Fiqh for economist 1

Fiqh for Economist 1ECON 3510

Supplication of todaySupplication for one whose affairs have become difficult” �تجعل وأنت سه'ال جعلت+ه ما إال سهل+ ال اللهم

ه'ال س+ شئت إذا ن ز' “الح+‘O Allaah, there is no ease except in that which You have made easy, and You make difficulty, if You wish, easy.

Lesson1: Introduction to Shari’ah

comprehensiveness of Islam:- Islam is a comprehensive “religion” that describes the way to fulfill the purpose behind our creation (worship none but our Creator). -Islam is the last Divine religion and as such, must rationally and practically be the most comprehensive and complete religion. There is no religion as comprehensive as Islam. Islam has answers to all the various questions that man encounters, directly or indirectly, from the first moments of life, rather, from the moment of conception. Islam deals with all social, economic, cultural and ethical questions of life.

- Belief in the comprehensiveness of Islam, its validity for every time and place, and its fulfillment of every worldly and religious requirement is a religious obligation. Anyone who believes otherwise, claiming that Islam is not valid for every time and place, or that there is a better way of life than it, is an apostate. Such false beliefs indicate denial of the revealed texts that assert the perfection of religion. Such false beliefs also indicate that the person degrades this religion and degrades the Messenger of Allaah , who conveyed it. They definitely render the person who follows this belief an apostate.

The meaning of Islam :What does `Islam’ means? - The Arabic word ‘Islam’ simply means ‘submission’; it is derived from a word “silm” meaning ‘peace’.- In a religious context Islam means “submission to the will of God and obedience to His law”.- Man possesses the qualities of intelligence and choice, thus he is invited to submit to the good will of God and obey His law, ie, become a Muslim.

The Meaning of Shari’ahThe word Shari`ah literally means “a water way that leads to a main stream, a drinking place”.-Technically Means: “The divine revelation and knowledge which is only obtained from the Qur’an and Sunnah.”

- Shari`ah, conceptually, refers to a set of rules, regulations, teachings, and values governing the lives of Muslims. individual attitude and conduct, as well as the political, social, economic, criminal, and civil spheres.

The Shari`ah, therefore, is a path – set by Allah for those who accept Him – to follow, in order to attain success both in the worldly life and in the hereafter.

Tawhid or Belief in the Unity of Allah swt(Islamic Monotheism)?

- Tawhid (Oneness and Unity of Allah) is the foundation stone of Islamic faith (iman).

- Tawhid means: “declaring Allah to be the only God who deserves to be worshiped in truth and confirming all attributes with which He has qualified Himself or that are attributed to Him by His Messenger”

The Meaning and Significance of Akhlaq -Islamics Ethics.

in the Arabic language: the word Akhlaq is derived from the word "Khuluq" meaning the character and the nature. -The definition of morals in the Shari'ah terminology: The morals are the characteristics which Allah (SWT) has ordered the Muslim to abide by when performing his actions be it acts of worships, transactions and others.- morals are part of the Islamic legislation for they are part of Allah's commands and prohibitions

If the Muslim did not adhere to the morals as being commands from Allah (SWT) and as being acts of worship for which he will be rewarded in the day of Judgment, his morals would not be considered as acts of worship and they would not be accepted of him even if they were not for the sake of ALLAH" - For instance someone told the truth because telling the truth is regarded in society as a good deed, his action would not be considered an act of worship, but if he did so in response to the command of Allah (SWT) and His Messenger (SAW) who said: "Verily a man would tell the truth and keep on doing so until Allah labels him as truthful" , only then would his truthfulness would be an act of worship.

The Necessity of Akhlaq in Economic Activities

The observance of Akhlaq is also essential to a healthy economy.- Lack of moral values may lead to corruption, mismanagement, bribery, breach of trust, misuse of authority, and obtaining illegal gains which are not only immoral but also crimes.The Prophet p.b.u.h. is reported to have said: “All the evils can be found in a Mu´min, except dishonesty and falsehood”.- If there is no mutual trust among the people they will not be able to trust and cooperate with each other.Making false promises or breach of promise are types of lies and amount to hypocrisy.

- They also damage a person’s reputation who will lose people’s confidence and trust. -In trade, business, and other financial and economic matters an atmosphere of confidence can be created only when the fulfilment of promises is considered a duty.-Al-Imam Al-Bukhari reported that the Messenger of Allah (SAW) said: "Verily those I love most and those who will be closest to me are those of you who have the best morals." And he (SAW) was asked once about the best assets that would make a Muslim enter Heaven, he said: "The fear of Allah and good morals".

- A Muslim businessman and trader should not indulge in fraud, misrepresentation and unlawful profiteering.The Prophet p.b.u.h. has stated: “It is not lawful for a Muslim to sell such a commodity that has a defect, except that the defect is shown to the buyer”.A Muslim employer should treat his employees with fairness and justice and a Muslim employee should serve with honesty and dedication.

Supplication of today:When visiting the sick

When the prophet would enter upon a sick person he would say:

“” اللGه شاء إن طهور بأس الNever mind may the sickness be purification,

if Allah wills”” يشفيك“ أن العظيم العرش رب العظيم Gه الل أسألI ask Allah The supreme, The Lord of the

magnificent throne to cure you”

Usul al-FiqhThe Emergence of Usul al-Fiqh: After the Prophetic period the revelation stopped and the Muslims no longer had the Prophet to give them guidance on the problems that they faced. Whenever Muslims had problems they would refer to the Quran and the Sunnah in order to find solutions to those problems. In the search for the solutions the Muslim scholars resorted to the interpretations of the Quran and HadithThese interpretations most of the time involved the use of reason. It was, therefore, natural that differences would emerge on the interpretations of certain words as reasoning is most of the time subjective and differs from person to person.

The scholars of the first and second centuries, after the demise of the Prophet, therefore concerned themselves with the rules of interpretations and the creation of methods that would govern the use of reason. These rules of interpretation and methods of reasoning later emerged as a well-developed science which is known as Usul al-Fiqh.

Usul al-Fiqh is a body of principles and methods by which the rules of Fiqh are deduced from their sources.

It can be defined as : “The sources and principles of interpretation and of legal reasoning that helps the jurists arrive at the legal rules of conduct”.Usul al-Fiqh is a science which deals with the sources of Shari'ah and the methods of extracting rules from them.

The priciples of interpretation are derived from the Qur'an and Sunnah in accordance with these rules and methods. These include consensus of opinions (Ijma’), analogy (qiyas), juristic preference (Istihsan), public interest (Masalih al-Mursalah), presumption of continuity (Istishab), blocking the means (Sadd al-Dharai’), and customs (‘Urf).

Muslim scholars developed these methods of reasoning in order to extend the law to new issues or to provide answers to new problems.

The meaning of Fiqh The word “Fiqh” in the Arabic language, means “understanding” and “ have the knowledge of something. Technically: Fiqh is the knowledge of the legal rules conduct ( العمليhة الشhرعية that have been derived األحكhامby the jurists from specific evidences found in the Quran and the Sunnah as well as other specific evidences in Ijma’ and Qiyas.During the time of the Prophet the term Fiqh has the same literal meaning as Ilm or knowledge .covering the whole of religion.

For instance the Holy Qura'n states: “That they may gain understanding (Liyatafaqqahu) of the religion” (9: 122).

The Prophet is also reported to have blessed Ibn Abas saying: “O God give him understanding (Faqqiho) in religion”.

Both, the Quranic verse and the Hadith mean a deeper understanding of the religion and not only knowledge of the legal rules.

However, later the science of Fiqh has got a more specialized meaning.

- Fiqh as understood today includes various branches of legal rules on transactions, family matters, offences, constitutional and international issues, and rules related to worship or ‘ibadat.

Distinction between Shari’ah and FiqhThere is a difference between the meaning of the terms Shari’ah and Fiqh:The real distinction between Shari’ah and Fiqh is that Shari’ah is the law itself, while Fiqh is knowledge or understanding of that law. In other words , Sharī‛ah refers to what was decreed in the time of prophethood found in the Qurān and prophetic traditions.Fiqh is what has been gained from the efforts of scholars after the prophet's (s) demise.

However the definition indicates that the term Shari’ah has a wider meaning than fiqh. The term Shari’ah includes both law –Fiqh- and matters of Faith that is the ‘aqa’id.

The Objectives of Shari’ahThe Holy Qur’an describes the purpose of the Prophet’s mission to be mercy not only to mankind but also to all of God’s creatures. (21: 107) Mercy includes, among other things, protection and safeguarding people’s interest.The Shari’ah aims at safeguarding people’s interest in this world and in the next.God instituted the Shari’ah for the benefit of mankind both in this word and the next. He has in fact singled out Maslahah as the only objective of the Shari’ah,

The scholars agree that there is no injunction in the entire Shari’ah that does not seek to secure a genuine Maslaha, that all of the commands of Shari’ah aim at realizing the interest (Maslaha) and that all of its prohibitions are designed to prevent corruption or harms (Mafsadah) in various degrees.

The objectives of Shari’ah:

In Islamic law They are five fundamental objectives:1- Protection of Din ( Religion)2- Protection of Life3- Protection of Lineage4- Protection of intellect5- Protection of Wealth

The Protection of Din ( Religion) means to protect the faith of every individual Muslim from negative influences that may cause confusion and undermine his faith.

Jihad is prescribed for defending Din, prayer , fasting pilgrimage and zakah help establish it.

The protection of life means the prevention of any harm that may result in the destruction of human life.

the maintenance of good health while Penalties are provided for those who destroy life without legal justification.

The protection of wealth means that wealth should not go from the hands of its owners without a fair compensation.

In order to achieve this objective the Shari’ah prohibits theft and all other forms of misappropriation . Shari’ah also wants to ensure that the wealth is transferred among the members of the society in a fair way.

The protection of intellect means the prevention of all negative and preserve influences on a person’s mind that lead to corrupt and preserved human behavior.

the provision of education and healthy conditions for its growth, Islam also prohibited the consumption of alcohol and other intoxicating substances that destroy the intellect.

The protection of lineage means the prevention of all means that stop procreation such celibacy, adultery, abortion…

the maintenance of healthy family life and the institution of marriage encourage marriage and Islam required children to attributed to their parents while penalties are provided for those who would corrupt it and destroy its values.

Supplication of todayAfter salam of the witr

prayer cالقدوس cكcل الم+ سبحان

”How perfect The King The Holy one “And on the third time he would rise his

voice, and add:

” cوالروح cالمالئكة cرب““Lord of the angels and the ruh: Jibra’il”

Fiqh/Legal Maxims

The Definition:The jurists have defined a legal maxim as “a general legal rule which applies to all its particulars”.Most important and principal legal maxims are:1- Matters are determined according to intention.2- Certainty cannot be removed by doubt.3-The principle about things is permissibility .4- Freedom from liability is a fundamental principle.5- Hardship begets facility.6- Harm should be removed.

