Murabahah and Tawliyah: Cost, Profit and Misstatement

1. Definition of murabahah

المرابحة: نقل ما ملكه بالعقد الأول بالثمن الأول مع زيادة ربح
Translation: Murabahah is the transfer of what was acquired under the first contract at its original price plus a profit.

Transfer of ownership means that the goods become another party’s property. The first price is the earlier acquisition consideration; the additional profit is calculated against it.

Example: goods purchased for Rs 10,000 are resold for Rs 12,000, with Rs 2,000 explicitly identified as profit.

2. Definition of tawliyah

والتولية: نقل ما ملكه بالعقد الأول بالثمن الأول من غير زيادة ربح
Translation: Tawliyah transfers what was acquired in the first contract at its original price without added profit.

Tawliyah is a resale at the disclosed first price, without an added margin. Like murabahah, its characterization depends on a truthful account of the first transaction.

Example: cloth bought for Rs 5,000 is resold for Rs 5,000 without any markup.

3. How the three sales differ

Assume the goods were first acquired for Rs 8,000.
1. Ordinary sale: an agreement is made at Rs 9,000 without basing the contract on the earlier price.
2. Murabahah: the seller discloses Rs 8,000 cost and Rs 1,000 profit, making Rs 9,000 payable.
3. Tawliyah: the item is transferred for the stated original Rs 8,000.

The critical difference is not merely the final amount but the representation on which the buyer relies.

4. The requirement of fungible consideration

ولا تصح المرابحة ولا التولية حتى يكون العوض مما له مثل
Translation: Murabahah and tawliyah require the initial countervalue to be fungible or replaceable in kind.

A fungible consideration is one that can be specified and replaced by an equivalent of the same type and quantity, such as a known sum or measured fungible goods. This makes the first price reliably carry over.

When the original consideration was a unique nonfungible object, its estimated monetary value is not automatically the original contractual price; the situation requires separate treatment.

5. Fungible versus unique countervalue

Case 1: Inventory was acquired for Rs 20,000. That first price is determinate and can be disclosed reliably.
Case 2: Inventory was acquired in exchange for a unique antique of uncertain market value. Calling an estimated valuation “the amount I paid” would misrepresent the first bargain.

The commentaries discuss qualifications and special situations. This lesson teaches the basic governing rule stated by Quduri, not an exhaustive treatment of unusual barter contracts.

6. Allowable value-adding expenses

ويجوز أن يضيف إلى رأس المال أجرة القصار والصباغ والطراز والفتل
Translation: The fees for cloth finishing, dyeing, embroidery and thread twisting may be added to acquisition cost.

These are services that enhance the goods or their commercial value. Once such work has been performed, qualifying charges can be included in the cost basis used for murabahah.

Example: cloth cost Rs 6,000; dyeing added Rs 500 and embroidery Rs 700. Subject to the governing conditions, the accumulated cost is Rs 7,200—but this is not what was paid under the first purchase contract.

7. Four classical types of processing

Qassar refers to cloth finishing or washing; sabbagh to dyeing; tiraz to decorative textile finishing or embroidery; and fatl to twisting or preparing thread.

The point is not merely that money was spent: these operations can improve the actual goods or their saleable value. Thus their inclusion has a legal rationale tied to their effect, not simply to their appearance on an expense list.

8. Transport charges for grain

وأجرة حمل الطعام
Translation: The cost of transporting food grain may also be included.

Moving goods to another location can improve their commercial value or marketability. That is the rationale for counting this transport expenditure.

Example: ten sacks cost Rs 30,000 at purchase, with Rs 2,000 transport to market. The qualifying accumulated cost may be Rs 32,000, although the first purchase price is still Rs 30,000.

9. Not every expense qualifies

Mere expenditure is not enough: the charge must satisfy the recognized basis for inclusion. *Fath al-Qadir* distinguishes, for example, protective storage rent and a shepherd’s wage from the listed value-enhancing expenses.

