There are five khiyars in a sale contract which are as follows:

Khiyar-e-Shart (Optional condition): At the time of sale Buyer or Seller can put
a condition that he has an option to rescind the sale within the specific 4 days.
This option is called Khiyar-e-Shart.
 Khiyar-e-Roiyyat (Option of inspecting goods):
Where the goods can be returned after inspection. This applies automatically to
all
contracts. E.g. ‘A’ buys machinery from ‘B’ without seeing. However, ‘A’ has the
option to
return the machinery after inspection.
 Khiyar-e-Aib (Option of defect):
Where the goods can be returned if found defective. It is the responsibility of the
seller
to supply goods free of error/defect or point out the defect to the buyer. No way
is he
allowed to cover the defect of the goods which constitutes as fraud.
Khiyar-e-Wasf (Option of quality):
Where the goods are sold by specifying a certain quality by the Seller but which
is
absent in the goods. Eg. ‘A’ buys a car from ‘B’ which is automatic. However
when
‘A’ uses the car, he finds the car to be manual. Therefore he can return the car to
‘B’
in the absence of a specific quality.
Khiyar-e-Ghaban (Option of price):
Where the seller sells the goods at a price which is far expensive than the
market price,
a Buyer has the right to return it to the seller. e.g. a Parker pen is sold to ‘A’ by
‘B’ at a
price of Rs.500/-. However after the sale, ‘A’ discovers its market price to be
Rs.250/-,
he has the option to return the pen to ‘B’.

introduction and fefination

Musharakah means ‘sharing.’ The root of the word is Shirkah, which means
‘being a partner.’ Under Islamic law, Musharakah is a joint enterprise, formed for
conducting business, in which all partners share the profit according to a
specified ratio, while the loss is shared according to the ratio of the contribution.
classification of Musharakahf
1 Shirkat-ul-milk (Partnership by joint ownership
oint ownership of two or more persons in a particular property.” It means joint
ownership of two or more persons in a particular property. This kind of “Shirkah”
may come into existence in two different ways:
>Optional Shirkat-ul-Milk (Ikhtiari) >If two or more person purchase an equipment, it will be
owned jointly by both of them and the relationship between them with regard to that property is called
“Shirkat-ul-milk.”
Compulsory Shirkat-ul-Milk (Ghair Ikhtiar
There are cases where this kind of “Shirkah” comes to operate automatically without any action taken
by the parties
2Shirkat-ul-Aqd
“A partnership effected by a mutual contract in which the partners join together with different
contributions, work or obligation for the purpose of earning profit”. “Joint commercial enterprise.”
Shirkat-ul-‘aqd is further divided into three kinds
: 1. Shirkat-ul-amwal (Partnership in Trade “Capital”
“Where all the partners invest some Capital into a Commercial enterprise.”
) 2. Shirkat-ul-A’mal (Partnership in Services “Labour”
“Where all the partners jointly undertake to provide some services for their customers”.
) 3. Shirkat-ul-wujooh (Partnership in Goodwill)
The word Wujooh comes from Wajahat meaning goodwill” Hence this is a partnership in Goodwill.

The basic rules of Musharakah

Musharakah means relationship established under a contract by the mutual consent of the parties for
sharing of profits and losses, arising from a joint enterprise or venture.  Investments come from all
partners / shareholders hereinafter referred to as partners.  Profits shall be distributed in the
proportion mutually agreed in the contract.
Basic rules of Capital: The capital in a Musharakah agreement should be: a) Quantified (Ma‘loom):
Meaning how much etc. b) Specified (Muta‘aiyan): Meaning specified currency etc.
Not necessarily be merged: The mixing of capital is not required. d) Not necessarily be in liquid form:
Capital share may be contributed either in cash/liquid or in the form of commodities. In case of a
commodity, the market value of the commodity shall determine the share of the partner in the capital.

Management of Musharakah
Each partner has a right to take part in Musharakah management. - The partners may appoint a
managing partner by mutual consent(Agreement). - One or more of the partners may decide not to
work for the Musharakah and work as a sleeping partner. - If one or more partners choose to become
non-working or silent partners. The ratio of their profit cannot exceed the ratio which their capital
investment bears so the total capital investment in Musharakah
Basic rules of distribution of Profit
The ratio of profit distribution must be agreed at the time of execution of the
contract
• The ratio must be determined as a proportion of the actual profit earned by the
enterprise
- Not as percentage of partner’s investment –
• Not in lump sum amount A sleeping partner cannot share the profit more than
the percentage of his capital.
If A and B enter into a partnership and it is agreed between them that A shall be
given Rs. 10,000/- per month as his share in the profit, and the rest will go to B,
the partnership is invalid. Similarly, if it is agreed between them that A will get
15% of his investment, the contract is not valid. The correct basis for
distribution would be an agreed percentages of the actual profit accrued to the
business. 31
Rules of Musharakah Rules for Loss In the case of a loss, all the Muslim jurists
are unanimous on the point that each partner shall suffer the loss exactly
according to the ratio of investment. There is a complete consensus of jurists on
this principle. Profit is based on the agreement of the parties, but loss is always
subject to the ratio of investment.

Termination of Musharakah Musharakah is deemed to be terminated in any one

of the following events: (1) Every partner has a right to terminate the
Musharakah at any time after giving his partner a notice to this effect, whereby
the Musharakah will come to an end. In this case, if the assets of the
musharakah are in cash form, all of them will be distributed pro rata between the
partners. But if the assets are not liquidated, the partners may agree either on
the liquidation of the assets, or on their distribution or partition between the
partners as they are
(2) If any one of the partners dies during the musharakah, the contract of
musharakah with him stands terminated. His heirs in this case, will have the
option either to draw the share of the deceased from the business, or to continue
with the contract of musharakah. (3) If any one of the partners becomes insane
or otherwise becomes incapable of effecting commercial transactions, the
musharakah stands terminated.

Termination of Musharakah without closing the business

1. Termination of Musharakah • If one partner wants to terminate the
Musharakah but other partners want to continue this can be done by
mutual Agreement • Termination of Musharakah with one partner does not
mean termination with other partners • Price of leaving partner’s share
must be determined • If assets are not liquid their valuation must be done
to distribute shares 39
2. Termination of Musharakah • If partners cannot arrive at consensus on
value the leaving partner can compel others to liquidate business •
However, partners may agree at the start of the project that liquidation
will require majority’s consent • If assets are not liquid their valuation
must be done to distribute shares 

The difference between interest based financing and Musharakah:

interest based
A fixed rate of return on a loan advanced by the financier is predetermined irrespective of the profit
earned or loss suffered by the debtor.
The financier cannot suffer loss.
Results in injustice either to the creditor or to the debtor. If the debtor suffers a loss, it is unjust on the
part of the creditor to claim a fixed rate of profit
Musharakah
Musharakah does not envisage a fixed rate of return. The return is based on the actual profit earned by
the joint venture.
The financier can suffer loss, if the joint venture fails to produce fruits.
The returns of the creditor are tied up with the actual profits accrued through the enterprise. The
greater the profits of the enterprise, the higher the rate of return to the creditor. If the enterprise earns
enormous profits