Islam stands for clarity in business deals and discourages all possibilities of confusion. One such case forbidden in Prophetic traditions is two-in-one deal.
Abu Hurairah (may Allah be pleased with him) reported that the Prophet (peace and blessings of Allah be to him) forbade two-in-one transaction. [Recorded in Tirmizi (1231), Nasai (4232), Ahmad (432/2)]
Another tradition reported in Abu Daud adds that the Prophet (peace and blessings of Allah be to him) said: If anyone keeps two prices for one product, he should charge the lower price; otherwise it would become interest. [Abu Daud (3461)]
Obviously, forbiddance of two-in-one transactions would also cover transactions more than two-in-one too.
Every transaction should be complete and its performance should not be linked to any other transaction. For example, if one enters into a deal with somebody for purchase of item ‘A’ on the condition that that person will sell to him item ‘B’, the transaction would not be correct. Deal for purchase and sale of both the items ‘A’ and ‘B’ should be done separately without making one a precondition for the other. This is the exact meaning of forbidding two-in-one-transaction.
The other tradition relating to keeping two prices of one product has one simple and straight meaning. The buyer and seller should know clearly at what price they are transacting and the seller should charge the lower price if he has confused the deal with more than one price. Some scholars have understood from this tradition that there cannot be a system wherein the seller keeps different prices for cash and for credit sale. If the price of a product is higher in the case of sale on credit than that on cash, the differential will be interest, according to this interpretation. Other scholars do not agree with this interpretation and they justify differences in prices between cash and credit sales. They even justify different prices for different credit periods.
The difference of opinion among Islamic scholars, as mentioned above, has assumed importance owing to the growth of Islamic finance, particularly Islamic banking. Not less than two-thirds of the business of Islamic banking is being done on the basis of mark-up financing comprising trade finance by murabaha (cost plus contracts) wherein different prices for different instalments spanning different periods are determined. For all practical purposes, Islamic finance, as practised today, is not possible on the concept of negating this price differential. What the Prophetic tradition has described as a wrong practice is the confusion between buyers and sellers about the price of a product. At the close of a deal both should know clearly what they have dealt and agreed. In fact, the above mentioned tradition does not talk about credit sales as such. It refers to a situation where the seller is keeping more than one price for the same product.
Justice Mufti Muhammad Taqi Usmani has described this opinion as under:
“…it is allowed for the seller, at the time of bargaining, to say to the purchaser, ‘If you purchase the commodity on cash payment, the price would be Rs.100/- and if you purchase it on a credit of six months, the price would be Rs.110/-.’ But the purchaser has to select either of the two options….However, if either of the two options is not determined in specific terms; the sale would not be valid.” [An Introduction to Islamic Finance; published by Natamkar Farooq Ahmed; Chennai, 2011 edition, p. 117]
Justice Taqi Usmani has further opined that the sale would be valid even in the case where the seller determines different prices in instalment sales for different maturity periods and the purchaser chooses one of those. [Ibid, pp. 117-118]
In short, every deal should be on one-to-one basis, avoiding any deal with conflicting and overlapping conditions. Further, price should be determined at the time of the deal avoiding all possibilities of ambiguity and confusion.