In brief
Gharar is excessive uncertainty about the object, the price or the outcome of a contract. The Prophet ﷺ prohibited the sale of gharar (Muslim 1513). Scholars tolerate minor gharar, which is unavoidable in any transaction, but major gharar voids an exchange contract.
The basic text
Abu Hurayra reports that the Prophet ﷺ prohibited the so-called pebble sale and the sale of gharar (Muslim 1513). The Qur’an forbids believers to “consume one another’s wealth unjustly” and allows only “business by mutual consent” (an-Nisa’ 4:29): gharar opens the door to disputes and to one party growing rich at the other’s expense.
Other hadiths follow from this: the prohibition on selling what one does not have (Abu Dawud 3503, al-Tirmidhi 1232), and the prohibition on two sales in one (al-Tirmidhi 1231), where the price is not settled at the time of the contract.
Minor gharar and major gharar
No transaction is free of uncertainty: you buy a house without seeing its foundations. Scholars therefore tolerate minor gharar. Gharar makes a contract void when it combines several features, which contemporary jurists sum up as follows: it is major, it concerns the main object of the contract, the contract is an exchange (sale, lease) rather than a gift, and it meets no recognised need.
Sales forbidden because of gharar
- Selling what one does not yet own, or what one cannot deliver.
- Selling something unknown or poorly described, or at an undetermined price.
- Selling before taking possession, for the goods where the schools of law require it.
- Linking the price to an uncertain event.
Salam (payment in advance for future delivery) is not gharar because the Sunnah sets its conditions: a known quantity, quality and term (al-Bukhari 2240, Muslim 1604).
Modern applications
- Commercial insurance: the International Islamic Fiqh Academy sees in it a major gharar that makes it unlawful, and prefers cooperative insurance (takaful, resolutions 9 (9/2) and 200 (6/21)). Diyanet, on the other hand, accepts commercial insurance (decision 2005/64): see is insurance permissible?.
- Options and derivatives: the Academy prohibits options and futures settled without delivery (resolution 63 (1/7)): see options and trading.
- Cryptocurrencies: Diyanet ruled unlawful those that carry serious uncertainty with nothing to guarantee them (2017); the Academy has called for further studies (resolution 237 (8/24), 2019): see cryptocurrencies.
The verses
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ لَا تَأْكُلُوٓا۟ أَمْوَٰلَكُم بَيْنَكُم بِٱلْبَٰطِلِ إِلَّآ أَن تَكُونَ تِجَٰرَةً عَن تَرَاضٍ مِّنكُمْ وَلَا تَقْتُلُوٓا۟ أَنفُسَكُمْ إِنَّ ٱللَّهَ كَانَ بِكُمْ رَحِيمًا ٢٩
O you who have believed, do not consume one another's wealth unjustly but only [in lawful] business by mutual consent. And do not kill yourselves [or one another]. Indeed, Allāh is to you ever Merciful.
The hadiths
Abu Huraira (Allah be pleased with him) reported that Allah's Messenger (ﷺ) forbade a transaction determined by throwing stones, and the type which involves some uncertainty.
عَنْ بَيْعِ الْحَصَاةِ وَعَنْ بَيْعِ الْغَرَرِ .
Hakim asked (the Prophet): Messenger of Allah, a man comes to me and wants me to sell him something which is not in my possession. Should I buy it for him from the market? He replied: Do not sell what you do not possess.
لاَ تَبِعْ مَا لَيْسَ عِنْدَكَ "
"The Messenger of Allah (ﷺ) prohibited two sales in one." There are narrations on this topic from 'Abdullah bin 'Amr, Ibn 'Umar, and Ibn Mas'ud. [Abu Eisa said:] The Hadith of Abu Hurairah is a Hasan Sahih Hadith. This is acted upon according to the people of knowledge. Some of the people of…
بَيْعَتَيْنِ فِي بَيْعَةٍ
Frequently asked questions
Is every risky contract gharar?
No. Normal business risk (a product may not sell) is permitted and even lies at the heart of Islamic finance: gain goes with risk. Gharar concerns uncertainty about what is itself being exchanged: the object, the price or the delivery.
Why does cooperative insurance escape gharar?
Because it rests on donation and mutual help between participants, not on an exchange of a premium for an uncertain payout. The International Islamic Fiqh Academy tolerates gharar in this setting (resolution 200 (6/21)).