Islamic Legal Maxims

Prof. Dr. Younes Soualhi

Maxim 1: Acts are judged by their Goals and purposes. (Al Umuru
Bimaqasidiha)

Circle the correct answer:

1. Wadiah accounts which are guaranteed by Islamic banks are treated as

(loans/wadiah yadd amanah)
2. shares bought with the intention to earn dividends only are subject to zakat on
the )shares+dividends/ Dividends only).
3. buying shares for the purposes of trading are (subject to zakat/not subject to
zakat)
4. ‘inah contract in which the two contracts are stipulated for the purpose of
providing cash financing is (permissible/not permissible).
5. Hibah al-thawab (gift offered for an exchange of an award) is a (gift/contract
of exchange).
6. Third party guarantee with a right of recourse is ( kafalah/loan)
7. Third party guarantee without a right of recourse is (kafalah/tabarru’).
8. Amalgamation of sale and loan is treated as ( loan with interest/ two separate
valid contracts)
9. Commodity Murabahah with a stipulation to ultimately sell the commodity to
the original seller is ( ‘inah/ commodity murabahah)
10. Discounting of conventional bills is seen as ( a valid transaction/loan with
interest)
11. Accepted bills-i (import) are treated as ( loan with interest/wakalah)
12. Issuing a bond with a yield is ( sale contract/loan with interest)
13. Administrative fee for Islamic credit cards exceeding the actual expenses is
deemed ( a fee/interest).
14. Discretionary hibah in saving account-i is treated as (hibah/interest).
15. Jewellery purchased and stored with the intention to sell it at a time of distress
is subject to ( zakat/not subject to zakat)
16. A derivative used with the intention of hedging not speculation is
( permissible/ not permissible).
17. In musharakah sukuk, stipulating that the issuer must provide a loan to the
sukukholders in case of a loss would amount to (capital guarantee/non capital
guarantee).
18. According to Malikis, if a patient in his death bed divorces his wife, the latter (
will inherit/will not inherit).
19. A debtor giving a gift to his creditor would amount to ( riba/unilateral gift).
20. A remittance transaction implies ( sarf only/sarf+hawalah).
Maxim 2: Certainty is not overcome by doubt

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(Al-Yaqinu la yazulu bishakk)

Circle the correct answer:

1. A person not sure whether he has paid zakat (should pay/shouldn’t pay).
2. A Customer claimed he has paid his debt to the bank but no receipt or record
exists to substantiate his claim. (He should pay/ he shouldn’t pay).
3. In a mudarabah venture, the burden of proof of negligence falls on the (capital
provider/bank as mudarib).
4. After the conclusion of the contract, a customer claims that the purchased
product has a defect which some businessmen would not consider it as such.
(He is entitled for refund/he is not entitled for refund).
5. A customer claims that the purchased product was defective at the time of
delivery. The seller claims the contrary. Shariah considers the claim of the
(seller/buyer)1.
6. A debtor-creditor dispute on the amount of a loan. Shariah considers the claim
of ( debtor/creditor)? 2
7. Customer claiming payment of price/debt/rental to the seller/creditor/lessor.
Final say goes to ( customer/the other contracting party)3.
8. Charging late payment charges on the basis of cost of fund and lost
opportunity4 (valid\not valid)
9. Violation of the pillars and conditions of an Islamic financial transaction
would (validate/invalidate the contract)5.
10. Lessor-lessee dispute on the amount of rental fee after the asset has been fully
utilized. Shariah accepts the claims of the (lessor/lessee) 6.
11. Cash deposit without a receipt. The bank is (liable or not liable)7?
12. A seller claims he sold goods to a customer who denies the sale. The burden of
proof falls on the (seller/customer)8.
13. a person covered by Takaful has gone missing. The Takaful benefits are to be
(paid to the nominee\not to be paid to the nominee)9.
14. The bank claims that the depositor has withdrawn his deposit while the
depositor denies making such a withdrawal. The burden of proof falls on (the
Bank/depositor)10.

Maxim 3: “Hardship begets facility”

1
Al-Asl Idafat al-hadith ila aqrab waqtih ( The presumption is that a development of legal significance
is only of recent occurrence).
2
Bara’at dhimma mina ziyadah.
3
Al-Asl baqa’ makan ‘ala makan. Yaqin la yazulu bishakk. ( The basic rule is that a thing remains in its
original state).
4
La ‘ibrata bi Zanni al-bayyin khata’uh. ( No legal consideration is given to conjecture that is
obviously tainted by error).
5
La ‘ibrata bi Zanni al-bayyin khata’uh.
6
Al-Asl bara’at al-dhimmah. ( freedom from liability is the pre-existing and therefore prevailing state).
7
Al-Asl bara’at al-dhimmah.
8
Al-Asl bara’at al-dhimmah.
9
Al –Asl Baqa’ makana ‘alan makan.
10
Al –Asl Baqa’ makana ‘alan makan

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(Al-Mashaqah tajlib al-Taysir)