Matters are determined according to intention

Acts have been linked to intention.A tradition of the Prophet p.b.u.h. reads: “Deeds are judged by intentions and every person is judged according to his intention”.The purpose of Intention (Niyyah):1- It distinguishes between habitual actions and actions of worship.2- It distinguishes between action of worships one from another.3- it distinguishes the purpose of the action for the sake of ALLAH only or not.

-In the event of a difference between the intention and the wordings of the contract, consideration should be given to the meaning and not to the literal wording.

Certainty cannot be removed by Doubt

a statement supported by evidence or witnesses is considered certain. Claims cannot remove a statement supported by evidence.For instance if a borrower claims that he has settled the debt and the lender says he has not, the principle is the borrower has not.

The applicable sub-maxim is: الصفات في األصلالعدم العارضة

which means that the principle is the absence of new things. According to this principle if a dispute is about the presence of new states or conditions, the principle is that they do not exist. For example if the disagreement is about whether the defect in a certain commodity has occurred before or after the sale and the seller denies that the commodity was defective, his statement is accepted.

The Principle in all Things is Permissibility

According to this legal maxim, all foods and transactions are allowed unless they are prohibited or have prohibited elements. This is because the Quran and the Sunnah have only mentioned the prohibited foods and are mainly focused on prohibited transactions. The jurists have concluded from this that foods and transactions which are not included in the prohibited lists are permissible. Commerce and trade are areas where creativity and innovation could be needed in order to meet the needs of changing times

The Zahiris argue that the principle concerning transactions is prohibition. This means that all transactions which are not allowed by Shariah are void and prohibited. The majority of the Fiqh Schools are of the opinion that the principle in transactions is permissibility. They argue that the purpose in transaction is to protect the interests of the people and all those transactions that ensure the lawful interest of the parties are allowed as long as they are concluded by mutual consent (4:29).

Seeking refuge from him. The adhan (call to prayer). Recitation of the Quran and words of

remembrance and supplications”.

Supplication for expelling the devil and his whisperings

Freedom from liability is a fundamental principle

According to this principle persons are not liable unless proven. It follows from this that a person is not held responsible solely on the basis of claims made against him. The person who has made the claims has to prove them.

Hardship begets facility

Rules of law are general in nature to cover all situations and individuals, and are not confined to particular situations or persons.in certain exceptional situations a general rule may lead to injustice and harm.According to this maxim difficulty is the cause for easiness

Necessity renders prohibited things permissible

Necessity (dharorat) refers to a situation where a person strives to safeguard his religion, life, property, mind, or offspring from perdition.

Harm Should be Eliminated

This maxim is originally taken from the Prophet’s Hadith. It states: “la Darara wa la Dirar” “Harm should neither be inflicted nor received

The Theory of property (Al-Mal)

Importance of property:Property is the subject matter of ownership and all transactions. It is also ranked among the five essential values which the Shari’ah protects.The concept of property including all forms of wealth: intellectual properties, patents, copyrights, confidential information, and trade secrets.

Al-Mal in the Holy Qur’an and Sunnah- The word mal and its derivatives are

mentioned 86 times in the Quran and in numerous ahdith.

Ex: : تعالى جما ”قال حبا المال وتحبون “” أوالدهم وال أموالهم تعجبك “فالThe Prophet :” للمرء ا نعم الصالح لمال.الصالح

- The Qur’an and the Sunnah do not specifically define what mal is.

Definition of Property

Literally: The meaning of the word mal includes all

things which can be acquired, possessed, and owned by individuals.

Linguistically, things which are not possessed or secured such as free air and the heat, the heat from the sun or the light from the moon, are not considered property or mal.

knowledge, health, honour, or intelligence, are also not properties as they cannot be possessed

Property linguistically should has beneficial use in accordance with the accepted customs. Things such as carrion(ةhhجيف) or poisonous food from which no benefit can be derived are not property.

a drop of water or a single seed of rice is not considered property.

Property in the view of Muslim jurists:2 views : 1- According to the Malikis ,Shafii’s, and Hanbalis

who constitute the majority of the Fiqh Schools, Private property or mal includes: all permissible things which have financial value.

How financial value could be existed in property ?

By the destruction of which a person is held responsible either it is much or little.

- The financial value of a certain thing determines whether it is property or not

2nd veiw: The Hanafis define property (mal) as:

a thing that can be possessed and which is customarily used by the people.

The Hanafis confined the meaning of property to valuable things that could be possessed, and stored for later use.

This argument excludes intangible assets such as usufruct (manfa’ah) and rights from the definition of the property.

1-Based on the value of property according to Shari’ah:

Valuable and non-valuable propertiesValuable (Mutaqawim) property includes all

permissible things in Shariah, and things that can be possessed and secured.

Non-valuable property, includes all those things, which are prohibited by the Shari’ah: wine, prok... and things which cannot be possessed: pork, wine, birds in the sky, fish in the sea, and minerals inside the earth.

Classification of Property

The validity of contract: depends on whether the subject-matter of the contract is a valuable or a non-valuable property. All contracts concluded on non-valuable properties are considered void. It is because when the Shari’ah prohibits the use of a certain thing it also prohibits its sale and purchase.

The Consequences of this classification

Compensation for the destruction of non-valuable property if it is owned by a non Muslim:

- According to Hanafis: they consider pig and wine as valuable properties as far as the non-Muslims are concerned.

If these properties are destroyed while they are owned by the non-Muslims, they should be compensated.

- The majority of the schools, on the other hand, consider pig and wine as non-valuable property whether Muslims or non-Muslims own them.

Two views whether a certain property is considered movable or immovable :

1- Malikis view: - Immovable property (‘aqar) includes land

and anything that is permanently fixed to it or those properties which if moved they may change.

such as buildings, trees.- Movable property is a property that can be

moved from one place to another. Such us money, animals, books, car, etc.

2- Based on stability and instability :Movable and Immovable Property

2- Hanafi’s view and some Fuqahas: - Immovable property is a property that cannot

be taken from a place to a place like land. Buildings, Trees, and anything planted on land

are not considered immovable properties but they follow the land.

They restricted the meaning of immovable property to land only.

If the land is sold together with the building and trees the rules governing immovable property are also applicable to the building and trees. If only the building or the trees are sold without the land the rules governing immovable property are not applicable to them.

- Movable properties: are all those that can be taken from one place to another whether they remain in their original form or not.

Ex: money, animals, cars, books, and other tradable commodities.

1- The right of pre-emption (shuf’ah) can only be exercised with regard to immovable properties. The right however, cannot be claimed with regard to movable properties unless they are sold as part of an immovable property.

(Shuf’ah is defined as the right of co-owner to substitute himself for the purchaser if the other co-owner decides to sell his share

Islamic law gives right of pre-emption in cases of indivisible property)

The Consequences of this classification

2- The other consequence of this classification is related to cases of bankruptcies:

In cases of bankruptcy, in order to settle the debts of a bankrupt person, initially his movable properties are sold. if these are not enough to satisfy the debts, then the court may order the sale of his immovable properties.

Similar (mithli) or homogenous property refers to those things which have an equal quantity of something similar to them in the market.

Such us: money, rice, wheat, corn, barley, salt, oil, and etc.

homogenous property are usually four types:

1- weight الموزونات : gold, silver.2- measures المكيالت : grain, oil 3- numbers المعدودات  : eggs, orange4- measurement الذراعيات such as meters:

Fabrics, carpet

Based on similarity :Similar and Dissimilar Property

Dissimilar or non-homogenous (qimi) property is a property the like of which could not be found in markets or when it is found dissimilarities would still exist.

-They include all those properties which cannot be exchanged by weight or measurement of capacity such as land, houses, animals, trees, precious stones, used cars or books, hand-written books and etc.

1-Homogeneous properties are considered obligation (dayn) while non-homogeneous property is classified as a specific thing (‘ain)

when a homogenous property such as rice is sold indeterminately, the purchaser has only the seller’s obligation, which is the direct subject of the contract and not a specific thing as it can be any rice of the same quality.

Similarly, money is considered among the homogenous properties and is always indeterminate or an obligation (dain).

The Consequences of this classification

In contrast, ‘ain means is something determinate or specific. A non-homogenous property itself is the subject of the contract as it is a specific and unique thing.

For example, when a house or a car is sold it is a specific house or a car and not any house or a car.

2- Riba may arise when parties deal with homogeneous properties and do not observe certain conditions.

Ex: any additional amount charged on the borrower of money is considered usury .while it is permissible if an owner of non-homogeneous property such us a car may charge the borrower for the use of these properties.

- Homogeneous properties are usually considered ribawi properties when they are exchanged there must be equality of weight and on the spot transaction. If they are of different kinds equality is not a condition but delivery must be immediate.

3-Compensation: if a homogenous property is destroyed, a

person is obliged to compensate it with a property similar to it.

if a non-homogenous property is destroyed, its price has to be paid.

Usable (Isti’mali) property is a property that would remain even after if is used such as land, car, cloth, books.

perishable (Istihlaki) property is a property which does not survive once it is consumed .

Ex: food, water, petrol, paper and money are considered perishable properties as they could only be used once.

Perishable properties are most of the time homogeneous properties. While dealing with these properties it is necessary to observe certain conditions in order to avoid the possibility of riba.

Based on surviving :Usable and Perishable Property

Certain transactions are not applicable to perishable properties:

- Perishable properties cannot be rented out , these properties can only be used once therefore Islamic law prohibits renting these properties. But it is allowed to lend or borrow these properties. And while lending these properties any condition for additional return is considered usury.

- Thus a person may charge another for the use of his house while he cannot charge him for the use of his money.

The Consequences of this classification

Nuqud refers to gold, silver, and currencies while ‘urudh refers to those merchandise goods which are not measurable.

The examples of ‘urudh are silk or cotton cloth, watches.

- According to Malikis in partnership contract partners may contribute goods.

Other school do not agree and argue that all partners must contribute in cash.

Cash (nuqud) and Goods (‘urudh)

Intellectual properties :literary and artistic works, inventions, designs, registered trademarks, trade secretes and confidential information that could not be disclosed without permission.

Intellectual works are the outcome of tremendous research and efforts carried out by the scientists or the authors.

An intellectual work as such is the property of the one who made it as he has the right to benefit from his labour. This right is protected by law and others cannot take and use a certain property without its owner’s permission.

Intellectual Property

protection of intellectual properties means that no one else should duplicate it without its author’s permission.

If you person who has bought disk or book you have the right to sell the same disk or book but you have no right to copy the disk or book and sell it.

Protection of intellectual property gives the inventor a proper incentive to improve and develop it. It may also encourage others to contribute to different scientific fields.

When insulted while fasting

صائم إني صائم إني

I am fasting , I am fasting.

Supplication of today

Islam has imposed various types of rights and obligations on every human being.

A person should fulfil his obligations towards Allah swt, towards his own self (nafs), towards other members of the society and towards the physical nature and the environment.

He should obey Allah’s laws that imposes these obligations on him and at the same time entitles him to certain rights

The Theory of Right ( Haq) and obligation (Dayn)

DefinitionHaq literally means proper, right, true,

authentic, valid, established, a just claim, confirmed as a truth, duty, or an obligation.