Accordingly, “every overhead cost is part of what I paid for the goods” is not a valid general rule. One must determine the status of a particular expense before including it in the represented cost basis.

10. Accrued cost versus original purchase price

ولكن يقول: قام علي بكذا ولا يقول: اشتريته بكذا
Translation: He should say, “It has cost me such-and-such,” not “I bought it for such-and-such.”

“I bought it for” reports the first contract price; “it cost me” can report the legitimate accumulated cost including later qualifying expenses.

If goods were bought for Rs 10,000 and dyed for Rs 1,000, “the goods cost me Rs 11,000” may be truthful. “I bought them for Rs 11,000” would misstate the original contract.

11. A disciplined cost-plus calculation

A careful cost-plus quotation proceeds in four steps:
1. Ascertain the genuine first-contract price.
2. Add only expenditures recognized as countable costs.
3. Distinguish the actual purchase price from the accumulated cost.
4. Disclose the agreed profit and final payable amount.

Example: first price Rs 8,000, allowable processing Rs 1,000, profit Rs 900, sale price Rs 9,900. The amount described as the original purchase price must remain accurate.

12. Fixed profit and proportional profit

Profit can be stipulated as a fixed amount or by a known proportion of cost. In either case the basis and agreed gain must be clear.

Example 1: cost Rs 5,000; fixed profit Rs 500; total Rs 5,500.
Example 2: cost Rs 5,000; 10% profit; total Rs 5,500.

The results coincide here. But when the disclosed first price proves false, the effect on a proportional margin becomes particularly relevant to Abu Yusuf’s view.

13. What constitutes misstatement of cost

Misstatement or betrayal in this discussion means presenting an inflated first price or cost basis to a buyer who relies on it when entering a murabahah or tawliyah sale.

For example, the seller paid Rs 800 but claims to have paid Rs 1,000. The fault is not simply excessive profit; it is a false representation of the initial contractual basis that influenced consent.

14. Abu Hanifah: the option in murabahah

فإن اطلع المشتري على خيانة في المرابحة فهو بالخيار عند أبي حنيفة
Translation: If the buyer discovers dishonesty in murabahah, Abu Hanifah gives the buyer an option.

The buyer agreed on the understanding that the original price and the disclosed profit were accurate. Misstatement defeats an important expected feature of that bargain.

The option does not itself mean an automatic reduction of the price; the buyer can maintain or reverse the transaction as the next wording explains.

15. Keep at the full price or rescind

إن شاء أخذه بجميع الثمن وإن شاء رده
Translation: The buyer may retain the goods at the full stated price or return them.

Under Abu Hanifah, the buyer has two paths:
1. Keep the goods for the entire agreed price.
2. Exercise the option to return them, subject to the usual requirements for rescission.

On this view, discovery of the inflated basis does not automatically rewrite the agreed price. Abu Yusuf takes a different approach.

16. Worked murabahah example

The seller claimed Rs 1,000 as the first price and quoted a 20% markup, making Rs 1,200 payable. The actual first price later proved to be Rs 800.

Under Abu Hanifah, the buyer can keep the goods for Rs 1,200 or exercise the right to rescind.

The price does not automatically change to Rs 960 merely because the true cost became known. That revised figure illustrates Abu Yusuf’s different view.

17. Correcting dishonesty in tawliyah

وإن اطلع على خيانة في التولية أسقطها المشتري من الثمن
Translation: If dishonesty is discovered in tawliyah, the buyer deducts the dishonest excess from the price.

Tawliyah is a transfer at the genuine first price. If an inflated amount remained payable, it would no longer be a true tawliyah transaction. Abu Hanifah therefore removes the dishonest increment.

Example: goods bought for Rs 900 were sold as tawliyah at a claimed first price of Rs 1,000. Once the fact is established, Rs 100 is deducted, leaving Rs 900.

