Answered by Shaykh Abdul-Rahim Reasat
Question
I would like to know about the status of the following transaction in Islamic law (particularly the Hanafi school):
Party A receives a service provided by party B. However, Party A makes a contract with party C to provide payment to party B. The money itself is specified in the contract to be paid to Party B and is transferred directly from party C to party B without Party A gaining actual possession of the wealth.
Party A then pays party C, however the wealth owed increases over time until it is paid completely back. I would be very grateful for your response.
Answer
This is impermissible. Giving any sort of extra amount would be paying interest, and the Messenger of Allah, Allah bless him and give him peace, cursed the one who takes interest, the one who gives it, the one who writes (the contract), and those who witness it. [Muslim]
When Party A asked Party C to pay the amount it was basically like asking for a loan. He must pay the actual amount back. Asking for more is deriving a benefit through a loan, and every loan which brings a benefit is interest, based on a number of narrations. [Maydani, al-Lubab]
Pay back what he originally paid on your behalf, and if he wants more money for delayed payments, borrow the amount from someone else and pay it all back.
May Allah grant you the best of both worlds.
[Shaykh] Abdul-Rahim Reasat
Checked and Approved by Shaykh Faraz Rabbani