DurbahPurePaisaFull - Finance

Pure Paisa: Fiqh of Money and Transactions || Taught By: Shaykh Yaser Birjas || Qabeelat Durbah
:
Allah says,

To Him belongs what is in the heavens and what is on the earth and what is between them and what is
under the soil. [Ta-Ha 20:6]

And to Allah belongs the treasures of the heavens and the earth, but the hypocrites do not understand.
[Al-Munafiqoon 63:7]
Many people think that the wealth that they possess is theirs, while in reality it belongs to
Allah.
Believe in Allah and His Messenger and spend out of that in which He has made you successors
(trustees). For those who have believed among you and spent, there will be a great reward. [Al-Hadeed
57:7]
The money or wealth that you have is a trust that Allah has given you. One day you will have to
give it back and you will be asked about how you managed this trust.
Allah mentions many times in the Quraan that this money belongs to Him,
and give them from the wealth of Allah which He has given you [An-Noor 24:33]
We should understand that whatever we have in our pockets is our provision from Allah; our
rizq. Allah guaranteed 2 things for you; that you are not going to die missing any rizq that was
meant for you, nor any time that was decreed for you to live.
Whatever wealth that is left behind is not actually our rizq. It is the rizq of others distributed
to them by virtue of inheritance.
So all the wealth of this world belongs to Allah and He distributes it however He wills.

And Allah has favored some of you over others in provision. [An-Nahl 16:71]
He favors some over others but obligates them to give to the poor and spend in His cause.

and has raised some of you above others in degrees [of rank] that He may try you through what He
has given you. [Al-Anaam 6:165]
So those who are wealthier, they are being tested with this wealth. Those with more
intelligence are being tested with their intelligence. Even the ones who dont possess as much
are being tested; are they going to fight? Steal? Or will they all work together to bring about
good and virtue to the community?
So when Allah distributes His wealth this way, should we question or judge Allah?
Do they (have the right to) distribute the mercy of your Lord? It is We who have apportioned among
them their livelihood in the life of this world and have raised some of them above others in degrees [of
rank] that they may employ one another for service. [Az-Zukhruf 43:32]
Allah calls this wealth mercy because it is actually a mercy from Allah. Allah is the one who
distributes His mercy.
Imagine if everyone is wealthy and smart. Who will be working the lower wage jobs? What if
everyone is underprivileged? Who will work the leadership positions and try to bring about
prosperity and justice for the community? Allah raised some over others so we can assist and
employ the services of one another. One day you will be an employer and another you will be
an employee!
Whats for certain is that you will have to deal with others financially. The question is, how are
you preparing yourself to deal with that?
You are allowed to invest and do business and try to possess as much wealth as you want. But
you have to remember the share of the poor , an ordained and predetermined portion
or haqq (zakah).

And those within whose wealth is a known right. For the petitioner and the deprived [Al-Maaarij
70:25-26]
It belongs to them, it is their right. You dont have any favor upon them; they have one over you!
Allah commands us to go out and seek our provision and work for it. We wont get it by just sitting at
home and it is not going to rain gold and silver. But we have to seek the means of rizq through halal
sources. And Allah has given us so many sources of halaal income.
In addition to conventional sources like having a job, education, and training; there are other sources of
rizq that dont require a lot of toil and effort on your behalf. They are non-material ways to increase
your provision and bring about barakah from Allah in it. They include:
1. Taqwa and extra good deeds.

When you pray the night prayer, fast Mondays and Thursdays, give extra in charity,
you will indeed get reward in the hereafter for it. But what about in this dunya? Even in
dunya you will get extra provision:

And whoever fears Allah - He will make for him a way out And will provide for him from where
he does not expect. [At-Talaaq 65:2-3]
Allah will make an exit out for him from every hardship and provide for them from
sources they never expected. How many people got money or savings in ways they
never expected? Who made this possible? Did you deserve it?
2. Istighfar or saying ( seeking forgiveness)

When you seek Allahs forgiveness and mercy, He will provide you ample provision:

And said, 'Ask forgiveness of your Lord. Indeed, He is ever a Perpetual Forgiver. He will send
[rain from] the sky upon you in [continuing] showers. And give you increase in wealth and
children and provide for you gardens and provide for you rivers. [Nuh 71:10-12]
The prophet (pbuh) who had all his sins forgiven, used to make istighfar 70 times a day.
How about me and you, how many times do we do that?
3. Being thankful and grateful.
This is not just lip service; you have to really mean it.
And [remember] when your Lord proclaimed, 'If you are grateful, I will surely increase you [in
favor]; [Ibrahim 14:7]
Some people when you ask them how they are going. They say alHamdu lillaah, cant
complain. This in itself is a statement of complaint.
4. Get more by giving more
Giving in charity will bless your provision and grant you more.
But whatever thing you spend [in His cause] - He will compensate it; and He is the best of
providers." [Saba 34:39]
He is the best of providers. He will return it back to you multifold; 700 times plus without
measure.
All the above sources of income you dont have to claim on your tax returns. So have no fear or
hesitation in doing them and know that will only be able to claim it from Allah.
As for those who fail in their struggle to seek the halaal in this dunya, this could be due to
them succumbing to the pressures of this dunya and their attempt to satisfy their personal
dersires. Therefore they resort to haraam sources of income that end up affecting the halaal
sources. These haraam sources include:
1. Riba (usury)
It is called usury because people use and exploit other peoples needs. 1 dirham causes
cancer in the wealth and destroys it.

Allah destroys interest [Al-Baqarah 2:276]
2. Cheating
Woe to those who give less [than due] [Al-Mutaffifeen 83:1]
Woe is a word that indicates a warning or threat. Some scholars say that it is a valley in
jahannam. Cheating here is in the general sense; cheating in the scale, in selling, in
buying, etc.
3. Consuming the wealth of the orphan
Indeed, those who devour the property of orphans unjustly are only consuming into their
bellies fire. And they will be burned in a Blaze. [An-Nisa 4:10]
This happens especially when family members deprive others from their rightful inheritance
or deceive them so they can get more. Allah has promised them fire in their bellies and
punishment in jahannam.
All the above are very dangerous sources of income and we need to be very careful not to fall
into any of them.
Wealth belongs to Allah. He is the true owner of this wealth. What is your job then when you
receive this wealth? Allah made you a trustee over it to test you. He will demand that you seek
the halaal means and will demand that you support the needy with a portion (right) that is due
to them.
This is the essence of being a true Muslim; having taqwa of Allah and being considerate and
merciful with others.
All of us somehow or another deal with the world of transactions. Even if you are not a
businessman, you still have to learn about the proper rules that govern all these transactions.
If you have a credit card, you are already dealing with halaal and haraam transations.
Is it halaal for you to deal with a vending machine? Was there a verbal agreement between you
and the machine to conclude the sales transaction?
How did you fund your education?
Are you allowed to buy a house on mortgage?
Some people act on the sense of necessity on every single transaction. They would buy
anything in any way and would call it a necessity. They wont seek help or guidance in these
transactions until they are in trouble and are about to declare bankruptcy. Are you allowed
islaamically to declare bankruptcy?
Are you allowed to escape paying expensive hospital bills?
All of these and more are what we hope to cover in this course.
Introduction
Fun Fact: Do you know that most people buy things more than they need them? And you are
one of those people?
Welcome to Pure Paisa: Fiqh of Finance and Transactions.
What did you do to attend this class?
You registered and paid using:
Credit card
Cash
Scholarship
Gift card
VIP pass
IlmRush card
Money transfer
To whom did you pay your tuition?
The registration volunteer
PayPal account
AlMaghrib website
A friend or a family member
A phantom
Where did you get the money from?
Paycheck
Family member
Bank account
PayPal
Account Credit
What did you pay for?
The knowledge
The service
The convenience
The material
The experience
The Iman Rush moment
Was it measurable?
Your Daily Interaction with the World of Finances:
LOANS (CONTRACTS OF CHARITY)
An arrangement in which a lender gives money or property to a borrower, and the borrower
agrees to return the property or repay the money, usually along with interest, at some future
point(s) in time. Usually, there is a predetermined time for repaying a loan, and generally the
lender has to bear the risk that the borrower may not repay a loan.
Fun Fact: Loans fall under contracts of charity because they are supposed to help others in
their difficult times and not exploit their needs. The reward for this action is with Allah.
STUDENT LOANS
Subsidized:
A subsidized student loan is one in which the government actually pays the interest while a
student remains enrolled in a qualified college or university. This means that any interest that
would have been added to a subsidized loan balance is essentially erased by the government.
Unsubsidized:
An unsubsidized student loan has interest added to the balance even while a student is still
enrolled in school. This means that a students balance will likely be significantly more that
what they initially borrowed by the time they graduate.
Fact: According to the The Economist, in 2011 there was $757 million worth of outstanding
student public loans and over $112 billion in private loans. The total amount outstanding will
surpass $1 trillion in the not-so-distant future.
*Do you know that a Muslim is responsible to learn the fiqh of transactions as much as he or
she needs to practice them in real life? The more you trade, the more you need to study it.
HOME LOANS
Conventional Mortgage:
A loan to finance the purchase of real estate, usually with specified payment periods and
interest rates. The borrower (mortgagor) gives the lender (mortgagee) a lien on the property
as collateral for the loan. The mortgagors lien on the property expires when the mortgage is
paid off in full.
Rent to own:
The process of paying monthly rent for a piece of property (house, apartment, or condo) with
the option to eventually own it. This type of option is determined before initial rental period
begins. A portion or all the previous rental payments are applied to the total cost for the
property. Rent to own is commonly used with the purchase of homes.
BANK ELECTRONIC CARDS
Credit Cards
Average credit card debt per household with credit card debt: $15,956
Total U.S. revolving debt (98 percent of which is made of credit card debt): $801 billion, as of
December 2011.
Facts:
609.8 million credit cards held by U.S. consumers.
The average credit card holder has 3.5 credit cards.
The average age at which a U.S. consumer under the age of 35 first adopted a credit card is 20.8
years. (Source: creditcard.com)
Revolving Credit Card
An electronic card issued by a financial company giving the holder an option to borrow funds,
usually at point of sale. Credit cards charge interest and are primarily used for short-term
financing. Interest usually begins one month after a purchase is made and borrowing limits are
pre-set according to the individuals credit rating.
Charge Card
An electronic card that charges no interest but requires the user to pay his/her balance in full
upon receipt of the statement, usually on a monthly basis. While it is similar to a credit card,
the major benefit offered by a charge card is that it has much higher, often unlimited,
spending limits.
Debit Cards
An electronic card issued by a bank, which allows bank clients access to their account to
withdraw cash or pay for goods and services.
INVESTMENT AND BANKING (CONTRACTS OF INVESTMENT)

To use money in the hope of making more money.
And what is money?
Any money declared by a government to be legal tender.
401(K)
A qualified plan established by employers to which eligible employees may make salary
deferral (salary reduction) contributions on a post-tax and/or pre-tax basis. Employers
offering a 401(K) plan may make matching or non-elective contributions to the plan on behalf
of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on
a tax-deferred basis.
STOCK MARKET
The market in which shares are issued and traded either through exchanges or over-thecounter markets. Also known as the equity market, it is one of the most vital areas of a market
economy as it provides companies with access to capital and investors with a slice of
ownership in the company and the potential of gains based on the companys future
performance.
Fun Fact:
Did you know that Umar b. al-Khattab (radyAllahu anhu) intended to use camel skin in place
of gold and silver for legal tender? But it didnt work out. He gave up the idea out of fear of the
overconsumption of camels.
SAVINGS BANK ACCOUNT
A deposit account at a bank or savings and loan which pays interest but cannot be withdrawn
by check writing.
PARTNERSHIPS
A business organization in which two or more individuals manage and operate the business.
Both owners are equally and personally liable for the debts from the business.
al-Mudarabah (passive partnership)
Groupon
Timeshare
*Partnership is one of the most recommended acts of investment in Islamic Finance. The
principle is to maximize capital and keep circulating small capitals in the market.
SALE AND TRADE (CONTRACTS OF EXCHANGE)
An exchange of goods, services, or other property for money.
Online sales
On site auctions
eBay and online auctions
Money exchange When you travel overseas, you take currency with you and
exchange it so you can engage more easily in local transactions. In some countries,
when you have 100 dollar bill, this gives more local currency than a 20 dollar bill.
Check cashing Is such a business allowed to charge money for the service of cashing a
check?
Catalogue orders - When you buy a product from a product from a catalogue, was it
already available in stock? In many catalogues they are not; they do it based on order,
like furniture. Then you have to wait 6 weeks for delivery. So you basically purchased
something that did not exist, is this permissible?
Vending machines Does a vending machine qualify as a taajir/merchant? Do you talk

to it? Is this considered like where you give and take silently?
When you go to grocery story, you examine the merchandise and read the prices. If you
like something, you buy it. Does scanning and seeing the price constitute acceptance?
Do you need ijaab and qabool for each item scanned for purchase at the cash register?
What about when stores say when you touch something, you have to pay for it?
GAMES AND CHANCES (CONTRACTS OF EXCHANGE)
Lottery and scratch cards These constitute another form of gambling
Draw prizes
Priceline deals - Would you be paying for a tangible commodity or something

unidentifiable?
Raffle Are you allowed to buy a raffle ticket? What if it is for a charitable cause?
SMS games Text the answer to a puzzle to a certain phone number and you might win
a prize. Each message costs maybe $0.50. Is this allowed or is it another form of
gambling?
Gaming You go by a basketball hoop in a recreation park and start shooting. When
you score, you get tickets and you exchange tickets for a prize, is that permissible?
These are all transactions that you deal with in some way or another whether you like it or
not.
INSURANCE (CONTRACTS OF SECURITY)
A promise of compensation for specific potential future losses in exchange for periodic
payment. Insurance is designed to protect the financial well-being of an individual, company,
or other entity in the case of unexpected loss. Some forms of insurance are required by law,
while others are optional. Agreeing to the terms of an insurance policy creates a contract
between the insured and the insurer. In exchange for payments from the insured (called
premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of
a specific event. In most cases, the policy holder pays part of the loss (called the deductible),
and the insurer pays the rest.
Example of insurance contracts:
Health insurance This is a big problem nowadays, because many people cannot afford
their medical bills, can we apply rule of necessity?
Car insurance It is security, but it is based on chance. Do you get just the basic
liability? What if accident never happens, you will pay for 30 years for nothing!
Life insurance Do you really own human life? Are you allowed to trade it then? What
if your employer offers you a free policy, are you allowed to take it?
Home insurance
Warranties Can you buy an extended warranty? Is it offered by the vendor, the
manufacturer, or a third party?
Fun Fact: Health insurance companies paid $158,221,505 in 2011 just for lobbying in
Washington!
CONTRACTS OF
CHARITY/LOANS
Islamic principle money
cannot be used as
commodity to earn money
DIFFERENT FORMS/TYPES OF CONTRACT

CONTRACTS OF
CONTRACT OF EXCHANGE/
INVESTMENT/
SALE AND TRADE
INVESTMENT AND
BANKING
STUDENT LOANS
- subsidized
- unsubsidized
401K
- post
tax/pretax
- matching/no
nelective
- profit
sharing
(earnings of tax
deferred basis)
Home loans
Stock market
- conventiona
- exchange of
l mortgage
shares
- rent to own
- equity
market
Bank electronic
Saving bank account
cards
- interest
- credit cards
bearing deposit
account
- revolving
credit cards
- savings and
laon
- Charge card
-
Exchange goods for money

-online sales
- onsite auctions
-ebay /online auctions
-money exchange
-check cashing
-catalogue orders
-vending machines
Exchange services for
money
******** in transferring
ownership have to keep in
mind the laws of land
after selling your asset,
must sign and register with
state and release your
liablity
Debit cards
Partnerships
- al
mudarabah/pass
ive partnership
- groupon
-
Exchange property for

money
timeshare
GAMES AND CHANCES
-lottery
-draw prizes
-priceline auction deals
-raffle
-sms games
-gaming
CONTRACT
S OF
SECURITY/
INSURANCE
- Health
insurance
- car
insurance
- life
insurance
- home
insurance
- warranties
CHAPTER TWO
THE FINANCIAL ETHICS OF A MUSLIM INVESTOR
On the authority of Abu Hurairah who said, I heard the Messenger of Allah say: truly Allah is
pure and accepts only that which is pure. Allah has commanded the believers to do that which
he has commanded the messengers, for He, the Most High, said, O Messengers! Eat of the good
things and do right, for I am aware of what you do. (23:51) and He the Most High said, O you
who believe! Eat of the good things that We have provided for you. (2:172) then he ( the
prophet) mentioned a man who after a long journey is disheveled and covered in dust who
stretches his hands out towards the sky and says, O Lord! O Lord! while his food is unlawful,
his drink is unlawful, his clothing is unlawful. Indeed he has been nourished by the unlawful,
so how will he be responded to? ( narrated by Muslim)
A Muslim investor, man or woman, is a tajir or merchant. He or she should observe the
following rules and etiquette in his or her dealings:
1. Having good intentions what is your main interest when getting into the business? The
conventional idea is to make money; however, as a Muslim you must make sure it is halal,
for the pleasure of Allah, to stay away from begging or being dependent on people, help
others by creating job opportunities, dawah by living Islam, it is permissible to have the
intentions to become rich (as long as you are paying zakah, the prophet salallahu alaihi
wasallam said, any maal on which you have paid zakah is not considered kanz.) - when
there is sincerity for sake of Allah, Allah will put barakah in your efforts and your rizq.
2. Maintaining good manners and kindness the good manners of Muslim businessmen had
great impact on people around the globe and brought many nations to Islam. Example
Indonesia and Nigeria, entire west and South Africa. Jabir ibn Abdullah narrated that The
prophet sallallahu alaihi wassalam stated, rahima allahu rajulan samhan idha baaya wa idha
ishtaraa wa idha iqtaDaa may Allah have mercy on someone who is kind when he sells and
when he buys and when he judges (recorded by Bukhari). Of the good manners is not to
cheat anyone and giving the fair market price, not taking advantage of the persons
circumstances (the prophet forbade trading by a resident for a non-resident till he reaches
the market place, i.e. he is aware of the market prices to avoid being abused or cheated)
Jarir ibn Abdullah al Bajali radiallahu anhu had his slave buy a horse and the slave paid 300
dinars for the horse. Jarir went back to the person who sold the horse and he told him that
it was worth 400 dinars and the man was also willing to accept that. Then Jarir said it was
worth 500 dinars and so on, until he reached 800 dinars and he paid the man 800 dinars for
the horse that his slave had bought for him for only 300 dinars. His explanation was the
following: I made the oath of allegiance to the Prophet sallallahu alaihi wasallam to do
the following establish the prayer, give the zakat and make nasihah to every Muslim.
(the last part of the wording is also recorded in Sahih Bukhari, and this story was recorded
by AlTabarani.) Honesty is a virtue that shines in every aspect of Muslims life. You must
maintain a balance between profit making and fair dealing.
3. Knowing that poverty is not a virtue if you are afraid that wealth will be a fitna for you,
then give sadaqah; humility and richness are not mutually exclusive. Some of the sahabas
who were rich Uthman ibn Affan, who donated 1000 camels in battle of Tabuk, in times of
famine gave his whole caravan in charity.
Abdur Rahman ibn Awf was a smart entrepreneur. Saad ibn Rabea was made his brotherin-Islam by the prophet after Hijra. In one week after immigration to Medina, he got
married with one datestone weight of gold as mahr and yet Umar ibn Al-Khattab chose
Uthman and Abdur Rahman amongst the 6 for the khalifa after him due to their financial
skills.
The Prophet sallahu alaihi wassalam would supplicate three times at sunrise and three
times at sunset, o Allah I seek your refuge from kufr, poverty, and I seek your refuge from
the punishment of the grave. There is no deity worthy of worship except You.
Allahumma inni audhu bika minal kufri wal faqri allahumma inni audhu bika min adhabil qabri laa
ilaha illa anta. (Abu Dawud)
He would also supplicate before going to sleep, O Allah Pay off our debts and make us rich
from poverty. Allahumma iqDi anna addayna wa aghninaa minal faqri. (Muslim)
What is more virtuous doing profitable business or spending time on learning and
spreading the deen? Ibn Taymiyyah rahimahullahu said, afdalu man atqaahum the best is
the one who is more righteous/fearful of Allah. Any talent or resource that Allah blesses us with
is beneficial if spent in His way with sincerity and piety.
We should not ask for trials from Allah in fact the sunnah of the prophet is to seek
protection from all trials Allahumma innee asaluka al aafiya fi deeni wa dunyayi O Allah I
seek your protection from trials in my religion and worldly affairs. But if Allah chooses you
try you then you must be Patient.
Al-Tirmidhi HadithHadith 5244
Narrated byAnas ibn Malik ; AbuSa'id
The Prophet (peace be upon him) said, "O Allah, grant me life as a poor man, cause me to die as a poor man, and
resurrect me in the company of the poor." Aisha asked him why he had said this, and he replied, "Because they will
enter Paradise forty years before the rich. Do not turn away a poor man, Aisha, even if all you can give is half a
date. If you love the poor and bring them near you, Aisha, Allah will bring you near Him on the Day of
Resurrection."
Tirmidhi and Bayhaqi, in Shu'ab al-Iman, transmitted and Ibn Majah transmitted it up to "in the company of the
poor" on the authority of AbuSa'id. Abu eesa attirmidhi said that this hadith is ghareeb. (darussalaam edition
takhreej = the isnad is weak, one of the narrator al harith bin an numaan allaythi is weak and all other shawaahid
of this hadith are weak too)
4. Dealing with halal products and services that is legally permitted.