The jurists define haq as “a prescription acknowledged by the Shari’ah that gives authority or right and assigns responsibility or duty”.

This definition includes both the rights of Allah swt and the rights of humans.

The source that confers right or imposes an obligation is Shari’ah

The Pillars of Right1- The owner of the right (sahib al-haq) which

could be Allah swt, humans, or institutions.2- The subject (mahal al-haq) on which a right

is exercised . Ex: debt, property.3- The person who is under the obligation

(man ‘alayhi al-haq). Ex: the borrower is under obligation to return his debt.

4- The source of Haq.

Rights can be classified in different ways:1- Rights of Allah and rights of humans and

combined rights. A- The Rights of Allah swt (Haqqullah): They

refer to rights that He has upon His creatures. The rights of Allah swt are divided into two main

groups: a- Exclusive rights of Allah swt: include His rights on

human beings to worship Him, to obey His laws, and to pay zakat and penances.

b- Rights, which, are intended for public interest and are not specifically assigned to any individual. These are called the rights of Allah swt as they are beneficial to the community or the public at large.

Ex: mineral wealth: rivers , forests..

Classification of Rights

1-The right of ALLAH cannot be abolished.2- no person can absolve or exempt another person

from his obligations towards ALLAH.3-The right of ALLAH cannot be inherited. Ex:the heirs are not obliged to fulfil an act of

worship such as prayer which the deceased did not perform.

4-The offender who repeatedly violates the rights of Allah swt is punished once. For instance, a person who has committed theft many times is punished once.

5- The enforcement of the rights of God is the duty of the state and it is not left to the individual.

Specifications of ALLAH’s right

B- The Rights of Humans (Haqquannas): They refer to those rights, which are intended

for the protection of private interests.-These interests can be:• general: ex: all human beings are entitled to

the protection of their religion, life, property, health, and honour.

• They can also be specific : ex: in a sale contract purchaser has a right to

own the object which he has bought and seller is entitled to receive the price.

1-The enforcement of the rights of human are entirely at the option of the individual who have them. he may demand his rights or waive them. (right of shuf’ah).

2- The offender of a private rights is punished as many times as the right is violated.

3- person can exempt another person from his obligations towards him, ex: a seller may exempt a purchaser from paying the price.

Specifications of Human's right

The right of ALLAH cannot be exempted. For example: no one could exempt anyone

else from obligatory prayers or from the payment of zakat.

In contrast :a seller may exempt a purchaser from paying the price or a creditor may exempt a debtor from paying the debt.

The distinction between the rights of Allah swt and the rights of humans

C- Combined rights (Haq almushtaraq): Those rights were the rights of ALLAH and

those of human are combined.Ex: Defamation (qadhf), Retaliation (qisas) .

2-Financial and non-Financial Rights: Financial rights (Al-Haq al-mali): are those that

are related to property or its usufruct or rights that may arise from commercial transactions.

Ex: a tenant has a right to stay in a house which he has rented.

A lender in loan contract has the right to claim his loan.

Non-financial rights are those, which are not related to property such as the rights of parents, the rights minors, the rights of husband and wife , custody, the rights of citizens, authorities or the states.

3-Rights over Persons and Rights over Property

1- The Rights over Persons Rights over humans are those that the Shari’ah has

assigned to one person over another.Like: the parties to a contract of sale are under

obligations to exchange the sold item and the price.

A debtor is under obligation to settle his debt to the creditor and a husband is under obligation to provide maintenance to his wife.

The right over a person is on the shoulder (dhimmah) of another person  it does not depend on the existence of a property.

Ex: the right of a creditor over a debtor is not terminated if the sold item is destroyed

The right over a person cannot be claimed from another person

2- The Rights over a Property The right over a property is confined to the

property itself. Like the right of ownership, which enables the

owner to use or exploit his property within the limits ordained by law.

Ex: the right of the lessee to use the leased asset for a specified period.

Right over properties are abolished when the properties are destroyed

Ex: the contract of lease is terminated when the asset is destroyed

4- Rights that can be waived and rights that cannot be waived:

Rights of Allah cannot be waived.All rights of humans or private rights can be

waived.There are certain Humans rights that cannot

be waived:a- Future rights cannot be waived : a partner

could not waive his right of pre-emption in a property, which is not offered for sale.

WHY?? these rights have not yet come into existence, they cannot be waived.

b- Authoritative rights established by the Shariah:

EX: the right of a father or a grandfather to have guardianship over their children.

c- Rights which if waived may result in changes to the law cannot be waived:

EX: a person cannot waive his right to use his own property or disown or abandon it. The property would become without an owner and the law does not allow it.

d- Rights which if waived, other person’s rights will be affected.

EX: a mother cannot waive her right in the custody of her children.

5-Heritable and Non-heritable Rights:Heritable rights like: - Rights intended to serve the purpose of

guarantee can be inherited. Ex: a pledged property can be kept by the

heirs of the pledgee after the later dies. - rights related to immovable property

(huquq al-irtifaq) such as the right of water or the right of way can be inherited.

These are rights that follow the land and are included in it. Anyone who inherits or owns the land also owns these rights.

Non-heritable Rights: are things related to the person and end with his death, and no right left for him his death:

Ex: rights related to his thought or honesty guardianship over his oneself or his money.

Misuse or Abuse of Rights: If a person does something which is not his

right, this is considered injustice. However, if he does some action which is his right, but he does it in an improper way, it is considered the misuse of right.

person has to exercise his right in a proper way that will not harm others and it should be in accordance with Shari`ah teachings.

When the exercise of a right lead to a greater harm to the society an individual is deprived of his right in order to prevent a common harm.

-Ex: Monopoly black marketing stopping the rider (talaqi al-ruqban) sale of grapes for wine making are prohibited.

-Ex: a person cannot make a will (wasiyyah) that would result in a harm to the creditors or the heirs.

- a person suffering from a mortal disease may divorce his wife but this exercise of his right cannot deprive the wife from inheritance.

- a person is prevented from raising a wall of his house in a way that would harm the neighbours by preventing light and air, or opening window in a way that would take away his neighbour’s privacy.

When a certain action is done without proper care as a result of which harm would be caused to others the person is held liable.

In Islam, the real ownership belongs to Allah swt.

Quran in many verses refers to the ownership of God over all the creation.” لله قل واألرض السماوات في ما لمن (12:6“ )قل

From the other hand Ownership is a part of human nature . Islam therefore recognizes and upholds an individual’s right to private property and ownership.

Therefore the Quran uses certain phrases such as “his wealth”, “their wealth”, “your wealth”, and “the property of others” which suggest private ownership of an individual over properties.

The Theory of Ownership 

like other rights the right of ownership is not absolute. It is subject to certain restrictions and regulations as a Muslim holds a property in trust for which he is accountable to Allah swt.

Definition of private ownership:“It refers to a right over property, which

excludes others and enables the owner to make use of the property itself or its usufruct”.

Causes for the acquisition of ownership:A person may acquire ownership of property

through three ways:1- Contracts : like contract of sale, gift, donation

, will, partnership (sharikah).2- Inheritance: in contracts a person becomes

the owner of a property intentionally , in inheritance a person becomes the owner of a property by operation of law.

3- The rule of first possession of natural resources: like: hunting, exploitation, application of labor to natural resources like trees cut down from a forest.

Private ownership is divided into two divisions: complete and incomplete ownership.

1- Complete Ownership: It is an ownership over a certain property and its usufruct, which entitles the owner to all the legal rights. The owner has complete authority to use, exploit, or appropriate his property in a lawful way. (sale, gift , donation, waqf...).

2- Incomplete ownership: it is divided into 3 types: ownership over rights included in a land, ownership over property, and ownership over usufruct.

Division of private ownership

A- Ownership over Rights, included in a Land (Huquq al-Irtifaq):

These refers to the right of water, the right of irrigation, the right of passage.

These rights cannot independently traded because they are related to land so any one owns the land owns the rights.

B- Ownership over a Property : It refers to a situation where a property is owned by one person and its usufruct by another. For example, in a leased house the owner only owns the house while the usufruct is owned by the lessee.

C- Ownership over Usufruct :it refers to the benefits of the asset while the owner owns the asset.

It can be obtained through borrowing (ia’arah), lease (ijarah), endowment (waqf), will (wasiyyah)....

Ex: In lease (ijarah) a certain usable property such as a house, a car or a book is leased in return for a consideration. The lessee who owns the usufruct may use it himself or he may allow someone else to use it in return for a consideration or free as long as the property is used for the same purpose.

The Characteristics of Ownership over Usufruct

1- Unlike complete ownership, it is restricted to time ,place, and conditions.

2- contract in ownership over usufruct is trust contract, If the property is destroyed or becomes defective, a beneficial ownership is not held responsible unless negligence is proven.

3- a beneficial owner is not responsible for the maintenance expenses of the leased property. If ownership over usufruct is obtained through a borrowing (I’arah) the borrower is responsible for maintenance expenses of the borrowed property.

Restrictions on Ownership RightsThe right to own property is not an absolute right

but it is subject to certain conditions.Restrictions relate to acquisition of ownership

: A person cannot acquire ownership rights over

public properties as they are meant to benefit all. He cannot own prohibited things such as wine,

pigs, etc as they are not considered property in Shari’ah.

In acquiring ownership over other properties a Muslim is bound to observe certain limitations. For instance, he has to avoid unlawful means of earning such as usury, gambling, trade in haram goods, cheating, corruption, stealing and unlawfully taking others property.

Restrictions relate to utilizations Muslim is commanded to spend his wealth for the

sake of Allah swt and help his nears of kin and the poor by giving them their due, charities and zakat.

He is also prohibited from wastage. A Muslim has to invest his wealth in a useful way

that would boast the economy and create job opportunities to others.

The owner is free to exercise his right over his property. However he has to use his right in a permissible way that would not violate other people’s right.

For example, no one is allowed to raise his building to obstruct light and air from reaching his neighbours.

Abuse of ownership When the right of ownership is abused the

state may interfere and regulate private ownership.

The government may also impose restrictions upon development and construction in a certain area and property. Owners are bound to follow them as they cannot develop their lands according to their own wishes.

Non-use of private property particularly land may also warrant state intervention. By taking an uncultivated land from a person who is not cultivating it, and giving it to another person who may cultivate it.

Ex: during the Prophet’s time, Bilal was granted a title over an agricultural land. Bilal, however, did not cultivate the land as a result the land was left barren. The second calipha Umar asked Bilal to cultivate the land, failing which he took the uncultivated part of land over from Bilal. By taking an uncultivated land from a person who is not cultivating it, and giving it to another person who may cultivate it.

The government has also the right to take private land in order to build highways, roads, hospitals, and other public utilities. It may also regulate the utilization of private property in accordance with the public interest. For example, price ceiling or price control of certain essential commodities could be implemented in the public interest.

Properties that cannot be owned by Individuals

Recognition of private ownership is one of the fundamental principles of Islam. However

certain properties cannot be owned by individuals.

