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Fiqh for Economist 1

ECON 3510
Supplication of today
Supplication for one whose affairs have
become difficult

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 Shariah
comprehensiveness of Islam:
-Islam is a comprehensivereligion 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
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 Shariah
The 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 Quran and

- 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
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
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
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 Mumin, except dishonesty and
- 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 persons reputation
who will lose peoples 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
- A Muslim businessman and trader should not
indulge in fraud, misrepresentation and unlawful
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:

Never mind may the sickness be purification, if
Allah wills

I ask Allah The supreme, The Lord of the
magnificent throne to cure you
Usul al-Fiqh
The 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 Hadith
These 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

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
Technically: Fiqh is the knowledge of the legal rules
conduct (
that have been derived by
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 Shariah and Fiqh
There is a difference between the meaning of the terms
Shariah and Fiqh:
The real distinction between Shariah and Fiqh is that
Shariah is the law itself, while Fiqh is knowledge or
understanding of that law.
In other words , Sharah refers to what was decreed in
the time of prophethood found in the Qurn 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 Shariah has a wider meaning than fiqh.
The term Shariah includes both law Fiqh-
and matters of Faith that is the aqaid.
The Objectives of Shariah
The Holy Quran describes the purpose of the
Prophets mission to be mercy not only to mankind
but also to all of Gods creatures. (21: 107)
Mercy includes, among other things, protection and
safeguarding peoples interest.
The Shariah aims at safeguarding peoples interest
in this world and in the next.
God instituted the Shariah 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 Shariah,
The scholars agree that there is no injunction
in the entire Shariah that does not seek to
secure a genuine Maslaha, that all of the
commands of Shariah aim at realizing the
interest (Maslaha) and that all of its
prohibitions are designed to prevent
corruption or harms (Mafsadah) in various
The objectives of Shariah:

In Islamic law They are five fundamental

1- Protection of Din ( Religion)
2- Protection of Life
3- Protection of Lineage
4- Protection of intellect
5- 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
Shariah prohibits theft and all other forms of
misappropriation . Shariah 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 persons 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
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
Supplication of today
After salam of the witr prayer

How perfect The King The Holy one
And on the third time he would rise his voice,
and add:

Lord of the angels and the ruh: Jibrail
Fiqh/Legal Maxims
The Definition:The jurists have defined a legal maxim
as a general legal rule which applies to all its
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
5- Hardship begets facility.
6- Harm should be removed.
Matters are determined according to
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
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:

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).
Supplication for expelling the devil and
his whisperings
Seeking refuge from him.
The adhan (call to prayer).
Recitation of the Quran and words of

remembrance and supplications.

Freedom from liability is a fundamental

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

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

Prophets Hadith. It states: la Darara wa la
Dirar Harm should neither be inflicted nor
The Theory of property (Al-Mal)

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

Al-Mal in the Holy Quran and Sunnah

The word mal and its derivatives are
mentioned 86 times in the Quran and in
numerous ahdith.


The Prophet : .

The Quran and the Sunnah do not specifically
define what mal is.
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

Property linguistically should has beneficial
use in accordance with the accepted customs.
Things such as carrion( )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:
1- According to the Malikis ,Shafiis, 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
2 nd veiw: The Hanafis define property (mal)
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 (manfaah) and rights
from the definition of the property.
Classification of P roperty
1-Based on the value of property according to
Valuable and non-valuable properties
Valuable (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 Shariah: wine, prok...
and things which cannot be possessed: pork, wine,
birds in the sky, fish in the sea, and minerals inside
the earth.