5. To have the knowledge of halal and haram in business eg. if you want to start online
business then you must know permissible online transactions, for eg selling gold jewelry
online you cannot accept credit card payment, it must be either money transfer or debit
card payment etc. another Eg short terms stock trading online must know enough to
differentiate halal from haram.
6. Observing the financial rights of others
Your family has rights over you that you observe their financial needs; the poor has rights that
you pay zakah for them; your financial partners have their rights just as you have yours.
7. Not consuming peoples wealth by falsehood fraud and cheating are haram. The Prophet
sallallahu alaihi wassalam stated, This money is green and luscious ( like ripe fruits) so he who
takes it properly will be blessed in it. (Muslim) inna hadha al maala khadiratun Hulwatun faman
akhadhahu bitayyibi nafsin boorika lahu.
8. To avoid riba and all contracts that lead to it. One might conceive the notion that in our day
and age, riba is unavoidable. The onus is on us to be creative, innovative and think outside the
box to revive the riba free financial system. Wattaqullaha manistatatum fear Allah to the
best of your ability.
9. Following the laws of the land and regulations regarding business in the shade of what Allah
permits
Ex: the law of the land requires insurance, then you must abide by the law of the land, and take
minimum required liability insurance. On the other hand - The law of land permits trading in
haram products and contracts but as Muslims, you cannot deal in such products or businesses
since its haram in Islam.
10. Not to transgress in dealings or cause harm to others. Upholding justice is from the higher
objectives of shariah. Regardless of whether youre dealing with a Muslim or a non Muslim.
Ethics are ethics, theres no such thing as business ethics. John C. Maxwell, the New York
Times best-selling author, successful businessman, and former pastor was asked about his
thoughts on business ethics, his response was, "There's no such thing. There's only ethics."
Book Summary: "Theres No Such Thing as "Business" Ethics", by John C. Maxwell
Maxwell's primary thesis in this book is that there is no such thing as business ethics - there's only ethics. And that it is important to understand that "ethics
is never a business issue or a social issue or a political issue. It is a personal issue." Therefore, he suggests that in business decisions, just as in our personal life,
there is only one rule for making decisions: the Golden Rule. And since the Golden Rule begins with each of us, we need to ask ourselves the question "How
would I like to be treated in this situation?"
How we answer is based on things all human beings have in common:
1. We want to be valued.
2. We want to be appreciated.
3. We want to be trusted.
4. We want to be respected.
5. We want to be understood.
6. We do not want others to take advantage of us.
Maxwell recommends that we adopt the Golden Rule as the basis for our ethics because:
1. It is accepted by most people and can be used to create common ground with any reasonable person.2. It is easy to understand. 3. It is a win-win
philosophy.4. It is a compass when you need direction.
With the Golden Rule as our guide, he feels that we can make ethical decisions on a much more consistent basis.
Maxwell reviews a number of well-known breaches of ethics at companies such as at Enron, Adelphia, Tyco, and Worldcom, and laments the depths to which
ethics have seemingly fallen in business. He contends that when faced with an ethical dilemma (an undesirable or unpleasant choice relating to a moral
principle or practice) that people make unethical choices for one of three reasons:
1. We do what's most convenient: giving ourselves permission to cut corners.
2. We do what we must to win: many people think they must choose between being ethical and winning.
3. We rationalize our choices with relativism: deciding what is "right" at the moment, according to our circumstances.
Again, with the Golden Rule as our guide, fewer unethical choices would be made. To pursue the opportunities available to those who live their life unfailingly
ethically, Maxwell recommends that you:
1. Take responsibility for your actions
2. Develop personal discipline
3. Know your weaknesses
4. Align your priorities with your values
5. Admit wrongdoing quickly and ask forgiveness
6. Take extra care with finances
7. Put your family ahead of your work
8. Place high value on people.
The Josephson Institute of Ethics writes that "Ethics is about how we meet the challenge of doing the right thing when that will cost more than we want to
pay." Maxwell contends that living your personal and business life by the Golden Rule will minimize the guesswork associated with making ethical decisions,
even when the costs of doing so are high.
We have the best example in the life of the Prophet sallallahu alaihi wasallam, kana khuluqahu
al quran his example was the Quran.
Islam is the balance and middle path between capitalism and socialism, there is freedom for
the merchants to have their profit margins, except in case of necessities/emergencies and for
essential commodities the state has the right to Tasaeer(Price-Fixing) and compensate the
merchants for their losses.
11. Supporting one another to succeed in businesses. In our communities we have both
intelligent entrepreneurs and pious investors, its a matter of joining hands.
CHAPTER THREE
DEFINING WEALTH
(tharwaa), maal = money
There are different ways to define it based on a persons socio economic status.
Wealth or (maal): anything to which people have an inclination and is permitted in the
Shariah and can be stored to use later.
Anything = services, objects that have monetary value like clothes, livestock, jewelry, fruits, to
which people have an inclination.
Permitted in shariah = this excludes things that are forbidden in shariah like alcohol, pork etc.
That can be stored for later use = this excludes services.
The fuqaha gave different technical definitions to wealth, According to Imam al-ShafiI
(rahimahullah), wealth (maal) is defined as follows: That which has intrinsic value (perceived
value in your heart/culture, not market value), which it is sold for, which can lose/gain value
even if only by little, which will not be discarded without care by the people as is done to a
worthless (muhaqqiraat- eg pencil in our culture is worthless but for others it may be a
treasure) coin or something similar to that. (al-Suyuti: al-Ashbah wal-Nazair, 327). This is
just one classical definition of wealth, which can change for different times and culture. In our
times credit cards (plastic cards) have value.
There are three rights involving any permissible wealth:
1. The right of the owner:
- To take it away from him only with his consent, willingly, without coercion or force. Mutual
consent is an important condition for valid contract.
- It is protected under the law of theft.
If someone steals something from you, and you find it selling on ebay, Islamically and legally,
you have the right to claim it so long as you can prove it as yours.
2. The right of Allah
and give them from the wealth of Allah which He has given you. (al-Nur, 33)
a- To earn it in a halal manner
Allah (azza wa jall) in Suratl-Qasas ayah 73 says:
In his mercy He has given you night and day so that you may rest and seek His bounty and be
grateful.
b- To earn it responsibly
In many verses in the Quran, Allah commands the believers to enjoy the material blessings,
which He has provided for them. Allah states:
Eat and drink of that which Allah has provided and do not act corruptly, making mischief on
the earth. (al-Baqarah, 60) this ayat highlights the importance of consuming the resources
responsibly and avoid overconsumption or ecological threat, cause extinction of species.
Indiscriminate fishing is not permitted Islamically.
Go green is an Islamic prinicple.
The Prophet salallahu alaihi wasallam stated, This money is green and luscious (like ripe
fruits) so he who takes it properly will be blessed in it! (Muslim)
Eg High cash crops like corn in USA, if there is a high consumer demand and all the farmers
grow only corn then there will be threat to ecosystem and deficiency in other essential
commodities. The state has the right to regulate and control the growth of such crops. Public
benefit will take precedence on individual benefit.
There is no limit on the profit margin so long as what youre selling is not an essential
commodity, and there is no haram involved, nor cheating or exploitation.
Is monopoly allowed in Islam? Monopoly of accessories is allowed but monopoly of essentials is
not allowed. In Surah Hashr: 7:
What Allah gave as booty to His Messenger from the people of the townships it is for Allah,
His Messenger, the kindred for the messenger, the orphans, al masakin, and the wayfarer. In
order that it may not become a fortune used by the rich among you. And whatsoever the
Messenger gives you take it and whatsoever he forbids you, abstain from it and fear Allah
verily Allah is severe in punishment.
Patency rights are disputed amongst the fuqaha, and even in conventional system it's debated.
How much royalty are you allowed to charge? The Commercialization of Genetic Research: Ethical, Legal,
and Policy Issues Eg Since 2009, the two legal groups have represented a host of plaintiffs including women's groups and genetic counsellors. They
argue that the patents granted to Myriad for the BRCA1 and BRCA2 gene sequences effectively grant the company a monopoly on medical and research testing
for familial breast and ovarian cancer.
The question of "copyright" is related to a wider concept, generally known as the concept of "intellectual property". In previous days
the concept of ownership was confined to those tangible commodities only which can be perceived through our five senses. But the
speedy progress in the means of communication gave birth to the new concept of "intellectual property" which extended the concept of
ownership to some intangible objects also. The theory of "intellectual property" contemplates that whoever applies his mental labour
to invent something is the owner of the fruits of his labour. If a person has invented a certain instrument, he does not own that instrument
only, but he also owns the formula he has used for the first time to invent it. Therefore, nobody can use that formula without his
permission. Similarly, if a person has written a book, he is the exclusive owner of the right to publish it, and nobody has any right to publish
that book without his permission. This right of an author or an inventor is termed as his "intellectual property". It is also implied in this theory
that the owner of such rights can sell them to others like any other tangible objects. The law of "copyright" has come into existence in
order to secure such rights and to give legal protection to this kind of property.
It is obvious that the concept of intellectual property on which the law of copyright is based is a new phenomenon created by the rapid progress
of industry and the means of communication, therefore, the concept is not expressly mentioned in the Holy Qur'an or in the Sunnah of
the Holy Prophet (S.A.W).
The acceptability or otherwise of such new concept which are not clearly mentioned in the original resources of Islamic jurisprudence can
only be inferred from the general principles laid down by the Shari'ah. As the views of the jurists may differ while applying these principles to
the new situations, there is always a wide scope of difference of opinion in such cases.
C- To pay zakat to the poor.

Allah (azza wa jall) in Suratl-Qasas, ayah 77 says:
And seek the abode of the Hereafter by means of what Allah has granted you, but do not
neglect your rightful share in this world. Do good to others as Allah has done to you, and do
not seek to spread corruption in the land. Allah does not love those who do this.
3. The right of the community
To consider the greater benefit of the community a priority over the individual benefit.
If theres a clash between your personal benefit and the benefit of the community, the
community benefit will take precedence. Eg for expansion of roads the state will confiscate
the private properties, wetlands and natural preservation, walmart corporation is harmful
for the local businesses, throwing waste in rivers or streams ( public hazard),
TYPES OF WEALTH CLASSICAL FIQH CATEGORIZES WEALTH FROM DIFFERENT
PERSPECTIVES
1. Nature of Wealth
- THAMAN = Price (comparison between commodities) or Money price of commodities
This is three types:
- Gold
- Silver
- And its replacement (Ex: paper currency)
- MUTHMAN = The item that is priced or valued
This is of two types:
- Transferable (or movable) commodity (other than properties) (manqul)
Ex: car
- Non-transferable (or non-movable) commodity (properties and estates) (aqar)
Ex: house, garden, factory, gardenetc
Category like mobile home can fit in either category ( aqaarun manqul) . Depending on when
you buy it when its in store/manufacturer then its mobile and when placed and fixed on
ground its aqar. But there are mobile homes like RV which can be in either category.
2. in terms of ownership = OWNED AND UNOWNED WEALTH
MULKIYAH AMMAH = Public properties cannot be privately owned such as public
roads, bridges, seas and sunlight, public/state parks.

Ibn Abbas reported that the Messenger of Allah said: All Muslims are partners in three thingsin water, herbage and fire. (Abu Daud, Ibn Majah)
From this hadith the Ulema expand into public properties by analogy to salt, air, light etc. the
jurists have laid down certain rules and regulations in this eg. A person who kindles a fire in
a desert cannot prevent others from using it (except if he is using his own propane cylinder). A
private property can be brought under public ownership if the state interest so demands (eg
expansion of roads) however this is exceptional and after payment of fair compensation. If
there is conflict between public interest v/s personal benefits then the communal/public
interest takes precedence.
- AWQAF = Public properties that can be privately owned under Shariah approval such as an
endowment estate for the benefit of the public. The public can be a specific class of people. Eg:
orphanage, shopping center owned by an Islamic center = no one individual owns these
properties.
- MULKIYAH KHASSAH = Private properties that can be owned and susceptible to transfer of
ownership to others. Anything that does not fit into the previous two types. Eg cars, homes,
computers etc.
How is this ownership recognized?? How do you transfer these ownerships?
Ownership can be acquired through one of three means:
1. Putting a hand on free property or commodity.
Examples: hunting an animal like a deer or taking a free book
2. Valid contract that allows transfer of ownership.
Examples - gift (contract of charity) or buying a car. Once you own it you have full right to do
anything with it. But extravagancy and wasting is not permitted in Islam.
You should not reject/revoke a gift or return it back. - The Prophet salallahu alaihi wasallam
said, A person who revokes his/her gift is like a dog who vomits and then starts licking their
vomit back. The one who gives the gift or endowment is not allowed to take it back, but one
who is offered the gift can refuse to accept it.
The ownership can be transferred through spoken or written contract. In case of spoken word
thought it is acceptable Islamically, as long as the law of land permits. However it is always
recommended to have it as written records as proof or to avoid future disputes.
3. Inheritance the ownership is automatically transferred to the legal recipients of the

inheritance. Even if the deceased writes a will against the inheritor, the legal recipient of
inheritance will be granted his/her share of inheritance. In case of converts they cannot
inherit from a non Muslim relative, neither do the relatives inherit from them. But they are
allowed to be gifted or given grants by writing a will for them.
3. In terms of SPECIFIC AND UNSPECIFIC WEALTH

- Fungible (aynee or mithlee)
A fungible item is one that specific and can be substituted by others of its kind. They are things
that are exchangeable, interchangeable.
If someone damages something, he must replace that fungible item for example, if a person
ruins 10 bags of rice, he must replace the owner his 10 bags of rice (not the value of it, an
actual 10 bags). Or one ipad2 for another ipad 2 with the same specifications, or replacing one
egg for another egg.
Principle in the shariah: If something is fungible, you replace it with theequivalent and not by giving its
value.
What if the insurance company gives you money for someone damaging yournewcar? The
insurance company will give you a check. Under the shariah, you have the right to a new
fender. Legally, you have the right to the money given by insurance company, but morally you
do not. Therefore, best to give it in sadaqah.
- Non-fungible (daynee or qiyamee)
A non-fungible item is one that is not specific and cannot be substituted by another of its kind.
things that are non-exchangeable or interchangeable.
Eg - Selling a model of what youre going to get, i.e. furniture shopping when you purchase
based on floor models and you receive it later, or buying a customized computer which you
receive later in the mail. Example: You own a 65 Ford Mustang. Someone totals it. There are
no others available, thus they must repay you the value of it.
This is important on online trading where it must be explicitly stated whether its the exact
thing thats sold with the specification given clearly or its only a model with specifications
and the customer customizes before buying and the product will be delivered at a later date.
When you return a commodity after the return period expires and you receive store credit,
what type of wealth did you earn in this case? This will be a non fungible wealth since you
dont get in the same format you paid. Store credits is a conditional option of revocation of
contract based on good will ( khiyar al iqaalah)
4. VALUED AND NON-VALUED WEATH

The value of a commodity in terms of the permissibility to benefit from it is based on the
permissibility of its use in Shariah and not by human preference.
- Valued (mal un mutabar) = legal/Islamic value. Commodity that is pure and has value in
reason of Shariah and is permitted to benefit from.
Examples: cars, clothes, gold, and livestock.
- Non-valued (mal ghayr mutabar) no legal/Islamic value. Commodity that is not pure or has
no value in the reason of Shariah and it is not permitted to benefit from. Therefore, even
though marijuana was made legal commodity in the state of California, for a Muslim
pharmacist it is still a non-valued commodity and he cannot sell it. Other Examples: wine,
statues and stolen goods, pet dogs.
On the authority of Jabir radiAllahu anhu that he heard the Prophet sallahu alaihi wasallam in Mecca the
year of the liberating of Mecca saying: "Allah and His Messenger forbid the selling of alcoholic drinks,
dead animals (without being killed Islamically), pigs and idols." It was said to him (sas): "O Allahs
Messenger, what about the fat of the dead animals -it is used for coating boats, oiling leather and the
people burn it in their lamps? He salallahu alaihi wasallam said: "No, it is haram." Then, the Prophet
salallahu alaihi wasallam said: "May Allah fight the Jews: Allah forbid them the fat, so they liquefied it,
sold it and ate (consumed) its value." Muslim and Bukhari
In another hadith:
"Whenever Allah forbids something, He forbids its value (i.e., money obtained by selling it).
Selling dogs is forbidden, even though it is lawful to benefit from them only for hunting or
guarding property. Hadith in Sahih Muslim: "The most evil earnings are the fees of a
prostitute, the selling price of a dog and the fees of the bloodletter." Hadith of Abu Mas'ud,
who said, "The Prophet (sallallaahu 'alayhe wa sallam) forbade the revenue made from the sale of dogs."
( Muslim and Bukhari)
The hadeeth found in the two Saheehs is general (including all kinds of dogs), however there is an additional
phrase collected by an-Nasaa'ee, the authenticity of which has been discussed, that it is da'eef (weak,
unauthentic): "Except for a hunting dog." And due to this additional phrase the scholars have differed over the
permissibility of buying and selling them (hunting dogs). The position of the majority, from them are the two
imaams: ash-Shafi'ee and Ahmad, is that buying and selling them is not permissible, even if they are hunting dogs,
or used for farming or as shepherds. To keep one for these reasons is permissible, but buying and selling them and
the revenue from such sales remains impermissible, since the base ruling on a text that orders us to refrain from
doing something is that the action is impermissible. Al-Khattaabee said, "The permissibility of making use of
something in times of necessity is not something that proves the permissibility of its sale. This is like the meat of
dead animals (not killed according to Islamic laws), it is permissible for someone to eat it under necessity, while its
sale remains impermissible. And Abu Haneefah held that it is permissible to sell it in general, whether or not it is
permissible to make use of it." And 'Ataa' ibn Abee Ribaah and Ibraaheem an-Nakha'ee said that when it is
permissible to have dogs, then buying and selling them is permissible; and when having them is not permissible,
then buying and selling them is not permissible.
Most scholars forbid the selling of dogs absolutely and that is the apparent meaning of the
above hadith. Some allowed the sale of dogs whose use is lawful such as hunting dogs and
guard dogs (and seeing eye dogs/hearing dogs by analogy and the payment is for the service of
training the dog for the specific purpose).
When dealing with non Muslims and you damage a commodity that has no value Islamically eg
a statue in a store, or a wine bottle though its ghayr mutabar in Islam, you are liable to pay
the damages to the nonMuslim owner.
Can a Muslim put up figurines (human or animal = dhat ar ruh), statues for garage sale and sell
to non Muslim neighbors? NO! That sale and money is not permitted for Muslim even if they
are of high market value in our society. However, if the sculptures are of the material has
value, then you can break them and sell the material but not the actual statue.
Can you sell a mens gold ring? A Muslim is allowed to own an item though he is not allowed to
use it, just like gold/silver utensils, can own them but not use them.
Can you sell an artifact or antiques/human heritage to a museum? Needs to researched
further.the prophet sent Ali with instructions to destroy every single idol statue and level
any grave that has construction on it.
Marijuana is not proved to have any medical benefits (urf alaam) classical jurists allowed
intoxications as anaesthesia, in case of necessities. But now since there are medical
alternatives you cannot use intoxicants.
Fun Fact:
Paper currency was first developed in China in the Tang Dynasty during the 7th century and was later
introduced in the Mongol Empire, Europe, and America. Paper money originated in two forms: Drafts,
which are receipts for value, held on account, and bills, which were issued with a promise to convert at
a later date.
5. DURABLE AND CONSUMABLE WEALTH = this is relative since nothing stays forever.
Consumable (ghayr muddakhar) perishable Commodities that have short shelf life and
cannot be stored for a long time such as fresh vegetables or fire, fresh Fruits, fresh flowers,
dairy products, fresh meat, gasoline,
Durable (muddakhar) non perishable properties or commodities that is sustainable such as
buildings and books or can be stored for a long time such as dried beans, gems, car,
land/house, compressed gas, canned food products.
Why is this important? Because when you set conditions for every transaction in trading, you
have to keep the shelf life of the product in mind and the shipping time, and the time of
transfer of ownership. In case of damage who is liable? eg order for an edible arrangements it
arrives 2 days later and the fruits are rotten. Who is liable? The seller. Or you arrive after a
weekend vacation and find the rotten package; who is liable? Depends on the conditions put in
the shipping contract. If the seller states that after 2 attempts for delivery the item will be left
at the door then the buyer is responsible. Hence important to read the fine prints and
conditions before agreeing on a contract. The conclusion of transaction occurs when the
package is delivered to you.
Islamically (opening a food store or edible arrangement store), you are not allowed to waste resources such as what
happens to the rest of the fruit when they cut out the parts needed.
NATURE
Of
wealth
TRANSFERABILITY
OWNERSHIP
Ayni
Mith
li
THAMAN
MUTHMAN
-gold
-silver
-its
equivale
nt in
currency
Specificity
mulkiyah
Manqul/aqaar
-
Dayni
qiya
mi
transferable /mobile
nontransferable/immobile
amm/waqf/kh
ass
-public
-fungible/ayni is
exchangeable
-nonfungible nonexchangeable
-endowment
-private
LEGAL
VALUE
mutab
ar
legal/halal
goods
DURABILITY
Muddakhar Ghayr
Muddakhar
-durable/muddakhar=
nonperishable
perishable/consumable/g
hayr muddakhar.
-ghayr
mutaba
r
haram
goods
PART TWO: CONTRACTS

CHAPTER FOUR
CHAPTER DEFINITIONS
Muamalat (Fact: on scale of mufaalah, from the root verb of taaamala, i.e.) to cooperate or
work with one another or do business with one another.
Ibadat: deals with the relationship between man and the Creator (fasting, praying) while the
laws of muamalat address the relationship between man and man.
PERMISSIBILITY OF MUAMALAT AND CONTRACTS
From the Quran
O you who believe, fulfill all your contractual obligations

(al-Maidah, 1)
But this is talking about halal contracts only, since
But Allah has allowed trade and forbidden usury
(al-Baqarah, 275),
and
O you who believe, do not wrongfully consume each others wealth but trade by mutual
consent
(al-Nisa, 29)
From the Sunnah
Verily, Allah, the Most High, has prescribed the obligatory deeds, so do not neglect them. He
had set the limits, so do not go beyond them. He has forbidden some things, do so not violate
them. And He has been silent about some things, out of mercy upon you and not out of
forgetfulness, so do not go looking for them. (al-Daraqutni, hasan)
That is, dont be excessive in questioning about it this is primarily during the time of
legislation, but now no one is allowed to remain ignorant about it and cannot be excuses,
except if they are contemporary issues. Ignorance cannot be used as an excuse for wrongdoing.
This hadith is not asking about issues that the shariah has already clarified or about mubah
things (there is another hadith halal is clear and haram is clear and in between, there are
doubtful matters which many do not know. Another hadith says that those things about which
shariah is silent are considered mubah) questioning to seek ilm is permitted but questioning
for mischief is not permitted.
A Contract (aqd) linguistically Aqd, (plural uqud), literally means to tie or to bind and in
the modern sense it refers to a contract to confirm and strong an agreement.
Technical definition = a contract is an agreement entered into voluntarily by two parties or
more with the intention of creating a legal obligation, which may have elements in writing or
can be made orally.
The purposes of aqd or a contract are as follows:
Type of contract
Purpose
Contracts of exchange
Permanent exchange of
ownership of the counter
values/using the services or
utilities.
Contracts of investments
To make a profit for the
profit sharing on mutual
partners; this requires an
Some examples
Sales of goods (bay)
Rental (Ijarah) exchange
service/utility
Partnership (Musharakah)
Silent partnership
agreement.
Contracts of Charity to
provide a relief of stress to
someone. The Islamic system
is a faith based system.
Contracts of security
Other forms of contract

This is important in the
discussion of credit cards.
input of capital or labor by

partners with a sharing of the
resulting yield in a
permissible way
To give without countervalue
for the sake of Allah. It is
unilateral transfer of wealth
with no conditions upon the
recipient (in contrast to a
reward where conditions
exist, for example I will give
you a prize if you pass your
exams). Gifts are not binding
so long as the recipient does
not suffer damage in even of
the donors revocation.
To secure a pre-existing or
defined liability in favor of a
creditor, or to improve trust
and confidence in a
commercial relationship.
This involves the creation of
some kind of right over an
asset that is in the ownership
of the debtor, but no benefit
is taken by the creditor unless
maintenance is involved (e.g.
if a creditor feeds a pawned
goat, he may take the goats
milk)
To improve the ease and
efficiency of commercial and
other dealings
(Mudarabah)
Sharecropping (Muzaraah)
Gift (hiba)
Donation (tabarru)
Loan (qard)
Mortgage (rahn)/pawn
Guarantee (kafalah)
warranty for a laptop, or
kafeel/guarantor on behalf of
someone. This is like
dhamaaan.
Agency (wakalah)
Trust (amanah)
Bill of exchange (hawalah)
Difference between amanah and loan?