Ex: atmosphere, free air, heat coming from the sun, ocean and its resources, and space. These properties belong to all mankind.

The prophet has stated “Muslims are partners is three: grass, water and fire”

The principle that is laid down in the hadith is that the society is declared the owner of natural resources.

These includes: rivers, forests, land, mountains, minerals, soil resources etc, these resources belong to the people who reside in that territory who have equal right to benefit from them.

These resources should be under the supervision of the state. The state should manage them either directly or through private companies for the common welfare of the people.

However companies cannot claim ownership of the forests for instance but they are only authorized to do logging activities in a certain area of the forest for limited period.

in certain situations it is possible that a public property is transferred into a private property. For instance, land belongs to the public. However, the state may give land to individuals. A hadith of the Prophet p.b.u.h. states: “whoever revives dead land has the right of ownership to it”.

There are some other properties which cannot be owned by individuals such as mosques, graveyard and waqf.

Humans are social beings who are not self-sufficient to fulfil all their needs individually without help from others. They need to trade, interact and cooperate with each other.

It is through Trading, and exchanges that humans fulfil their mutual economic needs.

A Muslim should not take another’s property unlawfully but by way of trade and with mutual consent .أن ” إال بالباطل بينكم أموالكم تأكلوا ال آمنوا الذين يها يأ

منكم تراض عن تجارة “تكون

The Theory of Contractالعقد  

The only valid way through which ownership could be transferred is through mutual agreements and trading.

Much of Islamic economics and finance is based on contracts between two or more parties. Whether it is a contract to purchase goods or a contract to make a loan

In this theory we will discuss the principles of trading and mutual agreements. And will explains detailed rules and regulations on the formation of a contract.

Definition of Contract (‘aqd)The word ‘aqd (contract) in Arabic language

means: tying tightly, as in tying a rope. Arabs used the word to speak about firm belief or determination.

They used to say ‘qd al yamin to mean ‘give an oath’. Along the same line is ‘adqat al nikah meaning a marriage contract.

The word ‘aqd also carries the meaning of obligations, as used in the first verse of Surah al-Maida. O ye who believe! Fulfill your obligations.

In Islamic jurisprudence the word contract is used to mean “a legally binding obligation, which has consequences for its subject”.

According to Islamic Law a promise may not be legally enforced although it is strongly

recommended by religious and moral values to be fulfilled. (Surah al-Saf 61:2).

Therefore a breach of promise to marry does not give a cause of action according to Shari'a.

However, in certain circumstances a promise may become legally binding.

promise is widely used by Islamic banks in B.B.A. and murabahaÍ transactions.

When the bank relies on the promise and purchases the property, the customer is under an obligation to purchase the property from the bank based on the promise which he has made.

Pillars of Contract (arkan)“Rukn what is considered to be necessary for

a thing to exist, and it is part of it” . Consent is the cause for the existence of a

certain contract. If either party to a contract does not give his consent the contract does not exist.

The Prophet is narrated to have said: “It is unlawful to take the property of a Muslims except by his consent”.

consent is a hidden phenomenon and unless expressed .

Consent can be known through : an offer (ijab) and acceptance (qabul) by the parties .

According to Hanafis, a contract stands on two pillars which are offer and acceptance.

According to Hanafis, the elements of ‘aqd include anything that manifests the meeting of two intentions either through conduct, action or writing.

Some other matters are not considered as pillars of a contract however their existence is necessary.

For example it is necessary that there must be contracting parties in order to have ijab & qabul. Similarly there must be the subject matter upon which the parties have the agreement to indicate that there is the meeting of two intentions.

According to The majority of the Fiqh Schools, pillars of contract are are three:

1- expression (sighah), which includes offer and acceptance,.

2- the party, or the parties (al ‘aqidan).3- the subject matter (mahal al ‘aqd) or the

property on which a contract is concluded.

Hanafi ijab qabul

Sighah ijabMajority qabul Contracting

Parties

Subject Matter

Pillars of contract

Pillars of contract

I. Expression (Ijab and Qabul) (Sighah)Mutual consent of parties is the basis for

formation of a contract.However consent is an intangible mental

fact. Therefore this intention must be manifested in sufficient form of words/conduct that indicates a definite intention to contract.

Sighah is “a method to manifest the intention to contract. It consists of Ijab & Qabul”.

The contract is concluded when the connection between the ijab (offer) and qabul (acceptance) takes place.

According to the Hanafis offer is a statement that comes from the party who first expresses his consent and this could be from the buyer or the seller. the latter is considered (qabul).

The majority of the Fiqh Schools, offer is a statement that comes from the seller who as an owner of a property. qabul is made by the buyer or the person to whom the subject matter of the contract is addressed regardless as to whether this comes first or later .

( if the first statement comes from the buyer and the second statement comes from the seller the latter is considered offer while the former is acceptance).

For instance: if a buyer in a sale contract offers to buy the goods from the seller by saying: “ I bought this book from you for “ringgit 100“ ”. To which the seller replied: “I sold that book to you for “ringgit 100” ”.

In this situation, according to Hanafis’ view, it was the buyer who has said the ijab being the first person who manifested the intention to contract. On the other hand, according to the others’ view, the word of seller is the ijab since he was the owner of the book.

Forms of Expressing consent : The most obvious form through which consent

could be expressed is through spoken words or verbal communication.

Any phrase and words are acceptable as long as they reflect the intention of the offer or to make an offer. However, the words used should show a definite intention to form a particular contract.

Words should also indicate whether the contact made by the parties is a sale, waqf, rent or a mortgage contract.

Both present and past tense may be used to express a valid offer while words used to show intention to offer in future or to ask for confirmation are not enough.

. For example the phrase “I will sell the house to you” only indicates a promise to sell in the future and is not a contract.

A contract may also be concluded by writing .

For instance: when an e-mail sent offering a specific object for sale for a specific price, this amounts to a valid offer which will be binding on the offer.

A person who cannot express his consent verbally may do so by gestures. For dumb people, a sign or gesture is equal to speech.

A contract may also be concluded by action: (the seller delivers the commodity to the

buyer without any expression of words):In Fiqh it is known as “mu‘âtah”, “ta‘âti” or

“murâwadah”. This simply refers to the conduct of a seller, displaying commodity for sale attached to it its price and pays the seller the price.

customarily this indicates that the parties consented to the transaction

Exchange of offer and acceptance through modern means of communication such as fax

and the internet is included under writing. It can be also concluded through Automatic

Teller Machine (ATM) .Machines that dispenses food and drink or

coins are considered to be written exchanges.

Conditions of Offer and Acceptance1- Clarity: The words used in offer and

acceptance should clearly indicate and express the consent of the parties with certainty.

2- Conformity of Offer with Acceptance:For example when a seller offers to sell two

computers for RM 3000 the buyer should accept the offer and buy both computers for RM 3000. He cannot buy one of the computers for RM 1500.

3- Continuity Between Offer and Acceptance: which means acceptance should reach the offer within particular time or in the same session of contract (Majlis al’aqd).

The session of contract (Majlis al’aqd).The session of contract refers to “a period of

time in which an offer is made negotiated and accepted while both parties remain at the same place”.

This means that acceptance should be made before both or one of the parties separate and leave the place.

If acceptance is not taken within particular time, offer may not survive. The party who has made the offer has the right to withdraw or change the offer.

The majority of the Fiqh Schools are of the opinion that an offerer can also withdraw his offer even within the session of the contract but before an acceptance could be made.

The Malikis, on the other hand, argue that unless the offeree accepts or rejects, the offer cannot be withdrawn within the session of the contract. They argue that the offerer, by making his offer, has established to the offeree the right to accept the offer. They say the offerer is bound by his offer, until it is either accepted or rejected by the offeree,or when the session is over.

II The Parties to a Contract (contracting parties)

- The contracting parties are the parties who exercise the sighah of ijab & qabul.

- In order to conclude a valid contract, the contracting parties must have legal capacity (ahliyyah).

- Definition of Ahliyyahliterally means capacity or competence.Technically, it has been defined by Muslimjurists as “The eligibility of a person to

establish right for and obligation upon himself”.

- a person may not have the requisite legal capacity to conclude transactions but he may still receive rights and obligations. A child or a lunatic person, for instance, cannot conclude contracts but are entitled to receive their share of inheritance and are obliged to pay for the necessities bought for them through their guardians.

Types of capacities Muslim jurists have therefore recognized two

types of capacities: 1- Ahliyyah al-wujub or Receptive

(passive)capacity

2- Ahliyyah al-ada’or Active Capacity

Al-Ahliyah

Receptive (passive)capacity Active Capacity

ahliyyah al-wujub Ahliyyat al-ada’

1- Ahliyyah al-wujub: “it refers to the capacity of a person to receive rights and obligations”.

It is possessed by all living human beings (Humanity or life)

Types of Ahliyyah al-wujub

Ahliyyah al-wujub-------------------

Complete Incomplete

A- Incomplete receptive capacity is a type of capacity that enables a person to receive only rights but not obligations (positive).

This capacity is established to a fetus . Fetus is part of the mother as it does not have an

independent personality.

Fetus: is entitled to certain essential, beneficial rights: There are 4 rights granted:

1- a fetus has the right to be attributed to his parents.

2- He is also entitled to receive his share of inheritance .

3- He is also entitled to receive his share in a will (wasiyyah) .

4- He is also entitled to receive his share in waqf.

-but a fetus is entitled to these rights only when it is born alive .

B- Complete receptive capacity: it refers to a capacity through which a person receives rights and obligations.

- A person acquires this capacity after his birth and retains it until his death.

The example of this is Children: They receive rights and obligations as the

guardians are acting on their behalf. They can enter into the contracts of sale, or gift through their guardians.

They are also under obligations to pay zakat, zakat fitr or to pay for the damage which they inflicted on others properties.

- A child who has obtained a complete capacity to receive rights and obligation still cannot undertake contractual obligations except through his guardian. And if he does the ‘aqd is void.

- He is not also obliged to pray , fast or go to haj.

2- Active (legal) Capacity (Ahliyyah al-ada)

It refers to: “The ability of a person to manage his wealth and exercise his rights and undertake obligations in a manner recognized by the Shari’ah”.

- the principal elements for the capacity of performance (ahliyyah al-ada) are:

- The puberty and - The intellectual standard that a person

has attained. This enables him to distinguish between useful and harmful, profitable and unprofitable things or transactions.

Ahliyyah al-ada’ could be_____________________

complete or incomplete

A- incomplete active capacity: a child between the age of eight and the age of puberty (age of puberty is 15 according to majority)

- He has a incomplete capacity to attain rights and responsibility.

- A child in this age group is called sabi al-mumaiyz or a child who could distinguish between good and bad.

According to the Shafiis and Hanbalis a distinguishing child does not have the requisite capacity and therefore, he cannot enter into any contract with or without the permission of his guardian. His guardian instead may conclude contracts on his behalf.

