What happens if an agent borrows money to make a purchase authorized by the principal, and then uses that borrowed money or substitutes it with the principal's money?
General Chapter
Al-Mughni
Book of Agency
Primary text
If the agent borrows money and transacts with it, the agency is voided. If the agent later substitutes a coin for the borrowed one and uses it to purchase for the principal, this action is treated as the agent purchasing for themselves without permission. The agency is voided because of the initial handling of the borrowed money. The substituted coin does not become the principal's property until the principal takes possession of it. A purchase made with this substituted coin is conditional upon the principal's ratification; if ratified, the purchase is valid and the price is binding on the principal. If not ratified, the price is binding upon the agent.
Supporting text
There is an opinion that the agent is always liable for the price in this scenario. Another ruling states that any purchase made by someone using the exact money of another party for an item that belongs to the other party is void because it is not sound to buy, with one's own money, something belonging to another to possess for another. Conversely, the Shafi'is hold that if an agent buys for another using their own personal money, the purchase is valid for the agent, whether they transact based on a debt obligation or using specific funds, as they bought something they were not explicitly authorized to buy.