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In a Nutshell: It is generally permitted to buy and sell cats and dogs for a lawful purpose though some scholars prohibit it. All however allow a price to be given for relinquishing control of an animal - which differs from a sale in that the one relinquishing control does not carry the usual responsibilities associated with a sale such as quality, fitness for purpose, delivery etc.

Evidences

The Prophet (saw) said:

"Whoever keeps a dog, two Qirats (a huge portion) of the reward of his good deeds is deducted daily unless the dog is used for guarding a cattle or for hunting." (Bukhari and Muslim])

The companion Abu’l-Zubayr said:

I asked Jaabir about the price of dogs and cats. He said: The Prophet (saw) told us not to do that (i.e., sell them). (Muslim)

Jabir Ibn Abdullah said: The Messenger of Allah (saw) prohibited receiving payment for selling dogs except for those kept for hunting (Nisa'i)

It is reported Uthman gave twenty camels in compensation to a man for a dog he killed and from Ibn Amr ibn al-Aas about paying compensation for destroying a dog... (Nawawi, Sharh Muslim)

Ibn al-Mundhir narrated from Jabir, Ata and al-Nakha’i that it is permissible to sell a hunting dog but not any other kind… (Nawawi, Sharh Muslim)


Scholarly Opinion

It is permitted to sell cats and dogs in the Hanafi and Maliki schools as both are considered pure and among those animals that can be benefited from. (Kasani, al-Bada'i, 5:142))

The ahadith that prohibit them are understood to refer to selling of undomesticated cats and dogs or such sales being disliked.

The Hanafi jurists and others maintained a similar opinion permitting selling of dogs stipulated they were kept for lawful or beneficial purposes such as hunting, guarding, guiding the blind, companionship etc. (Mullah Ali Qari, Mirqat - Sharh Mishkaat Vol. 6, p. 15).

They based their opinion on the hadith reported by Jabir Ibn Abdullah where the Messenger (saw) prohibited receiving payment for selling dogs except for those kept for hunting as recorded later by al-Nisa'a (who regarded this part of the hadith as munkar - a type of weak hadith - whilst others regarded it as acceptable).

Abu Hanifah said: "The sale of dogs which bring some benefit is permissible, and the one who destroys them must repay their value. Ibn al-Mundhir narrated from Jabir, Ata and al-Nakha’i that it is permissible to sell a hunting dog but not any other kind…" (Nawawi, Sharh Muslim)
"The [buying] and selling of dogs, cheetahs, elephants, monkeys and all types of carnivorous animals is lawful, even the buying and selling of a cat, as it hunts rats and other harmful vermin (pests), hence one benefits by it." (al-Durr al-Mukhtar & Radd al-Muhtar, Vol. 7, p. 505)
"The buying and selling of dogs, cats, elephants, cheetahs, falcons, kestrels and hawks is permissible" (Bahar Shari’at, Vol. 2, Part 11, p. 809)

The Egyptian body that issues rulings, Dar al-Ifta, states on their website:

To facilitate the matter, in Islamic law, owning or exchanging a dog for any lawful purpose must not be through a transaction involving a sale and purchase but through relinquishing control of it i.e. the person who owns the dog relinquishes control of it to someone else in return for a monetary compensation. In this case, the money is not considered a price for the dog but for its relinquishment.

This is not a sham deal; it is different from a sale in that as soon as the person who relinquishes control of an article receives the money, he is not obliged to guarantee the relinquished article or even its deliverability. On the other hand, in a sale, the seller continues to guarantee the sold article until the buyer takes possession of it.

The luminary Shafi’i scholar, al-Qalyubi, wrote in his meta-commentary on Sharh Al-Jalal Al-Muhalla (2/383), "It is valid to agree on a benefit such as that derived from a dog or dung; the money exchanged is in return for relinquishing control of the article and not in return for the derived benefit or the article’s possession."


Conclusion

The opinion of Hanafi and Maliki jurists is that it is lawful and there is no objection to trading in cats and dogs (or other carnivorous animals) whether they be kept for hunting or any other lawful purposes is based on the opinion of Imam Abu Hanifah or on paying money in return for relinquishing control of a dog according to the opinion maintained by the majority of scholars.


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