- According to the Hanafis and the Malikis: - his contract is of 3 types. 1.Beneficial ‘aqd is valid (to receive gift or

will) 2. ‘aqd that causes loss to him even with his

guardian’s permission is void (Talaq, give gifts or become a guarantor for another person’s debt).

3. ‘aqd that may cause either benefit or loss (eg: sale, hire) it depends on the approval of the guardian.

B- complete active capacity: Complete capacity to acquire rights & responsibilities. He can enter to any ‘aqd without the need to get any one’s approval. (Baligh/Major).

- the principal elements for the complete active capacity are the puberty and the intellectual standard that a person has attained. This enables him to distinguish between useful and harmful, profitable and unprofitable things or transactions.

- Signs of puberty and prudence: puberty and Prudence is a hidden

phenomena.The scholars, therefore, rely on age as a

determining factor, which could establish them:

According to the Hanafis, the age of majority is 18 for males and 17 for females.

other scholars , it is 15 for both male and female. Every person who has reached the age of majority may enter into contracts of sale and purchase, rent, wakalah, partnership....

Obstacles to Capacity:

- There are some factors that may prevent a person from dealing with his own property.

These factors disqualify a person from concluding a contract, it could be beyond his power, or within his power.

Obstacles to capacity refer to “a situation where a person is restrained from dealing with his property”.

1- Insanity (جن�ون): where a person’s mental capability is affected. Consequently, this affects his ability to make a rational decision.

- All contracts performed by an insane person are invalid.- A transaction made by a person who is not continuously

insane in his state of sanity is considered as valid.

2- Idiocy ( ma’tuh): where a person is inconsistent in his decisions and behaviours, which may change from time to time

His status is the status of a child who could distinguish between good and bad.

He may perform contracts, which are in his interest, without seeking permission from his guardian.

He could not enter into contracts that are harmful.

He may enter into contracts that fall between these two extremes with the permission of his guardian.

3- Unconsciousnessغيبوب�ة : it is a disease of mind or heart which may weaken or suspend a person’s power to think.

- Such a state could be compared with sleeping. Sleeping however is a natural state, but unconsciousness is not. A contract made by such a person is not valid.

 4- Sleeping: person’s mind becomes in its

lowest level of activity. He is not conscious of what is occurring around him.

- the contracts performed by a sleeping person are not valid.

5- Intoxication ك'ر �السIntoxication prevents a person from

distinguishing what is good and bad or beneficial and harmful.

- Intoxication could either be caused voluntarily (person choice and within his control) or involuntarily (beyond one’s control).

- Voluntary intoxication could be caused by wilfully taking intoxicants.

- Involuntary intoxication, could be caused by consuming certain medicines or taking anaesthetic or when a person is forced to take intoxicants.

- There are two views on the validity of a contract entered into by a person who intentionally takes intoxicants:

1- The Malikis and Ibn Taymiyyah and Ibn Qayyim argue that all contracts entered into by such a person are not valid.

Reason: intoxication whether voluntarily or involuntarily takes away a person’s rational power to make a proper decision.

2- The majority of the Fiqh Schools argues that contracts entered into by a person intoxicated involuntarily are not valid.

- if intoxication is caused wilfully, the contracts entered into are valid.

Reason: this could serve as a sort of punishment to a person who voluntarily weakened his rational power.

6- Prodigality (Sufha):Sufha refers to a situation where a person’s

financial decisions or activities run contrary to the guidelines of Shari’ah and reason.

A safeh is a person who is wasting or spending his wealth improperly.

- A person who could easily be deceived is considered as a sefih.

- The opposite of sufha is rushd which refers to the maturity of mind. Rashid is a person who has the ability to manage his wealth properly and is not involved in extravagance.

- Only a court has the power to ascertain that a certain person is a sefih, and once a person is declared a sefih by a court the judge would become his guardian. The father or grandfather of a spendthrift person has no right of guardianship over him.

- Any commercial transaction made by a sefih could not be executed unless the judge is satisfied that the transaction is in his favour and approves it.

- Types of Sufha :Two types:1- Those who have become adult but are still

sefih. He is not allowed to interfere with his property. He would be under the supervision of a guardian.

-According to Imam Abu Hanifah, after a safih reaches the age of 25 years his property should be returned to him.

Reason: because when a person reaches this age he would attain maturity of mind.

- According to The majority of the Fiqh Schools the prevention may continue until such an age at which a person may attain maturity of mind.

2- Those who after attaining maturity of mind becomes sefih.

- Imam Abu Hanifa :no prevention could be imposed on such persons.

- The majority of the Fiqh Schools and Abu Hanifah’s own disciples Imam Abu Yusuf and Imam Muhammad Al-Shaibani: he may still be declared sefih even if he has attained maturity of mind; if it is proven that he misappropriates his property or spends it in ways that are unlawful or improper.

7- Insolvency or Bankruptcy اإلفالس أو اإلعسارWhen a debtor’s debts are equal to or exceed his

assets he is considered to be an insolvent or bankrupt.

- On the application of the creditors, the court may declare the debtor as insolvent to prevent him from transferring his property in favour of others through gifts or may make admission of new debts.

- Once a person is declared insolvent, he cannot enter into transactions that would reduce his assets. For instance, he cannot create waqf, or make a gift, or selling a property for a lower price.

- Insolvent’s transactions are not valid unless approved by the court or the creditors.

- The court then sells his property and divides the proceeds among his creditors.

- How the court makes distribution? The court begins by paying cash if the debtor

has any. If it is not sufficient the court may sell debtor’s movable properties (‘arudh) such as jewelleries, car, and other valuable things. As a last resort the court may sell his immovable properties such as house and land.

According to Imam Abu Hanifah the debtor should not be restrained from disposing his asset even if his debts are equal or more than his asset.

Reason: the debtor has full rational capacity and does not suffer from any impediment that would prevent him from dealing with his wealth. According to him imposing restraints on a debtor would go contrary to human dignity and would deprive him of his right over his wealth.

Solution: the debtor should be ordered by a court to settle his debts failing which he could be forced or imprisoned to sell his property himself and to settle his debts.

The majority of the Fiqh Schools and Imam Abu Hanaifah’s two disciples do not agree. They argue that on the application of the creditors a judge may declare a debtor as an insolvent, sell his assets and settle his debts.

8-Mortal illness (maradh al-mawt):- Mortal illness refers to an illness which will

lead a person to strong probability of death.- This usually happens when the disease gets

worse from day to day until death ensues.- Mortal illness also includes situations in which

people fear death, although they may not be sick, as when a person is sentenced to death.

- A person who suffers from mortal illness may make certain contracts: waqf , charity, or make gift of his property to some of his heirs or non-heirs.

- Some of his dispositions may cause injustice to his legal heirs and the creditors

- In order to protect the interests of his legal heirs and creditors Islamic law, applying the rule of wasiyyah, has limited his dispositions to one-third of his wealth.

- For example, a person who suffers from mortal sickness may give a part of his wealth as a gift to one of his heirs. After his death if the other heirs do not agree, the gift is not valid. A gift to a non-heir is valid and does not need the approval of the heirs provided the gift should not exceed one-third of the asset.

Authorisation/Delegated Authority A party to a contract who concludes a contract

on behalf of another should not only have complete capacity of performance but he should also be authorised to enter into the contract.

He may derive this authority either from the Shari’ah or from an agreement.

In guardianship (walayah) authorisation is granted by Shari’ah while in agency (wakalah) a person who has complete capacity of performance authorises another person to conclude a certain transaction on his behalf.

1- Guardianship (Al-Welayah):Al-welayah literally means help and assistance.- Technically: “it is an authority granted by

Shari’ah to a person over the person and property of another by virtue of which his dispositions and transactions in respect of such a person would have legal consequences.

- Guardianship could be over a person: it is concerned with the ward’s private matters such as his education, medical care, and marriage

- Guardianship over property : it is concerned with the protection of a ward’s property, its management, and investment. The guardian is authorised to make financial dispositions and transactions on behalf of the ward.

- Types of people who need guardianship- A minor is in need of guardianship: It begins

from the day a child is born and ends when he/she reaches the age of majority.

- A father is the natural guardian of his child’s person and property.

- father cannot release himself from guardianship as it is granted by the Shari’ah. –

- In his absence legal guardianship would devolve upon father’s executor, father’s father, the executor appointed by the father’s father, the judge, and the executor appointed by the judge.

- A lunatic, and an idiot are also in need of guardianship.

- A person who is in a state of lunacy or an idiocy immediately after attaining the age of majority remains under the guardianship of the same guardian.

- If lunacy or idiocy occurs after a person has attained the age of majority, a judge or a person appointed by him assumes guardianship over such a person.

- In case of prodigal (sefih) if prodigality continues from the childhood then a person who was his guardian immediately before attaining the age of majority would remain his guardian. However, a judge is the guardian of a person who becomes prodigal after attaining the age of majority as only a court has the power to declare whether or not a certain person is prodigal.

- A bankrupt person is in no need of guardianship as he has complete capacity of performance. However, he is restrained from certain financial dealings concerning his property in order to protect the interests of the creditors.

- The conditions for the guardianship are as follows:

1- A guardian should have a complete capacity to perform.

2- A guardian must be a Muslim . A non-Muslim cannot be the guardian for a Muslim ward and a Muslim cannot become the guardian for a non-Muslim ward.

3- A guardian must be just. A guardian must be a pious and practising Muslim and has a good character.

4- A guardian should have authority and be able be to make decisions required by the guardianship. He should protect, manage, and invest the property of the ward. A guardian should spend on the maintenance of the ward with moderation from the ward’s property in accordance with his social status and wealth.

5- A guardian should always ensure that the interest of the ward is protected while making financial dispositions.

-He is not permitted to use his authority in a way that would cause loss to the property of the ward.(ex: he cannot make a gift of the ward’s property ..).

-any act of a guardian that is beneficial to the ward is acceptable. (ex: accepting a gift or a will).

- a guardian may conclude transactions where the possibility of profit and loss is equally present such as sale, purchase, and partnership.

- A guardian cannot become one of the parties to a contract with the ward. He cannot sell or rent his property to the ward neither he can buy or rent ward’s property.

If a guardian violates one of these conditions, the judge may remove him or he may appoint another guardian to jointly manage the property of the ward with the first guardian.

literally means: protection delegation or authorization.

Legally: it refers to “a contract where a person who is fully competent authorizes another who is equally competent to do a certain well-defined legal action on his behalf”.

-An agent (wakil) is someone who establishes contractual and commercial relations between a principal (asil/muwakkil) and a third party for which he can receive a commission.

-The contract of wakalah is a non-binding contract.

2- Agency (wakalah)

The necessity of to wakalah: People need agents for variety of reasons: - A person may need an agent to act on his

behalf as the issue may require specialized knowledge and expertise. (ex: a lawyer..).

- Sometimes distance may force a person to appoint an agent as he himself may not be able to travel and it may cost him less in terms of expenses and time to appoint an agent.

- a person may not have enough time to personally attend to all his business transactions.

