْنِ رَبَاحٍ، عَنْ أَبِي عَمْرٍو الشَّيْبَانِيِّ، أَنَّ رَجُلًا أَصَابَ عَبْدًا آبِقًا بِعَيْنِ التَّمْرِ، فَجَاءَ بِهِ «فَجَعَلَ ابْنُ مَسْعُودٍ فِيهِ أَرْبَعِينَ دِرْهَمًا»
Musannaf Ibn Abi Shaybah 21940:
حَدَّثَنَا أَيُّوبُ، قَالَ: حَدَّثَنَا يَزِيدُ بْنُ هَارُونَ، عَنْ حَجَّاجٍ، عَنْ عَمْرِو بْنِ شُعَيْبٍ، عَنْ سَعِيدِ بْنِ الْمُسَيِّبِ، أَنَّ عُمَرَ «جَعَلَ فِي جُعْلِ الْآبِقِ دِينَارًا أَوِ اثْنَيْ عَشَرَ دِرْهَمًا»
[3] Jami’ At-Tirmidhi 1232:
حَدَّثَنَا قُتَيْبَةُ، حَدَّثَنَا هُشَيْمٌ، عَنْ أَبِي بِشْرٍ، عَنْ يُوسُفَ بْنِ مَاهَكَ، عَنْ حَكِيمِ بْنِ حِزَامٍ، قَالَ أَتَيْتُ رَسُولَ اللَّهِ صلى الله عليه وسلم فَقُلْتُ يَأْتِينِي الرَّجُلُ يَسْأَلُنِي مِنَ الْبَيْعِ مَا لَيْسَ عِنْدِي أَبْتَاعُ لَهُ مِنَ السُّوقِ ثُمَّ أَبِيعُهُ قَالَ “ لاَ تَبِعْ مَا لَيْسَ عِنْدَكَ ”
[4] Lubab, vol. 2, pg. 43-44, Maktabah Ilmiyyah Beirut:
ولا يصح السلم عند أبي حنيفة إلا بسبع شرائط تذكر في العقد: جنسٍ معلومٍ، ونوعٍ معلومٍ، وصفةٍ معلومةٍ، ومقدارٍ معلومٍ، وأجلٍ معلومٍ، ومعرفة مقدار رأس المال إذا كان مما يتعلق العقد على قدره، كالمكيل والموزون والمعدود، وتسمية المكان الذي يوافيه فيه إذا كان له حملٌ ومؤنةٌ
Lubab, vol. 2, pg. 44, Maktabah Ilmiyyah Beirut:
ولا يصح السلم حتى يقبض رأس المال قبل أن يفارقه
Lubab, vol. 2, pg. 47, Maktabah Ilmiyyah Beirut:
فإن باع فضة بفضةٍ أو ذهباً بذهبٍ لم يجز إلا مثلاً بمثلٍ وإن اختلفا في الجودة والصياغة، ولابد من قبض العوضين قبل الافتراق
[5] Lubab, vol. 2, pg. 44-45, Maktabah Ilmiyyah Beirut:
ولا يجوز التصرف في رأس المال ولا في المسلم فيه قبل قبضه، ولا تجوز الشركة ولا التولية في المسلم فيه قبل قبضه
[6] Raddul Muhtar, vol. 5, pg. 517, Darul Fikr:
وَأَمَّا فِي السَّلَمِ فَإِنَّهُ يَجُوزُ بِدَفْعِ رَأْسِ الْمَالِ فَقَطْ، وَأَمَّا مَا يَأْخُذُهُ فَلَا يَجُوزُ؛ لِأَنَّ الْوَكِيلَ إذَا قَبَضَ رَأْسَ الْمَالِ يَبْقَى الْمُسْلَمُ فِيهِ فِي ذِمَّتِهِ وَهُوَ مَبِيعٌ وَرَأْسُ الْمَالِ ثَمَنُهُ، وَلَا يَجُوزُ أَنْ يَبِيعَ الْإِنْسَانُ مَالَهُ بِشَرْطِ أَنْ يَكُونَ الثَّمَنُ لِغَيْرِهِ كَمَا فِي بَيْعِ الْعَيْنِ
