Академический Документы
Профессиональный Документы
Культура Документы
Law of Contract
For MBA Program, Course : EIF
1) M.Arshad
2) Bilal Ahmed
3) Akash Noor
4) Atiq ur Rehman
Islam is a Deen which means way of life. Life is full of problem and issues.
To over come and resolve these issues All Mighty Allah has reveled laws
and Rules in the Holy Quran which is imposed on human life to follow and
make their lives miserable.
Islam opposes the ways that unlawfully devour the assets which belong to
others, such as by theft, robbery, blackmailing, bribery, or land grabbing.
An average man deals with contracts almost every day in his life and
contract is not something rare. So, it is important to identify the implications
of Shariah to the contracts.
Different transactions have different characteristics that need to conform to
the principles of Shariah and any transaction that either involves those
prohibited elements and / or that involves characteristics that do not
conform to Shariah are regarded as invalid.
Bay is Arabic word for Sale and it literally means exchange of one thing
with another. One thing is the subject matter (Mabi) and the other thing is
the price (Thaman). The Majallah28 gives almost the same definition for the
sale. However, in the language of law, a sale is an exchange of property
for property with mutual consent of the contracting parties, which is
completed by declaration and acceptance.
In Arabic Asl refers to something which is fundamental. In reference to the
Islamic law of contract Asl refers to the fundamentals elements and
components of the Islamic law of contracts.
Literally it means a credit sale. Technically, it is a financing technique adopted by Islamic banks
that takes the form of Murabaha Muajjal. It is a contract in which the seller earns a profit margin
on his purchase price and allows the buyer to pay the price of the commodity at a future date in
a lump sum or in installments. He has to expressly mention cost of the commodity and the margin
of profit is mutually agreed. The price fixed for the commodity in such a transaction can be the
same as the spot price or higher or lower than the spot price.
Hiyal literally means to come in between as a way-out and it is important to know that for most of
the deeds to be acceptable in Shariah the substance of the deeds must conform to the
underlying Shariah principles. This claim is supported by the following Hadith of the Holy Prophet
(SAAWS):
The reward of deeds depends upon the intentions and every person will get the reward
according to what he has intended.29
All the attempts in which the ultimate objectives are to bypass the underlying Shariah principles
are prohibited. These are prohibited because these are considered as deceit and deceits are
specifically prohibited in Quran and the Sunnah.
Explanation
Bay Inah is one of the examples of the use of Ruse. AAOIFI defines Inah as:
it refers to the process of purchasing the commodity for a deferred price, and selling it for a
lower spot price to the same party from whom the commodity was purchased.30
29 Sahih Bukhari, Volume 1, Book 1, Hadith Number 130 AAOIFI Shariah Standard No. 30 Monetization (Tawarruq)
Bay Inah is a double sale by which the borrower and the lender sell and then resell an object
between them, once for cash and once for a higher price on credit, with the net result of a
loan with interest.
It is prohibited in Shariah because the net result of Bay Inah is an interest bearing loan and
interest is strictly prohibited in Shariah.
Hibah literally means Gift. Hibah is a non-remunerative contract which means that one party
transfers an asset while the other party does not give anything in consideration. In non-
remunerative contracts (such as Hibah), some of the restrictions and adherence to some of the
principles of Shariah are different from those which are applicable to remunerative contracts.
One of the examples is that for the effectiveness of Gharar it is important that the contract must
be an exchange based contract. But in case of Hibah it is not an exchange based contract.
Therefore if someone accepts a box as a gift from another person and does not know the
content of box, Hibah is still valid.
Just for better understandability, if the same box is sold to another person in exchange of some
consideration without disclosing the contents of the box; the sale contract is voidable on the
basis of Gharar.
The ownership in Hibah is transferred as soon as the receiver obtains possession of the underlying
asset. After having given a gift, one cannot take it back except with the consent of the person to
whom the gift was given.
31 AAOIFI Shariah Standard No. 30 Monetization (Tawarruq)
TERMS OF REFERENCE