Do not sell what you do not own
Question :
If I have a sum of money and a person comes to me and says, "I want you to give me 1,000 riyals as a loan." Then, I say to him, "I will give you 10 for 13 riyals." I mean by that, that I will earn 3 riyals for every 10 riyals (that I loan him). Then, he accepts that and I go with him to the market and I buy a product that is priced at 1,000 riyals. Then, I sell it to the person who wants the loan for 1,300 riyals. Is this lawful or forbidden, while knowing that the sales contract was made before I bought the merchandise?
Answer:
Since the questioner mentioned that he sold some property to a person before owning it, and then after he sold it to him, he went and purchased it from the market, the sales agreement in this form is not correct. This is because he sold what he did not own, and indeed the Prophet said:
"Do not sell what you do not have."
This was recorded by At-Tirmithi, Ibn Majah and others. And success is from Allâh. May Allâh send blessings and peace upon Muhammad, his family and his Companions.
Source:
The Permanent Committee
Fatawa Islamiyah, Vol. 4 Pages 441
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