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Islamic Law of Transaction - Documentation, Witnessing, and Ethical Conduct in Sales
In Islamic law, a sale (bayʿ) means exchanging one item for another. The Arabic word bayʿ is used for both buying and selling, as mentioned in the Qur’an in verses [12:20] and [2:102].
The word bayʿ comes from the Arabic word bāʿ, meaning “arm,” because people stretch out their arms to give or receive items during a transaction. Another explanation is that people used to shake hands after completing a deal. Because of this, another Arabic word for a sale agreement is ṣafqa, which literally means “a handshake.”
Sales and trade are lawful and permitted in Islam. Their legitimacy is supported by the Qur’an, the Sunnah (teachings and traditions of Prophet Muhammad ﷺ), and the consensus (ijmāʿ) of Islamic jurists.
The Qur’an clearly allows trade and commercial transactions. Allah says: “But Allah has permitted trade” [2:275]. The Qur’an also encourages proper commercial dealings by stating: “Take witnesses whenever you make a commercial contract” [2:282]. Another verse says: “Let there be trade among you by mutual consent” [4:29]. Allah also says: “It is no crime for you to seek the bounty of your Lord” [2:198], meaning that earning through lawful trade and business is permissible.
The Sunnah of Prophet Muhammad ﷺ also supports lawful trade. The Prophet ﷺ was once asked which type of income is the best. He replied that the best income comes from a person’s own work and from every lawful and honest sale, meaning a transaction free from cheating and betrayal.
In another Ḥadīth, the Prophet ﷺ said: “A sale must be by mutual consent.” This shows that both the buyer and seller must willingly agree to the transaction without force or deception.
The Prophet ﷺ also accepted trade as a normal and lawful activity among people during his time. He praised honest business people by saying that a truthful and trustworthy trader will be among the prophets, the righteous, and the martyrs in the Hereafter. This Ḥadīth was narrated by Al-Tirmidhi and classified as ḥasan (good).
There is also agreement (ijmāʿ) among Muslims that sales are permissible. Islamic scholars agree that trade is necessary because it helps people fulfil their needs by cooperating and exchanging goods and services with one another. Therefore, the general rule in Islamic law is that all sales are permissible unless there is clear evidence that a specific type of sale is forbidden.
Al-Shafi‘i explained that the basic rule for all sales is permissibility as long as the transaction is carried out by capable people who willingly consent to it. However, any type of sale specifically prohibited by Prophet Muhammad ﷺ, or anything very similar to a prohibited transaction, is not allowed. Anything outside those prohibited matters remains lawful based on the Qur’anic verses that permit trade and commercial dealings.
According to the Hanafi School jurists, a sale is the exchange of a lawful and owned item (māl) for another item in a beneficial and specific manner. This definition excludes exchanges that bring no real benefit, such as swapping one identical coin for another identical coin. It also excludes worthless or prohibited items, such as dead animals or dust, because they are not considered valuable in Islamic law.
The Hanafi jurists also explained that a commodity or property (māl) must be something desirable and capable of being stored for future use. An object can be recognised as property if people generally see it as useful and valuable.
Mustafa Al-Zarqa criticised this definition and suggested a broader meaning. He defined property as any identifiable object that has material value to people.
Based on the Hanafi view, services and simple rights are not usually considered commodities because they are not physical objects that can be stored. However, the majority of Islamic jurists (fuqahāʾ) consider services and rights capable of ownership because the real benefit of physical property often comes from its use (usufruct).
Al-Nawawi defined a sale as the exchange of one owned item for another together with the transfer of ownership from one person to another.
Similarly, Ibn Qudamah defined a sale as an exchange that not only transfers ownership, but also allows the new owner to take possession of the item.
In all cases, a sale in Islamic law must be based on a contract that includes an offer (ījāb) and an acceptance (qabūl) between the parties involved.
Islamic Ethics, Documentation, and Proper Conduct in Sales
Islam places great importance on honesty, fairness, mercy, transparency, and proper documentation in business transactions.
One important ethical principle is avoiding excessive profit and unfair advantage over buyers. Islam allows traders to make reasonable profit, but it discourages exploitation and cheating. The Maliki School scholars explained that excessive unfairness may exist when profit reaches one third or more above the normal value. Therefore, profit within reasonable limits is generally acceptable.