Amanah is trust and you are not allowed to touch it if an accident/calamity occurs you are
not liable for the damage. But if you open it or use it, then you are liable for it and repay any
damage or loss in this case its dhamaan now and no longer amaanah.
Loan is given for use on terms of period of return.
CHAPTER 5
TYPES OF CONTRACTS/CATEGORIES OF DIFFERENT CONTRACTS
IN CONSIDERATION OF
THEIR
RULINGS IN
THE SHARIAH
THE COMMODITY
BEING EXCHANGED
THE STATUS
AFTER THE
CONTRACT IS
ESTABLISHED
TAKING
POSSESSION/HO
LD OF THE
COMMODITY
EXCHANGED
THE
COMPENSATION
RESULTING
FROM THE
EXCHANGE IN
CONTRACT
THEIR
VALIDITY IN
THE SHARIAH
Min haythu
al hukm al
taklifi
Min haythu al
maaliyyah wa
adamihaa
Min haythu
alluzumu
wa
adamihi
Min haythu
ishtiraat al
qabdh wa
adamihi
Min haythu
wujuud al
iwad wa
adamihi
Min haythu
al sahhah
wal fasaad
a. Obligato
ry waajib
b.
recomm
ended mustaha
bb
c. Permissi
blemubah
d. Dislikedmakroo
h
e. Forbidd
enharam
a. Money from
both parties
money
exchange = sarf
b. Money from
one party and a
manqul
(movable)com
modity from
the other.
c. Money from
one party and
an aqaar (non
movable)
commodity
from the other.
d. Money from
one party and a
benefit or work
form the other
e. Non
monetary
contract =
exchange of
services from
both parties.
f. Money
based
commodity
from a party
and non money
based
a. aqd
laazim =
binding
contrac
t
b.
aqd
ghayr
laazim
non
binding
contrac
t
c.
aqd
laazim
on one
party
and
aqd
ghayr
lazim
on the
other.
a. Takin
g
possessio
n of
commodit
y is not
obligatory
at time of
the
contract.
b. Takin
g
possessio
n of
commodit
y is
obligatory
at the
time of
contract
I. Affecting
the transfer
of ownership
Ii. Affecting
the validity of
the contract
itself
Iii. Affecting
the
effectiveness
of the
contract.
a. Al
muaawad
ah =
compensa
tory
b. Al
tabarru /
ghayr al
muaawad
ah = non
compensa
tory
a. aqd
sahih =
valid
contrac
t
b. aqd
faasid
aw
baatil =
invalid
contrac
ts.
(majorit
y of
jurists)
* hanafi
school
B. Aqd
faasid =
defective
contract
c. Aqd baatil
== null and
void
contract
commodity
from the other.
1. Contracts in consideration of their rulings in Shariah (min haythul-hukml-taklifi)

a. Obligatory - waajib
Example: Marriage if one has the financial and physical means and fears falling into the haram,
zakah(contract of charity)
b. Recommended mustahabb/mandub
Example: lending, endowment (awqaf) and charity to one in need ( qardh hasana)
c. Permissible -mubah
Examples: Sale and trade and renting in general, giving charity to someone who is not in need,
giving gifts.
d. Disliked - makrooh any doubtful matter or one which has multiple contradicting opinions, will be
identified as makrooh, and it is better to stay away from it.
Example: Selling grapes to someone who might make wine out of it (some fuqaha say it is
haram ( since you are facilitating sin) others say its permissible and what he does is not your
problem, anything that is originally halal then trading in it is permissible, the use or outcome of it is not
the responsibility of the seller), taking money for hijamah( cupping) since hijamah is act of
charity, selling birth gem stones ( fear of people committing shirk) selling TV sets(disputed
makruh or mubah) , makeup artist, facebook stocks, putting up an internet satellite/internet
provider, car stereos or sound system (how do you outweigh the halal usage from haram?).
(using neighbors wifi; is it permitted or not? Depends if it is password protected or not. If its open, then
its okay; if protected then you cannot hack it.)
e. Forbidden = haram
Examples: Riba, mortgage, selling dead meat or pork, or life insurance (it is haram to buy, but
to the beneficiary receiving the money, it is permissible), prostitution, selling stolen items,
beauty parlor = eyebrow shaping, tattooing, psychic/fortuneteller.
If you rent a space for shop and the party uses as liquor shop or tattoo shop (If you know it,
then its haram, but if you dont know what its being used for, then you can refuse to lease or
continue the lease if you have the choice). Selling items used for religious or beliefs that are
unIslamic like Christmas/easter etc.
The haram is limited and the halal are outnumbered shows the mercy of Allah.
2. Contracts in consideration of the Commodity Being Exchanged
(Min Haythul Maliyyah wa Adamihaa)

a. Money from both parties = al sarf
Example: money exchange (currency exchange)
b. Money from one party and a movable commodity from other. This is the regular baya
Example: selling a jilbab online, cash for a car
c. Money from one party and a non-movable commodity from the other.
Example: buying a house or land
d. Money from one party and a benefit or work from the other.
Example: renting a car, carpeting cleaner, renting apartment
e. Non-money based contract from both parties
This is the strongest of all contracts because it cannot be revoked except in case permanence of contract is
no longer possible.
Example: guarantee contract or truce, peace treaty, exchange of services, marriage (mahr is
not a part of the marriage contract; its the necessary consequence of marriage), divorce
contract
f. Money based commodity from a party and a non-money based commodity from the other.
Example: al-khul in a marriage contract, labor work, severance pay and separation agreement
for layoff
3. Contracts in consideration of the binding or non-binding status after the contracts has
already been established (Min Haythu al-Luzumu Wa Adamih)
a. Aqd lazim or a binding contract on both parties. In this contract, no party has the right to
revoke the contract without the consent of the other party.
Example: renting an apartment for a 6-month contract, buying a car, partnerships.
b. Aqd ghayr lazim or a non-binding contract on both parties. In this case, any party has the
right to withdraw from the contract after taking reasonable arrangement.
Example: a partner decides to discontinue his partnership with other contracting parties or
lending someone $500, gym or any membership, monthly rentals, software projects that are
for limited period, laborer work hourly wages.
c. Aqd lazim on one party and Aqd ghayr lazim on the other.
Examples: in pawn objects or a guarantee contract, gifts its not laazim on recipient.
4. Contracts in Consideration for taking possession (taking hold) of the commodity exchanged
(Min Haythu Ishtiratl-Qabd waAdamih)
a. Contracts in which taking possession of the commodity is not obligatory at the time of the
contract. When doing online business you have to keep in consideration the type of
commodity durable or perishable affecting the shipping methods, also in transporting food
you need health insurance.
Examples: sale, buying objects other than gold or money online receiving after few days,
marriage, guarantee
b. Contracts in which taking possession of commodity obligatory at the time of contract.
Example gold and silver trading and currency exchange have to be in the same sitting and
transfer from hand to hand cannot do online trading, you are not allowed to use money
as commodity since it will cause inflation and recession, it hurts the entire economy.
Affecting the transfer of ownership.
Example: giving gifts
Affecting the validity of the contract itself
Example: money exchange
Affecting the effectiveness of the contract
Example: giving gifts and pawn items.
5. Contacts in consideration of the compensation resulting from the exchange in contract (Min
Haythu WujudI Iwad waAdamih)
a. Al-Muawadah (compensatory): A compensatory contract in which each of the contracting
parties receives a compensation as a result of the exchange of commodities in the contract.
Ex: sales and trade, rent and lease, sarf.
b. Al-Tabarru or Ghayr al-Muawadah (non-compensatory)
A non-compensatory contract in which one of the contracting parties receives a valued
commodity as a result of the exchange in the contract.
Example: gifts, bequests, and fiduciary deposits( trust taking care of someones money)
6. Contracts in consideration of their validity or invalidity in reason of the Shariah (Min
Haythu I-Sahhah wal-Fasad)
a. Valid contracts: aqd sahih - a valid contract fulfills all the legal requirements and conditions
in essence and description of the contract, becoming binding and immediately effective. The
hanafi scholars describe a valid contract as legal in origin and characteristics.
Ex: buying a new car cash money. If a minor is buying is it sahih or baatil? Depends if he is
buying candy then its valid but if he is buying a valuable item like car with father credit card
then its baatil.
b. Invalid contracts: aqd faasid /baatil - an invalid contract does not fulfill all the legal
requirements or conditions in essence or in description of the contract. It is not recognized by
the Shariah, and it is not binding or effective until it is rectified.
Ex: buying a house from a minor, taking a riba based loan, or giving away your laptop under
compulsion. Buying a stolen item.
The Hanafi school of thought makes a difference in effectiveness of (fasid) contract from a
(batil) contract. If a contract is illegal in origin or one of its pillars is unsound then the
contract is baatil/ illegal null and void, eg if one of the parties on the contract is a minor child.
While if the origin of contract is legal but one of the characteristics of the contract is unsound
then the contract is a (fasid) contract can still have some degree of effectiveness, eg if one of
the conditions of the contract is to pay riba, the contract is fasid and if you remove the
condition of riba then the contract is valid.
It is related in Sahih Bukhari, that A'isha said, "Barira came and said, 'I have a freedomcontract with my owners for nine awqiyas, with one awqiya every year. Help me.' A'isha said, 'If
your people like, I will give it to them all at once and then I will set you free. But your wala' will
be with me ' Barira went to her owners and they refused to let her do that. She said, 'I offered
that to them and they refused until they kept the wala'.' The Messenger of Allah, may Allah
bless him and grant him peace, heard about that and asked me about it and I told him. He said,
"Take her and set her free and give them the condition of the wala'. The wala' is with the one who sets
free.'" A'isha said, "The Messenger of Allah, may Allah bless him and grant him peace, stood up
among the people and praised and glorified Allah. Then he said, 'Following on from that: why
is it that some men among you make conditions which are not in the Book of Allah? Any
condition which is not in the Book of Allah is invalid even if it is stipulated a hundred times.
The decision of Allah is truer and firmer. What is wrong with some men among you who say,
'Set see, so-and-so, and I will have the wala'. The wala' is for the one who sets free.'"
CHAPTER 6
THE PILLARS OF A CONTRACT
THE PILLARS OF A CONTRACT ARE THREE (requirements for a valid contract)
a.
The two (or more) contracting parties (al-Mutaaqidayn)/alaaqidaan.
b.
The commodity upon which the contract is being done (al-maqud alayh)
c.
The spoken word of the exchange (al-seeghah) (written documentation of the verbal
contract is recommended based on the verse in quran 2:282 == O you who believe, when you
contract a debt for a fixed period, write it down..you should not become weary to write it
whether it be small or big, for its fixed term that is more just with Allah..)
The two (or more) contracting Parties Al-Mutaaqidayn
Conditions:
1. Mutual consent from both parties, al-taradi. This is an important condition as mentioned in
the verse 4:29 = O you who believe! Do not eat up your property among yourselves in vanities,
but let there be amongst trade by mutual good will
2. To have trading competence based on (ahliyyat I-tasarruf), which is the acquisition of rights
that qualifies them to have the capacity to contract and to dispose financial affairs without the
need of legal guardianship.
Tasarruf - which is the acquisition of the legal capacity and qualifications to enter into a
contract, take possession, and to dispose financial affairs without the need of legal
guardianship. Ahliyya/ aptitude is a quality which makes a person qualified for acquiring
rights and undertaking duties and responsibilities. Thus, ahliyya is divided into: capacity of
/wujub rights and capacity of ada/ performance of action. Aptitude of rights is that a person
is entitled to all his legal dues even if it is still an unborn fetus provided that it is delivered
alive. Capacity of performance is that a person is qualified to take action which is legally valid.
And this does not exist before a person acquires proper mental awareness and becomes
discerning (tamyeez) when a child reaches the age of discernment he acquires the capacity of
performance but this is considered deficient until the person reaches the age of maturity, then
he is considered fully capable of performing and taking legally valid action and take liabilities.
Trading competence is identified by two qualities:
A. Puberty
The maximum age to reach puberty is 15 years. Any child, boy or girl who does not show any
physical sign of puberty is declared so at age 15 in the lunar calendar.
B. Maturity referring to financial maturity
And test the orphans when they have attained the age of puberty; if you find them mature,
then give them their wealth.
Test the orphans until they reach the age of marriage, and then if you find them mature of
mind hand over to them their property and do not eat it up by either spending extravagantly
or in haste, fearing that they would grow up..
[al-Nisa :6]
This verse highlights two conditions: until they reach the age of marriage/puberty, and to test
them for financial maturity. This is very relative and depends on culture, time, and place. In
our day, there is difference between the maturity of a 12 year old in a developed nation v/s in a
developing nation.
***Fact: The age of majority is the threshold of adulthood as it is conceptualized (and
recognized or declared) in law. It is the chronological moment when minors cease to legally be
considered children and assume control over their persons, actions, and decisions, thereby
terminating the legal control and legal responsibilities of their parents or guardian over and
for them. The vast majority of countries set maturity at 18, but ages as low as 15 and as high as
21 also exist.
So based on this, you cannot buy or sell a car/cigarette to a 7 year kid, but you are allowed to
sell something to a kid that is natural for them to buy like candy, water, gum, soda etc.
The acquisition of rights to have the capacity to contract and trade ( AHLIYATU TASARRUF) is
based on the acquisition of following items:
A. Al-dhimmah the eligibility to bear liability/reliablity. Eg a 10 year old child goes to buy
goodyear tires/rims, would you sell it to him? No, because he is not capable to bear the
responsibility and are not reliable. But for a 18 year old, you can sell since he can be held liable.
B. Al-aql or reason qualifies the individual to understand verbal communication.
They have to understand the magnitude of the contract. Eg buying a house, the buyer has to
understand the consequences and responsibility he will bear with this contract sign the
papers and the process, pay the taxes etc. the buyer can review the terms of the contract with
someone else/lawyer, before signing it. The buyer is not obligated to explain the whole
contract and all the fine prints.
C. Al-taklif or accountability it is identified by reaching the age of puberty and developing a
sound mind. Accountability qualifies the individual to assume responsibility.
The maximum/cap age, which take the child out of age of childhood, and into puberty is age of
15.
D. Al-wilayah the authority to have over oneself or over the property in possession. Eg a 25
year old can enter into a marriage contract without the consent of his parents (legally not
emotionally). A 25 year woman can buy a car from her own money without asking anyone ( to
consult husband or father is different issue).
Although laws have declared 15-21 years old to be the age of maturity, the Shariah remained silent on
deciding a decisive age for it because it is different from one person to another.
Exceptions from the rule of trading competence:
1. A child who has reached the faculty of discernment (al-sabiy al-mumayyiz) they can recognize
the currencies, can exchange money, eg a kid can sell lemonade outside their houses (but not
the house behind him), or 11 year boy scouts selling cookies.
2. Women, in two cases:
- Marriage contract
According to the majority of the fuqaha, a woman cannot have her nikah done without her
walis approval. (Except for imam Abu Hanifah who allowed woman to marry without the
walis consent)
- The limitation for giving donation to one-third of her wealth without the need for her
husbands permission. Thats according to Imam Malik (rahimahullah) predominant in North
Africa. The majority of fuqaha do not set any limit on her.
CAUSES OF DEFECTIVE LEGAL CAPACITY AWARID AL AHLIYYAH
These causes are found in factors that prevent capacity for acquisition and capacity for
execution from taking full effect. The existence of these factors may result in the total absence
of capacity or incomplete capacity.
The legal basis for the capacity of acquisition is being a living person, so death alone can cause
a change in this kind of capacity.
Reason (aql) and discretion (rushd) are the bases for the capacity for execution and each factor
that has power to influence and affect the normal functioning of the human mind can become
a cause for defective capacity.
The jurists divide the causes of defective capacity into two kinds:
1. natural causes ( samawiyyah)/ Pre-decreed reasons
2. acquired causes ( muktasabah)
these causes can be either temporary or permanent.
Natural Causes Of Defective Capacity
These are causes that are beyond the control of the person (mukallaf) and result from an act of
the Creator. The jurists list ten causes:
- Sighar (minor);
- junun ( insanity);
- atah ( idiocy);
- nisyan ( forgetfulness);
- nawm ( sleep);
- ighma ( unconsciousness, fainting, epilepsy);
- riqq ( slavery);
- marad (illness) - mentally challenged (advanced alzheimers), and coma, post traumatic
mental disorder.
- mawt (death);
- haidh ( menstruation), nifas ( post natal bleeding) these will affect their capacity to
worship, and not financial transactions or other worldly affairs.
Acquired Causes Of Defective Capacity
These are those that are created by man or in which human will and choice are the basic
factors. Jurists have listed seven causes:
- Ignorance ( jahl);
- intoxication ( sukr);
- jest ( hazl);
- indiscretion/immaturity ( safah) this concerns financial transaction resulting in foolish waste
and squandering of property. Such a person is subjected to interdiction (hajr) till such time
that he mends his ways. This is based upon the necessity (darurah) of preserving his wealth
which is one of the acknowledged purpose of the law.
- journey (safar);
- mistake (khata, shubhah) and
- coercion (ikrah), this can be obstacle to making a valid binding contact .
Example: bankruptcy.
The commodity al-maqud alayh

It can be a physical commodity or a service
Conditions:
1. The commodity must be permissible to use in other than times of need (the use of alcohol
and haram meat at times of dire need to save life is allowed as concession, but otherwise its
haraam). But trading in forbidden things is not allowed based on the excuse of darurah.
Examples of impermissible commodities:
Alcohol, dead animal, and stolen items.
2. The commodity must be sold by the owner or one who represents him.
Examples of representatives: agent like a travel agent, father of a minor or anyone who is
given the power of attorney, worker for a store.
3. Ownership of the commodity can be transferred to the buyer. This is an important Islamic
principle. In the conventional market system, one of the major reasons for financial crisis
globally is the speculative trading of products or items that are not in the ownership of the
seller. You cannot even advertise for a commodity that you dont own. Scenario 1 = you find a
product on ebay, so you advertise for it on your website with the specifications given on ebay,
but you dont buy it till someone buys from you, this is not allowed Islamically. Scenario 2 =
real estate business where the bank you are taking loan/mortgage from do not buy the house
till they have a signed contract from the debtor to buy the house from them.
**Transferring of ownership depends on the kind of commodity or service traded. For
example, transferring ownership of the house is when the title is issued. Transferring the
ownership of a movable commodity is when the seller hands it over to the buyer or when the
online purchase is delivered.
An exception (al istithnaa) is made for custom made products, wherein the contract is made on
some specifications or a model, make your payment, and the actual product is delivered at a
later date. This is acceptable and is termed bayu salam.
Examples of non-transferable ownership: selling what you dont own, selling the fish in the
sea, air, birds in the air. Any public property cannot become a commodity to trade in.
4. The commodity must be identifiable whether actually, if it was specific, or by description if
it was unspecific.
Examples of a specific commodity: an actual land, book, hijab or a car off the internet, or any
product from craiglist, in this case you have to mention exact description and defects if any.
Examples of an unspecific commodity: buying from a catalogue, buying a duplicate of a model.
THE SPOKEN WORD (or what substitutes for it) al-sighah
The sighah or format is the utterances of expressing the wills/intentions of the two parties,
that is understood by them or what is customarily known by the people of the local market
place (eg egypt v/s Syrian milk = laban/haleeb) or those of the same profession, showing the
purpose of the contract and bringing it into existence after it had been a hidden and unknown
thing, since Islamically a contract is based on mutual consent (taraadin). There must be two
spoken words one from each party ijab /offer and qabul/acceptance.
What substitutes for it includes, but is not limited to, sign language/gestures (should be clear,
unequivocal and understandable by the people of the same profession) such as in auctions, and
written agreements (in any language as long as it is clear and readable), voice recording for
verbal contracts this call maybe recorded for quality assurance purpose. The receipt is the
most common form of written contract. An email confirmation is also a form of legal written contract
(online purchases or application downloads)
Al muaatat silent trading: eg Buying from a vending machine, or you pick an item from the
store shelf pay the price and leave. This is permissible only in muhaqqiraat insignificant value
(this is relative according to customs and culture, airport vending machines have ipad and
iphones) you cannot buy car or house on muaatat.
If different language is spoken by the two parties then an interpreter will be required. If the
language or technical terms of the contract is unknown or difficult to understand for the buyer
then he is responsible for taking help (lawyer if needed) to understand it before signing it,
since the seller is not responsible to explain the whole written document to the buyer.
Articles of the spoken word:
Ijab or offer
Qabul or acceptance
In case of conflict between written word and spoken word what takes precedence? If both
parties agree on the spoken word, then the mistake in writing is ignored and the spoken word
is upheld. If there is conflict between the two parties, one spoken word and other signed on
written word then the legal maxim al ibratu fi aluquud bilmaanii laa billfazi wa mabaani the
essence/intention of contract takes precedence over the spoken word, and if there is no way to
resolve it then the hard copy ( written) will take precedence.
Conditions:
- To be exchanged during the same contract session (majlisi-aqd). i.e. the contract session
should be whole
Example: there should be no interruption between the offer and acceptance, if there was any
interruption then you must review the final contract again before signing it, and time should
not lapse long (or expire) between filling out an online contract and signing it. Usually online
transactions have a time limit set to conclude the contract after which the session expires
(contract annulled from the seller) and the buyer has to start all over again.
- The acceptance of the trade should be in respect to the actual offer.

Example: if the offer was for a red car, you cannot give the acceptance for the blue one without
the consent of the seller.
If you order online a shirt size M and you receive size L, the sale would not be binding, and the
seller is responsible for return shipping.
Buying a Lincoln car online based on description but the buyer receives an old police car
(recognized due to accessories on it), this sale is not binding, since by custom when a person is
buying a car then its a civilian car a well-known legal maxim custom is considered similar
to a stipulated condition' (alMaruf 'urfan kal- mashrut shartan').
It is always important to read the fine prints (which most people ignore ) before accepting or
clicking the I AGREE button, because if its written, and you signed, then youre liable its
your fault if you didnt read it.
THE PILLARS OF CONTRACT
ALAAQIDAAN
The commodity
Two parties
ALMAQUD ALAIHI
1. Mutual consent -permissible
(al taraadi)
2. Ahliyyat
tasarruf trading
competence
- sold by owner or his

representative
AL SEEGHA
The spoken word
Spoken/silent/written/sign/gesture that is
known to the people of the same profession
2 articles ijaab/offer and qabul / acceptance
Conditions
- majlis al aqd the contract session should
be whole
- the acceptance should be in respect to
the actual offer
-
- puberty
- maturity
- al
dhimmah the
eligibility to
bear liability
- al aql =
reason
- al taklif =
accountability
- al wiayah =
authority over
oneself or over
the property.
- ownership can
be transferred to
the buyer
- identifiable
CHAPTER 7
ADDING CONDITION TO A CONTRACT
The store policies or return policies on/at the back of a receipt are conditions put by the seller.
GENERAL RULING IS PERMISSIBLITY:
Quran:
Oh you who believe! Honor your contracts.
[al-Maidah, 1]
Sunnah:
The Muslims are upon their conditions, except a condition that makes prohibited permissible
or a permissible prohibited. (Abu Dawud)`
From this hadith we know the categories of conditions: halal/permissible,
haram/impermissible, and waajib conditions.
Aspects of a legitimate and legally accepted contract:
In order for any contract to be seen as an aqd sahih (a legitimate contract) in shariah, it must
be:
1. Concluded: if the contract is not properly concluded, then it is void.
To conclude a contract it is important not to leave anything suspended. if the spoken word is
not finalized ( the negotiation between the buyer and seller) the contract is not valid based on
promise. Therefore important to read the fine prints of the agreements and the option given to
print or save is beneficial for future disputes.
A promise does not make a binding/final contract legally.
2. Valid: these are the general conditions to be met in each and every one of the three pillars of
contract = the two parties who are ahliyatu tasarruf, the commodity and the proper spoken
word. If the contract violated one or more of the conditions of the contract, then it is invalid.
Example: selling alcohol, riba based loan
3. Executed: Execution refers to the implementation of the terms of a contract, hence a contract
that has been concluded may not have been executed.
If the contract is not executed (for example, the seller has not come into possession of the
object of a previously concluded bayl-salam contract), then the contract is regarded as being
suspended until such time as it is executed.
4. Binding: when any contract is made, the seller have to release that product and/or service. Eg
you book a hotel online, made reservation and confirmation is received so the contract is
concluded when you signed it, and is valid as there are no haram elements in it, executed since
they gave you the key to the room, but this becomes binding when you enter the room and see
it and are satisfied/matching the specifications you agreed to when making the reservations.
Or when you start using the product or the services then it becomes binding.
This is specifically for the contracts where the product is not in front of you custom made,
catalogue orders or online purchases.
if a contract is not binding (in other words, if options have been specified), then the contract
may be voided or made binding at the choice of the options holder.
TYPES OF CONDITIONS IN A CONTRACT:
VALID CONDTIONS
1. Conditions that are part of the essence
of the contract
2. Conditions that are for the benefit of
the contract.
INVALID CONDITIONS
1. stipulate a second contract in exchange for
the first contract.
2. stipulate conditions that go against the
essence of the contract.
3. Conditions that stipulate a particular

3. to stipulate a foreign condition as a base for
benefit for either the buyer /seller and is
concluding a contract.
not contrary to the essence of the contract
4. Stipulating penal conditions to ensure
fulfillment of the contract.
4. stipulating cash penalties on late payments