- there is also political agency (wakil rakyat) where it is impossible for all the people to come together and discuss issues related to governance and politics.Comparisons between guardianship and

agency.1- in guardianship one of the parties lack legal

capacity while in agency both parties have legal capacity.

2- guardian is appointed by law while an agent is appointed by the principal.

3- the guardian and ward should have the same religion, but a Muslim principal my appoint a non muslim agent.

4- a guardianship is usually not paid while an agent is entitled to his commission.

5- a guardian remains a guardian until a minor reaches the age of majority while a principle may at any time terminate the service .

Muslim jurists had laid down four conditions for the subject matter:

1. It must be in existence at the time of the contract

2. It can be delivered 3. It should be precisely determined 4. It must be suitable for transactions

according to Shari'a

The Object or the Subject matter of the Contract

1.The subject matter must exist Islamic law requires that subject matter must

be in existence at the time when an ‘aqd is concluded. Otherwise an ‘aqd is void, even if the subject matter would exist in the future.

The wisdom behind this prohibition is the possibility of gharar or risk that is associated with the sale of the subject, which is not in existence.

Therefore the sale of the animal fetus yet to be born while it is still in the mother’s womb is void if the mother is not part of the sale.

Exception is given to bay al-salam (forwarding contract) , bay al-istisna (contract of manufacture), ijarah (contract of hire) based on necessity and customs.

2. The subject matter can be delivered. Islamic law requires that subject matter must

be able to be delivered to the contracting parties. Otherwise an ‘aqd is void.

Hence, it is void to sell a bird on the sky, fish in the sea or runaway horse.

3. The subject matter should be precisely determined

Islamic law requires that subject matter must be precisely determined and known to contracting parties. Sufficient knowledge about the subject matter is necessary to avoid future disputes.

For instance: The genus, species, quality, and quantity should be clearly described.

If the seller describes goods to be sold as being of a certain quality, and the goods upon inspection proves to be of inferior quality or value, the law allows the purchaser an option whether to cancel the sale under the “option of misrepresentation” or to accept the goods.

4. The subject matter must be legal. Islamic law requires that subject matter must

be of commercial value, otherwise an ‘aqd is void.

Therefore the sale of the wine, blood, pork is void even if these articles are of value to others or according to civil law.

Similarly, the sale of items that can not be secured or possessed, such as fish in the sea, bird in the air, etc, But once possessed, it can become the subject matter of transaction.

In Islamic law of transaction each contract has a certain purpose and effect.

The purpose of a contract refers to the main purpose for which people use that contract.

The effect of a contract refers to its consequences or results, and the rights and liabilities of the parties.

For example, the purpose behind a contract of sale is to enable the parties to exchange their counter values with mutual consent while its effect is the transfer of ownership from the seller to the buyer in return for a consideration or compensation.

The purpose and effect of a Contract

The purpose of a lease contract is to allow the tenant to use the leased asset while its effect is to transfer the ownership over usufruct to the tenant with consideration.

The purpose of Kafalah contract is to provide a guarantee to the creditor while its effect is to enable creditor to claim his debt either from the principle debtor or the guarantor.

The parties are at liberty whether or not to enter into a certain permissible contract .

However ,once they have concluded the contract they are automatically entitled to its purpose and effect.

Any condition that would change the purpose and the effect of a contract is not acceptable.

Expression and the Hidden intention

The question here is whether the fulfillment of the competence of the parties and the existence of consent are sufficient ground for the validity of a contract or we have to look behind intention to the motive and investigate whether the motive was lawful or not?

Is it sufficient for the validity of a contract to fulfill its pillars and conditions or it should be concluded for a purpose for which it is intended by Shari’ah ?

Does the existence of unlawful motive behind a lawful contract make a contract invalid?

- To the Shafiis and Hanafis, motive is something hidden and is left to God.

- They don’t look beyond the agreement at the hidden intention

- They say that the Shari’ah requires that the parties entre into a contract by mutual consent and that all the pillars and conditions of the contract should be fulfilled.

- Thus, bia’ al ‘ina, the sale of grapes to a person who would make wine, the sale of arms during the civil war, and zawaj al Muhallil are correct-sahih-contracts.

- The Malikis, Hanbalis, on the other hand, look at the cause or the motive of the parties. Thus, if the cause or the motive is unlawful, the contract is also unlawful and vice versa.

- For example, they do not allow the contract of gift, when such gifts are given to the people in authorities. They argue that the motive is bribery.

- They argue that the permitting such contracts would promote prohibitions and sins, they therefore use the juristic method of blocking means ( الذرائع .to prohibit such contracts ( سد

Fictitious Contract (al-‘aqd al-sowri)This happens when apparent intention (irada

zahiriyah) is present and hidden intention (irada batiniyah) is absent.

- The parties while making offer and acceptance do not have intention to make that contract.

In this case the contract is called fictitious or artificial (sowriyah).

- The examples of artificial contracts are contracts that are concluded by persons who are minor ,insane, drunkard, sleeping.

- contracts made by mistake, coercion, and contracts made for an unlawful purpose are considered artificial.

Deficiencies of Consent When the consent is defective, the contract

is not valid. The existence of the following factors makes

the consent defective. Duress Mistake Fraud Deception

1- Duress: it refers to a situation where a person is forced against his consent to enter into a contract which if left alone, he would not have entered into.

For example: when a person is threatened with death, or the deprivation of his limbs, or severe beating, which may result in his death.

This type of coercion destroys consent and invalidates a person’s choice.

Duress does not destroy the capacity of a person but destroys his consent.

Conditions:1-The one who uses force is capable of

implementing his threats.2-The person forced is certain that the one who

uses force would implement his threat.3-The nature of threat is such that it really

endangers life.4-The threat is immediate.5-The force is used for an unlawful purpose.  To the majority the contract is void

2- Mistake: It refers to doing some action without intention.

A mistake refers to both mistake with regard to the substance of a thing and mistake with regard to the attributes of a thing.

- When a mistake is with regard to the essence of a thing, e.g. when the seller thinks he sold a thing made of silver and the thing turned out to be made of gold.

This type of mistake invalidates the contract as it is void ab initio

Mistake with regard to the attributes of a thing refers to a mistake where for example, the buyer bought a certain product with one color and later he noticed that it is of a different color.

The validity of such contract depends on the approval of the party who may suffer from the mistake.

3- Fraud: الت�دليس)): “it refers to a situation where the performer of a contract is made to believe that the contract is in his interest, but in reality, it is not”.

- Types of fraud: Fraud can be actual, verbal or in the form of hiding the truth.

Actual fraud refers to: a situation where the person through his actions changes the subject of the contract with the intention to cheat another person.

Example: painting a car in order to look new, or changing the mileage of a car.

- The majority is of the opinion that the purchaser has the option to return the thing, while the Hanafis say the purchaser is entitled to compensation.

Verbal fraud: is where one of the parties tries to convince another party by words to enter into a contract( giving wrong information or lying) .

Example: if a seller says another person offered such and such a price or wrongfully describes a thing.

This action is prohibited as it amounts to cheating but it does not affect the validity of a contract except when the goods are sold for a higher price than the market as in this case it combines both fraud and serious deception غبن.فاحش

Fraud may also happen when a seller does not disclose the defects of the sold goods (ex: accident in the car). In this case the purchaser has the option of defect which entitles him to either approve or cancel the contract.

4- Deception (al-Ghubun) Deception may happen due to the ignorance of the

buyer as to the true price of the commodity. Types of Gubun: It can be of two types:- Slight deception like buying a thing 10% more than its

market price.(The contract is valid)- Serious deception: If the deception is serious, the

contract can be invalidated on that ground.- To the Hanafis, Ghubun alone does not entitle the

cheated party to cancel the contract. However, if ghubun is accompanied by Taghrir (wrong description of sold item) then the buyer has the option to cancel the contract.

- exceptions with regard to properties owned by minors, lunatics, and prodigals .

To the Hanbalis the existence of ghubun whether accompanied by taghrir or not affects the validity of the contract. The buyer according to them has the right to cancel the contract in case of Talaqqi al-rukban, Najash or where he is ignorant of the actual price and relied on the honesty of the seller.

 To the Shafiis, a person cheated, should have known the actual price, or should have asked those who had experience. The Shafiis attribute this to the fault of the party cheated. The Shafiis, therefore, do not give the option to rescind the contract.

The following are some examples of deceptions that are specifically prohibited by the Prophet p.b.u.h.

Najash: It refers to an increase in price by a third party who is not actually buying, but wants to encourage others to offer a higher price.

Talqi al- Rukban or meeting a seller on his way to the town and buying from him the commodity before the seller has ever a chance to reach the market and to know the actual price.

Conditions refer to: “Those attributes which if are absent the contract will not come into existence”.

Types of Conditions- Conditions are divided into two main divisions:- Conditions put by the Shariah رعى £hالش رط £hالشwithout which a

contract cannot be realised. For instance conditions related to the capacity of the parties .

-Conditions that may be put by the parties الجعلى رط £hالش in order to achieve certain specific objectives. For example if the borrower travel, then I will pay for him.

Conditions Imposed by Shari’ah -These conditions are divided into four types.-Conditions for concluding the contract. االنعقاد شروط-Contracts for the validity of the contract. الصحه شروط-Conditions for the execution of the contract النفاذ شروط-Conditions for a contract to be binding. اللزوم شروط 

Conditions of Contract 

These conditions are sub-divided into two.1- General conditions are those conditions,

which should be fulfilled in all contracts. (Ex:conditions for offer, acceptance, and conditions with regard to the capacity and the subject matter of the contract).

2- Specific conditions that is necessary for certain contracts. For example the physical transfer of a property is a condition in contracts of gift, borrowing, deposit, loan and mortgage. In the absence of this condition, the contract cannot be concluded.

Conditions for concluding the contract. االنعقاد شروط

These are those conditions which if not present the contract would be void.

For example, a contract should be free from elements of ignorance such as ignorance about the price or the type of currency, similarly, a contract entered into by duress, or contracts involving fraud are not valid.

Contracts for the validity of the contract. الصحه شروط

There are two conditions: 1- Ownership over a thing, guardianship, or agency.2- That a third party’s right is not involved. For example, a person who suffers from the death

sickness is not allowed to interfere in more than 1/3 of his property, but with the permission of heirs. Similarly, an insolvent person is not allowed to sell his property in a way that would harm the creditors.

Conditions for the execution of the contract النفاذ شروط

All contracts are binding, unless there are options. The presence of options makes a contract non-binding until the options are exercised or the contracts are approved.

Conditions for a contract to be binding. اللزوم شروط 

- The parties are free to choose a particular form of contract. However, they are not free to add new effects to a contract. The effects and consequences that a certain contract may lead to are already determined by the Shari’ah. These effects and consequences result and apply automatically.

- However, the parties may add conditions that are harmonious with the nature of a contract. For instance, a seller may require of the buyer a down payment in return for a stated delay in the payment of the price of the goods.

Conditions stipulated by the parties

According to the view of fuqahah conditions put by the parties can either be valid or void.