Another important principle is truthful and complete disclosure of information. A seller must provide honest and complete details about the product, including its type, origin, quality, condition, and cost. Hiding defects, giving false information, or misleading customers goes against Islamic business ethics.
Al-Tirmidhi narrated a Ḥadīth on the authority of Rifāʿah in which the Prophet ﷺ said that most merchants will be resurrected on the Day of Judgment as sinners except those who fear Allah, deal kindly with customers, and speak truthfully in their business transactions.
Islam also encourages ease and kindness in buying and selling. Sellers and buyers should not be too harsh in negotiations or place unreasonable conditions on one another. They should avoid demanding prices that are unfairly high or unrealistically low.
Al-Bukhari narrated on the authority of Jābir that the Prophet ﷺ said: “Allah shows mercy to a person who is easy and gentle when selling, buying, and collecting debts.” This Ḥadīth teaches Muslims to act with patience, kindness, and flexibility in financial dealings.
Islam further teaches Muslims to avoid swearing by the name of Allah during sales, even if the person is speaking truthfully. Using Allah’s name frequently in business transactions is considered disrespectful and not suitable for the honour of Allah’s name.
The Qur’an criticises the misuse of oaths by saying: “Do not use Allah’s name in your oaths as an excuse against doing good, acting rightly, or making peace between people” [2:224].
In another Ḥadīth narrated by Al-Bukhari and Muslim ibn al-Hajjaj on the authority of Abū Hurayrah, the Prophet ﷺ said: “Swearing may help sell goods, but it removes their blessings.” This means that even if swearing helps attract buyers, it can remove the spiritual blessings (barakah) from the business.
Islam also encourages merchants to give charity regularly. Traders may sometimes fall into mistakes such as swearing, hiding information, cheating, poor behaviour, or taking excessive profit during business transactions. Giving charity helps cleanse and purify their earnings and actions.
Al-Tirmidhi, Abu Dawud, and Ibn Majah narrated a Ḥadīth on the authority of Qays ibn Abī Gharzah in which the Prophet ﷺ said: “O merchants, sins and wrongdoing are present in trade, so purify your sales with charity.” This teaches that charity is an important way to seek forgiveness and blessings in business dealings.
Islam also encourages the proper documentation of contracts, loans, debts, and delayed payment sales. It is recommended that financial agreements be written down clearly and supported by witnesses. This helps protect the rights of all parties, prevents disputes, and promotes trust and justice in society.
Allah instructed believers in the Qur’an [2:282] to record debts and financial contracts and to involve witnesses in such agreements. This verse forms the basis for the Islamic principle of documenting and witnessing financial transactions.
These teachings encourage Muslims to rely on honesty, trustworthiness, kindness, charity, proper documentation, and good character rather than greed, deception, or careless dealings in trade.
Case Scenario: Ethical Trade and Proper Documentation
Ahmad sells his bicycle to Bilal for RM500. Ahmad legally owns the bicycle, while Bilal owns the money. Ahmad offers to sell the bicycle, and Bilal willingly accepts the offer. Ahmad honestly informs Bilal that the bicycle has a small scratch and that one brake needs repair. During the discussion, Bilal asks for a small discount because he is a student, and Ahmad kindly agrees. Ahmad also avoids swearing by Allah to convince Bilal to buy the bicycle. This transaction reflects Islamic teachings of honesty, fairness, ease, and mutual consent.
Bilal is unable to pay the full amount immediately, so both parties agree that RM200 will be paid later. Ahmad and Bilal write down the agreement and ask two friends to witness the delayed payment arrangement. This follows the Islamic recommendation to document debts and financial contracts to avoid future disagreements.
After completing several sales during the month, Ahmad realises that he may have spoken harshly to some customers or charged slightly high prices in certain situations. To seek Allah’s forgiveness and purify his earnings, he gives part of his profit to charity. This follows the Islamic teaching that charity helps cleanse mistakes that may occur in business dealings.
In another example, Sarah pays a tutor for online teaching services. Although Hanafi jurists may not classify services as physical commodities, the majority of Islamic scholars allow such transactions because the service provides recognised value and benefit.
However, if Ahmad hides major defects in the bicycle, falsely claims that it is new, swears repeatedly by Allah to convince Bilal, cheats customers, refuses to document debts properly, or demands extremely unreasonable prices to exploit buyers, he would be violating Islamic business ethics. Likewise, forcing someone into a transaction, dealing harshly, or selling prohibited and worthless items such as dead animals or dust would not be regarded as proper or valid conduct in Islamic law.