== riba.
Valid Conditions:
1. Conditions that are part of the essence of the contract. There should be no ambiguity in the
wordings eg you sell the house with the condition that you will remove your belongings from
basement after you return from hajj. This is ambiguous, have to set a specific time period, and
after that the buyer has the right to dispose the goods if you dont take action.
Example: to stipulate the immediate transfer of ownership.
2. Conditions that are for the benefit of the contract. It does not invalidate the contract. This is
permissible.
Example: to stipulate the price be paid in specific currency like US dollars ($).
3. Conditions that stipulate a particular benefit for either the buyer or seller and does not run
contrary to the essence of the contract nor to its benefit. It benefits one of the two parties.
Example: the seller of the house stipulates to live in it for the next month or two. Or a car seller
stipulates to give the car after 3 days. Putting a time period for a rental contract = eg renting a
facility for 3 years, is for benefit of one of the parties. But the seller may stipulate to renew
contract every year in lieu of changing market value of the property, so the contract will be
binding only for a year though the buyer intends to rent for 3 years.
4. Stipulating penal conditions in order to ensure fulfillment of the contract.
Example: if you cancel a banquet hall booking within less than 30 days from the even date, you
are obligated to pay 30% of the total booking fees. To compensate for the loss they incurred.
These conditions are negotiable to mutual agreement.
Eg - On buying appliances the charge of restocking fees (sears - charge 30%) on returned
products. Non-refundable registration fees for a course/ or booking fees is like Bayal urbuun =
down payment and is permissible. It falls under valid penalty. But they cannot take the full
amount of the money for a contact that was terminated by the buyer.
There is difference between penalizing and exploiting. Exploitation is not allowed.
In contracts of exchange money for service you can stipulate condition of reserving part of the
agreed price if the service is not satisfactory (eg carpet cleaning services)
Stipulating cash penalties on late payments is not permissible because its riba.
Invalid Conditions:
1. To stipulate a second contract in exchange for the first one.
Example: I sell you my car only if you sell me your laptop. Rent a house with the condition that
you mow my lawn every week ( this is taking extra money/service)
2. To stipulate conditions that go against the essence of the contract.
Example: I sell you my car with the condition that you cannot take it outside the street, or I sell
you my house if you agree not to change the original paint or I sell/rent you my house with
the condition that I have the right to visit anytime.
Eg - The Rutgers family putting a condition on donating the Busch /Livingston campus, not to
build any building on the private wildlife reserve.
3. To stipulate a foreign condition as a base for concluding a contract. A condition that has
nothing to do with the contract itself.
Example: I sell you the house, the contract is concluded but the actual exchange will take place
when the value goes up 5%., or you sell a car and close the deal but put the condition that the
buyer will receive it when the new model arrives. Home owners association, there is someone
benefitting from it.
CHAPTER 8
ADDING AN OPTION (KHIYAR) IN A CONTRACT
These are additional conditions that can be added to a contract, and will be binding.
Khiyaral majlis
Meeting
Khiyar al shart
Condition
Khiya al ruyah
Viewing
- commodity has
to be specific
not available
for viewing at the
time of the
contract
Khiyar al tayin
identification
Khiyar al ayb
Defect
- The defect
decreases the value
of the commodity
- The defect was
present prior to
the conclusion of
the sale.
- The buyer was
oblivious to the
defect prior to the
conclusion of the
sale.
OPTION OF MEETING (khiyari-majlis)

The choice of continuing or invalidating the contract after it had been concluded while the
buyer and seller are still in the place of the contract.
The place of the contract differs depending on the site where the meeting for the contract took
place. A payment webpage or confirmation page on an online sale is considered a virtual
meeting site. If you delayed accepting the agreement then after sometime like 5- 10 minutes
the session expires.
Example: leaving a store after concluding the transaction nullifies the option of meeting. Like
in final sale or no return policy.
This khiyar can be extended to 3- 7days or any time frame based on the mutual agreement.
For gold and silver trading the khiyar al majlis has to be in the exact same meeting and cannot
be extended.
(al-bayyian bil-khiyar ma lam yatafarraqa) Ibn Umar narrated the Messenger of of Allah
sallallahu alaihi wa sallam said: The parties to sale have an option as long as they have not
parted, except in sale with an option. [Bukhari and Muslim]
Requesting to revoke a contract after it had been concluded and became binding is called iqala
and its not binding on either the seller or the buyer. This is option of revocation of a contract
after it is concluded based on good will, without any return policy. Most stores accept iqaalah
conditionally; they give store credit instead of returning your money. This is again another
type of contract that is binding. They may or may not have an expiration date.
OPTION OF CONDITION (khiyarl-shart)
Making the condition that either of the two contracting parties, the buyer or the seller, has the
choice to invalidate the contract within a specific amount of time, before the contract is
finalized. Eg the buyer puts condition that I will call you to finalize, if I dont call you its
cancelled.
(idha baya ta fa qul la khilabah) the companion Habban b. Munqidh used to be constantly
fooled in business dealings so the Prophet (sallallahu alayhi wa sallam) told him: If you trade,
then say no cajole/laa khilaaba (no pressure on me or dont fool me/ no hidden strings).
[Bukhari and Muslim]
Example: placing a return policy of 90 days money-back guaranteed with no questions asked.
OPTION OF VIEWING (khiyarl-ruyah)
The right of the contracting parties to invalidate the contract upon viewing a commodity that
was not seen prior to the concluding of the contract.
Example: to buy a car over the phone based on a description given to the buyer, he puts the
condition that he will buy/conclude after seeing it if he likes is. Online booking for hotel
becomes binding after you actually see the room
This form of option is greatly disputed among Muslim jurists because it does not make the
commodity clear, hence running contrary to one of the main conditions of a contract.
VALID IF TWO CONDITIONS ARE MET:
The commodity has to be specific
The commodity was not available for viewing at the time of the contract.
Option of identification (khiyarl-tayin) THIS IS THE MOST DISPUTED OPTION amongst the
fuqaha due to ambiguity. The disagreement is whether the option itself is determined or not,
or it has to be a specific known item only.
The right of the seller or buyer to identify one of multiple items (3 and under) of different
values in a contract as the specific commodity to be exchanged.
Example: in a development area there are modular houses with all the accessories, base house
is 280,00 and with all the accessories is 400,000 so if you agree to buy the house with
accessories you have to be specific with what exact additions you are paying for. You cannot
give the money with whatever you choose style. Another example you buy sandwich
(nonspecific) and tell the cashier you choose whatever. The buyer says, Im buying a laptop
this Dell or this Mac or this HP while the prices are mentioned. The sale has been concluded
and is only waiting for execution by selecting one of the three items. Similarly in games if
you win you select any prize from these items, you dont know when you are paying for the
game.
Eg ilmrush card you are paying $580 for as many classes you can take the service they
receive is of the quality class of AlMaghrib, not the knowledge itself.
Option of Defect (khiyarl-ayb)
The right to invalidate the contract upon finding a defect in the traded commodity that was
not made explicit prior to the sale. Unless the products are sold As Is and you have the actual
product in front of you to inspect. To what extent are hidden defects to be tolerated? Eg if you
buy a car 'As Is ( nowadays lubricants and fluids are added so that the engine runs smoothly
for few days and after the effects of these additives disappear the car shows the troubles) you
have the right to return specifically if you demand information from the seller, and they do
not disclose it (in classical fiqh this is identified as bayul musarrah = when a cow that is not
milked for few days to show its full udders and deceive people that it produces a lot of milk)
Valid if three conditions are met:
- The defect decreases the value of the commodity
- The defect was present prior to the conclusion of the sale.
- The buyer was oblivious to the defect prior to the conclusion of the sale.
ACTIVITY FOR CONDITIONS 1. I will rent hall from you if you sell halal food its a valid condition benefitting one of the
two parties
2. Car rental conditions they give the option of filling the tank or they will fill it, if you return
without full tank then they charge you extra for convenience valid option of condition
3. If you sell a house with the condition to use the basement/leave the belongings in basement
for an unspecified time, this is invalid since the full ownership is not transferred; these are
ambiguous terms. What does the buyer do with the goods if the owner does not show up? He
tries to contact him or his relatives/friends, and you cannot sell the goods since you are not
the owner of it. If the original owner does not show up in reasonable time, then you can sell
the goods but it is not allowed for him to take that money, he has to return the money to the
owner. If he sells it under the market value then the buyer is responsible to pay the difference.
The other option is to keep the goods in storage and the original owner is responsible for the
charges. You cannot give it as donation; if you do so then you are responsible to pay the price
to the original owner.
4. If you rent a house and the owner says not to use the basement or one room this is valid
because rent is for the available space that the owner offers.
5. Rent an apartment with the condition that if you stay for 12 months then you get one
month free, this is valid condition.
6. Marriage contract with the condition put by wife that the husband should not marry second
wife the majority of fuqaha say this is invalid condition, but the hanabali school say it is not
invalid but if the man agrees then it is a binding condition.
7. Leasing a car with the condition not to use the trunk this is invalid condition since it is
against the essence of the contract; use of a car means use of the entire car.
8. A masjid buys a property with the house with the condition put by the owner that he will
give the house to them after he dies it is invalid condition. Actual contract should give you
full ownership and the term until I die is an ambiguous term. How can you fix the contract?
Change the contract after taking full ownership and possession of the house, make a rental
contract with the person.
CHAPTER 9
DEFECTS IN CONTRACTS
COERCION
Al-ikrah (coercion) occurs where force (of whatever nature) is used to produce a physical or
legal action. It can be complete (causing threat to life or limb) or partial (causing
inconvenience).
Different formats of ikrah
A. That which invalidates a contract
Example: to force someone at gunpoint to sign a contract of sale against his free will to sell a
property they would otherwise not sell.
If a husband forces his wife to sell the house she received from inheritance at a low price this
will invalidate the contract
B - That which does not affect the contract = emotional eg if you dont buy this house I will not
love you.
The State forces to sell a private property for public benefit (if there are no other alternatives
for the state) this is valid since communal benefit takes precedence over personal benefit, with
reasonable compensation paid to the owner.
Eg of contemporary contracts on ikrah father forces daughter to marry someone, car
insurance required by law, paying taxes.
MISTAKE AND ERROR
(al-ghalat)
It makes contract valid but non-binding, but you can make it binding it by rectifying the
mistake.
Example: to give someone a diamond for a crystal he purchased. If you agree to something
verbally and written agreement has a mistake then it suspends the contract till it is rectified or
redone.
FRAUD AND DECEPTION
(al-ghabnu wal-ghish) this will make the contract invalid.
Example: to buy a commodity extremely overpriced, buying a car As Is = if the owner says
there is no defect in it and then there is a defect detected then it is invalid, but if he says there
is nothing obviously defective but gives you the option of one week if the car breaks down
after one week then he is not liable, but you can revoke the contract on the option of iqalah,
but if the seller disagrees then its his right.
Selling generic products as genuinely name brand is fraud

Selling jewelry 18K as 22K or gold plated as real gold
Cheating in advertisement.
UNFORESEEN CIRCUMSTANCES
(al-zurufl-tariah)
Anything that comes up which would make you unable to fulfill your part of the contract.
It is ethical issue and it is up to the other party to forgive or give extension and relief
Example: getting into war or losing a job after concluding a contract.
You bought the house and it got damaged by tornado.
CHAPTER 10
SALES AND TRANSACTIONS
Definition of sale (al-bay) or trade: The classical definition is: a contract for the exchange of
commodities based upon mutual consent (mubadalah mal bi mal bil-taradi).
The modern definition is: The exchange of a specified property or permissible service for its
like or far a debt to be paid (deferring the payment later, i.e-- buying a book and paying for it
two months later), entailing the change of future ownership (i.e--installment payments, lease
to own scenario), not based on usury, and not a loan (not giving money and taking more
money in return). This has to do with money for commodity, not money for money.
Allah (SWT) made al-bay halal and riba haraam.

The permissibility of sale is clear in the Quran, Sunnah and ijma of muslim mujtahids.
Understanding the sale contract:

1) Its a compensatory contract.
Money paid for the commodity (product or service).
2) The contract has to be legally accepted.
Islamically halal and Islamically permissible to trade. An illegal transaction: buying
pork products and buy gold with a deferred price.
3) Involving at least two contracting parties who are legally competent to carry out
business dealings. For instance, a child cant be a contracting party for a major contract.
4) Commodities come in different types. They can be services provided. Commodities
for services.
Considering the nature of the commodity :

1) Money for an item of value (bayun mutlaq). Exchange of money for a commodity.
2) Money for Money (bayl-sarf). Example: Dollars for Euro, Gold for Silver.
3) Item of value for another item of value (bayl muqayadah). Example: eggs for bread,
apples for oil. This is similar to what we understand as barter trade. Barter trading still exists,
like in craigs list, pawn shops and the Amish people still use barter trade.
**Fact: Do you know that government has the right to do tasir or setting a price limit
during difficult time for the greater benefits of the people?
**Profiting from a business transaction has no limits and is permissible. Sources of

prohibited profit in contracts are:
1) Trading haram items
2) Cheating and lying
3) Extreme deceit
4) Monopoly
Considering the nature of way deciding a sales price

1) Negotiating the sales price without disclosing the cost price (bayl-musawamah).
The bargaining technique--when the price is not set, you can negotiate the price without
knowing the cost of the item. You can absolutely negotiate prices, its halal. Since gold is now
exchanged for some currency, negotiation may be allowed, but ideally it should be based on
market value and weight.
2) Negotiating the sales price after disclosing the cost price to determine the margin of
profit or loss (bayl-amanah). For example, someone is harassing you to lower the price of a
commodity and you disclose the cost price with the intention of having the buyer pay a higher
amount. In this situation, the profit margin is not set. Ex: Youre a seller and you disclose the
cost price as $30, but ask the buyer to buy it for a higher price, in which you are not setting the
profit margin, rather wanting the buyer to name his price higher than $30. The seller is
leaving the profit margin to the buyer.
This comes in four forms:

a) Bayl-Murabahah: Is a sale where the seller names the profit mark-up that he
is applying to the cost price of goods that he is selling and agrees on a sale price with the seller
on that basis. The seller should name him costs truthfully. Example: Seller sets the exact
profit. Seller says he paid $30 for an item, but wants $40 from the buyer. The cost is disclosed
and profit margin is set by the seller. These so-called islamic banks in real estate buy it for
$40,000 and then sell it back to you for $52,000 ($12,000 in profit) and the reason you did not
purchase it directly is because you did not have the money and the Islamic banks act as a third
party. They call this murabahah, but this not really murabahah at all. Its murabahah if you
already own the commodity and sell it with disclosing the cost price and giving the margin of profit. An
example of murabahah is when investment companies purchase cars for $40,000, which are
now under their ownership. People then purchase the cars from these companies for $52,000
and are making installment payments.
b) Bayl-Wadiah: Is a sale when the seller names the loss mark-up that he is
applying to the cost price of goods that he is selling and agrees on a sale price with the seller
on that basis. The seller should name his costs truthfully. You essentially want to get rid of the
product, by telling the buyer up front your cost, but that youre ready to rid yourself of the
product by selling it to them at a lower price. This is permissible and is still considered fair
trade. However, you shouldnt do this with the intention of taking a loss to kill the competition
and make other business go out of business. This is considered unethical.
c) Bayl-Tawliyah: Is a sale where the seller names the cost price of goods that
he is selling and agrees on it as a sale price with the seller on that basis. The seller should name
his costs truthfully. In this scenario, you are not asking for profit, but at the same time, you
dont want to lose. Just pay the cost price.
d) Bayl-Muzayadah or auctioning is a process of selling goods or services by

offering them up for bid, taking bids, and then selling the item to the highest bidder. This is
allowed. The price is not set yet, so the sale is not final and you can negotiate via auction.
However, there should not be much gharar.
Considering the nature or way payment is given:

1) Payment paid and commodity is delivered (al bayl-munajaz aw al-naqd): This is a cash
sale. Money for the commodity at the same time. This is how you should purchase
gold/silver and exchange of currencies (i.e: dollars for euros).
2) Payment deferred and commodity is delivered (bayl-nasiah): You get the commodity,
but payment is deferred.
3) Payment paid and commodity is deffered (bayl-salaam): The cash is given and
commodity is deferred. We use this when we purchase via ebay, online purchases.
4) Both payment and commodity are deferred (bay al-dayn bil-dayn): Trade a debt for
another debt. Both payment and commodities are deferred. This is speculation. An
example of this is in oil purchasing: oil contracts are being sold from companies to
companies, while the oil still remains in the earth. We are not allowed to sell debt for
debt. Another example is: You want to pre-order the new IPAD, but youre unable to do
so, but your friend was able to do so (implication is your friends credit card has not
been charged as of yet) and he agrees to sell you the IPAD before he actually receives it.
CHAPTER 11
PROHIBITED SALES
Prohibited sales are considered illegal for a few reasons:
1) The contract did not fulfill its conditions and legal requirements.
Example: One of the 2 contracting parties is legally incompetent.
2) The contract involves illegal financial commodities.

Example: Such as riba (usury) or gharar (uncertainty).
3) The contract is causing damage outside the contracts limit.

Example: Monopoly of specific essential commodities and sell the items at a high price.
4) The contract is concluded contrary to some other circumstantial laws of Shariah.

Example: Trading on Friday during Jumuah salat (time of jumuah for you in your
area), even if it is your son, your wife, your daughterthe prohibition is the sale itself.
Types of Prohibited Sales:

1) Selling a debt for a debt (bay al-dayn bil-dayn).
Example: You owe Ahmad $100 and Ali owes you $110, so you sell Alis debt to Ahmad
with the extra amount included to remove your liability for his debt.
Example: Credit card companies sell their debt to collection agencies.
2) A conditioned sale (bayun wa shart). The condition benefits one contracting party.
Example: I sell you this phone with a condition that you dont jailbreak it.
3) Two contracts in one sale (bayatani fi bayah).

Example: I sell you this book for $100 deferred until the end of the month. When it
becomes due, the buyer asks for extra time. After the sale has already been concluded,
the seller sells the book again for a higher price.
*A local merchant is allowed to broker for a visiting merchant if the visiting merchant
was familiar with the local market and was familiar with the value of his commodities and
agrees to the service of the local merchant.
4) Selling upon the sale of another person (bay al-rajuli ala bayI akhihi).
Example: Aisha agrees to buy a purse from Fatima for $100. After the sale has been
concluded, Safiyyah offers Fatima $110 to give her the purse, or Hafsa offers Aisha the
exact same purse for $90.
*Auctions are exempt from this prohibition because the sale has not been concluded
yet until the final bid.
5) The resident action as a broker for the visitor (bay al-hadir lil-badi).
Example: Fahad came from overseas to the US with good commodities. Khalid is a local
merchant. He tells Fahad not to go to the marketplace, and he will sell the products for
him. Fahad does not go the marketplace and never knew the exact value of his
commodities in the market. Once the visiting merchant enters the marketplace and
knows the prices, then it is halal.
6) Selling forbidden commodities or services (bayl-muharramat). Haram service.

Example: Selling pork products.
Example: Selling pet dogs or offering fortune-telling services.
7) Selling after adhan of Jumuah (al-bay inda adhanl-Jumuah).

Example: An adult who is obligated to attend Jumuah, staying in the care in the
masjids parking lot buying online using his iPad after the first Jumuah in that masjid
was called for.
8) Selling the unknown or trading uncertainty (bayl-gharar). Based on ambiguity: the

price, description or amount.
9) Dealing with riba (al-taamull-ribawi). Covered later in detail.
Four Main Defects in Contemporary Sales:

1) The contract involves a legally prohibited commodity.
Example: Selling Pork-product based cosmetics.
2) The contract involves the exchange of riba.

Example: Buying furniture with 5% interest for 48 months.
3) The contract contains gharar (or extreme uncertainty).

Example: Buying a sealed container (you know its a laptop, but are unaware of the
condition) off eBay.
4) The contract stipulates conditions leading to a legally prohibited practice.

Example: Signing a contract of sale that includes deferred payments and stipulates
charging for late payment fees.
Four Main Defects in Contemporary Sales:
1. The contract involves a legally prohibited commodity or service. Example: Selling porkproduct based cosmetics, wine or beer, drugs, prostitution, riba-based service, life
insurance, opening a casino etc.
2. The contract involves the exchange of riba. Example: Buying furniture with 5% interest
for 48 months.
3. The contract contains gharar (or extreme uncertainty). Example: Buying a sealed
container off eBay.
4. The contract stipulates conditions leading to legally prohibited practice. Example:
Signing a contract of sale that includes deferred payments and stipulates charging a
late payment fees. Other examples could be conditions leading to riba, or causing
gharar, or forcing someone to sell or taking property through coercion. If the initial
structure of the contract is halaal, yet the conditions are haraam, you have to modify
the contract to make it legally executable.
Penalties (such as late fees) for utility bills are different than those for loans. Utility bills are
charges for a service you use (like water). If you fail to make a payment for a service provided
for you, they will assess a late fee. On the other hand, a late fee on a credit card payment is
haraam because the late fees are being assessed on an interest-based loan; the initial condition,
i.e. interest, makes the contract haraam.
Chapter 12
Explaining Riba and Gharar
Dealing with Riba (Al-Taamull-Ribawi)
The only halal riba you are allowed to use and include in any transaction is when you engage in riba with
Allah.
Definition of Riba
A literal meaning of riba in Arabic is excess or growth. This makes for an interesting
comparison with the word zakah which can also mean growth. Zakah is the only halal
growth you are allowed to seek.
Allah destroys riba and He increases sadaqah. When it comes to giving, if you give 1, you get 10
to 700 times, or even more, in return from Allah. He multiples it however much He wishes.
Eventually, riba boils down to earning money on money. No actual transaction of sale, or trade
of tangible items, or exchange of commodities occurs.
Categories
A riba transaction features one or both of the following characteristics:
A surplus (riba fadl) in the amount of one countervalue over the other in barter transactions of
specific commodities. So, whenever you exchange specific categories of commodities, make
sure you make the exchange equal in a certain way. The shariah has classified riba al-fadl in 6
categories of commodities.
A delay (al-nasa or al-nasiah) in the settlement of debts or loans involving more money than
the principal OR in the settlement of one or both countervalues. This is riba accumulating over
a loan. This is the more prevalent form of riba today.
The Sin of Riba

Allah has mentioned many crimes in the Quran such as adultery, theft and cheating, but riba
is the only sin foe which Allah has declared war against its perpetrators. The seriousness of the
sin of riba and its grievous consequences are indicated in the Quran and hadith as follows:
O you who have believed, fear Allah and give up what remains [due to you] of interest, if you
should be believers. And if you do not, then be informed of a war [against you] from Allah and
His Messenger. But if you repent, you may have your principal. Deal not unjustly and you shall
not be dealth with unjustly.
(al-Baqarah: 278-279)
In 2008-9, when real estate market collapsed and banks started falling apart, you would
literally think of it as a situation of war.
Ibn Masud (radyAllahu anhu) reported that the Prophet sallalahu alayhi wa sallam said:
No one takes too much Riba except that is always leads to utter poverty.
(Sunan Ibn Majah, 2270, Sahih)
On the authority of Ibn Masud (radyAllahu anhu) that the Prophet sallalahu alayhi wa sallam
said:
cursed the one who takes the riba, the one who gives riba, the two witnesses to it, and the
one who writes it.
(Sunan Ibn Majah, 2268, Sahih)
Who consumes riba today? Generally, banks do. Who is the one giving riba? The borrowers.
Who are the two witnesses? Lawyers, accountants, notaries. Who is the one writing it? The
clerks who are giving receipts; they are all involved in this. Todays banking system is based
100% on riba.
Allah says in the Quran:
And [for] their taking of usury while they had been forbidden from it, and their consuming of
the people's wealth unjustly. And we have prepared for the disbelievers among them a painful
punishment.
(al-Nisa 4:161)
Fact: Riba was prohibited in all previous revelations.

