Here is a transcript of the audio ‘Drop Shipping And A Clarification Of Selling That Which You Do Not Own’ originally lectured by Abu ‘Attiyah Mahmood Al-Kanadi:
Bismillaah Ar-Rahmaan Ar-Raheem
It is reported by Abu Dawud, An-Nisaai and others from the hadeeth of Hakeem Hizam, may Allaah be pleased with him, who said he asked the Messenger ﷺ, that a person he comes to him in order to purchase from him what he may not have with him in his possession that which he can sell to the person. So he said that he purchased it from the market, meaning, in order to resell it. So the Messenger of Allaah ﷺ, he said to him in this hadeeth: do not sell that which you do not hold or resign in your possession.
In this hadeeth, the noble Shaykh, Muhammad Bin Hizaam in the checking of Bulugh mentions that one of the reporters who he stated by name, is Majhool Al-Haal, an individual whose state is not known. However, this hadeeth, it comes from another chain, the chain of Amr bin Shuayb An Abeehe An Jadeehee [from his father from his grandfather] and by this the hadeeth elevates the level of authenticity.
And this hadeeth of Amr bin Shuayb who reports from his grandfather who is Abdullaah bin Amr Bin Aas, may Allaah be pleased with them both, the Messenger ﷺ prohibited in this hadeeth for a person to sell something which he does not own, and this hadeeth is reported by Ahmad, Abu Dawud, Nisai, Tirmidhi, and others and this hadeeth with a sound chain of narration.
The previous ahaadeeth have indicated the impermissibility of selling a commodity or product or land or so on which is not in the possession or owned by the seller at the time it is being sold. Ibn Hubayrah Al-Hanbali, he mentions in his book ‘Al-Afsaah’ which is an explanation of the book ‘Al-Humaydee Jam’ Bayn As-Saheehayn’, he says, may Allaah have mercy on him, and they agreed, this agreement/consensus, what is intended here is what he mentions himself in the muqaddamah (introduction), refer to the book, is the consensus of the four imams who are known as Abu Hanifa, Imaam Malik, Shaafi’ee and Ahmad, may Allaah be pleased with them all. He, may Allaah have mercy on him, said that they agreed that it is not permissible for a person to sell something which is not in his possession and it is not owned by him. Then he goes in order to purchase this product, meaning, so that he may sell it again.
So we take from this hadeeth as well the understanding of the people of knowledge that selling a commodity/product which is not in the possession of the one selling it at the time in which it is being sold is something which is incorrect. It opposes the prohibitions of our Messenger ﷺ. From the reasons in which the Messenger ﷺ prohibited this action of selling something which the person does not own, some of the people of knowledge have stated that this transaction in which a person is selling something which he does not own or is in his possession at that time, this may lead the person to go out looking for the product after he is already involved himself in a transaction and committed himself to producing or bringing forth the commodity to a customer. And him going out and looking for that product, it may that he finds it and it may that he does not find it. And it may be that he finds it at a price higher than he expected. Then all of this are from the forms of unclarity and harm which are found in the transaction which returns back to the one who is purchasing, the customer, or the one who is selling. So for this reason, this type of transaction is something which is incorrect.
And if we look at the transaction which is referred to as dropshipping, where the retailer, he doesn’t have the product which he is selling in his possession, but instead he has an agreement with a wholesaler. So when the customers come to him, he makes an agreement that he will produce for them or he will sell them such and such commodity. Then after they make the agreement, the person then goes again and purchases from the wholesaler and resells it. This type of transaction itself is to an extent entering into this action which is prohibited. What can be exempted from this is that the person who is a retailer, when is purchasing from a wholesaler, that he is a Wakeel, someone who is an agent, who works for the wholesaler. Then if they are an agent, there is no harm in this because the company is one company, so it is permissible for him to sell. However, if he is not an agent and he is just a retailer, and him purchasing from the retailers is in this scenario in which a person and he is lying from him, and when he makes an agreement from this retailer upon a specific product, the retailer tells him that he will supply him and he will go and make an agreement with the wholesaler, then this, as we mentioned, to an extent enters into this hadeeth of a person selling that which he does own.
Likewise, another error that is found in this transaction is that the person who is a retailer, when he is reselling the product from the wholesaler, he is not bringing it into his possession, meaning that the product itself or the commodity which is being sold, it remains in the possession of the wholesaler and it doesn’t come in the possession of the retailer in order for the retailer to sell it.
If this is the scenario in which a person, meaning a retailer, is selling the product, then this also enters into another prohibition, being that the Messenger of Allaah ﷺ, he prohibited the selling of a merchandise or a commodity where it is sold originally/initially before the person takes it into his possession. What is meant by this? If I was to give an example of this, is a person, he purchases a product. This person, when he purchases the product from the retailer or shop or so on, another person comes in order to purchase this same product, and he finds for example that someone proceeds him. So this person, who is a customer, who has now sold this commodity/merchandise, he sells it to that person while they are still in the place in which he bought that commodity originally. This type of transaction is something which is not allowed.