In Islamic law, a sale (bayʿ) means exchanging one item for another. The Arabic word bayʿ is used for both buying and selling, as mentioned in the Qur’an in verses [12:20] and [2:102].
The word bayʿ comes from the Arabic word bāʿ, meaning “arm,” because people stretch out their arms to give or receive items during a transaction. Another explanation is that people used to shake hands after completing a deal. Because of this, another Arabic word for a sale agreement is ṣafqa, which literally means “a handshake.”
Sales and trade are lawful and permitted in Islam. Their legitimacy is supported by the Qur’an, the Sunnah (teachings and traditions of Prophet Muhammad ﷺ), and the consensus (ijmāʿ) of Islamic jurists.
The Qur’an clearly allows trade and commercial transactions. Allah says: “But Allah has permitted trade” [2:275]. The Qur’an also encourages proper commercial dealings by stating: “Take witnesses whenever you make a commercial contract” [2:282]. Another verse says: “Let there be trade among you by mutual consent” [4:29]. Allah also says: “It is no crime for you to seek the bounty of your Lord” [2:198], meaning that earning through lawful trade and business is permissible.
The Sunnah of Prophet Muhammad ﷺ also supports lawful trade. The Prophet ﷺ was once asked which type of income is the best. He replied that the best income comes from a person’s own work and from every lawful and honest sale, meaning a transaction free from cheating and betrayal.
In another Ḥadīth, the Prophet ﷺ said: “A sale must be by mutual consent.” This shows that both the buyer and seller must willingly agree to the transaction without force or deception.
The Prophet ﷺ also accepted trade as a normal and lawful activity among people during his time. He praised honest business people by saying that a truthful and trustworthy trader will be among the prophets, the righteous, and the martyrs in the Hereafter. This Ḥadīth was narrated by Al-Tirmidhi and classified as ḥasan (good).
There is also agreement (ijmāʿ) among Muslims that sales are permissible. Islamic scholars agree that trade is necessary because it helps people fulfil their needs by cooperating and exchanging goods and services with one another. Therefore, the general rule in Islamic law is that all sales are permissible unless there is clear evidence that a specific type of sale is forbidden.
Al-Shafi‘i explained that the basic rule for all sales is permissibility as long as the transaction is carried out by capable people who willingly consent to it. However, any type of sale specifically prohibited by Prophet Muhammad ﷺ, or anything very similar to a prohibited transaction, is not allowed. Anything outside those prohibited matters remains lawful based on the Qur’anic verses that permit trade and commercial dealings.
According to the Hanafi School jurists, a sale is the exchange of a lawful and owned item (māl) for another item in a beneficial and specific manner. This definition excludes exchanges that bring no real benefit, such as swapping one identical coin for another identical coin. It also excludes worthless or prohibited items, such as dead animals or dust, because they are not considered valuable in Islamic law.
The Hanafi jurists also explained that a commodity or property (māl) must be something desirable and capable of being stored for future use. An object can be recognised as property if people generally see it as useful and valuable.
Mustafa Al-Zarqa criticised this definition and suggested a broader meaning. He defined property as any identifiable object that has material value to people.
Based on the Hanafi view, services and simple rights are not usually considered commodities because they are not physical objects that can be stored. However, the majority of Islamic jurists (fuqahāʾ) consider services and rights capable of ownership because the real benefit of physical property often comes from its use (usufruct).
Al-Nawawi defined a sale as the exchange of one owned item for another together with the transfer of ownership from one person to another.
Similarly, Ibn Qudamah defined a sale as an exchange that not only transfers ownership, but also allows the new owner to take possession of the item.
In all cases, a sale in Islamic law must be based on a contract that includes an offer (ījāb) and an acceptance (qabūl) between the parties involved.
Islamic Ethics, Documentation, and Proper Conduct in Sales
Islam places great importance on honesty, fairness, mercy, transparency, and proper documentation in business transactions.
One important ethical principle is avoiding excessive profit and unfair advantage over buyers. Islam allows traders to make reasonable profit, but it discourages exploitation and cheating. The Maliki School scholars explained that excessive unfairness may exist when profit reaches one third or more above the normal value. Therefore, profit within reasonable limits is generally acceptable.
Another important principle is truthful and complete disclosure of information. A seller must provide honest and complete details about the product, including its type, origin, quality, condition, and cost. Hiding defects, giving false information, or misleading customers goes against Islamic business ethics.