Another crime similar to this is wine-making. The Prophet sallalahu alayhi wa sallam forbade it
and he cursed 6 kinds of people connected with it. Wine (rather khamr) has been called umm
al-kabaair the mother of all evils. A drunkard does all other sins while drunk lie, cheat, kill,
fornicate, drugs, and lots of other evils just by consuming wine. Riba is similar to that but
much more dangerous. The effect of wine is limited to the one who is consuming it, but the
effects of riba can plague an entire society.
Riba in Arabia in the Time Pre-dating Islam:
It was practiced in two forms:
Riba in sale and trade
Riba in loans
Riba in Sale and Trade
The Ribawi Items
The items to which the riba prohibition applies are termed the ribawi items. These are
defined in the hadith reported by Abu Said al-Khudri (radyAllahu anhu) that the Prophet
sallalahu alayhi wa sallam said:
Gold is to be paid for by gold, silver for silver, wheat by wheat, barley by barley, dates by
dates, and salt by salt, like for like and equal for equal, payment made hand to hand. He who
makes an addition to it or asks for an addition deals in riba. The receiver and the giver are
equally guilty.
(Sahih Muslim, 2791)
Fact: Six ribawi items are defined here. They include monetary items (gold and silver) and non-monetary
fungible items (the remainder), although it should be noted that all six items have the capacity to be used
as money. For example, salt has been used as a form of money in Egypt, Ethiopia and Rome, while barley
fulfilled this function in ancient Sumeria.
They need to be exchanged for exact same amount and given at same time, and not to be given
in surplus. 10 ounces of gold should get you 10 ounces of gold in return.
What if you give 10 ounces of gold for jewelry to a jeweler and then, in return get 7 ounces of
beautifully crafted jewelry of gold? No, their weights must be same. Raw gold and crafted gold
have to be exchanged in exact same amount. However, in the US they have already priced gold
jewelry. Islamically, you pay by the weight; that is how you solve the problem of buying
jewelry.
How can one make halal exchange in these 6 categories?
Categories and Species of Ribawi Items
CATEGORY 1: Monetary Items
SPECIES: Gold and Silver (and what replaces them of paper money and currency)
The reason for riba: Monetary purpose (mutlaq-thamaniyah) The value of commodities
Question arises: Why did Allah forbid exchanging with riba/surplus on these two items?
Ulema argued on why this was done. Back in the day when people used silver and gold as
currency, they valued different commodities using these two. If they wanted to buy bread,
they would say how much? They were told 3 silver coins, or something else for 5 gold coins.
Today, paper money has replaced gold and silver as our currency. So, whatever has replaced
silver and gold as currency will be included in prohibition for riba.
Notable exception is the position of Shaykh al-Uthaymeen rahimahullah. He maintained that
when it comes to exchanging paper bills for coins you can fluctuate the quantity, and he was
very firm on this position.
Question: If a creditor loans $100 to someone but accepts $95 in return, has the debtor earned
riba in this case? No, because the debtor did not get $5 extra, just $5. Riba happens on the money
of the creditor, not the debtor. The rest is charity, which is permissible. If the creditor were to
receive $105 back in return, then that would be a transaction involving riba.
How about exchanging plastic cards, like credit cards? Are you allowed to take 2 credit cards in
exchange for 1 credit card? The answer is, yes! Credit cards are not considered values of
commodity. The same goes for exchanging checks, as long as, the money being offered is the
same as the money being received by each party.
CATEGORY 2: Food Items

SPECIES: Wheat, Barley, Dates, Salt
The reason for riba: The ulema argued over the reason for this prohibition as well, and arrived
upon three distinct possibilities
1. Food item (taam): If it is the food item itself, then these 4 would not be unique to other
foods. Why not include meat or vegetables to this category?
2. Sold in weight or volume (mikil aw mawzun): If the consideration is weight or volume then
other items can be included in this category, such as rice, which is still food and can
also be measured in terms of weight or volume.
3. Staple food (qut muddakhar): Staple food, which can be saved for later, i.e. non-perishable.
The most appropriate reason for prohibition appears to be last one, i.e. it being a staple food.
Can you make qiyaas on other items in use today? When the Prophet sallalahu alayhi wa sallam
counted these 4 items, did he mean these 4 items only? Many ulema maintained that it is
limited to these 6 items only. In their view, there is no riba when exchanging (say) apricots.
Similarly, there is no riba in exchanging curry, or saffron, so you can exchange different
amounts for those items.
Rules of Exchanging Ribawi Items

CASE ONE: Same category and same species
Rule:
Same quantity for same quantity
At the same sale meeting
Hand in hand
Example 1: Gold for gold

10 oz. of gold bracelet for 10 oz. of gold rings.
The exchange should not be delayed from the sale-concluding meeting (i.e. after
finalizing the sale, the seller and the buyer cannot agree on next day for delivery).
The exchange should be immediate between the contracting parties at the same time.
Example 2: Dates for dates
One cup of Medjool California dates for one cup of Ajwah of Madinah dates.
The exchange should not be delayed from the contract session.
While exchanging gold for gold, or dates for dates, there has to be same quantity on both sides,
at the same sales meeting, exchanging in same session and it has to be done hand in hand. So,
if I am buying 2 boxes Medjool dates from California for 5 boxes of Madinan dates as an
exchange, I cannot do that because, even though the exchange occurs hand in hand and in the
same meeting, the quantity is not same.
CASE TWO: Same category and different species

Rule:
Quantity may vary
At the same sale meeting
Hand in hand
Example 1: Gold for gold

10 oz. of gold bracelet for 30 oz. of silver necklace.
The exchange should not be delayed from the sale-concluding meeting (i.e. after
finalizing the sale, the seller and the buyer cannot agree on next day for delivery).
Example 2: Wheat for dates
Two tons of wheat for one ton of Ajwah of Madinah dates.
The exchange should not be delayed from the contract session.
The quantity can vary; you can fluctuate it, but it has to be concluded in one meeting, and the
exchange should be hand in hand i.e. no deferred delivery.
Is it permissible to exchange 10 ounces gold bracelet for 25 ounces silver necklace? Yes, as long
as it is done in same meeting, hand-in-hand. It has to be done by weight. If the contracting
parties know the weight for sure then it will be ok. Same thing when it comes to dates and salt
5 tons of packaged dates with 15 tons of packaged salts, as long as the exchange is immediate
and at the same time.
Question: While exchanging gold for silver, does the dollar value of both commodities need to
be the same i.e. $1000 worth of silver for $1000 worth of gold? No, you can exchange 5 ounces
of gold for 100 pounds of silver? Quantity can vary since they are not the same species. 5
ounces gold might cost 50 dollars, but 100 pounds of silver may cost $1000. Yet, you can do that
exchange qty can vary, as long as the exchange is done hand in hand.
Similar to this example is currency exchange: you exchange values of commodities (such as
dollars for euros) when you do money exchange, provided it is done at the same place, hand in
hand. Quantity can vary; you can make a profit by finding the best exchange rate for your
dollar.
CASE THREE: Different categories and different species

Rule:
Quantity may vary

Sale may be concluded at different sale meetings
Exchange of one or both items may be deferred
Example 1: Gold for dates

10 oz. of gold bracelet for a ton of dates.
The exchange may be delayed from the sale-concluding meeting (i.e. after finalizing the
sale, the seller and the buyer can agree on a different day for delivery).
The exchange does not have to be immediate between the contracting parties.
The rule here is that once you cross categories, everything becomes permissible. So, the
quantities involved can vary, you can delay sale contract and may also defer exchange of
commodity. Say, I want to buy 10 tons of Madinah dates; can I do contract over the phone?
Yes! Can I pay $5000 for this sale? Yes! Can I make the contract but delay payment until the
dates are delivered to me? Yes, you can do all of that. It is because the exchange is of different
categories over different species. Another example is food stamps. For a food stamp card, you
can buy other items than food if they allow you that.
Riba in Loans
Scenario 1: Riba on mature loans
When the loan is given with a final due date. The Arabs used to say: Give me some more time
and I will increase your return.
Lets say someone takes $1000 from you and the deadline for return is 2 months. After 2
months, he is supposed to pay back $1000, the exact same amount. However, he comes at
deadline time and says I do not have the money and requests an extension. If you say that it is
fine as long as he agrees to pay you 5% more than the principal then this is the riba that the
Arabs used to practiced; riba nasiah. Similar to this is the American Express card: the charge
card has no limit. If you make a charge and pay it in full, they charge you no interest. But, once
you default in making a payment, they start charging you riba right away.
Scenario 2: Riba on deferred loans

Practiced in two ways:
Loans whose principal and interest are postponed for a specified period of time. In this
case, there is a condition of increase right at the time of concluding the loan contract.
Loans whose principal is delayed for a specified period of time, usually the end of the term,
and the interest installments are paid monthly.
Riba on deferred loans occurs in two ways at the time of taking the loan, the contract
stipulates that you will pay interest from beginning; and the second form is when the contract
stipulates that you pay riba now and pay principal later. Most of credit cards fall under the
second form, other than American Express. What about bank loans (mortgage, for example). It
is classified as a deferred loan you take a $2000 loan and you pay it on a monthly basis.
Student loans can be both, depending on whether they are subsidized or non-subsidized. They
inform you that if you do not pay it back in full, in 6 months, they will start charging you a
very high rate of interest.
Another form of loan is a car loan. What form of loan is that? That is the second form. Usually
the borrower starts paying riba before principal. They will divide the money you are paying
based on that. Some of it you pay towards the principal and some towards the interest. Once
the interest has been collected, you start seeing a deduction in your principal. Business loans
from bank are the same thing.
Another form of loan is overdraft on a checking account. If you withdraw more than your
principal, the bank will charge interest on that amount.
Recognizing Riba in Loans

It is widely reported from earlier Imams and most authentically from Ali ibn Abi Talib
(radyAllahu anhu) that he said: Every loan which brings some kind of benefit to the lender is
riba.
While any benefit contracted in favor of the lender at the time a loan is made is regarded as
being usurious in Islam, even where that benefit is small in amount, the payment to the lender
of a benefit after the loan has been contracted is discouraged or prohibited.
Tajir says: Bay ul inah is said to take place when a commodity is sold to the buyer with the money to be
paid in the future and then the exact same commodity is repurchased from the buyer with a lesser
amount of money paid immediately.
Anas ibn Malik (radyAllahu anhu) reported that the Prophet Muhammad sallalahu alayhi wa
sallam said, When one of you grants a loan and the borrower offers a dish, he should not
accept it, and if the borrower offers a ride on an animal, he should not ride unless the two of
them have been accustomed to previously exchanging such favors mutually.
A subtle form of riba in loans is when the creditor asks for a favor as part of that loan. So, if a
borrower asks for a loan and the creditor agrees provided the borrowers son can come and
mow his lawn then this is not acceptable. They can make this condition part of a separate
contract (say, the borrowers son will be paid a small amount for his service by the creditor) but
not the original one without it becoming riba.
What about reward points earned for purchases made on a credit card? When it comes to
points, it all boils down to whether you need the credit card, not want it. If you really need it,
earning points in this case are ok, coming from the lender, not the borrower.
On the other hand, if the borrower offers a token of appreciation to the creditor at the time of
returning his loan then that token is fine, provided there was no such expectations on behalf
of the creditor nor was there a condition stipulating that in the contract to begin with.
Common Misconceptions About Riba
o Misconception: The Prophet sallalahu alayhi wa sallam did not live long enough to interpret
the verses which prohibit riba. The verses are therefore mutashabihat (unclear) and cannot
be the basis of a ban.
Clarification: The reality is that the ban on riba was revealed in 2 AH, at around the time of
the Battle of Uhud. Sufficient time existed between then and the Prophets death to fully
explain the implications of it. The verses in Surat al-Baqarah reiterate the ban on interest
and enforce a retrospective ban on all previous loans and any interest due at that time.
o Misconception: Riba refers only to usurious loans on which excessive interest is charged.
Modern banking loans do not fall within this definition.
Clarification: This argument relates to the verse in Surat Ale-Imran which states,
O you who believe, do not consume riba, doubled and redoubled. And have taqwa of Allah
so that you may be successful.
(Ale Imran, 130).
However, the rules of tafsir do not permit us to interpret the verse as confining riba to
occasions in which principal is doubled or redoubled. Rather, the verse highlights a
consequence of riba. The position that any benefit to the lender is indeed a form of riba is
confirmed in Surat al-Baqarah, where Allah states that but if you repent you shall have
your capital sums.
o Misconception: The Quran only bans riba on consumption loans, not on loans for
commercial purposes.
Clarification: The ban in the Quran is an absolute ban on riba. No distinction is made
between consumption and production loans. Neither does the Sunnah of Muhammad
sallalahu alayhi wa sallam make any distinction. Proponents of this idea have argued that
commercial loans were not in existence during the time Prophet sallalahu alayhi wa sallam,
hence they are not covered by the ban. However, commerce and the financing of
commerce were both common in Arabia at the time, and commercial loans would not
therefore have been alien to the Arabs.
o Misconception: Only ribal-jahiliyyah was banned by the Quran, and not the interest
present in todays commercial transactions.
Clarification: Ribal-jahiliyyah relates to a practice whereby a loan was advanced, or a trade
debt was created, for a certain period with no riba charged. If, at the end of the period, the
capital had not been repaid, then the loan would be rolled over for a further period and
riba would be applied. Those arguing this position believe that because modern
commercial loans specify interest rates from the outset of a transaction, they do not fall
within the ambit of ribal-jahiliyyah. However, the ban in Suratl-Baqarah does not specify
any such exception and none is evident elsewhere in the Quran or Sunnah.
Selling of the Unknown or Trading Uncertainty ( Bayl-Gharar)
In Arabic, the root of the word gharar, appears variously with the meaning of fraud, deception,
delusiveness, peril, uncertainty and fallaciousness.
As Allah says in Suratl-Hadeed, 20
The life of this world is only a deceptive pleasure

-
Ghuroor in this ayah means deception.
Gharar is therefore a deceptive transaction or any transaction that involves uncertainty. The
most common translations for gharar are deception and uncertainty. Deception implies an ill
intention. However, gharar is not based on intention and therefore, uncertainty is an
important translation. If there is any uncertainty in a transaction, it is considered as a
deception by default.
The Prophet sallallahu alayhi wa sallam forbade against the sale by the stone and from the
sale based on uncertainty.
(Reported by Muslim)
The Sale by the Stone: A customer pays upfront, and is then given a stone to toss on the items
on display. He is, then given whichever item that the stone falls on. Even though the customer
is able to see all of the items, and knows that he is getting one of these items for sure, it is still
not allowed.
In its financial application, it is sometimes defined as deceptive uncertainty, indicating that
the one who practices gharar deceives or defrauds through the use of uncertainty, although it
is more commonly rendered as uncertainty only. It is also known as speculative
transaction.
Kamali summarizes the general position on gharar in sales contracts as follows:
In a contract of sale, the word gharar often refers to uncertainty and the ignorance of one
or both parties of the substance or attributes of the object of sale, or of doubt over this
objects existence at the time of sale. Gharar is, however a broad concept, and may carry
different shades of meanings in different kinds of transactions.
(Kamali, Mohammad H., Islamic Commercial Law, 2000, p. 84.)
The Essence of Gharar:
Gharar Sales are of Three Kinds:
1. That which does not exist
(Which involves uncertainty over the existence, or uncertainty over possession of the
subject matter)
Possession takes two forms:
a. Physical possession is evident where the seller physically possesses the object of sale.
b. Constructive possession exists where an individual does not hold an asset in his
physical possession but does legally own it and is therefore responsible for the risks
pertaining to that asset. Possession of an asset is normally determined to custom.
Examples:
Multi-year contracts on crop sales.
o Crops are not allowed to be sold until they have just formed into the fruit or
vegetable or grain. At this stage they will be green. If they are sold in this
stage they need to be harvested immediately since the price will change if
they are left to become ripe. If the crop is sold just before it is about to
become ripe it is allowed to delay the harvest.
Buying horse breeds before they are even born.

o Buying the offspring of an imported Arabian horse for two or three
generations. This is haram.
Selling commodities online while it is still on the ship in the sea.

o Selling an item before it is even manufactured.
o Buying banana from Sudan before the season.
o In the case of commodities being on a ship, you do not physically have
position of them as yet.
2. Undeliverable commodity
(Which involves uncertainty over availability of the subject matter)
Examples:
Selling the fish in the sea.

o The customer pays for fish, and they give him a fishing rod to go fish in the
sea. This is not allowed since the customer paid for a fish, and he should
receive a fish.
o If a person pays for the service, i.e. to go fishing for recreation, this is
different and is allowed. The service being rendered here is a place for the
person to fish.
o Contracting on fish is allowed as soon as the fish has been caught and in the
boat.
Selling crude oil while still in the earth.

o This is the main reason for the absurdly high prices of oil today.
o Many of these contracts have already been concluded for the next hundred
years and the oil is still safely in the ground.
o It is only allowed to sell the oil when it is out of the ground and in the
containers. It is now deliverable.
3. The Unknown
Examples:
The seller says, I sell you one of my cars.

o This is not allowed. One of the cars has to be specified.
Playing carnival games to win a mystery prize.

o If there is no money involved, this is allowed.
o If a person pays for the chance to win this mystery prize then this is not
allowed.
Categories and Rulings of Gharar:

1. Extreme Gharar That which overwhelms a contract so that it becomes a dominant feature
Ruling: Prohibited Unanimously.
Gambling, lottery and similar games are prohibited due to the extreme gharar they involve.
-
In gambling a person pays $5 for a ticket hoping to win $600Million. There is no basis
for winning other than random chance.
Examples:
Selling fish in the sea and the bird in the air.

Selling a house before it is even built.
Raffle games.
2. Minor Gharar That which is outweighed by a greater benefit

Ruling: Permissible unanimously
-
Minor Gharar is forgiven because you cannot be 100% exact.
Examples:
The exact weight in food boxes

o When buying a box of dates it says 2lbs on the box. However if you were to
measure it with a scale you would always be off either you will get more
than 2lbs or less. This is permissible, as long as there is not a big difference
between the advertised weight and the actual weight.
The stuffing in furniture

o When buying a dining table, one does not expect to have the bottom of the
table finished. This is gharar but it is forgiven.
o A person does not usually care about the stuffings inside the furniture as
long as it feels good. This again is forgiven.
The ketchup on your burger!
3. Medium Gharar
Ruling: Disputable.
Measuring gharar is based on custom.
Examples:
Buying crops before they show sign of maturity.

The dispute here is over the meaning of maturity of the crop. What determines the
maturity of corn crops? Once the sign is seen the sale can take place. It is not
allowed to sell crops while they are still blossoming.
Priceline?!
o With Priceline you input all of the information that is relevant to your
search and then the website will conduct the transaction on your behalf.
o What if you purchase an airline ticket and then find out that there are two
stops on the way. This is a hardship but it still gets you where you wanted to
go.
o Some scholars considered this as gharar and not allowed and others say that
it is allowed because of the needs of the people.
All you can eat deals

o The gharar involved here is that you do not know how much food you will
end up eating.
o Some scholars have considered this to be haram and others have allowed it.
o Sh. Yasirs position is that it is medium gharar, but allowed. However, eat
responsibly.
Other Examples of Gharar:

o Games where you play for the chance to win a prize. This is not allowed since you are
actually paying for the chance to win or lose and chance is not a legitimate commodity
in Islam.
o Paying to enter Six Flags or any other theme parks. This is medium gharar since you
have paid for the opportunity to ride the rides. You might end up riding all of them or
some of them or none at all. It is not fair that some individuals ride all of the rides and
others are not able to do so. In the end, you are paying for a service that is not clearly
measurable.
o A basketball tournament.
-
If all the teams pay an entry fee that is collected and the total is given to the
winning team, this is gambling and is haram. To remove the haram element
from this scenario a team that does not pay the entry fee and has the same
opportunity to win all of the money should be allowed to play.
If the teams pay an entry fee and a portion is given as a gift to the winning team
this is allowed.
o Raffles If everyone pays to enter the raffle this is gambling. To ensure that the raffle is
-
not a gamble, individuals who do not pay should be entered into the raffle.
Some disputable sales due to gharar:
Bay al-juzaaf or the sale of a certain amount of quantity without being measured.
Examples:
o Buying furniture from a school auction. There are some good furniture and
some bad ones but you do not know how many of each and how many in total.
o Buying in bulk from a flea market.
o Buying baskets of fruits, while you do not know how many fruits are there.
Ruling: Most of the scholars allow Bay al-Juzaaf in the insignificant amounts such as a
couple baskets of fruits or a basket of individual cosmetic items. However, they do not
allow this type of transaction in regards to large quantities such as the entire contents
of a shipping container.
Note: Buying the contents of a storage unit, such as in the show Storage Wars, is not
Bay al-Juzaaf since the bidders are not even allowed to see the insides of the unit.
Bay al-urboon or the down-payment sale.

Examples:
o Renting a hall and paying 10% down payment. In the case where the use of the
hall is no longer needed the 10% is lost. This transaction contains gharar because
the Management of the Hall is charging you for an assumed loss of business
because of your reservation.
Ruling: Many scholars including Sh. Yasser believe that this transaction is allowed.
However, this also depends on the amount of down payment involved. Unreasonably
high down payments are problematic.
Bay maa laa yumlak or selling what you dont own.

Examples:
o Being a broker for a company. There are two scenarios here:
The company gives you a catalogue through which you elicit sales. For
each sale you receive a commission. This is called Samsarah and the one
who does this is called a Simsaar and this is acceptable.
If there is no contract between you and the company but you elicit sales
and then order from the company, this is Bay maa laa yumlak.
Bay maa lam yuqbad or selling what did not fully come into the possession of the seller.
Examples:
o You have ordered a shipment of Hijaab from Turkey and it is in transit to New
Jersey. Selling the Hijaab with this knowledge but not having received them as
yet is Bay maa lam yuqbad.
Ruling: Highly disputable. It is better to ensure that they are in your possession before
eliciting any sales. This is in order to prevent any problems. It is possible that customs
does not accept your shipment.
Part Four: Partnership Contracts

Chapter 13
Partnership (Mushaarakah)
-
Partnership is one of the Islamic solutions to Riba and Gharar.
Partnership comes in Two Forms:
Contractual partnership (sharikatl-aqd)

This occurs when individuals pitch in money, effort, expertise, etc. to establish a
specific business. This is based on agreement and contract.
Ownership partnership (sharikatl-mulk) which is sometimes also called coownership.

Example:
o If the Father of 3 individuals passes away, these three will become co-owners in
any properties he left behind.
o It is possible to enter ownership partnerships with non-relatives. This is seen in
individuals owning condos. All of those who own condos in that building are coowners in the building since you cannot separate a condo from the building.
General Definitions of Partnership

Mushaarakah is derived from the Arabic root very shaaraka which means to jointly
participate.
Partners can pool together the following assets:
Money capital (all scholars agree on this).

Example:
o The stock market.
o Five individuals pitch in money to form the capital to start a business.
Credit worthiness (termed sharikatl-wujooh), accepted by some scholars.

o This is where one individual uses his acquaintances or status to secure capital.
Example:
o Opening a McDonald franchise. You will be using their name and status.
Labor (termed sharikatl-abdaan), accepted by most scholars.