The Messenger ﷺ he prohibited this action and Imaam Bukhari, may Allaah have mercy on him, he chapters this in his Saheeh ‘Chapter Of Selling Food Before It Is Taken Into Possession As Well As The Selling Of That Which Is Not In The Possession Of The Person’. So in this chapter which Imaam Bukhari, may Allaah have mercy on him, he mentions, we see his fiqh (understanding) as he mentions after this the hadeeth of Ibn Abbas, may Allaah be pleased with them both, that which he mentions here, Ibn Abbas saying: that the matter that which the Messenger ﷺ prohibited, that it is food which is sold before it is taken into possession. Meaning, that the food is purchased at a specific location and resold at that specific location before it was taken out and into the possession of the buyer. He also mentions the hadeeth of Abdullaah Ibn Umar, may Allaah be pleased with them both, in the same chapter where he said that the Messenger of Allaah ﷺ said: Whoever purchases food then let him not sell it until it comes into his possession. And Isma’eeli added in a narration: he said: the person if he purchases food, then let him not sell it until it comes into his possession.
So in these two ahaadeeth that our Imaam Bukhari, may Allaah have mercy on him, mentions in this chapter, we see the prohibition of selling food before it comes into the possession of the owner.
And Ibn Abbaas, may Allaah be pleased with them both, he mentions about this hadeeth, Ibn Abbas, may Allaah be pleased with him, he mentions about this prohibition of selling the food. He says that I do not see everything or every matter except that it is similar to this. Meaning, whether it is food, materials, and other than this from the different commodities and merchandises that are sold, that a person cannot resell it in the exact location where he bought it until he transfers from that location firstly into his possession.
Also another hadeeth that indicates this meaning is the hadeeth of Zayd Bin Kab At-Tardee, may Allaah be pleased with him, which is found in the Sunan of Abi Dawud and others, where he said that the Messenger of Allaah ﷺ, that the Messenger of Allaah ﷺ, prohibited the selling of merchandises where they are sold until those who are purchasing these products/commodities/merchandises, they take them and transfer them into their possession. And this hadeeth was declared hasan by Al-Albani, may Allaah have mercy on him.
So if we return back to the dropshipping, we see in it that the transaction also contains another prohibition which is, that the retailer when is selling the product which is in the possession of the wholesaler, this product never enters the possession of the retailer. Rather, it is shipped from the wholesaler. And this transaction, if it is occurring in this method/way, then without a doubt it is entering into this hadeeth of the person selling a product which is not entered into his possession, which is prohibited by the Messenger ﷺ and the scholar, the likes of Al-Shaafi’ee and those narrations from the mathhab of Imaam Ahmad that this type of a transaction is not acceptable/valid until the person, he takes into his possession as comes in a hadeeth, until he takes the commodity/product/so on into his possession, and if this occurs, then he may resell at his own free will.
In summary, we have benefitted that selling the commodity/product which is not in the possession of the one selling it is something which is incorrect. And likewise, to sell a product where the person, he purchases it in that specific location and he takes it into his possession, and if these two matters in the transaction in addition to the other conditions that the scholars mention, then the transaction itself is incorrect and invalid.
And Allaah knows best. We ask Allaah to benefit us by that which we have mentioned, and All Praise and Thanks belong to Allaah.
I have seen some brothers make the excuse and they bring a Hadith about an exception can be made if it’s a known quantity, a known price, a known time etc or something similar to that. Could that be applied to drop shipping?
Yes it is called بيع السلم
They used this narration as proof:
Narrated Ibn `Abbas:
The Prophet (ﷺ) came to Medina and the people used to pay in advance the price of dates to be delivered within two or three years. He said (to them), “Whoever pays in advance the price of a thing to be delivered later should pay it for a specified measure at specified weight for a specified period.”
Some have exempted it from the previous ruling
Majid Jawed Al-Afghanee
Is there any opinions which suggest the permissibility of drop shipping? Some individuals state they have spoke with some scholars in makkah about it who said it is permissible. Is there a permissible angle for this type of business?
This is something I mentioned about drop shipping some time before to a brother.
