Definition of contract and its elements

After discussing the historical background of Shariah contracts very briefly, we move on
to explain the elements of a valid contract in Shariah.

Contract is also known as “Aqd” in classical literature of fiqh. Literally, this word
“contract” or “Aqd” means to conclude or to tie. Technically, it can be defined as
combination of offer and acceptance between contracting parties which constitute legal
obligations on them.

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There are mainly three elements of a valid contract:

1. Form of the contract (offer and acceptance).

2. Subject matter of the contract.

3. Contracting parties.

By fiza

The first element of valid contact in shariah law is offeror and offeree. As for the parties
to a contract, they must be legally competent to enter into a contract. The competence
to transact in Islamic law is measured largely by two aspects, namely prudence and
puberty as revealed in surah al-Nisa’ verse 6 “Observe the orphans through testing their
abilities until they reach the age of marriage; then if you find them capable of sound
judgement, hand over to them their property “. The most important part of each party is
the possess capacity. It has been describe with capacity (ahliyyah) according to Shari‘ah
’Islamiyyah. Therefore, the Islamic scholar defined the capacity as a quality, which makes
a person qualified for acquiring rights and undertaking duties and responsibilities.

The second element of valid contact in shariah law is offer (‘ijab) and acceptance (qabul).
Offer means a specific action that reflects consent or willingness of its maker that
presumed from the word first uttered by one of the contracting parties. Offer may be
verbal or in writing. Under shariah law, word qabul (acceptance) is used to represent a
statement uttered indicating assent to the ‘ijab(offer). Muslim Jurist takes two different
approaches interpreting qabul. The majority view is that 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. Whereas the Hanafi school holds a more flexible
approach when qabul is defined as the word uttered later corresponding to the terms of
a subsisting later. And it may be expressed by either the seller or the buyer. This is
somewhat similar to common law. Offer and acceptance also may be concluded by
means of representatives or modern communication systems such as the telephone,
telex, fax, e-mail and letter.

The third element contract in the shariah law is subject matter (mahal al-‘aqd). Mahal
al-‘aqd must be mal (property or wealth) mal is defined as something which can be
secured for use at the time of need. The term mal here is generally translate as property
and the word property is applicable only to objects which have a perceptible existence
in the outside world that is to say things sold which is a thing fixed and individually
perceptible as designated at the sale. A contract has to have a place or reference (mahal
al-‘aqd) which is the subject matter of the contract. The place of reference in contract is
its subject matter which is the place of application of its rule and which does not go
against its purpose. Islamic law focused on the lawfulness, existence, deliverability and
precise determination. Lawfulness requires that the object must be lawful, that is
something, which is permissible to trade and must be of legal value that is, its subject
matter and the underlying cause “sabab” must be lawful. The parties to a contract must
legally own the object “qabd”. The issues of existence presuppose that the object of a
contract must be in existence at the time of contract. The object must be capable of
certain delivery and it must be determined precisely as to its essence, its quantity and its
value.

Form of the contract

The form refers to the expressions which are made by contracting parties in order to
show their will and intention to enter into a contract. It is also knowns as offer (Ijab) and
acceptance (Qabul). The declaration which is made first to create an obligation, is
termed as offer (Ijab). And the subsequent declaration to accept the offer is called
acceptance (Qabul). There are some general requirements of for offer and acceptance.
First, it should be in clear language and unconditional. Second, there should be
conformity between offer and acceptance. Third, both offer and acceptance must be
concluded in the same session. Generally, offer and acceptance are exercised in words.
However, it is not necessary to express them only in words. It can be done by other
methods such as writing and conduct etc.

Subject matter of the contract

Subject matter refers to the object of the contract upon which the legal obligations are
manifested. It can be a good or property of sale contract or pledged object in a pledge
contract and usufruct in a lease contract. The general requirements for subject matter
are summarized in the following.

1. The Subject matter must not be a prohibited item in Shariah.

2. It should be in the ownership of the seller.

3. It should be in existence or available at the time of conclusion of the contract.

4. It must be identified and clearly known to the contracting parties in order to avoid any
dispute later.

5. The delivery of subject matter must be confirmed and certain at the time of contract.

Contracting parties

There are at least two parties in a contract, the offeror and offeree. The offeror is the
one who makes an offer and offeree is the one who accepts that offer. The main
condition for these parties is that they must have legal capacity and competency to
enter into a contract. In other words, they must be mature and sane. The maturity
means that a person is capable to deal his wealth properly and know the basics of
business and trade. If someone is immature or not have the legal capacity, then he is
not allowed to enter into a contract independently.

Essentials of Valid Contracts

 Types of Aqd’

1. Uqood e Mu’awadah (Compensatory Contract)

2. Uqood e Ghaer Mu’awadah (Non-Compensatory Contract)

Uqood e Mu’awadah (Compensatory Contract)

These are compensatory contracts where one person sells something to

someone else for a price or compensation, for example, sale of pen “A” to
”B” for PKR 50/-.
Uqood e Ghaer Mu’awadah (Non Compensatory
Contract)

These are non-compensatory contracts where one person gives something

to someone else without any compensation for example a contract of loan
gift.

Essentials of Aqd’

Four essential elements are required to constitute a valid Aqd.

1. Mutaa’qidain (Contractors)

2. Alfaz e Aqd (Wording of contact)

3. Ma’qood Alaih (Subject Matter)

4. Ma’qood Bi’hi (Consideration)

By Fiza

Mutaa’qidain (Contractors)

The contractors must not be mahjoor i.e. restricted to make a contract. Islamic Shariah identifies
three types of people as Mahjoor.

 An insane person
  A child not mature enough to understand the nature of transaction

 A Slave not permitted by his master to enter into a contract

Alfaz e Aqd (Wording of Contract)

Alfaz e Aqd should be absolute and immediate and non-contingent to a future event as a future
contract is not allowed in Islam. Also, the wordings should be unconditional. If the wordings of the
contract are conditional, the condition must adhere to the following rules of Islamic jurisprudence.

Ma’qood Alaih (Subject Matter)

The subject matter should exist, should be valuable, usable under Shariah, capable of ownership &
title and delivery & possession. Also, it should be specified, quantified and the seller must have its
title and risk at the time of the sale. For example, a certain mobile phone.

Ma’qood Bihi (Consideration)

It should be quantified, specified and ascertained at the time of executing the contract. For example,
a price of PKR 300 should be noted that Ma’qood Bihi (Consideration) is not requisite for Uqood
Ghair Mu’awadah.