18. Why Abu Hanifah distinguishes the two

In murabahah, goods can still be transferred at the first price plus some profit even when the disclosed cost was wrong; the buyer nevertheless receives an option because of the misleading disclosure.

Tawliyah specifically promises transfer without an increment over the first price. Keeping a dishonest excess would contradict that characterization.

This distinction explains why Abu Hanifah assigns an option in murabahah but a price deduction in tawliyah.

19. Abu Yusuf and Muhammad: distinct remedies

وقال أبو يوسف: يحط فيهما وقال محمد: لا يحط فيهما
Translation: Abu Yusuf requires a reduction in both; Muhammad does not require an automatic reduction in either.

This concise passage yields three distinct approaches:
1. Abu Hanifah: option in murabahah; price deduction in tawliyah.
2. Abu Yusuf: deduction in both.
3. Muhammad: no automatic deduction in either; *Fath al-Qadir* explains that the buyer has a keep-or-return option in both.

Thus “no deduction in either” does not mean that Muhammad denies every remedy to the buyer.

20. Abu Yusuf: proportional correction of profit

Under Abu Yusuf, established misstatement in murabahah calls for correcting both the dishonest amount and the profit proportion attached to it. The stated margin is applied to the true basis.

Example: declared first cost Rs 1,000, profit 20%, quoted price Rs 1,200. True cost is Rs 800.
Corrected price: Rs 800 + 20% profit (Rs 160) = Rs 960.
The deduction is Rs 240, not just Rs 200, because the Rs 40 profit attached to the false cost increment also falls away.

21. Muhammad: an option, not automatic repricing

*Fath al-Qadir* explains Muhammad’s position through the loss of a desirable quality: in both murabahah and tawliyah the first price was represented falsely, so the buyer gains an option.

Example: the real first price was Rs 700, but goods were sold as tawliyah with Rs 900 claimed as the earlier cost. Muhammad does not automatically deduct Rs 200; the buyer may affirm or return the goods.

This differs from Abu Yusuf’s deduction in both types.

22. Comparative summary of the three views

Dishonesty in murabahah:
Abu Hanifah — retain at the agreed price or return.
Abu Yusuf — deduct false cost and its related profit.
Muhammad — retain at the agreed price or return.

Dishonesty in tawliyah:
Abu Hanifah — deduct the dishonest excess.
Abu Yusuf — deduct the dishonest excess.
Muhammad — retain or return; no automatic deduction.

These rules address a proven false disclosure of the first cost; merely feeling that a price is high does not establish this particular option.

23. When the right to return can no longer be used

The commentary explains that where the buyer’s remedy is rescission by option, destruction of the goods or an intervening act that prevents their return may, under the apparent transmitted rule, leave the full agreed price payable.

The reason is that this option is not the same as compensation for a missing component of the goods under defect remedies; here the remedy was affirming or reversing the sale.

Its application depends on the state of the goods, intervening acts and the precise juristic opinion, not a universal rule detached from its conditions.

24. A complete audit of a cost-plus offer

A merchant says, “This cloth cost me Rs 40,000; my profit is Rs 4,000.” Records show first purchase Rs 35,000, dyeing Rs 3,000, and transport Rs 2,000.

The accumulated cost can be Rs 40,000, but “I purchased it for Rs 40,000” would be false: the contractual first price was Rs 35,000.

If the seller accurately distinguishes these amounts and the expenses qualify, the mere difference does not prove cost misstatement. Auditing the first contract separately from later charges is essential.

25. Consolidation and continuation

The key principle is that cost-referenced selling legally depends on truthfulness about the basis of the price, not just on a desirable ethical attitude.

Takeaways:
1. Murabahah adds a known gain to a disclosed first price.
2. Tawliyah transfers at the first price without a markup.
3. Qualifying later expenditures must be described as accumulated cost, not falsely as the original purchase price.
4. The jurists differ on the buyer’s remedy for proven dishonesty.

The next continuous passage in this same chapter addresses resale before possession, reserved for Level 113.