The Consequences of this classification

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 Shariah prohibits the use of a
certain thing it also prohibits its sale and
Compensation for the destruction of non-
valuable property if it is owned by a non
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
- The majority of the schools, on the other
hand, consider pig and wine as non-valuable
property whether Muslims or non-Muslims
own them.
2- Based on stability and instability :
Movable and Immovable Property

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- Hanafis 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.
The Consequences of this classification
1- The right of pre-emption (shufah) 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
(Shufah 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)
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
Based on similarity :
Similar and Dissimilar Property
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

1- weight : gold, silver.
2- measures : grain, oil
3- numbers : eggs, orange
4- measurement such as meters: Fabrics,
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.
The Consequences of this classification

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
sellers 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).
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.
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.
Based on surviving :
Usable and Perishable Property
Usable ( Istimali ) 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.
The Consequences of this classification
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.
Cash (nuqud) and Goods (urudh)

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.
Intellectual Property
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 owners permission.
protection of intellectual properties means
that no one else should duplicate it without
its authors 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.
Supplication of today
When insulted while fasting

I am fasting , I am fasting.
The Theory of Right ( Haq) and obligation (Dayn )

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 Allahs laws that imposes these
obligations on him and at the same time
entitles him to certain rights
Haq 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 Shariah 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 Shariah
The Pillars of Right
1- 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.
Classification of Rights

Rights can be classified in different ways:

1- Rights of Allah and rights of humans and combined
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
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..
Specifications of ALLAHs right
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
5- The enforcement of the rights of God is the duty of
the state and it is not left to the individual.
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.
Specifications of Human's right
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 shufah).
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.
The distinction between the rights of Allah swt and the rights of humans

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.
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 Shariah 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
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
There are certain Humans rights that cannot be
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
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 persons 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
-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 neighbours 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.
The The ory of Owne rship

In Islam, the real ownership belongs to Allah

Quran in many verses refers to the ownership of
God over all the creation.
From the other hand Ownership is a part of
human nature . Islam therefore recognizes and
upholds an individuals 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.
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
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
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.
Division of private ownership
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,
2- Incomplete ownership: it is divided into 3 types:
ownership over rights included in a land, ownership
over property, and ownership over usufruct.
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 (iaarah),
lease (ijarah), endowment (waqf), will
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
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 (Iarah) the borrower is responsible
for maintenance expenses of the borrowed
Restrictions on Ownership Rights
The 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

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
peoples right.
For example, no one is allowed to raise his building
to obstruct light and air from reaching his
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 Prophets 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
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
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.
The Theory of Contract

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 anothers property

unlawfully but by way of trade and with

mutual consent .

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 murabaha 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
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.
Pillars of
Hanafi contract

Sighah ijab
Pillars of
Majority contract
Contracting Parties

Subject Matter
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 &
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
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
. 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 mutah, tati or
murwadah. 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 Acceptance
1- 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 alaqd).
The session of contract (Majlis alaqd).
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
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

Definition of Ahliyyah

literally means capacity or competence.

Technically, it has been defined by Muslim
jurists 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
Types of capacities
Muslim jurists have therefore recognized two
types of capacities:
1- Ahliyyah al-wujub or Receptive (passive)capacity
2- Ahliyyah al-adaor Active Capacity

Receptive (passive)capacity Active

ahliyyah al-wujub Ahliyyat

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
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
-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 Shariah.
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

A child in this age group is called sabi al-mumaiyz

or a child who could distinguish between good and

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
guardians permission is void (Talaq, give
gifts or become a guarantor for another
persons 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 ones
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
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
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,
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
Obstacles to capacity refer to a situation where a
person is restrained from dealing with his property.

1- Insanity () : where a persons 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 ( matuh): 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
He could not enter into contracts that are
He may enter into contracts that fall between
these two extremes with the permission of his
3- Unconsciousness : it is a disease of
mind or heart which may weaken or suspend
a persons 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: persons 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

Intoxication 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 ones 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
- 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
Reason: intoxication whether voluntarily or involuntarily
takes away a persons rational power to make a proper
2- The majority of the Fiqh Schools argues that contracts
entered into by a person intoxicated involuntarily are not
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 persons
financial decisions or activities run contrary to
the guidelines of Shariah 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
- Imam Abu Hanifa :no prevention could be imposed on
such persons.
- The majority of the Fiqh Schools and Abu Hanifahs 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