- Valid Conditions Valid conditions are sub-divided into three categories. -The first group: includes those conditions which

confirm the effects already attributed by the Shari’ah to a certain contract.

Ex: a condition in a contract of sale stipulating that the object of sale be delivered by the buyer is valid.

The seller may insist that he shall keep the sold item until total payment is made.

These conditions do not change the effect of a sale contract and do not impose additional obligations on either of the contracting parties.

-The second category: refers to those conditions which agree with the effect and purpose of a contract, to which they are added. For example the seller may require pledge, or a guarantor if the buyer who wants to pay the price later.

-The third category: includes those conditions which are customarily accepted. For example the purchaser may require certain services of little importance that according to customs a seller may provide while concluding a contract of sale. (like guarantee period during which the sold item would be repaired.

- Void Conditions Void conditions are those conditions that may

favor one of the parties at the expense of another or conditions that may lead to usury.

Thus it is not allowed that a certain contract may comprise two agreements one of which is a condition for the other. For example, a person is not allowed to sell an item on the condition that the purchaser sells him something else to replace it, or buys some other article, or rents him the article sold, or lend him either its price or some other sum.

or when a loan is given on the condition that the borrower should buy a certain item from the lender.

Such conditions are null and void whether they are imposed by the seller or the buyer.

1- Classification According to CharacteristicsLooking at its characteristics, contracts may be

dividedinto 2 types, namely valid contract and invalid

contract.A valid contract is a contract, when all its pillars

are correct and all the conditions are met. A void contract is a contract when one of the

pillars or a condition is missing. The Hanafies, on the other hand, divide

contracts into valid (sahih), viodable (fasid) and void (batil) contracts.

Classifications of Contracts

Majority

Valid Invalid

Hanafis

Sahih (Valid) Bathil (Void) Fasid(Irregular)

TYPES OF CONTRACT

A valid contract is a contract which is legal in its asl as well as wasf. Asl refers to the essential elements which according to the Hanafies are offer and acceptance and all the conditions required concerning the parties and the subject matter. Wasf refers to external attributes that are not in the essence of a contract but falls outside it.

A contract is voidable or irregular (fasid) when its essential elements are present and all the essential conditions are complete but it contains a prohibited attribute. EX: when a contract contains elements of usury or when a contract suffers from gharar such as when a certain property is sold for an unknown price.

Similarly, a contract is considered voidable when it is made with a defective consent such as a contract made by a person under duress. A contract is also voidable if the parties agree on void conditions.

All these conditions render a particular contract voidable or irregular.

Voidable contracts do not have legal effects. However, the contract could be corrected when the prohibited attributes are removed.

Invalid or void contract, according to the Hanafies, is a contract where one of the pillars or their conditions is defective.

for example: the sale of a person who has no competence, or when a contract is concluded for an unlawful purpose or the sale of invaluable property or when the subject matter is not in existence.

These contracts are prohibited contracts and as such do not have any legal effect.

2- Classification According to the Purpose and Effects.

Based on their objectives and effects, contracts are divided into seven categories:1- ‘Uqud al-Tamlikat(aquiring ownership): These are

contracts entered into for the purpose of obtaining ownership over a thing or its usufruct. Ex: contract of sale, rent, gift, waqf.

2- ‘Uqud al-Isqatat(waiving rights): These are contracts entered into for the purpose of waiving rights. Ex: a creditor may release his debtor from the debt or waive his right to demand the loan.

3- ‘Uqud al-Itlaqaat(authorization): These are contracts entered into for the purpose of authorization. Ex: contract of guardianship or agency.

4- Uqud al-Taqaiydat(imposing restraints): These are contracts whereby a person could be prevented from exercising certain rights. Ex:, insane, minor bankrupt persons could be prevented from dealing with their properties.

5- Uqud al-Tawthiqat(providing guarantee): These contracts are intended for security. Ex: the contracts of kafalah, hawalah, and pledge.

6- ‘Uqud al-Ishtirak(partnership): This group includes contracts of partnership such as musharakah, mudharabah.

7- ‘Uqudd al-Hifz(safekeeping property): These contracts are meant for the protection and safe-keeping of properties such as the contract of wadi’ah.

3- Classification According to the Time of Execution:

Contracts are divided based on the time when they would produce their legal effects after their conclusion into three types.

A- Al-‘aqd al-Munjaz contract that give immediate effect: These are contracts, which produce their legal consequences the moment they are concluded. Ex: the contracts of sale, pledge, gift. If they are postponed the intended consequences are not attained immediately and it is not allowed. In a sale contract, for example, it is not allowed to say “I sell my house to you next month”. This offer even if accepted is not valid as a sale contract should result in the immediate transfer of ownership to the purchaser.

◦ B-Al-‘aqd al-Mudhaf Li al-Mustaqbalb contract the effect of which could be postponed: These are contracts, which may result in producing immediate legal effects or the effects of which could be deferred to a future date. Ex: the contracts of rent, kafalah, hawalah, wakalah, and waqf .

◦ For example, in a contract of kafalah it is possible for a guarantor to say to the creditor that if the debtor could not settle the debt within two months then he (the guarantor) would settle it. At the expiry of the stipulated period the contract of kafalah becomes effective.

C- Al-‘aqd al-Mu‘allaq ‘ala al-Shart contract the effects of wich could depend on conditions: These are contingent contracts that may depend on the fulfilment of certain conditions. Ex: the contracts of agency (wakalah), bequest (wasiyah), kafalah, and hawalah. Contingent contracts could only produce their legal effects when certain conditions that are put by the parties are met. For example, when A tells B: “If I travel, you will become my agent”. B can only become an agent when A travels.

4-Classification based on Nominated and non-nominated Contracts:

Contracts are also divided according to whether they are given a certain name by Shari’ah or not. For instance, the contracts of Mudharabah, Musharakah, Wadia’h, Kafalah, are grouped under the nominated contracts. On the other hand, contracts that are later introduced such as Istisna’, bay’ al-wafa and Takaful are called non-nominated contracts.

5- According to Physical or non-PhysicalContracts which need the physical

transfer/existence of a thing include the contract of gift, borrowing, deposits, loan. In these contracts the thing or the property should physically be present and transferred.

In all other contracts the physical transfer of the property is not necessary as long as all the pillars of a contract are fulfilled.

Option is a right given to one or both parties to either confirm or cancel a contract.

Options allow the parties a time to think over the terms and conditions of the contract and to make a choice that is the result of careful thinking and deliberation.

The followings are some of the important options that the contracting parties are entitled to by law, or they can stipulate in their contract.

Options of Contract

1- The Option of SessionsThis refers to an option given to both parties to

terminate a contract while the session still continues and they are not yet separated. This means that the contract is binding only after the session ends and neither of the parties rejects the contract during the session. The option ceases to exist if the session ends. The option is recognised only by the Shafis and the Hanbalis.

2- The Option of Condition:Either or both parties to a contract may insert a

condition into the contract giving them an option, within a fixed period, to either cancel or ratify the contract

This option is established by a hadith of the Prophet p.b.u.h. The reason for this option could be that some people may want to get the advice of an expert. Thus they may put this condition or may seek a longer period. Consulting others, or thinking or reflecting over the thing may need more time.

For examples, when a buyer tells a seller: I buy this thing on the condition that I may have the option for three days. The option of condition could be exercised for three days or the determination of the period could be left to the parties.

The option of condition gives the other parties the right to either confirm or cancel the contract within a certain period. If the period expires and the contract is not cancelled, the parties lose the option and the contract is confirmed and binding.

To the Hanafis and the Malikis the ownership is not transferred to the buyer. To the Shafiis and Hanbalis the ownership is transferred to the buyer. In case of death the right of option is not inherited according to the Hanafis. However, according to Malikis and Shafiis the right could be inherited.

3- The Option of Defect: The option of defect gives the buyer the right to

cancel the contract if he discovers, upon transfer of possession of the thing, a defect that would reduce or diminish the value of the thing.

Conditions- The defect should have been present in the

object before the contract was concluded.-The defect was not disclosed during the session of

the contract.- The defect should be of a type that would

decrease the value of the object. All schools of Fiqh agree that the option of defect

could be inherited as this right goes with the property.

4- The Option of Determination The option of determination refers to the right of the

purchaser to select from among three things, the item which he would buy.  

The option of determination is applicable to contracts where the parties agree to conclude the contract but the buyer has not decided on the choice of the object during the session of the contract.

The option is only recognized by the Hanafis and the Malikis. The Shafiis and the Hanbalis do not recognize the option of determination. They argue that if the object of the contract is not sufficiently determined. Then the contract does not conform to the basic conditions laid down for the subject matter

Conditions1-The option could only be exercised with regard

to three objects.2- The objects should be of different qualities and

prices. If they are of the same quality and prices, then the option has no meaning. The price of all three items should be known.

3- That the period in which the option is exercised should be ascertained.

Effects of the option of determination: The option of determination does not entitle the parties to a cancellation of the contract. When the buyer only puts the option of determination, the contract is binding on him. He can only select from amongst the three different items.

5- The Option of Sight or InspectionRefers to the right of the buyer, who has not

seen the object, to confirm or cancel the contract after inspection. The reason for this option is that the buyer has not seen the object. However, if he has seen the object, the right could not be established to him.

The Hanafis, Malikis, Hanbalis, argue for this right while the Shafiis argue that a contract in which the object is not present is not valid as it involves gharar .”

Generally, all contracts may come to an end by cancellation or by the death of one of the parties.

1- By CancellationA- When conditions are not met. Ex: when the party is

not competent, or when an unspecified thing is sold.B- A contract can also be cancelled through the exercise

of option.C- By mutual agreement between the parties -iqala.D- Cancellation due to frustration where it is impossible,

for one of the parties, due to natural causes, to perform a contract. For e.g. when the subject matter of a contract is destroyed.

E- When the period for which the contract is made ends, or when the purpose is achieved. Ex: when the period for renting a house ends or the period for the contract of employment ends, or when a guarantor settles the loan.

Termination of contract

2- By the Death of the PartiesA- according to the Hanafis The contract of lease or

Ijara, comes to an end when either of the parties dies. , Other schools do not consider death as one of the

ground that may terminate the contract of ijarah.B- Pledge contract. The heirs of the deceased pledgor

can settle the debt of the pledgee and release the pledged property which would be divided among them

C- contract of guarantee for the person is terminated by the death of either the guaranteed person or the guarantor.

D- Contracts of sharikah- partnership- and wakalah-agency- are not binding on the parties. These contracts end with the death of one of the parties.

1-  Usury or Interest (Riba)- The Quran and the Hadith have forbidden

usury and all usurious transactions in the strongest terms.

- There are two varieties of riba which are :1- Riba on credit (riba al- nasiyyah )2- and riba on cash (riba al- fadhl).

Causes that invalidate transactions

1- Riba on Credit (riba al- nasee’a) - Riba al- nasiyyah refers to:” a stipulated increase

over the loan which a debtor agrees to pay to his creditor in relation of a specific period of time.

- It is a fixed charge payable by the borrower to the lender irrespective of what the loan money produces.