Example:
o A startup landscaping company where everyone participates in the labor.
o Shoveling snow.
General Conditions in Partnership Contracts
Property in the possession of any one partner is considered a trust; hence, he or she is
not responsible for the destruction of such property except if the destruction was due
to negligence or breach of contract.
Property in capital partnerships is to be mixed, hence contribution of two houses to a

partnership for the purpose of renting is not permissible.
o All of the money contributed needs to be together. It is not allowed to wait until
there is need to add your money capital.
o All of the capital needs to be in one account for everyone to be able to work
together.
The contribution of partnerships capital is monetary form is acceptable to all jurists

and obligatory according to the Hanbalis
o The majority of jurists allow a partner to contribute products or items to the
business. This might include desks and computers, etc.
o The Hanbalis hold that all partners must contribute money, which will then be
used to secure the required products.
The partnership capital must be present at the time of trading (but not necessarily at
the time of contracting the partnership), hence each partner can agree to contribute
$1000 tomorrow morning.
o The money does not need to be made available at the signing of the partnership
contract. However it needs to be there when the company is ready to start
operating.
Profit-sharing ratios are to be defined precisely as a proportion of profit, but

specification of a fixed or minimum amount of profit for one or more partners is
prohibited since this would contravene the riba prohibition.
o None of the partners is allowed to receive a fixed amount. If this is allowed,
during good times this individual will be receiving less than his share and in bad
times he will be receiving more than what he should get.
o It is not allowed to specify a percentage of sales for any of the partners, since
they would no longer be sharing in any losses incurred by the company.
Imam Malik and Imam Shaafii state that the return received by the partners in a
Mushaarakah must reflect their capital inputs, so a partner who has contributed 20%
of the partnership capital must receive 20% of the profits made by the partnership.
Imam Ahmed believes that the ratio of profit-sharing can differ from the capital
invested with no restriction.
Imam Abu Hanifah appears to take a middle view, namely that the ratio of the profits
may differ as per the agreement of the partners; however, a sleeping partner
cannot receive a percentage of profits in excess of the percentage of capital
invested. All schools agree that losses must be shared pro-rata to capital invested.
The partnership terminates when any one partner withdraws, dies, becomes insane or
apostates, but, in a ruling that greatly facilitates modern day partnership activities, the
Hanbalis allow the continuation of a partnership by the remaining partners in the event
of the withdrawal of one among them.
The majority of jurists see partnerships as a non-binding contract, hence any partner
can notify others of his or her intention to withdraw and then do so.
o What was agreed to in the contract is binding but staying in the partnership is
non-binding, unless there is a condition in the contract that states that you are
not allowed to dissolve this partnership before a certain amount of time.
o If a person must break the partnership before the specified time is up, this will
need to go into arbitration.
o If a partner withdraws the company is dissolved. All of the assets will be
evaluated and either sold in the market or the other partners will buy out the
share of the withdrawing partner.
o If a partner dies the company does not necessarily need to be dissolved. The
inheritors will become partners into the share of deceased.
Upon termination, if the assets of the partnership are entirely liquid capital, it is simply
distributed pro-rata to the capital account of the withdrawing partner.
o If the withdrawing partner contributed 2/3rds to the company he will receive
2/3rds of the liquid capital, even if the agreed upon profit-sharing was 50-50.
Different Forms of Partnership
Sharikatl-Inaan or Anaan
Inaan is an Arabic word that implies control in the same sense that reins control a horse.
Its use in the term sharikatl-inaan signifies the fact that control of a partnership is
exercised by all of its partners, so limitations exist on the activities of partners when they
act as agents of the partnership.
Sharikatl-inaan is therefore often translated into English, as a limited partnership, but

the term restricted partnership, is perhaps better.
Sharikatl-Mufaawadah
Yufawwiduhu means to delegate (to another or others).
In mufaawadah partnerships, each partner is a guarantor for all of the others and is
therefore personally liable for all debts incurred by the others in the course of their work
for the partnership. However, partners are not responsible of the transgressions of other
partners towards a third party, or transgressions committed by them outside the
partnership.
Sharikatl-Wujooh
In shariaktl-wujooh, two or more partners use their credit-worthiness as a basis for
engaging in business.
Sharikatl-Abdaan
In sharikat-abdaan, two or more individuals agree to work together in a trade or business
and share profits and losses according to the contractual agreement.
o Some of the scholars have a problem with Sharikat-abdaan because there is no way
of measuring the amount of work done by each partner.
o However, the majority of the scholars allow it.
Chapter 14
AlMudarabah
A partnership may be effected as a mudarabah also known as qirad, or silent partnership,
between a rabbl maal (the investor as silent partner), and a mudarib (the entrepreneur as the
executive partner) who together share profits in a pre-defined ratio.
The investor is seen as contributing capital, while the entrepreneur contributes labor and has
full agency rights over the capital. The term mudarabah indicates a sharing of profit.
Example: The Islamic bank of Dubai invested in the Dubai airport. The money is coming from
average investors that put their money in the bank. If the bank collapses, your money doesnt
collapse because you have a tangible asset.
General Conditions in Mudarabah Contract
-
The rabbl maal is regarded as initiating an agency in which the mudarib acts as an
agent.
o AlMudarabah requires 2 contracting parties, and investor (rabbl-mal) and the
entrepreneur (mudarib)
AlMudarib is given the money and he/she does all the work. The
investor gives the money, and at the end they share the money by ratio.
o Vast majority of opinion is that it is free decision on the ratio.

o Rabbl-mal is the silent partner and AlMudarib does all the work.
o How long does this stay? For however long they wish, and it can be more than
one investor for business.
o Shark Tank (the TV show) demonstrates exactly what almudarabah is.
A man had an idea of nose plugs for people that live in dusty countries
and the investors were willing to invest the money. So they are rabblmal, and the guy with the idea is almudarib.
It is not required that both parties be Muslim
For some jurists, the mudarabah can be restricted (mudarabah muqayyad) if the rabbl
maal wishes (so that limitations are placed upon the activities of the mudarib). But this
arrangement is not accepted by the Maliki or Shafii schools
o Conditions:
The mudarabah should not put limitations on the mudarib.
They can do what they want with the money as long as it has a
benefit for the business. You cannot buy a fancy car to impress
your clients. If the deal doesnt go through, then this can be
classified as negligence.
The majority of the fuqaha said he can use the money in any way for the
benefit of the partnership.
It is not permissible to live off the money of the investors.
Taking the money from someone as the mudarib, you cannot hire
another mudarib to work on this business.
There should be no fixed salary from these businesses. It should be a

ratio so that you share the profit and the loss. This is the only fair way of
dealing with these partnerships.
What if it is vague? It is not acceptable. The terms have to be

clear.
When rabbl-mal invests the money, and then the mudarib makes the
business deal, the profit is shared as well as the loss. The capital must be
returned to rabbl-mal and then split the profit. If the business loses,
then the mudarib returns the rest of the capital and he/she does not
have to pay any of the loss; he/she has lost time and effort in this
transaction.
Who has the responsibility that the money is spent in the halal way? The
entrepreneur is responsible. The investor should make sure that the
money is spent in a halal way.
The purpose of the mudarib is to make a profit.
Is this riba? No because hes making money on assets, not on the

money itself. The mudarib risks losing money. Riba is an added
amount of money on the loan.
If a mudarib receives money from an investor, does he have to ask where

the money is coming from? No, even if he borrows the money from
someone else. If he loses the money, its not the mudaribs fault. Its the
investors problem.
What if you know its coming from a non-halal source?

o If a parent deals with riba, and then they passed away, the
money comes to you from halal means, so this is halal for
you.
What if you have dealt with riba, what do you do? Try to give away from
your money as much as you can, make tawba, and dont indulge in it
again. You do not have to give all the money away because it may be
difficult for you.
Can you buy a stolen product? If you know, you should block the means
to evil. You shouldnt encourage these kinds of actions.
If someone wins the lottery and then they gift you with some money, the
money is halal for you. But you should not ask for it.
Maqam elwara- being careful with the transactions so as to not

promote evil.
The man that sells grapes:
Some fuqaha said he should sell to the people that they know will
not make wine out of it (Maliki and Hanbali)
Others said that YOUR transaction is halal, but whatever they do

with it, its not your business. (Shafiee)
Chapter 15
Other Contracts
Security Contracts:
Security contracts (insurance) are referred to in Arabic as Uqud al-daman or Uqud al-amaan.
Come in different formats.

o Rahn (Pawn): Selling your watch for cash money, and when you go back to get
it, you pay the same amount to retrieve your watch. This would be a security
that you will pay the money back. Giving extra money would be considered riba.
The purpose is to secure your rights (haq) and your money.
If someone wants to buy a house, you can pay for the house, and put a
loan on the title until they pay you back the full amount. This rahn is
now a security that you get your money back in some way, whether you
sell it or they actually pay you the full amount.
In surat albaqarah, it says if you were on safar, and you want to do

transactions, then take a rahn until you come back.
Kafalah (Guarantee):
o Warranties are considered a Kafalah.
o There is a limit of gharar because you dont know exactly what will happen to
the product. Contemporary scholars said that if the retailer or the manufacturer
of the product, then this kafalah is ok. If it is from a thirds party, then you are
not allowed to buy it, because theyre gambling on your purchase from the
retailer.
o A co-signer is also considered a guarantee or a kafil. The reason for this is
because if one person doesnt pay, then the other is guaranteed to pay.
Shufah (Pre-emption):
o Exclusively for real estate.
o To remove hardship. Removing hardship is the main principle of Islam.
o So when you sell anything, you should see if there are anyone (attached to this
piece of land) is able to buy it. If they cannot then you are allowed to sell to
others.
o This contract is ONLY on non-movable items.
Wakalah (Agent on behalf of an investor or partnership, protector):

o Alwakalah comes in two parts:
Full wakalah: giving the person full power of attorney searching and
making the deal.
Partial wakalah: giving the person a limit to doing the search but not
making the deal.
One day, the Prophet (saws) sent a man with two dirhams to buy a goat.
So he went to e market place and bought 2 goats for two dirhams, and
then he sold one of the goats for 2 dirhams. He then returned to the
Prophet with 2 dirhams and a goat.
This man was working as an agent for the Prophet.
Hawalah (transfer of liability for a debt):

o It is a non-binding contract.
o A debt is settled through a third person. But in this case, the debt is moved from
one person to another. But no extra money is allowed to be taken because then
it will be considered riba.
o The hawalah moved from one person to another.
Contracts of Charity:
Qard (loan): doesnt have to be money. It can be a car. You have to bring it back the
same way you took it. If something happens to the qard, then you must pay the price of
the item.
Hibah: Not expecting anything in return.

o Binding contract, you have no right to withdraw and take the gift back.
o The Prophet (saws) said a person that gives a gift and asks for it back. It is like
a dog that vomited and then went to back to lick it.
If they return the gift themselves, you shouldnt take it. But if they insist
then it would be ok to take it back. Some fuqaha said you shouldnt take
it at all and give it to someone else.
o During an engagement, significant gifts like a $5k diamond ring; its usually
given towards the mahr. If the engagement breaks then the guy has the right
to ask for all those gifts back.
Waqf:
o Giving a gift for the sake of Allah (swt)
Having a piece of land that you might not use at all, so you dont it to the
masjid for the sake of Allah (swt)
Giving the ownership for the sake of Allah (swt)
Insurance is all based on gharar and chance.

o All types of insurance are haram, except the daman al-ijitimay (social
security).
A pool of assets that is collected by investors, towards the benefit of

their members. It can be invested in something like the stock market, or
used as a mudarabah. If someone is hurt, then they can use the money
from that social security to pay for medical needs. However, the current
social security policy is all based on gharar, it is based on chance.
Car insurance is ok because it is the law. For coverage, you should get
that which is not expensive.
Most insurance issues are dealt with case by case because there is no one
answer that can cover all the cases.
PART FIVE: The Fiqh of Modern Events (Fiqh AlNawazil)

Chapter 16
Introduction
The issues that have happened in recent times need the fuqaha to come to an ijtihad about the
problem.
Definition:
An-Nazilah (pl. nawazil): what comes down and befalls
Technical: it is a new contemporary issue that requires a fiqh opinion based on ijtihad
(reasoning).
What Are the Aspects of Nazilah?
Real and present: Asking questions like what is the hukm of sending a commodity
through teleport? When this happens then you can look for an answer.
Sometimes there are things that are really common and need attention.
Taswir: taking a mental picture of what the issue really is.

o For example, a person that is getting money from an ATM machine. You should
start asking all the questions to help you get a mental picture of what is going
on so that you can use your knowledge and come up with a solution.
Main purpose is that you want to find a fiqh verdict to a fiqh issue. So you need a very
clear mental picture of what the issue is so as to find the correct fatwa.
Stem cell research is new. So is it halal?
What is the difference between the capitalist system and the Islamic system?
The capitalist system is based on demand.

o You can make life insurance against someones life and put yourself as the
beneficiary. This is because the market demands it.
o Whatever the market allows you to do, even if it is unjust.
o There are insurance policies that you can purchase in the case that a company
goes down. If the market demands it, then it is done. But this is not right,
morally.
In the Islamic system, everything is controlled by the divine.
With the Islamic system, there has to be some type of an asset.

o In Dubai, they took shares from the people and invested that money in the
newly built airport. If anything happens to the bank, the people still have a
tangible asset.
Banks do not invest. They are not allowed to use your money. The only function is the
transfer of money from the buyer and the seller. They create a pool of money for the
people that will invest. (All lending and making money off money)
o The only time you can make money off of money is when you do currency
exchange. However, you cannot make a living off of that. But if this is your
business then it is ok.
Entrepreneurs are subject to loss and profits.
Capitalists dont believe in regulations.
We are allowed to regulate the market. (Yes and No)

o Islamically, we are allowed to profit as much as we can, or own as much as we
can. There is no limit.
o But there is an ethical responsibility and a legal responsibility.
Chapter 18
The Doctrine of Necessity
The concept of necessity has become so lax that we are now applying it to everything to justify
our wrong doings.
We buy houses on riba, because of necessity
We use credit cards and take out loans because we live in America, (out of necessity)
The state of extreme necessity should exist in reality.
If someone is walking in the dessert, and there is nothing to drink except a 6-pack of
Budweiser Beer. You would drink enough to get you to cross the dessert. But you
should know that it is a haram drink, but its availability makes it ok because of
necessity.
o Buying a house on mortgage because you have only one child and want to invest
in buying a house does not constitute necessity. However, if you are a father
with 5 children and there is no one willing to provide you with an apartment,
then this may be classified as necessity.
It is a sacrifice for you to choose not to eat or consume something that is haram in an
extreme case of need. Some scholars said that it is wajib on you to eat and keep yourself
alive.
The issue has to be very common and wide spread to give a flat rate answer to all
people. However, if it is not, then it is a case by case scenario.
If you are in need of a house on mortgage, you dont have to buy the worst house out
there, but you shouldnt look for the most expensive as well. Be moderate in choosing
your house.
Student loans that are taken for the sake of going to an Ivy League school because we
need Muslims in them dont justify a need. Education can be obtained from schools
that are cheaper and more affordable. They can lead to the same career. You shouldnt
pay so much in loans just because of the name of the school
o What if you can pay off the loans in the grace period? These companies want
you to do this because they know you will not be able to pay them off right
away, and that way you can continue paying them back with riba.
There are multiple ways around this: delay graduation, search actively
for scholarships.
The only thing that is necessity here is for someone who wants to build
their life. However, they do not need to become doctors in order to do
this.
Some people take out loans to build a masjid because they wanted to build it for the
future
o The problem with this is that they cannot maintain it. The future needs masajid
in different places, not one huge one in one place that no one attends.
What if someone puts you as a beneficiary on their life insurance policy?

o It is permissible to accept that money, however, you cannot ask them to put you
down as the beneficiary.
o What if they ask you? Its up to you, give them a vague answer.
The difference between haja and darura:

o A car is a haja, (a pressing need), without it, it only makes things difficult, but
you can survive without a car.
o Having a job and earning a living is a darura (a life threatening necessity).
o The scholars said A pressing need can mount to the level of darura.
What is the difference between a body guard and health insurance?

o With health insurance is based on chance, and they rip you off. A body guard is
there to protect you from getting harmed in some way.
Chapter 19
Credit Cards (biqtl-itimn aw biqtl-iqr)
The main principle of the credit system:
The assumption of a financial trustworthiness of the borrower (debtor) (amnatl-muqtari)
The ability of the debtor to pay the debt back in a timely manner (al-wafu bil-dayn muajjala)
Al-takhrjl-fiqhi (the juristic understanding) of the credit card system:
The nature of the different contracts resulting from getting different parties involved in using
a credit card:
Between the source of the card or the issuer (ex: a bank, Visa Card) and the carrier (example:
the customer whether an individual or an entity)
Kaflah (suretyship)
Wakla (agency, representation)
Qar (loaning): Between the source of the card and the merchant (example: department store)
Samsara (brokerage)
Between the carrier of the card and the merchant.
awlah or iwlah (transfer of a claim)
Bay (sale) or ijrah (hiring or rent)
Classify a transaction (based on page 58) that you do with your credit card
What are these transactions could be and if there are any fees what could they be? (We have 3
different relations
Remember there are three relations here.
1. From you, the cardholder, to the bank

o Whats Hawalah? Basically, it is when you transfer liability from one side to
another side. Is there any transfer of liability here?
o No! Theres no transfer of liability here. Over here, Hawalah doesnt
happen between you and the bank! Hawalah would come in when you
charge the card at the store. So it becomes the relationship between
you and the merchant. The card, itself, is used as the Hawalah contract.
o
You tell the merchant, I am buying this, but Im transferring my
liability for payment to the bank- someone whos rich who can pay
you.
o So between you and the bank what would it be?
o Is it Qard? Are you taking a loan from the bank? Yes, you are, because
when you pay, you are not using youre money, but you are using the
banks
o When you take a loan, all the principles of loans need to be taken
in consideration, like riba, late fees, interest, delays, deferrals,
etc.
o Is it Kafalah? Can be also. The bank becomes like the kafil (the
guarantor), who guarantees on behalf of the cardholder that payment
will be made to the merchant. The bank can be considered as a cosigner to the cardholder. Ex. Last 4 digits of the card that appears on
the receipt that you sign serves as the banks signature.
o If it is Kafalah, is the bank/ the cosigner allowed to charge you
money for the service that they are providing for you, Islamically
or legally? No, because Kafalah is supposed to be an Act of
Charity.
o Can it be Wakalah? Representation? Not really. Some say, yes, because
you go as the representative of the bank, which is why the banks
collect the money, because you were representing them on their
behalf. However that was defeated by the argument, that you are not
buying on behalf of the bank, but you are buying for yourself. And the
bank just guarantees that you are going to pay them back.
o To clarify, it cannot be Wakalah from you, the cardholder, to the
bank. You cannot be the banks agent. But it can be Wakalah from
the opposite site. The bank acts as an agent on behalf of you, the
cardholder. When you charge your card, you are asking the bank
to go and cover your charges. If it is Wakalah, is the bank / agent

allowed to charge you money for the service they are providing
for you?
o Yes, you are allowed to pay money to an agent (Wakil) for
their services. Ex. So that is why they allow the bank to
cut a percentage, which would be in form of membership
fees as the Wakalah, because the bank is acting as your
Wakil, your agent.
o Samsara (broker) - The broker attracts more customers on someones
behalf. You, the cardholder, is like the broker who gets the bank more
customers.
o Ex. The banks send machines to these stores. Then the store puts
up a sticker indicating they accept Visa. The stores got these
machines in order to serve customers, like you, who may use
Visa. You served as a broker who led these stores to purchase
from the banks.
2. From you, the cardholder, to the merchant
o *You took that card, sign into machine, merchant takes our receipt and you sign it.*
What transaction happened? Hawalah.
o When you sign, it is not regular Bai (trading and selling).
o If it not, you need to observe if you are buying something that
they own, something deliverable, Halaal, buying something
existing, something in their position, etc..
o Some Ulema say its considered Hawalah. I am just signing this for
you, I have a cosigner, he is the wealthy person. I am sending you over
to collect the money from them.
o In agency (Waqalah) relationships, you are allowed to take money
for service, but not for Hawalah.
o You are allowed to take money from agency but not from Hawalah
3. From the merchant to the bank
o What would be the relationship between the bank and the merchant when there is
a cut?
o Umulah (commission): We would consider this as Umulah. The banks
bring the merchant customers, so they want their commission.
o Ex. The bank to merchant: I will put my logo (Visa) on your door
and that will attract my customers to come and buy from you.
They will swipe using my card, with my name, so I want my cut

from it.
o If you agree to the Umulah, the banks take a cut from
whatever the customers actually pay. So, thats how they
justify the percentage they cut from every sale that
happens in the store of that merchant.
*So there are many different interpretations to the relationship to the bank and the
cardholder. These are as mentioned on page 65.
Musalahah (Preventive Conciliation) with the creditor.
It is not riba to begin with because riba entails growth, and this percentage is deduction.
o Ex. The bank owns, you, the merchant, some money. And you say You dont need to
owe me the $100, you give me $98 and Im happy. Is this riba? No. But it would be if
bank pays you extra.
o How do you reconcile? Now that the bank owns the merchant, the merchant has
the right to drop some of his Haqq so he can get the cash fast and as soon as
possible. And, if the bank offers to pay $98 and the merchant accepts, this is
okay too. Thats why its called reconciliation.
Signing a contract that stipulates riba as part of the transaction.
o Are you allowed to sign a contract stipulating riba even if you are not going to be
paying riba? The Ulema have two opinions:
1) It is absolutely prohibited the condition included entails the approval of haraam, and any
contract that is based on haraam is null.
o (There is no such thing as necessity for using credit cards.) If you are going to have to
use credit card, just use your debit card and that will be it.
2) It is permissible because it alleviates a pressing need (haajah) or necessity (darurah). It is
permissible with the condition that in order to avoid riba, monthly, payments should be paid
in full.
o It is a pressing need which can rise up and become tantamount to a necessity. So, it is
okay to do so with the condition that you pay in full (not just the minimum) and you
avoid the late payment fees.
o It is not to say that it is 100% halaal, as much as it is for allowing this practice for the
necessity of using that credit card.
o Where do we get that this is permission from? From the Story of Bareerah and
Mugeeth. One day Aisha purchased a female slave. Her name was Bareerah and her
husband was Mugeeth. In the contract with the previous owners, they stipulated that
they would sell Bareerah to her with one condition- that if she ever freed her, they
would take Bareerahs loyalty.
Loyalty (Walaa) is a formal alliance between a free slave and their original
owners. If that slave ever dies, the former owner can inherit money from the
slave. If theres a need to pay blood money, he can participate as part of that
alliance.
Usually, loyalty goes to whoever frees the slave. Aisha wanted to free Bareerah,
but was worried about the stipulation. She came to the Prophet with this
concern. Tell, them [Fine, because Walaa is automatically given to person who
gives freedom to the slave.] Meaning: Even though the condition is put on you,
fine, give it to them, because when you free them, loyalty becomes automatic to
you. It doesnt matter if it is a condition or not.
Even though condition is null, from Islamic perspective, if you had to sign it
based on that necessity, that (fasiq) condition will be considered nullified, and
the contract OK.
Penalties and Late Fees

By unanimous agreement these late fees are the pure riba.
o Riba Jahiliya (the original riba) When the loan matures, and you didnt pay in full,
Extension is given, but you have to pay extra money. That is exactly what late payments
fees are.
How to avoid the issue of charging late fees?
o And taking account of the cardholder who neglects payment?
Some of the Ulems suggestions for the card carrier:
Offering a grace period to pay
Cancelation of membership and collecting fund through litigation.
Reporting the debtor to the national credit system and considering the credit score as a
measure of financial trustworthiness.
o Put restriction on business practices, which forces a person to keep track of
records good and sound.
o Do not charge a late fee to your customers. Report to a collection agency (who
becomes your agent/ Wakl), who you employ, and they get a cut from the
money they collect for you. The collection agency has their way of getting the
customers to pay. They can even get their hands on their assets. Either,
cardholder will pay. Or, they can come to reconciliation.
Ex. Cardholder has to pay $3000. But he says he only has $1500. If the
bank considers this a complete-debt transaction that they are better off
to take 1500 than nothing, the bank takes the $1500 and still pursues the
remaining 1500, until the debt is paid in full.
There has to be some sort of way returning the bank the money
back. Otherwise, if we keep it open to everybody, it will be
difficult to track all these default contracts.
However, this is based on the trustworthiness of the cardholder.