[7] Raddul Muhtar, vol. 6, pg. 5, Darul Fikr:
وَشَرْطُهَا كَوْنُ الْأُجْرَةِ وَالْمَنْفَعَةِ مَعْلُومَتَيْنِ؛ لِأَنَّ جَهَالَتَهُمَا تُفْضِي إلَى الْمُنَازَعَةِ
Raddul Muhtar, vol. 6, pg. 69, Darul Fikr:
(وَالثَّانِي) وَهُوَ الْأَجِيرُ (الْخَاصُّ) وَيُسَمَّى أَجِيرَ وَحْدٍ (وَهُوَ مَنْ يَعْمَلُ لِوَاحِدٍ عَمَلًا مُؤَقَّتًا بِالتَّخْصِيصِ وَيَسْتَحِقُّ الْأَجْرَ بِتَسْلِيمِ نَفْسِهِ فِي الْمُدَّةِ وَإِنْ لَمْ يَعْمَلْ)
[8] Raddul Muhtar, vol. 4, pg. 504, Darul Fikr:
(وَيَكُونُ بِقَوْلٍ أَوْ فِعْلٍ، أَمَّا الْقَوْلُ فَالْإِيجَابُ وَالْقَبُولُ) وَهُمَا رُكْنُهُ
[9] Jami’ At-Tirmidhi 1231:
حَدَّثَنَا هَنَّادٌ، حَدَّثَنَا عَبْدَةُ بْنُ سُلَيْمَانَ، عَنْ مُحَمَّدِ بْنِ عَمْرٍو، عَنْ أَبِي سَلَمَةَ، عَنْ أَبِي هُرَيْرَةَ، قَالَ نَهَى رَسُولُ اللَّهِ صلى الله عليه وسلم عَنْ بَيْعَتَيْنِ فِي بَيْعَةٍ
Sunan Abi Dawud 3461:
حَدَّثَنَا أَبُو بَكْرِ بْنُ أَبِي شَيْبَةَ، عَنْ يَحْيَى بْنِ زَكَرِيَّا، عَنْ مُحَمَّدِ بْنِ عَمْرٍو، عَنْ أَبِي سَلَمَةَ، عَنْ أَبِي هُرَيْرَةَ، قَالَ قَالَ النَّبِيُّ صلى الله عليه وسلم “ مَنْ بَاعَ بَيْعَتَيْنِ فِي بَيْعَةٍ فَلَهُ أَوْكَسُهُمَا أَوِ الرِّبَا ”
[10] Jami’ At-Tirmidhi 2518:
حَدَّثَنَا أَبُو مُوسَى الأَنْصَارِيُّ، حَدَّثَنَا عَبْدُ اللَّهِ بْنُ إِدْرِيسَ، حَدَّثَنَا شُعْبَةُ، عَنْ بُرَيْدِ بْنِ أَبِي مَرْيَمَ، عَنْ أَبِي الْحَوْرَاءِ السَّعْدِيِّ، قَالَ قُلْتُ لِلْحَسَنِ بْنِ عَلِيٍّ مَا حَفِظْتَ مِنْ رَسُولِ اللَّهِ صلى الله عليه وسلم قَالَ حَفِظْتُ مِنْ رَسُولِ اللَّهِ صلى الله عليه وسلم “ دَعْ مَا يَرِيبُكَ إِلَى مَا لاَ يَرِيبُكَ فَإِنَّ الصِّدْقَ طُمَأْنِينَةٌ وَإِنَّ الْكَذِبَ رِيبَةٌ ”
And only Allah knows best.
Written by Maulana Yusuf Badshah
Checked and approved by Mufti Tosir Miah
Darul Ifta Birmingham