Al-Tirmidhi narrated a Ḥadīth on the authority of Rifāʿah in which the Prophet ﷺ said that most merchants will be resurrected on the Day of Judgment as sinners except those who fear Allah, deal kindly with customers, and speak truthfully in their business transactions.
Islam also encourages ease and kindness in buying and selling. Sellers and buyers should not be too harsh in negotiations or place unreasonable conditions on one another. They should avoid demanding prices that are unfairly high or unrealistically low.
Al-Bukhari narrated on the authority of Jābir that the Prophet ﷺ said: “Allah shows mercy to a person who is easy and gentle when selling, buying, and collecting debts.” This Ḥadīth teaches Muslims to act with patience, kindness, and flexibility in financial dealings.
Islam further teaches Muslims to avoid swearing by the name of Allah during sales, even if the person is speaking truthfully. Using Allah’s name frequently in business transactions is considered disrespectful and not suitable for the honour of Allah’s name.
The Qur’an criticises the misuse of oaths by saying: “Do not use Allah’s name in your oaths as an excuse against doing good, acting rightly, or making peace between people” [2:224].
In another Ḥadīth narrated by Al-Bukhari and Muslim ibn al-Hajjaj on the authority of Abū Hurayrah, the Prophet ﷺ said: “Swearing may help sell goods, but it removes their blessings.” This means that even if swearing helps attract buyers, it can remove the spiritual blessings (barakah) from the business.
Islam also encourages merchants to give charity regularly. Traders may sometimes fall into mistakes such as swearing, hiding information, cheating, poor behaviour, or taking excessive profit during business transactions. Giving charity helps cleanse and purify their earnings and actions.
Al-Tirmidhi, Abu Dawud, and Ibn Majah narrated a Ḥadīth on the authority of Qays ibn Abī Gharzah in which the Prophet ﷺ said: “O merchants, sins and wrongdoing are present in trade, so purify your sales with charity.” This teaches that charity is an important way to seek forgiveness and blessings in business dealings.
Islam also encourages the proper documentation of contracts, loans, debts, and delayed payment sales. It is recommended that financial agreements be written down clearly and supported by witnesses. This helps protect the rights of all parties, prevents disputes, and promotes trust and justice in society.
Allah instructed believers in the Qur’an [2:282] to record debts and financial contracts and to involve witnesses in such agreements. This verse forms the basis for the Islamic principle of documenting and witnessing financial transactions.
These teachings encourage Muslims to rely on honesty, trustworthiness, kindness, charity, proper documentation, and good character rather than greed, deception, or careless dealings in trade.
Case Scenario: Ethical Trade and Proper Documentation
Ahmad sells his bicycle to Bilal for RM500. Ahmad legally owns the bicycle, while Bilal owns the money. Ahmad offers to sell the bicycle, and Bilal willingly accepts the offer. Ahmad honestly informs Bilal that the bicycle has a small scratch and that one brake needs repair. During the discussion, Bilal asks for a small discount because he is a student, and Ahmad kindly agrees. Ahmad also avoids swearing by Allah to convince Bilal to buy the bicycle. This transaction reflects Islamic teachings of honesty, fairness, ease, and mutual consent.
Bilal is unable to pay the full amount immediately, so both parties agree that RM200 will be paid later. Ahmad and Bilal write down the agreement and ask two friends to witness the delayed payment arrangement. This follows the Islamic recommendation to document debts and financial contracts to avoid future disagreements.
After completing several sales during the month, Ahmad realises that he may have spoken harshly to some customers or charged slightly high prices in certain situations. To seek Allah’s forgiveness and purify his earnings, he gives part of his profit to charity. This follows the Islamic teaching that charity helps cleanse mistakes that may occur in business dealings.
In another example, Sarah pays a tutor for online teaching services. Although Hanafi jurists may not classify services as physical commodities, the majority of Islamic scholars allow such transactions because the service provides recognised value and benefit.
However, if Ahmad hides major defects in the bicycle, falsely claims that it is new, swears repeatedly by Allah to convince Bilal, cheats customers, refuses to document debts properly, or demands extremely unreasonable prices to exploit buyers, he would be violating Islamic business ethics. Likewise, forcing someone into a transaction, dealing harshly, or selling prohibited and worthless items such as dead animals or dust would not be regarded as proper or valid conduct in Islamic law.
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