You do not give the credit card to just anybody, as we commonly
done in America (even to students- who will be enslaved to pay
these debts).
In the current credit card system, penalties are considered riba (all scholars agree). How do
we solve it/ keep cardholder in check? We dont have the Islamic system yet. Are the suggested
solutions above practical? It has to be tested in the real world.
(Membership fees are considered permissible, since bank is acting as agent and managing
money)
Is it permissible to use a credit card to buy gold or silver?
Gold and silver transactions must always be performed munjazah (full payment and exchange
of commodities at the time of the transaction). This sale is called arf.
Using a credit card to pay for a sale made with a different currency (arf).
Example: buying commodities at a foreign import
The credit card reward system
Example: Airline Mileage
o If they offer cash-back, avoid it.
o If they offer points, dont use points on food/drink/clothes, but use on services, like
airline tickets, rental cars, hotels, and recreation
Pure Paisa: Fiqh of Money and Transactions || Taught By: Shaykh Yaser
Birjas || Qabeelat Durbah
Chapter 20
The Loaning System
Buying a house using a conventional mortgage.
How does the mortgage system work? When you buy a house from the bank, this is called a
mortgage. How does the bank deal with it?
1) You build the house through the bank
2) Or the bank buys a house for you that already exists.
Either way, it is the same thing. Both ways, you are borrowing money
from the bank and paying it back with interest.
Two Opinions:
(1) The default ruling is prohibition because it is based on pure riba
o Taking a mortgage from a conventional bank is considered riba
o (This is by unanimous agreement (conservative, vast majority), even those who say
its okay to take your house on mortgage the first time you buy- the only reason
they allow it is because of necessity/pressing need).
(2) It is permissible to buy the first house on mortgage, out of necessity (arrah) or pressing
need (jah) for the following reasons:
Ex. They are unable to do so through ijrah (renting) because it would cost
much more than buying the house. The individual does not have the cash
money to pay.
A contemporary opinion that only works on a case-by-case scenario and

those with specific conditions.
Once this fatwa was issued, Muslims all over the world took it as a free for all
Abu Hanifas opinion on the permissibility of the charging al-arbi (with whom the state is
at war with his/her land) as long as it is done in their land.
o al-arbi : is a non-Muslim who lives in the land of the enemy
o If you go to the land of al-arb (ex. the Muslims are at war with a specific
nation- the merchant goes there after a truce / peace treaty is achieved), it
is permissible to trade dirham for dirhamain (1 dirham for 2 dirhams).
You can deal with them in riba with them provided:

you are the one who is profiting and not them
also, with the condition that there is mutual consent- they are
okay with that
o Rough translation [If a Muslim enters the land of the enemy during a time of peace
or truce, and (he deals with them in Riba) trading one dirham for two dirham, there
will be nothing wrong with it, because the rules of Muslims do not apply to them. If
he takes their money in any way, with mutual consent, than it is permissible].
o Sheikh Mustafa Al-Zurta, a Hanifi scholar from Syria said: [It is permissible to take
a loan from the bank with interest that is deferred for the reason of buying a house
that will end in a contract that you will own the house and it will come into your
possession- As long as you pay the principle with the interest. with the condition
that what you pay on monthly payments is not more than the rental price for the
same property in that market.
o Ex. If rental is $3000, and if you buying it is $2000, then it is okay, but if you
are going to buying for $3000 when the rental is only $1500, it is not okay.
The Muslims ought to establish themselves in the land where they reside, and they should
not allow their wealth be consumed by rent or lease.
It is based on necessity, the principle of removal of hardship and the need to alleviate the
suffering of the people.
Al-takhrjl-fiqhi to this issue (There are issues with the above explanation):
The careful look into the opinion of Imm Abu anfah ramahullah.
(Who is earning the money?)
o Allowed to earn riba as long as you are the one profiting, but when you buy a house
on mortgage, who is the one who is profiting? The bank!
o Also, the majority does not agree with this opinion, because riba is riba, whether you
are taking it from a Muslim or a non-Muslim.
The controversial dichotomy of the land of war (drl-arb) and the land of peace (drlislm).
o (Does any one dare openly call the land where they live drl-arb?)
o Although, there may be wars in Muslims lands, can you call the land you live in
drl-arb, even though, you are a citizen of that land? If so, what are you doing
here? Islamically, you cannot live in drl-arb. Therefore, this is a defeated point.
We call this arAllah al-wasia (The Land of Allah- its spacious, its everything, its
my hometown). Its simply drl-dhimma (non-Muslim land)
Applying the rule of saddl-dhari (blocking the means to evil).
Explaining the legal definition of necessity and pressing need.
o This opinion dangerous, because once you open the door, it starts flooding.
Everyone will start taking justifications for their first car, first bike, first boat, etc
That is why they need to block it.
How To Make A Halaal Justification To A Haraam System That Exists In This Context:
o This is basically what were doing with these situations, and how easy is it? Not so much.
Thats why we have multiple opinions. Justifications are given by contemporary scholars.
But they all agree, you can use it, as long as you pay in full, and you dont let
it go until it charges interest to your account. In this case, it is okay to do
that, otherwise, stay away from it.
Permissible Alternatives:
Creating a voluntary pool of money offered by local buyers to share the expenses of buying
houses, and they take turns by drawing lots to determine who collects the money for the
particular year.
o Ex. 10 young families come together and collect about $10-15,000, so they have
about a quarter-million dollars by the end of the year. They will take the money and
buy a house in cash. Problem with this system: some families are going to have to
wait 10 years. (Those who received their houses must still give their house.) Unless,
they raise the shares to say $25,000 (raising the number of people will make the line
longer) and/ or collect every 6 months. How do we know if they will be able to raise
enough money? If they are paying rent as much, in this case they cant.
o Young professionals can get together.
o Money-management is key.
o There has to be a serious contract with a lawyer involved.
o Extra Administrative fees- If they want to hire somebody to manage their pool of
money for them. Fee should be administered equally among participants. One of the
participants can manage it, but he should do so voluntarily, though he is allowed to
be paid for his services.
Using the collective financial power in the community by bringing interested buyers
together and striking deals with a local bank to buy foreclosed houses or stipulate a
Sharah compliant contract.
o Back in 2009, an Imam called up Sheikh Yaser Birjas, and asked him if they could do
anything with the real estate sector right now, since this is the best time for
Muslims to come in and buy houses. Most Muslims who dont deal in riba have good
credit. And many houses have been going on foreclosure.
o The Muslim community should get together, look into the foreclosure
list, and find as many as houses, either for personal profit or investment.
They should then go altogether, collect the money and then go to the bank.
Tell the bank that you have 15-20 buyers.
Each house will cost about $100,000 since its on foreclosure.

So you are talking about a few millions of dollars in cash
coming to the bank.
The bank is willing to get rid of these properties right

away, because these assets are just sitting there with
an uncertain future.
Dont go with a national bank, you are better off with a local bank, as
seen with experience.
Local banks dont have the luxury of having assets coming in

from other branches, so they are willing to secure a deal with
the local community.
Building homes with (bayl-ajal) deferred payments.

o When you buy the house or build the house with deferred payment (You have the
land, but not the money to build house)
o Ex. In this case, if you deal with builder directly, and you pay him back in
installments. It costs the builder $200,000 to build the home. Initially, the
deal was the builder would build the house for you for $300,000. You agree,
but say youll pay back over 15 years.
For builder this is a good deal, because it costs him less to build. But,
he is also taking a risk for losing because by the time he starts
building, material prices could go up, and, thus, he wont be getting
the same profit margin he hoped for.
o Building the house on installments from the builder directly, without involving a
third party, is permissible.
o What if the builder took the contract between you two and sold it to the
bank/ another company? Is this permissible?
His transaction with the bank is not permissible because he is selling

a debt
But what about your relation to the builder? To whom will you be
paying: to him or the bank? You have no contract between you and the
bank. Your contract was between you and the builder. And so your liability
lies toward the builder, NOT the bank. You made your end of the deal
hall. The transaction between the builder and the bank is not your
problem.
What if this deal with the builder was premeditated? You buy
the house from the builder and then you give permission to
the builder to sell it to the bank afterwards. This is not
permissible.
o Buying a house on installments from the original owner, even if it was the bank, after
locking the final price.
o If it is sold by owner, that is the BEST WAY of buying.
o Ex. You are buying a house. An owner says he wants $300,000 in cash. You say you
can pay $50,000 down-payment, if you allowed me to take this house in
installments. You agree to pay for 10 years until payment is completed.
o Is it allowed? Although disputable, majority of scholars say it is permissible, since
there is no third party who is profiting from the chance of losing/ profit and all the
money is goes straight to the assets (the principle).
Question and Answer
o Can the builder sell your debt without your knowledge? It happens in all real-estate
companies. Banks sold your contract right after you sign it, because they dont want
assets in hand, they want fluid cash (even if debt).
o Once you sign contract of loan of $250,000 with the bank that amount is
multiplied 9x.
o They sell a contract for a million dollars into the market based on the
contract with you. People buy it, and it is then ripped up in into shares
owned by different people in the stock market.
o Ownership of your contract becomes divided among millions of people. Even
though you still pay back money to bank assuming you are paying off your
debt, while the bank owes money to other people.
o You are advised against paying student loans as mahr (dowry)
o Shaikh Muhammad Taqi Usmani People try to cite his fatwa as the source
of permissible riba in the West- Disclaimer from him on his website: issued
this fatwa 15 years ago to a particular financial institution in Kuwait. He said
he hasnt endorsed any other company or contract in the world (Not even
Guidance Financial, or La Riba).
Be careful when some people tell you we have great Ulema say it is
hall and permissible.
From one fiqh opinion, you can not make a blanket answer to every
case.
Other Form of Loans- (Why would people want to take out a loan?):
Student Loans
Has a whole different category. That is why it is separate from personal.
Video Break on Student Loans
Suze Orman's Student Debt Warning w/M Moore's Response
http://www.youtube.com/watch?v=sswizmHvz1I
Student loan debt is the only debt in 99.999% of the cases cannot be discharged in
bankruptcy.
Public loans are not enough to cover tuition, so students get out private loans from the
bank, which can have from 15-19% interest
System allows you to defer your student loans. Interest continues to pile up, and this
thrills the banks, because this is how they make money off of money.
How is an expensive education going to get you a job, when there are not jobs to be
gotten.
Is taking a student loan a necessity? Sheikh Yaser seems not to think so,
though it may be a pressing need. If you need an expensive education, why
not start with taking an easier education, and sponsor yourself later after
you start working.
Students who owe large amounts of money are not legal recipients of Zakat because
they are in debt by choice (that is, further, based on luxury, and not necessity).
Business Loans
Example: starting a new business or expanding an existing one.
Personal Loans
Example: buying a car, appliances or buying furniture with interest or with interest
free contract.
Few people would take out a loan for personal use, such as paying for a wedding.
Rent to own contract
(section later)
Most common reasons loans are taken out:

1) Student loans
2) To buy houses
3) To finance a business.
Chapter 21
Rent (or Lease) to Own Contract (al-jrl-muntahi bil-tamlk)
Main thing about rent-to-own: considered 2 types of contract in 1.
How does it work?
Definition:
An arrangement between a consumer and a seller that allows the consumer to rent homes,
furniture, appliances and other goods for a defined period of time. The consumer is only
responsible for paying the periodic rental fee, which is usually above the market value, for that
defined time, which can be as short as a week or a month, but may be continued if the
consumer chooses to renew it. However, a condition or a promise in the rental agreement
provides the consumer with an opportunity to purchase the rented goods by continuing to pay
the rental fee for a length of time or by paying a lump sum payment.
o Ex. You find a house you want to buy. You go to a bank, because you do not have
enough money now and ask them to go in a partnership with you. The bank buys
the house for $300,000. Since you are partners, the bank pays $280,000, while you
pay $20,000 down-payment. So far, that much is yours in terms of the ratio out of
300,000.
o Now, as partners, you rent the house from the bank. How much is the rent? The
average rental for that type of house in the market, for example, $3000. The $3000 is
divided between the 2 parties in partnership: part of it goes towards buying the
house and increasing your ratio of ownership. And the other part is taken by the
bank to cover their expenses. So over the long term, you will be paying more than
$280,000.
o So say rent is $3000, and the house is $300,000. So for every monthly payment, how
much is going into increasing you share in the house? As much as given in terms of
ratio.
o The Math: You owe 20,000/300,000. So your share increases every month by $200/
3000 of the rent that you pay.
o $200 goes towards raising your share in the house. In response, the share of the
bank also goes down. Ratio that belongs to the bank keeps going down, until you
pay in full. On a monthly basis, say if paid off over 15-30 years, you are going to pay
the bank more than $300,000. For example, $100,000 more.
How does it work with real estate?
In a lease option, you rent a property at a cost slightly above market rate. Prior to moving in,
you agree with the seller on a potential purchase date and purchase price for the home (which
could be as low as zero, i.e. receiving it as a gift). You may buy the property at any point during
the rental period up until the lease option expires. The lease option period can be any length
of time that you and the seller agree to, ranging from several months to several years.
If you do purchase the property, the seller will credit part of your rent back to you, usually
more than the portion of your rent that was above market rate. You can put this money
toward a down payment and closing costs, or keep it. The purpose of the above-market rent is
to give the seller an incentive to complete the transaction.
If you do not purchase the property, all the rent you paid remains with the seller, giving the
seller an incentive for taking the property off the market during the time you were renting it.
o Its a confusing contract. It has 2 contracts in one deal. It is a sale and rent at the same time.
Sale doesnt take place until you secure rent contract. The rent contract was a condition for
the sale contract. Majority say it is not halaal and that it is a modification for conventional
lease system with a twist on it.
o Consider price of house over time, whether it increases or decreases. If buyer wants
o
o
o
o
o
o
o
o
to sell house over 5 years time, and the value went down, who faces the loss? Only
the buyer/ owner.
Current companies, like LaRiba and Guidance Financial, doesnt share loss with you.
So, how is it a partnership!
Further, it is the buyer who is responsible for the taxes, even though he does not
have it in full possession, yet.
Possible solution: Company should raise the rent so it includes the taxes. Otherwise,
its not a partnership.
Another issue is insurance. The house has to be insured. It is the buyer who pays for
the insurance. If its a true partnership, the company also has to share part of the
expenses.
Maintenance: Again, it is thrown on the buyer.
You cannot tell if it is a pure sale or a pure lease.
Most things in the market are not %100-riba free.
Ex. Devon Bank is the only bank that acquires the house and owns it before it starts
selling it to you. But when they own it, do they transfer the title to you? Or when
they buy it, is the title transferred to them before they sell it back to you? Or will it
o
o
o
o
o
be in limbo until it is sold to you.

It is not clear. But if they transfer ownership to themselves first and then they sell it back to
you, that is okay.
There has to be a legal transfer of ownership. Doesnt have to have your name of it,
but you have to have legal possession of the property.
The real estate market allows you to delay registration of the house for 30-60 days.
Within those 30-60 days, you are allowed to resell house without paying taxes on it.
Another question regarding Devon Bank. If you decide to back off the deal, will there be
any liability? The only liability is to pay back expenses they have spent based on
your request of inquiring about the property. In this case, you owe them that
money. But if they insist you become liable for the entire purchase, it becomes the
same problem as earlier that the condition upon which the bank bought the
property was that you promised to buy the property. This is problematic. There
should be no obligation on you to buy it from them once they buy it. If there is no obligation
and you back off and they wont sue you, then this will be permissible.
o Another problem is that you sign the promise contract
o It should be okay, if there is a 1) secure transfer of ownership to the bank first and 2) if there
is no obligation of buying it after transfer
o Does the bank act as an agent on your behalf who looks for the house for you and
buys it for you? It is not the function of a bank, it is the function of investment
companies, which actually own the property they want to sell. Investment houses
are not so popular in America because if they exist theyll ruin a lot of banks.
There are two opinions in regard to the permissibility of this contract:
1) The first opinion: It is prohibited, for the following reasons: Give a promise to purchase (alwadu bil-shir) agreement the power of a legally binding contract (by mandating legal
ramification in case the consumer backs off) is not acceptable. In fiqh, a promise is only binding
on moral basis not on juridical or legal basis.
o Biggest issue: 2-in-1 contract. Cannot recognize sale from rental.
o Issue of having Condition is the promise to buy the house and make that promise
bonding, when a promise in Islam is not necessarily a binding contract between 2
parties.
o The issue of selling at the end of the lease is confusing because Sale has to be
concluded at time of the contract. But in lease-to-own contract they dont conclude
sale until the end of the rental term. Islamically, you cannot make a contract like
this. So there has to be 2 different sales. 1st rental. 2nd sale. Banks will not go down
this path because it is risky and there is nothing binding on you to buy house at
term.
Setting the sale contract, at the end of the lease term, as a condition to permit the lease
contract makes it an invalid condition. A condition of that nature is actually invalid in a lease
contract.
Setting two contradictory contracts on the same item at the same time violates the adth of
the Messenger of Allh who forbade two sales in one contract bayatayn f bayah (Reported by
Amad, Tirmidhi, al-Nasi)
The first contract is a lease contract which gives the consumer (lessee) (al-mustajir) the right
to use the property while it is still under the ownership of the seller (Lessor) (al-muajjir). While
the second contract is a deferred sale contract on that exact same property which entails the
transfer of ownership of the property to the buyer (lessee in the case) but the transfer of
ownership does not take place until the lease ends first. This makes the contract unclear as to
what exactly is the type of transaction taking place.
In a lease contract the lessor is the guarantor (min) and responsible for the overall insurance,
maintenance and condition of the property against any damage except for what is customary
known to be the lessees responsibility. But in this contract, the lessor stipulates this
responsibility be carried out by the lessee because he is considered the actual owner of the
property at the end of the contract.
In the rent to own contract, the lessor does not own the property which rents out to the lessee
until the lessee submits his request to the lessor to buy it first and then rent it out to him. In
this case the sale is a form of selling or renting that which the lessor does not own.
2) The second opinion: It is permissible for the following reasons:

The promise is considered binding if it was initiated as a stipulation, this is according to Imm
Abu anafah.
o If financial expenses were incurred because of that promise, that promise then
becomes binding. According to Imm Malik, the promise is binding either way.
Example: The lessor says, I promise to sell you the house if you fulfill all the lease
installments. In this case, if the lessee fulfills all the payments, the promise then becomes
binding if the lessee desires to purchase the property.
The promise becomes also legally binding according to Imm Mlik if it results in bearing
financial responsibility by one of the contracting parties based on that promise. And in this
case the lessee has accepted the overpriced rent, which he wouldnt accept otherwise, for the
purpose of fulfilling the promise to purchase the property at the end of the lease agreement.
o Hassaan, Dr. Hussein Hammed. Islamic Investments and Methods of Financing.
o Islamic Bank of Dubai. Dr. Husseins opinion is that if it is mentioned by one
of the schools, it becomes mainstream. Problematic. You cannot switch
based on convenience but on evidences and proves.
The issue of two sales in one contract does not apply to this contract because the two contracts take
place at two different times. The lease is at the beginning of the lease agreement and the sale is
deferred to the end with only an advanced promise to fulfill the second agreement.
o It is the timing that is the problem itself!
The controversy over who who is the guarantor against damage can be solved buy adding the extra
amount (example: insurance) to the rent and then the lessor takes care of it. Or the lessor
deducts the amount from the original rent and considers the lesse as an agent on behalf of the
lessors in regard to the maintenance and insurance of the house.
o Can be added to the rent by the one who is giving the lease
o or dropped from the rent and making the renter responsible for the damages and
maintenance.
In regard to the case of renting that which you dont own, if the lessee promises to enter the
lease contract, then the lessor, independently (without the lessee being part of the purchase
deal) buys the property, the lessor now owns its title, the lease contract then becomes binding
on the lessee, because of the promise given prior to that purchase. This is according to what
was explained in the opinion of Imm Abu anfah and Imm Mlik in regard to the ruling of a
promise that results in a financial obligation.
Discussion:
If you are going to buy a house, what is the best way to buy a house without the trouble of
going through riba?
Things discussed:
o Partner with people, get together, and create a pool.
o And taking turns and deciding who is going to get the money every 6
months/ year.
o Ex. To pool with other people and then buy an apartment building.
o To buy from something that says For Sale by Owner.
o Ex. He is still paying his mortgage, but decides to sell the house you in
installments. Is that permissible? The bank wouldnt even allow it, if you still
owned them that mortgage.
o Save up enough money and then buy it later.
o Family members who get together. It gets difficult when you have multiple people
who need to be taken after.
o Go after homes in foreclosure- owned by banks because the houses are very cheap.
o If the bank owns the house can you buy it on installment? Yes, but remember you
need to close the price and make sure that it doesnt increase. You can possibly do
this by offering to pay a hefty down payment. You should avoid paying late.
o Shaykh Yaser spent 4.5 hours with the car dealership negotiating and laid
down some conditions. He locked the price. Made it zero-interest with a 25%
down payment. Reviewed anything with riba or extreme gharar. If you pay
something high, they are willing to make concessions. If you can give the
banks more than one person to buy those houses. You can negotiate with
these people. Further, Shaykh Yaser told them if they could do this, he could
send the car dealership more customers.
o How do you penalize person who didnt pay his debt over 5 years? Shaykh Yaser
said he did not see anything reasonable on this. So it is going to be based on the
trust you have with this individual.
o If the person doesnt pay over the specific period, that means contract is
terminated. You just take the house back. Sell it, and give them the excess
(of what they already paid). Its the only way to get out of that deal. But you
cant penalize them for that.
Chapter 22
Dealing with the Stock Market
What is the general principle of dealing with the stock market? The stock market is basically a
huge pool of investors and different contracts of partnerships (which are either capital
partnerships or silent partnerships-bc you pay money and sit back at home, )
Make sure you observe rules of Shariah
Investments Three Rules:
There are three principle rules, which need to be adhered to when analyzing an investment
from the standpoint of Sharah permissibility:
(1) The absence of riba in the investment
(2) The potential for unethical concerns such as gambling or tobacco in the
investment mix.
(3) The nature of the contract between the parties involved and whether the
substantial omissions exist which can result in a dispute between the parties.
o Avoiding 4 elements for the prohibition of a contract: riba, gharar
(uncertainty), ethical issues and conditions
Shaykh refers to House of Cards documentary. They ask Former Federal Reserve Chairman
Alan Greenspan, to explain why housing market collapsed. They showed him the final
products. Greenspan admits that he was puzzled by the more complex mortgage-backed
securities on the market, though he had PhD degrees. He was disappointed because he was
mastermind of the notion that the market regulates its self. After ruining billions of dollars of
peoples lives, he apologized for it.
There are two types of stocks (ashum) in the market:
(these financial instruments are based on demand, even if unethical)
1) Common Stocks or Ordinary Stocks (sahm di)
A security that represents ownership in a corporation. Holders of common stock exercise
control by electing a board of directors and voting on corporate policy. Common stockholders
are on the bottom of the priority ladder for ownership structure. In the event of liquidation,
common shareholders have rights to a companys assets only after bondholders, preferred
shareholders and other debt holders have been paid in full. Common Stocks given holders
direct equity in the company and the right to a share of the profits.
o Difference is that, the average person would buy these stocks from the market right
away.
2) Preferred Stocks (sahm mumayyaz)
A class of ownership in a corporation that has a higher claim on the assets and earnings than
common stock. Preferred stock generally has a dividend that must be paid out before
dividends to common stockholders and the shares usually do not have voting rights.
o Purchased by people who understand it so much. They are given preference when it
comes to dividing profit. They have Class A, Class B, Class C. So if in Class A, you get
profits before Class B. Class C gets the crumbs of the profit.
o If someone wants to buy in a company, they try to invest as much as they
can. Because the more money you pay for that share, the higher the class
will be.
o In exact same company.
o Is this permissible? Ex. Each one pays 10,000. How do you divide profit. 10%
for each one of them. Who takes priority on receiving profit? No one. If
someone pays $10,000 in gold or pays first does this make a difference?
Partnership act is always equal, regardless. So you have no right to receive
profit before anyone else.
The precise details as to the structure of preferred stock is specific to each corporation.
However, the best way to think of preferred stock is as a financial instrument that has
characteristics of both debt (fixed dividends) and equity (potential appreciation). Also known
as preferred shares. In summary, Preferred Stocks is class of ownership in a corporation with
a stated dividend that must be paid before dividends to common shareholders.
Bonds (Sanadt)
A debt investment in which an investor loans money to an entity (corporate or governmental)
that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by
companies, municipalities, states and and U.S. and foreign governments to finance a variety of
projects and activities. Bonds are commonly referred to as fixed-income securities and are one
of the three main asset classes along with stocks and cash equivalents.
o Investments done by the government or agencies related to the government