When a debtors debts are equal to or exceed his
assets he is considered to be an insolvent or
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
- 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
Insolvents 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
debtors 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
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 Hanaifahs 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-
- 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
He may derive this authority either from the
Shariah or from an agreement.
In guardianship (walayah) authorisation is
granted by Shariah 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
Shariah 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 wards private matters such

as his education, medical care, and marriage
Guardianship over property : it is concerned with

the protection of a wards 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 childs

person and property.

father cannot release himself from
guardianship as it is granted by the Shariah.
In his absence legal guardianship would

devolve upon fathers executor, fathers

father, the executor appointed by the fathers
father, the judge, and the executor appointed
by the judge.
A lunatic, and an idiot are also in need of
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

1- A guardian should have a complete capacity to
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

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 wards 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 wards
property ..).
-any act of a guardian that is beneficial to the
ward is acceptable. (ex: accepting a gift or a
- 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 wards 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.
2- Agency (wakalah)

literally means: protection delegation or

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.
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
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
Comparisons between guardianship and agency.
1- in guardianship one of the parties lack legal
capacity while in agency both parties have legal
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 .
The Object or the Subject matter of the Contract

Muslim jurists had laid down four conditions

for the subject matter:
1. It must be in existence at the time of the

2. It can be delivered
3. It should be precisely determined
4. It must be suitable for transactions
according to Shari'a
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
Therefore the sale of the animal fetus yet to be

born while it is still in the mothers 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
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.
The purpose and effect of a
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
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 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
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 Shariah ?
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 dont look beyond the agreement at the
hidden intention
They say that the Shariah 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
They argue that the permitting such contracts
would promote prohibitions and sins, they
therefore use the juristic method of blocking
means (
) to prohibit such contracts.
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.

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 persons choice.
Duress does not destroy the capacity of a person
but destroys his consent.
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
The validity of such contract depends on the

approval of the party who may suffer from the

3- Fraud: )): 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
- 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
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
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
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

Condit ions of Contrac t

contract will not come into existence.

Types of Conditions

- Conditions are divided into two main divisions:

- Conditions put by the Shariah without which a

contract cannot be realised. For instance conditions related to
the capacity of the parties .
-Conditions that may be put by the parties
in order
to achieve certain specific objectives. For example if the
borrower travel, then I will pay for him.
Conditions Imposed by Shariah

-These conditions are divided into four types.

-Conditions for concluding the contract.

-Contracts for the validity of the contract.

-Conditions for the execution of the contract
-Conditions for a contract to be binding.

Conditions for concluding the 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.
Contracts for the validity of the contract.

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.
Conditions for the execution of the

There are two conditions:

1- Ownership over a thing, guardianship, or agency.
2- That a third partys 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
Conditions for a contract to be binding.

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 stipulated by the
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 Shariah. These
effects and consequences result and apply
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.
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 Shariah 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.

Classifications of Contracts
1- Classification According to Characteristics
Looking at its characteristics, contracts may be
into 2 types, namely valid contract and invalid
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)

Valid Invalid


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

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
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
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,
7- Uqudd al-Hifz(safekeeping property): These
contracts are meant for the protection and safe-
keeping of properties such as the contract of
3- Classification According to the Time of
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
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-Muallaq 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 Shariah or not. For
instance, the contracts of Mudharabah,
Musharakah, Wadiah, 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
5- According to Physical or non-Physical
Contracts 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.
Options of Contract
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.
1- The Option of Sessions
This 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
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.
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

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
1-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 Inspection
Refers 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 .
Termination of contract
Generally, all contracts may come to an end by
cancellation or by the death of one of the parties.
1- By Cancellation
A- 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.
2- By the Death of the Parties
A- 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
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.
Causes that invalidate transactions
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).
1- Riba on Credit ( riba al- naseea )
- 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
- 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
shouldnt 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.

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
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
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 anothers property
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
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 Qimar
literally 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-Ghubn

Deception 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
- 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