In this chapter, we will focus on Islamic contracts in general. In the previous chapter, we explored the
These two sets of principlescut across all contracts in Islamic law. Contract is the very essence of transactions without which the transactions are void of legal significance.Islamic commercial law lays down detailed rules leading to the formation of contract. The guiding principle is that there should not be any injusticeand to practise legitimate trade and business in an honest manner. Islamic contract law is not expressed as a general theory of contract but statesrules for various specific contracts such as the law of sales, lease, pledge and so forth.Islamic commercial law is known in its Islamic legal term as
It deals with issues of contract and the legal affect(s) arising fromcontracts such as being valid, void or voidable respectively. Islamic contracts cover a variety of dealings and transactions to meet the needs of society. The first article of the
Majallah al-Ahkam al-'Adliyyah
(the civil code of the Ottoman Empire) endorses the idea that man is social bynature and that social life is essential to him. This article states that...
"In view of the fact that man is social by nature, he cannot live in solitude like other animals, but is in need of co-operation with his fellow menin order to promote an urban society. Every person, however, seeks the things, which suit him, and is vexed by any competition. As a result, ithas been necessary to establish laws to maintain order and justice "
This approach of the
is seldom found in the other compilations of law. The
Law of Contract is primarily based on threefundamental principles:
The Principle of Justice:
Ensures that neither party to a contract may exploit the other. Hence the
is strictly prohibited.
The Principle of Transparency:
Those concerned must share all available information. Withholding crucial information which has bearingon the transaction could render the contract invalid. Furthermore, contracts involving a high degree of
are strictly prohibited. Theobjective is to prevent transactions that lead to dispute and lack of trust.
The Principle of 'Maslaha':
Means the common interest supported by the spirit of
and not by a specific text. On the basis of
a particular form of transaction may be exempted from the general rule if it lias been shown to be in common practice to facilitatebusiness.
ESSENTIAL ELEMENTS OF A VALID CONTRACT
in Arabic means 'a tie or knot binding two parties together'. The contract is a declaration of offer and acceptance made at the sametime. Islamic law of contracts are developed through the work of Islamic jurists, based on the principles mentioned in the
and the narrationsfrom Prophet Muhammad. There are many verses in the
, which mentions of a number of contracts, and axioms of wide application in thearea of a contractual relationship. These include various commercial contracts such as sale, hire, guarantee, security and deposits.Contract are drawn to ensure the existence of clearly recognised guidelines for all parties involved. They state the standings of all those involvedand the condition(s) of the transaction(s) that are to take place. A contract in Islamic law consists of an agreement made between two or moreparties and the base elements are similar to those of the English common law.
Offer and Acceptance
An offer is a proposal to make a deal. An acceptance is the acknowledgment made by the person to whom the offer was made to and that the offeris accepted. Therefore, an offer is an agreement that is made by one of the parties to the contract, and acceptance is the statement that is made by thesecond party in response to the offer. As an illustration, if the first party (seller) says, "I want to sell this house to you for RM150,000" and thesecond party (buyer) says, "I accept", then what has been said by the seller is 'Offer' and statement made by buyer is called 'Acceptance'.The key conditions of offer and acceptance are listed below:
It is necessary that the
acceptance conforms to the offer
in all its details. If the offer contains any material change in, or addition to, theterms of the original offer, it will not be accepted. A counter-offer is a new offer in Islamic law.
offer and acceptance has to be executed in the same session.
the event any party to the contract is missing, then the session lasts until the knowledge of it reaches the party through a messenger and he repliesand communicates his acceptance to the 'offeror'.
Assent must be genuine
as the person giving his consent may not be mentally competent or he may be a person subjected to coercion orunder influence.
Existence of offer till the issuance of acceptance.
An offer must remain open until it is accepted, rejected, retracted, or has expired. Acounteroffer closes the original offer.
Contract Subject Matter
Islamic law stresses on the following matters described below when relatingto the subject matter of the contract, namely, the object and consideration:
The object must be lawful and should be permissible to trade. It must be of legal value, which means its subject matter andunderlying clause must be lawful and it must not be prohibited by Islamic law, neither a nuisance to public order nor morality.
The parties to a contract must legally own the object. The issue of existence presupposes that the object of a contract must be inexistence at the time of a contract (selling fruits which are not ripe/ready for the market is illegal as it does not meet this criteria).
The object should be potentially capable of certain delivery to the buyer at the time of the contract. Therefore,
prohibitsthe sale of a camel which has fled, a bird in the air, or a fish in water.
The object should be something known to the parties. It must be determined precisely as to its essence, its quantity and itsvalue to avoid any kind of exploitation and future disputes.