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The contents of the maxims are occasionally extracted from the Quran or the Sunnah but

the wordings of certain maxims are taken to greater refinement and perfection. Some legal
maxims are of general application, whereas others might apply to a particular area of Islamic
jurisprudence, such as devotional matters, civil transactions, contracts, litigation and court
proceedings. However, due to the limited scope of the study it will discuss only on the issues
related to the financial transactions.
The general Shariah legal maxim is that, a particular activity is permissible unless there is
a clear prohibition against it. This is reflected in the law on financial transactions. The Shariah
compliant financial services emphasise the ethical, social and religious dimensions of financial
transactions to enhance equity and fairness for the general good of society.
In the situation regarding the act and intention in financial transaction can be seen in the
first principle Acts are judged by the intention behind them (Al-umuru bi-maqsadiha). This
principle is a rephrasing of the renowned hadith that states: Acts are valued in accordance with
their underlying intention ( Innamal-amaalu bin-niyyaat). The rule embodied in this maxim
although been applied by early jurists mostly on acts of rituals, it is equally applicable to other
spheres of activity including financial transactions. It is actual acts and policies rather than
proclamations that determine the intention.
This is so because of a sub-rule which governs contractual obligations that reads as
follow;Contracts are to be understood in relation to their intention and substance, not by the
words and phrases used (Al-bratu fil-qudi lil-maqasidi wal-mani la lil-alfazi wal-mabani).
For example, the kafalah implies coextensive liability while transfer of debt implies discharge of
the principal debtor. If a contract of transfer of debt is made with the condition to hold the
principal debtor liable in case the transferee fails to discharge the debt, contract even though
termed as a contract of transfer of debt will be treated as a contract of kafalah. Similar will be the
treatment of a contract of kafalah in case the principal debtor is discharged after contract of
kafalah is signed.
In case the banks declare their policy of financing customers on non-interest bases it
would be necessary to do so and not merely continue the same practice and seeking to rationalise

it in Islamic terms by changing the relevant nomenclature such as calling it buy-back or

mark-up. Likewise, it will not be permissible for the banks to practice Musharakah and
Mudarabah in such a way as to ensure a fixed rate of return for the banks while the liability of
bearing loss or an uncertain amount of remaining profit is transferred to the working partner.
Meanwhile, the basic rule that resolves the conflict between doubt and certainty issues in
financial transaction is contained in the principle that reads: Certainty is not overruled by doubt
(Al-yaqinu la yazulu bish-shakk). This rule rejects the effect of doubt that disturbs the original
This rule is of great significance in the event of controversy on rights and obligations of
contending parties in the absence of a proof on either side. The benefit of doubt arising out of a
controversial position can never go to a person on whom the onus of proof lies; thus the position
of an indebted person even after his death will not be affected by doubt as to a probable
discharge of debt. Likewise a claim as to the discharge of a debt will not be rejected on the basis
of presumption to the contrary.
The rule, if read with its following sub-rules, provides a broader canvas of its application;
firstAs to incorporeal matters that do not prove themselves, the basic principle (presumption) is
that they do not exist (Al-aslu fis-sifatil-arida al-dam). For instance, a partner has no right to
assume a minimum rate of profit earned by his business partner and claim his share in that profit
as different from the amount stated to have been actually earned by the partner. The sub-rule
provides that in case the working partner declares a certain amount of profit no more will be
presumed unless the contrary is proved to be a fact. The first sub-rule is further strengthened by
another sub-rule that says: No reliance (should be made) on mere imagination (la brata littawahhum).
Given the above sub-rules, in case of loss in business a partner cannot allege wilful
neglect and require the latter to indemnify him for the loss unless he proves the contrary. Failing
this proof the partner will not be personally made liable to the loss or to indemnify the other
partner. Any doubt affecting his position of freedom from liability will be untenable. No arbitrary

judgment of the contender would be acceptable.

While in the cases for the removal of harm can be seen in the principle reads: Harm
may neither be inflicted nor be reciprocated (la darara wa la dirar) . Essentially, the principle
states that while engaging in the economic and business activities, a firm is prohibited from
inflicting injury or causing grief to others. This most important rule of the Sharih is based on a
Prophetic Tradition which says: There should be neither harming nor reciprocating harm. This
guiding rule, reads with its sub-rule, wrong is to be undone ( Ad-dararu yuzal) provides a
guideline to regulate the entire financial system in such a way that prohibits harm imposition and
discourages retaliation. Among the juristic arguments deriving from the above Prophetic
Tradition is: if someone has caused damage to another partys property, it is not permissible for
the affected party to retaliate by damaging the property of the person. This is because such action
is deemed to aggravate the damages without any benefits in return, hence it is harmful. The
alternative is paying compensation to the same value of the damaged property so as to avoid
further harm to the property of the owner.
Next, in the issue of necessity, the first principle in this regard reads as: necessity
justifies that which may be unlawful (Ad-daruratu tubihul-mahzurah) . It is on the basis of this
rule that the jurists validate demolition of an intervening house to prevent the spread of fire to
adjacent buildings, just as they validate dumping of the cargo of an overloaded ship to prevent
the danger (or darar) to the life of its passengers.
The second principle on necessity declares: necessity is measured in accordance with its
true proportions (Ad-daruratu tuqaddaru bi-qadriha). Given this maxim of the Shariah, if the
court orders the sale of assets of a negligent debtor to pay his creditors, it must begin with the
sale of his movable goods if this would suffice to clear the debt, before selling his real property.
The relationship between the right to enjoy benefit from a property and the liability to
incur loss due to proprietorship is governed by a number of rules that carry great significance in
transactions of commercial nature. In situations where commercial nature is not involved the
plain rule is that What is permissible in law cannot be a cause for liability (Al-jawazu

insharayna fid-damaan) . In cases, however, where commercial considerations are involved the
rule provides that No reward without risk (Al-ghurmu bil-ghunm). That is to say that a person
who obtains the benefit of a thing, takes upon himself also the loss from it.
The above general rule is based on the Prophets saying: In any benefit lies a liability
(Al-kharaju bid-daman) . This means that any benefits derived from a transaction must be
accompanied with the liability arising from a potential loss. Given this maxim, the yields of
trees, animals, others belong to those who are responsible for their upkeep and maintenance.
Another principle that also has the same bearing is: The blessings of a thing are in
proportion to the evils thereof and vice versa (Al-nmatu bi-qadrin niqmah). This principle
implies that if the commodity is not yet possessed by the buyer, is lost; it is the seller but not the
buyer who would have to bear the loss because the former enjoys possession. Likewise, renting
out ones house on the condition that the tenant would be liable to the value of the house if the
same is damaged due to flood or earthquake is also a contravention of the rule because the owner
who is earning its rent should also bear the loss.
Given the above, the study shows that the Islamic financial system has been closely
attached to various forms of transactions available in Islamic legal theory in general and in
Islamic legal maxims for financial transactions in particular. Also, the system has been working
quite well since the Islamic finance practices come of the ages as it has been able to meet various
needs of the parties concerned with Islamic financial transactions.

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MATRIC NO: 1111360