Question: I run an online business, is it permissible to sell an item that I do not own as yet? 

Answer: In Sunan Tirmidhi, there is a narration in which Hakim ibn Hizam  Radiyallahu asked Nabi Sallallahu Alaihi Wasallam : O Messenger of Allah! At times an individual comes to me to purchase a specific item that I do not possess. Can I sell him the item and then purchase it from the market? The Messenger of Allah Sallallahu Alaihi Wasallam said: Do not sell what you don’t own.

Hence, it  is not permissible to sell an  item that one does not own. 

However, there are two ways in which the sale may be structured which may make it permissible 1) Using the Salam model or 2) Engaging in a promise of sale agreement. 

1)Salam is a sale whereby the seller undertakes to supply some specific goods to the buyer at a future date in exchange of an advanced price fully paid on spot.

Briefly,  the requisites of a Salam transaction is a follows:

1.The seller  should indicate beforehand that he is not in possession of the item 

2.Full payment of the price should be made at the time of affecting the sale.

3.It is necessary that the quality of the commodity is fully specified leaving no ambiguity which may lead to a dispute. All the possible details in this respect must be expressly mentioned.

4.The exact date and place of delivery must be specified in the contract.

5.Salam can only be affected in those commodities whose quality and quantity can be specified exactly

6.The items ordered should be available in the market from the time of the transaction right until the delivery date.

7.The item or goods purchased through Salam should be such that its equivalent is available in the market (e.g. cutlery, rice, food items, etc.). If the item is such that it does not have an exact equivalent (e.g. live stock), then it will not be permissible to purchase such an item through salam. [Babus Salam, Al Lubaab Fee Sharhil Kitaab Vol 1 Page 225]

If these conditions and requisites are met then it will be permissible to sell an item that one does not own as yet. 

2) Promise Sale Agreement: The seller should offer the goods to the  potential buyers in a way that dispels ambiguity and  prevents any dispute arising.  The seller should  state that the  goods are not yet in his possession. He will take the money of the buyer as a trust and promise to sell the goods to the buyer when  it  comes into his possession. This is called a “promise to buy” agreement which is not entirely  binding on either of the  parties. Once the goods have come into the possession of the buyer, he will effectuate the sale. Only at that point will the  transaction become binding. 

And Almighty Allah Knows Best

Yusuf Moosagie