- Thus, any gain that comes from a loan transaction is usurious.

- This type of riba is prohibited by the Quran (30:39; 4: 160-1; 3: 130; and 2: 275-281). The hadith of the Prophet p.b.u.h. states: “Jabir said that Allah's Messenger (may peace be upon him) cursed the accepter of interest and its payer, and one who records it, and the two witnesses, and he said: They are all equal.”)Bukhari and Muslim)

Riba usually arises when the parties to a certain transaction deal with properties which are perishable and homogeneous. Ex: gold, silver, money, dates, salt, etc. While lending these properties the creditor is not allowed to charge the debtor for their use. In contrast, a person may charge another for the use of his usable property such as house or a car as their future benefit is certain.

Q: A question may arise that if a person can charge another for the use of his house why he shouldn’t charge him for the use of his money?

The Answer: House and money belong to two different types of properties. House is a usable property while money is considered perishable property in a sense that a person can use it only once. For example a person who uses his money to buy a computer cannot use the same money to buy another thing. The same applies to other homogeneous properties such as rice, sugar, oil, etc.

- Assigning time value to money is equivalent to accepting that money can be rented out.

- Furthermore, when a house is rented it is certain that the tenant would get benefit or usufruct from the house. Money, on the other hand, had to become part of an enterprise and combined with efforts in order to give benefit/profit.

- The money would have to be invested and there could be the possibilities of profit and loss. Charging an extra amount for the time, irrespective of the outcome of the enterprise is considered injustice. Instead of renting money Islamic law recommends profit/loss sharing contracts.

- In contrast conventional banks in practice are renting money and not lending money.

2- Riba in Cash (Riba al-fadhl)- Riba al-Fadhl is prohibited by the hadith of the

Prophet p.b.u.h. 1- The hadith states: “Abu Sa'id al-Khudri (Allah

be pleased with him) reported Allah's Messenger(may peace be upon him) as saying:

“ Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, salt by salt, like by like, payment being made hand to hand. He who made an addition to it, or asked for an addition, in fact dealt in usury. The receiver and the giver are equally guilty” (Muslim).

2- In another hadith it is narrated: “Abo Sa'id reported: Bilal (Allah be pleased with him) came with fine quality of dates. Allah's Messenger (may peace be upon him) said to him: From where (you have brought them)? Bilal said: We had inferior quality of dates and I exchanged two sa's (of inferior quality) with one sa’ (of fine quality) as food for Allah's Apostle (may peace be upon him), whereupon Allah's Messenger (may peace be upon him) said: Woe! it is in fact usury; therefore, don't do that. But when you intend to buy dates (of superior quality), sell (the inferior quality) in a separate bargain and then buy (the superior quality)”.

- Gold, silver, wheat, barley, dates, and salt are also called ribawi properties.

‘Iillah in Riba (The underlying cause)- Fiqh Schools are of the opinion that the hadith

is of general application and is not necessarily confined to these six items but could be extended to other commodities through Qiyas.

- However, they differ among themselves as to the reason (‘illah) for the prohibition:

- Malikis the unequal exchange of gold against gold and silver against silver is prohibited as they belong to the class of moneys. They also say that the four other commodities which are mentioned by the hadith are types of foodstuffs, which can be stored or preserved. They argue that the ‘illah is the quality of storability therefore all foodstuffs that can be stored are covered by the hadith.

- The Shafiis and Hanbalis while agree with the Malikis on gold and silver contend that storability is not necessary and the hadith could be extended to all foodstuffs.

- The Hanafis, however extended the hadith to all commodities that are normally sold by weight or measurement.

- The combined effect of these two hadith is that when ribawi properties are exchanged against each other they should be exchanged on equal basis and any such exchange should be immediate.

- Riba al-fadhl arises when: 1- one of these commodities is exchanged for

an unequal amount of the same commodity or 2- when the amounts are equal the delivery

of one of them is deferred- For example, usurious either to sell or

exchange one measure of wheat for two measures of wheat or one kg of dates for two kg of dates or one measure of wheat for two measures deliverable at a future period.

If the parties are not willing to exchange their commodities such as dates on equal basis then one of them should sell his dates and use the money to purchase the dates from the other party.

- Equality is not a condition where different ribawi commodities are exchanged against each other. However, such an exchange should take place immediately and from hand to hand. For instance, the sale of ten grams of gold for fifty grams of silver, and the sale of two loads of barley in exchange for one load of wheat are not usury because these commodities are not of the same type. However, the exchange should be immediate. It is not lawful to sell ten grams of gold for fifty grams of silver or one measure of wheat for two measures of barley payable at a future time..

-

- The conditions of equality or immediateness of delivery are not applicable to properties that fall outside ribawi commodities. Properties that are not sold by weight, measurement, or counting could be exchanged based on the agreement of the parties. For instance the parties may agree to exchange one car for two cars or one sheep for two sheep.

The wisdom (hikmah) behind the prohibition of riba al-fadhl could be that the value of a ribawi commodity such as dates cannot be ascertained by other dates. For instance, the value of a lower quality dates cannot be ascertained with reference to a higher quality date. Its value has to be established with reference to some other measures such as gold or silver.

Riba al-fadhl was prohibted also to block the means to riba al-nasiyah.

The differences between riba al-nasiyah and riba al-fadhl:

1- riba al-nasiyah is prohibted by The Quran and the Sunnah while riba al-fadhl is prohibted by the Sunnah only.

2- riba al-nasiyah may happen in cases of loan while riba al-fadhl may happen in a sale contract.

3- in cases of debt it is possible that a debtor voluntarily returns an additional amount to the creditor while in exchange of ribawi commodities

against each other any addition is prohibted.4- riba al-nasiyah is bad in itself( muharam li-

dhatihi), but riba al-fadhl (muharam li ghairihi) for the sake of others as it leads to riba al-nasiyah .

2- Ambiguity (Gharar)- Gharar literally means uncertainty, danger.- Technically: “it refers to a sale contract

which is attractive to the purchaser in its form but unknown and ambiguous in its substance”.

- The parties or one of them may not know what could be achieved from the contract

- The Quran prohibits all those dealings where the intention is to deceive one of the parties in a contract. The Quran states that Muslims should not “devour one another’s property wrongfully”

The Sunnah of the Prophet p.b.u.h. has specifically prohibited transactions which involved elements of gharar. These include transactions determined by throwing stones, by mere touching without proper inspection, or by chance.

The main reasons for the prohibition of gharar are that contracts involving gharar are fraudulent. They also amount to obtaining the property of others unlawfully which may subsequently lead to disputes and disagreements between the parties.

Causes that lead to gharar:Gharar may arise when the subject matter of a

contract is non-existent, not deliverable, cannot be acquired or is not clearly defined. Thus the sale of fish in the water, the sale of bird in the air, the sale of a foetus in the womb of an animal, and the sale of runaway animal are prohibited.

In all these cases the sale is void due to the existence of uncertainty as the seller may not be able to deliver the sold item and the purchaser does not know whether the item will later come to his possession or not.

Gharar may also arise when the effect of a certain contract is not known and one of the parties may not know what he would achieve from the contract.

Ex: a contract of employment (ijarah) may contain elements of gharar when the rights and duties of the parties are not clearly defined.

Similarly, a musharakah or a mudharabah contract may suffer from gharar if the percentage for the division of profit is not clearly defined. Such contracts are, therefore, considered void on the ground of gharar or uncertainty as they may cause harm to one of the parties and unjustified enrichment to the other.

frequently ambiguities in a certain contract are designed to commit fraud and cheat one of the parties and lead to unlawful profit to the other. They are therefore distinguished from uncertainties that may exist concerning the possibilities of loss or profit in a lawful business. These are not meant to cheat others.

Gharar is also distinguished from uncertainty

or risk that is naturally associated with certain business ventures. Ex: manufacturers, importers, exporters, and traders are uncertain whether their products and goods could find a suitable market or not.

They are uncertain about the amount of profit and the possibility of loss. This type of uncertainty is not intentionally created by the parties neither are they designed to commit fraud. The parties make all the efforts to minimise losses. However, they cannot totally eliminate the possibilities of loss and guarantee profit.

The parties also do not leave success of the business to chance. Unlike gambling where pure chance decides the winner and the loser, in business the parties have to render all the necessary efforts in order make profit.

This type of risk is combined with efforts that may eventually lead to profit

How to avoid GUARAR IN TRANSACTIONS? In order to eliminate the possibilities of gharar,

Muslim jurists have laid down various conditions for different contracts:

Generally in a certain contract all conditions concerning offer and acceptance, the parties, and the subject matter should be fulfilled.

For instance, in order to prevent gharar the quality and quantity of the subject matter, its price, the date of payment if the payment is deferred, the date of delivery.........must be agreed on by the parties.

EX: in an ijarah contract the usufruct or the service and the rent or wage should be clearly defined. In a musharakah or a mudharabah contract the parties should agree on a clear distribution of profit.

Tolerated uncertainty :There are certain transactions where the degree

of uncertainty is minimal and are customarily accepted. EX: in some parking areas all users are charged equally irrespective of the time they take. The parking time is the subject matter of the contract which is not specified. However, since this is customarily accepted Fiqh also tolerates it.

Similarly, in mudharabah contract the amount of efforts put in by the mudharib cannot be known and defined in advance neither they can be quantified. The uncertainty is tolerated and is left to the trust and agreement between the parties.

3- Maysir or Qimarliterally means a way of obtaining something

too easily, The term Maysir was originally applied to a pre-Islamic game of arrows in which seven participants gambled for shares of an allotted prize (5:90). The term Maysir includes all kinds of gambling.

“It applies to all activities when risk is taken and which are based on chance”.

In gambling the winner has not earned that which he has won, and the loser loses on the mere chance (ittifaq). Gambling risks entail loss and gain where the hope of gain motivates the choice towards risk.

According to Ibn Taymiyyah,. It also gharar leads to maysir and consequently to hatred and enmity allows one of the parties to consume others property unlawfully and unjustly.

4- Deception – Al-GhubnDeception may happen due to the ignorance of

the buyer as to the true price of the commodity. It can be of two types: Slight deception where

goods are bought for a price that is higher than its market price up to 10%.

Serious deception refers to a situation where goods are bought for more than 10% of its market value. If deception is serious, the contract can be invalidated on that ground.

- To the Hanafis, ghubn alone does not entitle the cheated party to cancel the contract. However, if ghubn is accompanied by taghrir that is if the sold item is wrongly prescribed then the buyer has the option to cancel the contract.  

- To the Hanbalis the existence of ghubn whether accompanied by taghrir or not, affects the validity of the contract. According to them, the party deceived has the right to cancel the contract in case of talaqqi al-rukban, najash or where he is ignorant of the actual price and relied on the honesty of the other party.

- To the Shafiis, a person cheated, should have known the actual price, or should have asked those who had experience. The Shafiis attribute this to the fault of the party cheated. The Shafiis, therefore, do not give the option to rescind the contract.

العالمين رب لله والحمد