Drop shipping is the following:
“Instead of purchasing a large amount of inventory, you simply partner with a drop shipping supplier and list their merchandise for sale. Then, once you receive an order you forward it to the supplier for fulfillment. The supplier will ship the product directly from their warehouse to your customer, and charge you only for the price of the shipped item”
This goes directly against the following Hadith:
عَنْ عَمْرِو بْنِ شُعَيْبٍ، عَنْ أَبِيهِ، عَنْ جَدِّهِ، قَالَ قَالَ رَسُولُ اللَّهِ ـ صلى الله عليه وسلم ـ “ لاَ يَحِلُّ بَيْعُ مَا لَيْسَ عِنْدَكَ وَلاَ رِبْحُ مَا لَمْ يُضْمَنْ
It was narrated from ‘Amr bin Shu’aib, from his father, that his grandfather said:
“The Messenger of Allah (ﷺ) said: ‘It is not permissible to sell something that is not with you, nor to profit from what you do not possess.”‘
[Saheeh Ibn Majah no. 1234]
Shaikh Abdul-Muhsin al-‘Abbad hafidhuhallah explained this Hadith saying:
“As for profiting from what you do not possess, then for example a person purchases a product and leaves it with the seller. So if it wastes or damages it is on the account of the seller. This is because it is in his possession but he has not delivered it. So the one who purchases it sells it before possessing it and then profits from it. So the meaning is that he profits from something which he does not possess”
[Sharh Sunan Abi Dawood no. 398]
So this is what happens in drop shipping in that the seller buys the goods from the wholesaler on credit and leaves the product with him. Then profits from the sale to the customer without having the product in his possession during the process. Along with the fact that the seller may also buy the product only when a buyer wants to buy it. So he advertises what he does not own, but can receive from his supplier provided that the supplier has it in stock as well. So this transaction can also falls into the first part of the Hadith. So from these two angles, it is a transaction that should be avoided.
And Allah Knows Best
Translated and Answered by
Faisal Ibn Abdul Qaadir Ibn Hassan
Just a small inquiry concerning the following:
“… you simply partner with a drop shipping supplier and list their merchandise for sale… ”
What is the essence of this partnership?
It is more of an agreement from a supplier to provide desired products for their cost/fee. However, both parties are separate businesses and entities. They make these arrangements, mostly from the retailers side, to sell products that the supplier receives in wholesale. The supplier gets the money for the product after it is sold to the buyer and carries the responsibility of shipping the goods to the buyer.
You can read more about it here
Faisal Ibn Abdul Qaadir Ibn Hassan
Shaykh sulayman Ar Ruhaylee mentioned examples
The first one correction he goes to the store besides him takes the product gives it to the one who wants it then after taking the money he goes back to the store pays what he owes and takes the profit*
1. A man comes to the store and says “I want such and such product, I will give you such and such wealth” They agree upon a deal and the man takes it and goes to the store besides him, takes the product, gives it to the one who wants it, and then after taking the money, he goes to the store, pays what he owns and takes the profit. This is selling that which he does not own.
2. A man comes to the store and says he needs such and such product, describes, it etc. Thereafter, the man says “wait here”. He goes to the store, buys it from its owner, whether paying all at once or delaying the payment, but now him being the owner, he goes back and tells the man how much you want, etc, and thus the contract and sale takes place after he owns it. This is somethign that is allowed
3. Example what the banks do
A person says “I need such and such product”. The bank says “ok sign this paper” or he obligates you with it and then he says “go take the product from whereever”. Therefore, he sold you that which he doesn’t own. But if he informs of his needs and doesn’t sign a contract or isn’t obligated with anything, and then the bank buys the product then sells it to you, that is ok.
The Ruling on Drop-Shipping
Ash-Shaykh Muhammad bin Saalih al-Uthaymeen rahimahullah was asked the following question:
If I’m aware of a person searching for a certain product, would it be permissible if I were to sell this product to him though I don’t own it? However [it should be known that] once I receive the money from him, I go and purchase the item from the market for a cheaper price than what I sold it to him for. So, would this be permissible? If you can clarify, it would be greatly appreciated.
This isn’t permissible. The scenario for this affair is that a person would go to another person and would say I want this and that product while the person doesn’t possess it. Therefore, the person sells it to him and he takes the money for it and buys it for a price cheaper than what he sold it for, this isn’t from naseehah [i.e. showing sincere concern for others] whatsoever!
And add to that, would the person be able to guarantee he will find that product? Perhaps he may have confirmed its availability with someone then comes to find out that the person sold it and no longer possess the item [i.e they ran out] which will result in a dispute between the buyer and the seller.
And a person may say, “So what about the transaction of a salam (السلم i.e. a payment of sale in advance upon the product being submitted later on)”, which was a transaction which was commonly established in the time of the Prophet, sallahu alayhi wa salam. And it [i.e. salam] is the case where a man would come to another who owns a garden and would say: “Here is one thousand [i.e. riyal] in return that you give me fruits from a tree or a plant or seeds from a plant after a one year period.” This is permissible which the Sahaabahs acted upon. However, our case doesn’t fall under the transaction of a salam (السلم). Our case is a regular purchase, a case where he assumes that the product is available with so-and-so then later doesn’t find it. What would the outcome be? It would result in a dispute such as the person saying, “Give me what you sold to me” and the person replying by saying “I didn’t find it”
And even if its availability was guaranteed, how can he deceive the customer?! He sells it to him for one thousand while he bought it for eight hundred, this transaction is impermissible and it is upon the person to fear Allah azza wa jal for verily the Prophet sallahu alayhi wa salam prohibited the Sahaabi Hakeem bin Hizaam – may Allaah be pleased with him – from selling what he doesn’t possess.
AbdulFattaah Bin Uthman