What is the ruling on selling merchandise that was bought from a merchant and its price paid, then selling it back to him in its place without taking possession of it, knowing that one owns it legally and has the option to sell? And is it a condition that this not be named in the contract?

The prohibition of selling a commodity before taking possession of it includes both actual and constructive possession. Possession of a commodity is valid through 'takhliyah' (making it available to the buyer) or by moving it to a place where the seller has no authority over it. This is supported by the consensus of scholars that if one takes possession by measurement or weighing, it is permissible to sell it in its place. The 'inah' sale is prohibited if the commodity is sold back cash to the seller for a lower price after being bought from him on credit.