1. Shariah compliance of agency, deposit, and partnership to facilitate

economic activities and guarantee adequate funds mobilization and
allocation.
2. The permission for a creditor to recover his debt from the non-debtor.
(hawalah).
3. Shariah non-compliance of contracts concluded under coercion.
4. The permission for a fund manager to allocate personal travelling expenses
from the mudarabah capital, e.g: food, lodging, ect..
5. Selling of assets whose utility cannot be fully verified during the time of
signing the contract or buying a product. E.g: online shopping, cataloguing,
fruits covered with shells, etc..
6. The no-obligation principle/non-binding element in some contracts such as
agency, profit making contract (mudarabah), partnership ( musharakah),
deposit for safekeeping purposes only.
7. Necessity dictates exception, i.e: deposit placement in conventional banks in
case Islamic banks don’t exist.
8. Ceding risks to reinsurance companies in case large risks cannot be ceded to
retakaful operators.
9. Mixed business activity (Sharia compliant and shariah non-compliant
assets/stocks). The need for benchmarks to facilitate trading activities.
10. Hedging against fluctuation of currency in international trades, e.g: FX
forward.
11. Option in a sale contract, e.g: warranties, refund in case of irreparable defect.
12. Discharging an agent from his duties in case of low performance.
13. The validity of manufacturing sale, forward sale, commission and random
sales.
14. Late payment charges: actual cost of each loan to be determined based on the
total actual cost incurred in administrating the aggregate of loans in a year.
(ratio)
15. Distributing shares dividends to all shareholders regardless of the time period
each shareholder has been holding the share.
16. Distributing mudarabah profit (collective investment) to capital providers on
the basis of the time each capital has been used in the investment.
17. Paying takaful benefits to the participants despite the intergenerational issue.
18. Permissibility of shares trading despite the components of share that consists
of assets, debt and cash. Debt and cash can only be traded at par.
19. Taking a conventional loan in the absence of a shariah compliant loan. So is
the case with conventional insurance. (darurah)
20. Opening a current/saving account in a conventional bank in the absence of
Islamic banks where is extremely unsafe to keep cash in places other than
banks. (darurah).
21. Imposing capital control to better manage economic crisis.
22. Introducing new taxes to cover budget deficit.

Maxim 4: “Harm must be eliminated”

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(al-Darar yuzal)

1. The Prohibition to open a door or a window in a linked house except with the
permission of the neighbor.
2. Turning one’s house into a workshop that affects the safety and tranquility of
neighbors.
3. Options (khiyarat) in a sale transaction to remove the harm that may result
from a defective product (‘ayb), or from an inadequate business strategy (
shart).
4. Pre-emptive right in properties removes the harm of non-privacy or an
unwanted neighbor. So does the right of house renovation in the co-owners
spaces.
5. “Conditions” in shariah contracts tend to remove harm that may befall the
contracting parties.
6. in cost plus contract, the undertaking given by the customer to purchase the
asset from the bank is binding in order to remove the harm that befalls the
bank in case the customer declines the facility.
7. In mudarabah and musharakah, the mudarib and the partner are not allowed to
rescind the contract after the work has commenced and the capital has been
fully or partially converted into goods and inventories.
8. Prohibition of monopoly to remove the harm of the scarcity of goods.
9. Permission of pricing to remove the harm of inflation.
10. Payment of debt in market value ( not in initial value) after a long maturity
period that has eroded the purchasing power of the currency. The creditor
would be significantly harmed.
11. Export and import control to enhance local production. Both consumers and
producers would be protected.
12. Paying ransom to liberate innocent people from hijackers is permissible.
13. Discount on unearned profits in an early settlement (Ibra’) absolves the
customer from paying additional amounts unjustly.
14. BNM raising the income qualification of credit card applicants after cases of
default rose to an unsatisfactory level.
15. Central banks to monitor debt ratios to avoid financial crisis despite the
permissibility of Islamic debt financing.

Maxim 5: “Custom is an arbiter”

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(Al-‘Adah muhakkamah)
1. Operating Salam,, mudarabah, istisna’ according to custom.
2. Online transactions via credit cards
3. Currency as a medium of exchange ( any thing deemed by people as a
medium of exchange).
4. Forward lease in services such as training, consultation
5. Trading securities with a portion of debt as the underlying asset
compared to tangible assets.
6. Modern documentation of contracts
7. In the agency contract, an agent is not allowed to sell commodity in
another currency or transact in a way different from the market norm.
8. Determining the standard of acquisition, deposit, gift, transgression,
currency.
9. Intangible assets such as trademark, intellectual property, services
( airtime).
10. It is permissible to sell a big quantity of a commodity based on a sample.
11. Mode of payment ( spot or deferred) is determined by custom,
12. T+2, cheque , credit cards
13. Renting a car and using it according to custom
14. Offer an acceptance in a contract are determined based on custom.
15. Constructive possession of goods ( bank’s debit and credit across
accounts, cash deposit transaction, remittance)
16. The bank to add storage and transportation expenses to selling the price
in murabahah ( e.g: acquisition cost of a firm).
17. Selling by conduct such as shopping from a supermarket.
18. Agency fee to take into consideration the equivalent rate.
19. Delivery modes to follow market practices
20. Conflict resolution arrangements
21. Lawyers fees to be borne by the buyer of an estate
22. Documentary credit arrangements and liabilities of both importers and
exporters.

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