o Ex. Dubai Airport- wanted investments so gave to Islamic Bank of Dubai. The Islamic
Bank of Dubai opened bonds to the public and people start buying. Now they had
shares with government on these investments. Bonds you cant take profit right
away. Has to be specific periods (6 months/ 1 year/ etc). Only allowed to unlock and
take profit when entire period expires.
o Bonds also come in Common or Preferred, just like stocks. Priority given based on
preference of buyers.
Interest on bonds is usually paid every six months (semi-annually). The main categories of
bonds are corporate bonds, municipalities, states and U.S. and foreign governments to finance
a variety of projects and activities. Bonds are commonly referred to as fixed-income securities
and are one of the three main asset classes along with stocks and cash equivalents.
Two features of a bond- credit quality and duration- are the principal determinants of a bonds
interest rate. Bond maturities range from a 90-day Treasury bill to a 30-year government bond.
Corporate and municipals are typically in the three to 10-year range.
10 points on hukm and rulings
1. Buying and selling shares (common stocks) for the purpose of profiting in an existing and
already operating company is permissible, as long as the company is all, because the
share in this instance represents a financial ownership in the capital of a partnership.
o You can buy since existing and already operating
2. Selling shares, for the purpose of profiting, in a new company (was just chartered and
before it starts operating) is not permissible, because the sale in this case represents cash
for cash.
o You cannot buy stocks in a company that was recently charted before it starts
operating.
o Ex. group comes together to make organic dhabihah company. You invest
and get 50,000 shares.
Are you allowed to sell it before it even hits the market? (like
Facebook who announced it before way before it hit the market)
You cant do that!
3. It is not permissible to deal with a company that is based on arm as a source of capital or
profit. (ex. banks, insurance company)
4. Although the default ruling is prohibition, dealing with companies that mix all and
arm dealing is based on the ratio of the arm involved and type of it. (Example: 15%
alcohol in a grocery store or riba in a construction company vs. 45% of selling pork or
gelatin in another.)
o No one can really give an accurate estimate of the ratio of arm that will not allow you to
participate in that company.
o They cannot give you a ratio because of the levels of arm. For example, 5%
riba is much more dangerous than dealing with something that has 15%
gelatin.
5. Blind Trade
(trading shares of companies with jahlah, i.e. without knowing what type of business it
runs) is not permissible.
o What is it? You look at price of shirts from company. It is very low and you realize it
wont go lower than that, and that its going to go up. So you start buying and
buying, so then when it goes up, you start selling. You have no idea what you just
bought.
6. Guaranteeing profit in stock market dealings results in the prohibition of that particular
transaction or stocks.
o Guaranteeing profit makes it haraam
o Are there any stocks in the market that you can buy and cannot lose? Yes,
there is.
Ex. Hedge Funds- government mandates that they always give them
profit. It is for an exclusive club, who can give 1 million minimum in
investment.
7. Preferred stocks are different types. If the stock entails guaranteed profit, or priority in
dividing profits (before the holders of common stocks), or extra value for profits (over
what the common stocks holders receive) or priority of assets distribution upon liquidation
then it is not permissible because it contradicts with one of the main principles of
partnership which is equality in the rights of ownership in the equity.
o Giving preference in terms of receiving profit, makes it haraam. You cant buy them
because you will be taking the rights (aqq) of your partners who have the common
shares.
8. Preferred stocks that provide voting or administrational power without guaranteeing
profit or priority upon liquidation is permissible, because it is still carrying the same equal
right or ownership in the equity of the business.
o Some of these preferred stocks dont give you preference in terms of dividing the
profit; instead, they only give you the power of voting, administration, limitation of
that business and so on. This is fine
9. Preferred stocks become permissible if the shareholder participates in the business with
his labor or expertise. In this case the extra profit is calculated for him based on the extra
work they provided towards benefiting the corporation.
o If you are buying shares from that same company and you are providing expertise
to that company, they give you a preferred share, because you are providing service
to that company/ partnership. Based on that you are allowed to take extra profit.
10. Bonds are considered another form of interest-based loans which is risk-free (of loss) and
therefore are considered prohibited. If the bond involves investing in a business on the
base of risk-taking principle then it is permissible.
o Even though its coming from government, it still has the issue of riba involved.
Subject to same problems as any stock (harm practices, risk-free guarantees)
Alternative: Investment Bonds
(sanadtl-murabah aw al-muqraah)
The business involving investment bonds is based on muraba (sleeping partnership) in which
the capital and the profit percentage is clearly stated.
o Silent partnership. If it follows same exact rule of hall muraba, then it is halaal.
You buy the stocks and provide nothing. You just sit there and watch as the
companies take care of this for you, just like in the case of the Dubai Airport,
mentioned above.
o You put your money as investor, the bank acts as an entrepreneur, and you get your
money back with profits. In this case, this is considered a hall practice as well.
The investors buys the bonds to finance the business and in return they wait until the
distribution of profit due date (maturity) comes around.
The owner of these bonds can trade them in the stock market after the business has started,
not before that.
A third party, the government, for instance, can guarantee the capital for the investors in case
of loss in order to encourage growth in businesses. Provided that the third party is not part of
the initial business itself.
Preferred bonds are not permissible in this scenario because it violates the rule of equality in
partnership, unless the bondholders contributing to the corporation through labor or
expertise.
Zakt on Stocks
o How can we pay Zakt on this money?
o Ex. You are participating in the stock market. You have very high
investments valued at $400,000. How do you pay Zakt on this money? There
are 2 kinds of stocks/ shares. Depends on the kind of share.
The corporation should calculate and pay the annual zakt on behalf of the shareholders.
Because the company, in this regard, is one entity and act as an agent for the shareholders.
o If you have an Islamic company on your behalf, you do not need to worry about it.
Otherwise, you are responsible for it.
If the corporation did not pay the zakt on behalf of the shareholders, then each investor is
responsible to calculate his/ her zakt as follows:
2 kinds of shares
1) If the stocks were used for quick profit by buying and holding them for a short period of
time and then selling them again, then they would be treated as a commodity. The zakt in this
case, after the passing of one year, is 2.5% of the market value of the stocks.
o If you use stocks as commodities (you buy and sell them immediately), and thats
your business on a daily basis, then you pay the zakt at the end of the year based on
their market value.
o So if there is $400,000 you are trading with, you pay 2.5% of that as zakt.
2) If the stocks were used for a long-term investment (Example: a permanent shareholder of a
particular corporation) or as investment bonds, then the zakt would be 2.5% on the profit only
after the passing of one whole year from earning the profit.
o Ex. 401K. You are not dealing with the stock on a daily basis. It is sitting there for
you until you retire. There is a difference of opinion, but the one that Shaykh Yaser
follows the opinion that you pay Zakt when you cash the 401K, after 10, 15, or 30
years. Thats when you pay 2.5 % zakt for the entire amount you get.
o Why? Because during its stay in the market, it is an assumed value.
o Some of the Ulema wanted to differentiate between:
o 401K plan that is given to you by your company completely or if you are the
one who is paying towards the 401K voluntarily
versus
o The one that is 50/50, where the company pays an amount and you match it,
or vice-versa.
Since you are putting money in there, you have tangible money that
you need to pay zakt on. You pay the amount of money on that
which you contributed yourself to the 401k. If its the companys
money, it is an assumed value until you cash it.
Other Forms of Dealing with the Stock Market

o Extra kind of stocks built in the stock market
Mutual Funds:
An investment vehicle that is made up of a pool of funds collected from many investors for the
purpose of investing in securities in securities such as stocks, bonds, money market
instruments and similar assets. Mutual funds are operated by money managers, who invest the
funds capital and attempt to produce capital gains and income for the funds investors. A
mutual funds portfolio is structured and maintained to match the investment objectives states
in its prospectus.
Hedge Funds:
An aggressively managed portfolio of investment that used advanced investment strategies
such as leveraged, long, short and derivative positions in both domestic and international
markets with the goal of generating high returns (either in an absolute sense or over a
specified market benchmark).
Legally, hedge funds are most often set up as private investment partnerships that are open to
a limited number of investors and require a very large initial minimum investment.
Investments in hedge funds are illiquid, as they often require investors keep their money in
the fund for at least one year.
For the most part, hedge funds (unlike mutual funds) are unregulated because they cater to
sophisticated investors. In the U.S., laws require that the majority of investors in the fund be
accredited. That is, they must earn a minimum amount of money annually and have a net
worth of more than $1 million, along with a significant amount of investment knowledge. You
can think of hedge funds as mutual funds for the super-rich. They are similar to mutual funds
in that investment are pooled and professionally managed, but differ in that the fund has far
more flexibility in its investment strategies.
Income and Growth Fund
Income Fund: A type of mutual fund that emphasizes current income, either on a monthly or
quarterly basis, as opposed to capital appreciation. Such funds hold a variety of government,
municipal and corporate debt obligations, preferred stock, money market instruments, and
dividend-paying stocks.
Growth Fund: A diversified portfolio of stocks that has capital appreciation as its primary goal,
with little or not payouts. Portfolio companies would mainly consist of companies with aboveaverage growth in earnings that reinvest their earnings into expansion, acquisitions, and/ or
research and development. Investing in growth funds requires tolerance for risk and a holding
period with a time horizon of five to 10 years.
o When a company wants to expand and have investment from outside
401K Plans
A qualified plan established by employers to which eligible employees may make salary
deferral (salary reduction) contributions on a post-tax and/ or pretax basis. Employers
offering a 401(K) plan may make matching or non-elective contributions to the plan on behalf
of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on
a tax-deferred basis.
o When you apply for it, they give you 5 different options. You have to choose 3 out of
5. Its problematic for a Muslim because you dont know what type of dealings they
have on all these options
o Try to find a hall mutual fund who will take care of your 401K plan for you.
Amanah Funds, inc, does that. They have to abide to the law of the
land. They offer you 5 but they give you direction. Is it %100 hall?
Not sure.
Whenever you want to invest, even with an Islamic company, check

with your Sheikh, your imaam.
Caps placed by the plan and/ or IRS regulation usually limit the percentage of salary deferral
contributions. There are also restrictions on how and when employees can withdraw these
assets, and penalties may apply if the amount is withdrawn while an employee is under the
retirement age as defined by the plan. Plans that allow participants to direct their own
investments provide a core group of investment products from which participants may
choose. Otherwise, professionals hired by the employer direct and manage the employees
investments.
Chapter 23
Deficient Contracts
We have shown all the important contract details that need to be considered above but, in summary, we
can say contemporary contracts typically fall foul of Sharah principles in four key areas as follows:
Penalty clauses (as in contracts for the supply of gas/water/ electricity, etc) which require
the householder to pay interest charges if they default on payment.
Contemporary scholars have permitted Muslims to accept such contracts for essential services
and goods on the basis of necessity.
Seller not having possession of goods.
Contracts must be devoid of excessive uncertainty (gharar)
Finally, contracts must not be interlinked so as to form a contract within a contract.
Chapter 24
Bringing Back the Barakah!
How to Increase Our Wealth?
How can you guarantee that Allah will bring wealth to you?
How to increase income through acts of worship?
1. Thanking Allah
Allah jalla wa al states in His magnificent Book:
Remember when your Lord promised, If you are thankful, I will give you more, but if
you are thankless, My punishment is terrible indeed.
(Ibrhm, 7)
o Be Thankful to Allah and He will increase His favor upon you. This is how
you increase your income.
o What is the meaning of being truly thankful to Allah? Especially for those of
us who see the changing seasons.
o It is spring. When you see things turning green around you, it is a reminder
from Allah, After every Difficulty there will be Ease. Be grateful Allah is
showing you a new season. You are moving now to the next phase.
2.
Seeking Forgiveness and Repentance

Allah states that Sayyidina Nh alayhil-salm said to his people:
I said: Ask forgiveness of your Lord: He is ever forgiving. He will send down
abundant rain from the sky for you; He will give you wealth and sons; He will
provide you with gardens and rivers.
(N, 10-12)
This concept is also mentioned in another verse of the Qurn. Allah states,
Ask Your Lord for forgiveness, then turn back to Him. He will grant you
wholesome enjoyment until an appointed time and give His grace to everyone
who has merit, but if you turn away, I fear you will have a torment on a terrible
Day.
(Hd, 3)
o Ironically, if you seek forgiveness from Allh regularly, Allh in turn will send
abundance upon you. He will send the rain pouring down upon you.
o Why is that? Back then, the source of life was agriculture. What does rain
mean to people? It means harvest. It means life, food, sustenance. As a result
youll get more money, more cash, more children (more labor).
o If you seek forgiveness, Allah will provide for you and give you prosperity
3. Tawakkul in Allh
Sayyidina Umar (raAllhu anhu) reported that the Prophet (allallhu alayhi wa sallam)
said,
If you were to put your trust in Allh the way that He deserves, you would be
provided for as the birds are; they leave at the beginning of the day famished,
and they return at the end of the day full.
o If you are truly reliant on Allh in your affairs, he will provide you like he provides
birds.
o Birds dont have a degree to get a job. They live day-to-day.
o Walk out of the door, saying O Allah, I will rely on you and you go and do
your job, Allh will provide for you.
4. Constantly Worshipping Allh
Abu Hurayrah (rayAllhu anhu) stated the Prophet (allallhu alayhi wa sallam) said,
Allh says, O Son of dam! Take time out to constantly worship me, I will fill
your chest with richness, and remove your poverty. And if you do not do so, I
will make busy your hands and will not remove your poverty.
o What kind of richness will Allah fill your heart with? Contentment
o Shaykh recounts story in Palestine of very poor citizens who were so poor
yet so generous. Not only that but they were content. The more money you
have in this dunya, the more stress you have. So much stress to get it, so
much stress to keep it.
o How do you show gratitude to Allh? By constantly worshipping Him. Thats how Allah
wants you to show gratitude to Him
o There are 2 ways to show gratitude.
o 1) amd. You say it by tongue Alamdlillah meaning All praise is due to

Allh.
amd is always done for the good and even when something difficult
happens to you.
o 2) Shukr
When it comes to Al-Shukr. You are thankful to Allh for the good,
but not for the bad. For the bad you offer amd. Thanking Allah is
done with your tongue, your heart, and through your actions.
So constantly worshipping Allah is a way of showing your

gratitude to Allah and a way of increasing your wealth.
5. Taqwa
Allh will find a way out for those who are mindful of Him and will provide for them
from an unexpected source; Allh will be enough for those for those who put their trust
in Him. Allah achieves His purpose; Allah has set a due measure for everything.
(al-alq, 2-3)
o Those who truly fear Allah, Allah will provide an exit out of every single hardship. And He
will provide for them from sources they are unaware of. Sources you have no idea where
they came from. Each and every one of us probably had an experience like this with Allh
azza wa jal
o Many people believe that when Allah promises to return money to you (for every $1 you
spend, you get 10-700 more), they think that the figure in their bank accounts are going to
go up. Not necessarily.
o Allah will put barakah (blessings) in what you already have in your
hands! That will have the power of 700 times.
o Ex. How many times do you go to buy something and you find it 50 %
off? Thats barakah right there! (You saved 50%). Or how many times
you were about to pay a heavy price when someone directed you to a
cheaper resource. It comes just like that
6. Establishing the Ties of Kinship
Abu Hurayrah (rayAllhu anhu) reported that the Prophet (allallhu alayhi wa sallam)
said,
Whoever is pleased with the fact that his rizq be increased and his life-span be
extended, then let him establish the ties of kinship.
o Anyone who desires that increases his rizq and a longer life should maintain the ties
of kinship (with family, cousins, uncles, parents, children)
7. Spending in the way of Allh
Allh azza wa jall says in the Qurn:
Say: My Lord gives in abundance to whichever of His servants He will, and sparingly to
whichever He will; He will replace whatever you give in alms. He is the Best of
Providers.
(Saba, 39)
The Prophet (allallhu alayhi wa sallam) said,
Allh has said: O son of dam! Spend, I will spend on you!
o
Those who are afraid of giving, just give it! And Allah will give for you.
o Ex. At a fundraiser the Shaykh attended, 10 year old donated all her money
($200). Towards the end of the fundraiser, she won the raffle-prize- a $500
plasma t.v. This is the promise of Allah
8. Marriage
Allh azza wa jall says in His Book:
Marry off the single among you and those righteous ones from your male and female
slaves. If they are poor, Allh will provide for them from His bounty: Allhs bounty is
infinite and He is all Knowing.
(Nr, 32)
o If they were poor, Allah will provide for them.
o Still should have a good business plan for marriage.
9. Supporting Students of Knowledge
Anas b. Mlik (rayAllhu anhu) narrates, There were two brothers (that lived) at the
time of the Prophet (allallhu alayhi wa sallam). One of them would come to the Prophet
(allallhu alayhi wa sallam) whereas the other one would seek his sustenance (by
working). The one who used to seek his sustenance complained to the Prophet
(allallhu alayhi wa sallam) about his brother. The Prophet (allallhu alayhi wa sallam)
replied, (laallaka turzaqa bihi) It is possible that you are provided your rizq because of
him!
o Giving those who are learning for the sake of Allah. Providing for someone to
become a scholar, imagine how Allah will return it back to you. This doesnt mean a
person quits his job and jeopardizing his life and his family. You have to have a
business plan and then put your trust in Allah, even if it was for the sake of Allah
and for the purpose of seeking knowledge.
10. Making the Hereafter Ones Key Objective
On the authority of Anas b. Mlik (rayAllhu anhu) who said that the Prophet
(allallhu alayhi wa sallam) said:
Whoever made the Hereafter his goal, Allh will place His richness in his heart, gather
his affairs for him, and the world will come to him defeated. But whoever puts this
world a his goal, then Allh will place poverty right before his very eyes, divide his
affairs for him, and nothing will come to him of this world except that which was
already written for him.
Abu Umamah reported the Prophet (allallhu alayhi wa sallam) said:
O Mankind! Jibrl has whispered in my soul that no person shall die until his time be
complete, and his sustenance be finished. So have taqwa of Allh, and seek your
sustenance in a beautiful manner. And let not any of you- when his sustenance appears
to be delayed in arriving- try to seek it through disobeying Allh! For verily, what Allh
has (with Him) can never be obtained except through obedience to Him. Abu Nuaym
Closing remarks by the Shaykh Yaser Birjas:
Know my dear brothers and sisters, that if you chase the Dunya, it keeps running away
farther and farther from you. If you keep chasing the Dunya. It is an illusion. It is a
mirage that you will never be able to capture. And if you leave the Dunya and start
running away from it, Allah will make the Dunya run after you. Allah, subhana waala
will send the Dunya towards your feet. That doesnt mean you dont become an
entrepreneur. There is a difference between someone who plans and balances his dunya
with the akhira than someone who puts the akhirah behind his back. Even if the latter
becomes rich, he will always be poor. Why? Because he wont be content even if he is a
millionaire and he will constantly be looking for more. He will have the money but not
the contentment in his heart. Arab proverb.
If you have this contentment in your heart, then you and the One who owns this whole
universe, you both are equal. The One who owns the universe is happy with it, and you
who has these pennies are happy with. So you both are equal.
Whatever you do with your money, think about whether it is halaal or haraam.
The nature of knowledge is that it produces more questions than giving you answers.
o Hope you have instruments and tools that will help you find your way
through these transactions.
o You will have a responsibility on yourself and your family to educate them.
I ask Allah to provide for you from the blessings of the Dunya.
And I ask Allh to provide for you from the hall sources.
And I ask Allh to make all your incomes in this dunya hall.
And that your abode will be Jannatul Firdous.
And I ask Allh to provide for us from the riches of the world in a way that pleases Him.
And we ask Allh to keep us away from anything that is harm.
Oh Allah! Make useful for me what you have taught me and teach me knowledge that will be
useful to me.
Recite:

"O Allah, save me from harm and make the hall sufficient and by your boon/favour
make me independent from others".
Books You can Refer to:

Al-Hallak, M. Moatz, trans. Banking and Interest: A Close Examination of Al-Azhar's Verdict. AMJA.
Hassaan, Dr. Hussein Hammed. Islamic Investments and Methods of Financing.
Iqbal, Munawar. Islamic Banking and Finance: Current Developments in Theory and Practice. Leicester: Islamic
Foundation, 2002.
Morris, Virginia B., and Monem A. Salam. A Muslim's Guide to Investing & Personal Finance. New York: Lightbulb,
2008.
Annual Harvard University Forum on Islamic Finance
http://ifp.law.harvard.edu/login/conference
http://ifp.law.harvard.edu/databank/databank_home | free access but you must register

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Pure Paisa: Fiqh of Money and Transactions || Taught By: Shaykh Yaser Birjas || Qabeelat Durbah

1. Taqwa and extra good deeds.

2. Istighfar or saying ( seeking forgiveness)

Woe to those who give less [than due] [Al-Mutaffifeen 83:1]

To whom did you pay your tuition?

The registration volunteer

A friend or a family member

Where did you get the money from?

What did you pay for?

INVESTMENT AND BANKING (CONTRACTS OF INVESTMENT)

An exchange of goods, services, or other property for money.

eBay and online auctions

Vending machines Does a vending machine qualify as a taajir/merchant? Do you talk

GAMES AND CHANCES (CONTRACTS OF EXCHANGE)

Lottery and scratch cards These constitute another form of gambling

Priceline deals - Would you be paying for a tangible commodity or something

DIFFERENT FORMS/TYPES OF CONTRACT

Exchange goods for money

Exchange property for

4. Dealing with halal products and services that is legally permitted.

C- To pay zakat to the poor.

MULKIYAH AMMAH = Public properties cannot be privately owned such as public

roads, bridges, seas and sunlight, public/state parks.

3. Inheritance the ownership is automatically transferred to the legal recipients of the

3. In terms of SPECIFIC AND UNSPECIFIC WEALTH

4. VALUED AND NON-VALUED WEATH

PART TWO: CONTRACTS

O you who believe, fulfill all your contractual obligations

Other forms of contract

input of capital or labor by

Difference between amanah and loan?

1. Contracts in consideration of their rulings in Shariah (min haythul-hukml-taklifi)

(Min Haythul Maliyyah wa Adamihaa)

The commodity al-maqud alayh

- The acceptance of the trade should be in respect to the actual offer.

- sold by owner or his

3. Conditions that stipulate a particular

4. stipulating cash penalties on late payments

OPTION OF MEETING (khiyari-majlis)

Selling generic products as genuinely name brand is fraud

Allah (SWT) made al-bay halal and riba haraam.

Understanding the sale contract:

Considering the nature of the commodity :

**Profiting from a business transaction has no limits and is permissible. Sources of

Considering the nature of way deciding a sales price

This comes in four forms:

d) Bayl-Muzayadah or auctioning is a process of selling goods or services by

However, there should not be much gharar.

Considering the nature or way payment is given:

2) The contract involves illegal financial commodities.

3) The contract is causing damage outside the contracts limit.

4) The contract is concluded contrary to some other circumstantial laws of Shariah.

Types of Prohibited Sales:

3) Two contracts in one sale (bayatani fi bayah).

6) Selling forbidden commodities or services (bayl-muharramat). Haram service.

7) Selling after adhan of Jumuah (al-bay inda adhanl-Jumuah).

8) Selling the unknown or trading uncertainty (bayl-gharar). Based on ambiguity: the

9) Dealing with riba (al-taamull-ribawi). Covered later in detail.

Four Main Defects in Contemporary Sales:

2) The contract involves the exchange of riba.

3) The contract contains gharar (or extreme uncertainty).

4) The contract stipulates conditions leading to a legally prohibited practice.

The Sin of Riba