05 Permissible Modes of Property 1

Economic Ideology of Islam
Permissible Modes
of Property
Permissible Modes of Property
Islamic Law of
Contracts (I)
Islamic Law of
Contracts (I):
• Islamic Financial
law, known as Fiqh –
ul-Muammalat.
• Islamic laws for
contracts are very
important.
• Because it defines
rights and duties and
constructs legal
effects
Islamic Law of
Contracts (I):
• To live in the world
every person has
different demands
and needs which
requires its
fulfillment in the
legal way as
described by shariah
which is very
important for the
smooth functioning
Islamic Law of
Contracts (I):
• In this world every
person has some
specific duties and
responsibilities
without which the
smooth functioning
of the society is not
possible.
Islamic Law of
Contracts (I):
• Contract in Islamic
law is a complex
legal discipline in
both its
jurisprudential and
practical function.
• A contract covers a
variety of dealings
and transactions to
meet the needs of the
society.
Islamic Law of
Contracts (I):
• In Fiqh-ul-
Muammalat the
word “Aqd” is used
for contract while
the word “Bai” is
used for Sale and
Purchase both.
Islamic Law of
Contracts (I):
• Legally a contract is
an agreement
between two or more
persons or parties
for doing something.
• According to Islam
every action or work
that takes place
between two or
parties is a contract.
Islamic Law of
Contracts (I):
• A contract is also
defined as it is an
agreement which is;
1. Enforceable by Law
2. Recognized by Law
and,
3. Effects Legal Rights
and Duties of the
parties.
Islamic Law of
Contracts (I):
• Therefore, exchange
of goods, receiving a
gift, accepting a
woman as wife
through Nikah and
END
agreement on
partnership etc. etc.
come under the
umbrella of
“CONTRACT”.
Islamic Law of
Contracts (II)
Islamic Law of
Contracts (II):
• According to Islamic
Laws contracts can
be divided in to two
types.
1. Compensatory
Contracts
(Contracts Like
Sale)
2. Non Compensatory
Contracts (Like Gift
or Hiba)
Islamic Law of
Contracts (II):
• Issues of commercial
transactions are
bound to change due
to the changing
circumstances and
situation of both the
object and subject of
transactions.
Islamic Law of
Contract (II):
• Islamic Laws for
Contracts includes:
1. Contractors-Parties
to a Contract
2. Subject Matter-
Goods /
Commodities /
Services
3. Consideration /
Compensation
4. Wording of Contract
Islamic Law of
Contract (II):
Contractors:
• The parties to a
should be:
 Legally competent to
enter into a contract
i.e. they should be
legally allowed to
undertake the
transaction
Islamic Law of
Contract (II):
Contractors:
• The parties to a
should be:
 Mature, which is
measured largely by
two aspects, namely
prudence and or
puberty as revealed
in the Quran
Islamic Law of Contract (II):
‫ْم َّو ْر ُز ْو ْم‬ ‫َل‬ ‫َء َا َو ُم‬ ‫َو اَل‬

The Quran Says:
‫ُتْؤُتوا الُّسَفَهآ ْم اَلُك اَّلِتْى َجَع الّلٰـ اًلُه َلُك ِقَياًما ا ُق ُهـ ِفْيـَها‬
‫ُرْو‬ ‫ْم ْو‬ ‫َو ْك ْو ْم َو ْو ْو‬
‫ا ُس ُهـ ُق ُل ا َلـُهـ َق َّمْعـ ًفا‬
And do not give your wealth (entrusted
wealth of the orphans) to the simpletons
(immature orphans of weak understanding)
which Allah has made a source of economy
for you and feed them from it and clothe
them also and advise them a good matter .
[Q4: 5]
‫‪Permissible Modes of Property‬‬
‫‪Islamic Law of Contract (II):‬‬

‫‪The Quran Says:‬‬
‫ٓو‬ ‫ْم ُر ًد ْد‬ ‫ْم‬ ‫ْن‬ ‫َذ‬ ‫َو‬

‫اْلَيَتاٰمى َحّتـٰٓـىاَلِا ا َبَلُغوا ال ِّنَك ا ِاَف ٰا َنَاْسْنُتـ ِّمْنـُهـ ْش ا َفاَنَفـُعـ ا‬
‫َۚح‬ ‫َا‬ ‫اْب َتُلوا‬
‫َو ْن‬ ‫َّو‬ ‫ْم َو ْم َو‬
‫ِا َلْيـِهـ ْم اَلـُهـ ۖ ْاَت ُك ُلْو َهآ ِا ْسَراًفاْل ِبَد اًر ا َّيْك ـَبـُر ْو اَذۚ َم َك ا َغِن اًّي‬
‫ْم‬ ‫َد ْم‬ ‫ُرْو‬ ‫ًر‬ ‫ْف َو ْن َن‬
‫َفْلَيْسَتْعِف َاۖ َم َك ا َفِقْيـ ا َفْل ْاَي ُك ِباْلَمْعـ ِف ۚ ِاَف ا َفْعُتـ ِا َلْيـِهـ‬
‫ْم َو‬ ‫ُد ْو‬ ‫َو ْم‬
‫ْم اَلـُهـ َاَف ْشِه ا َعَلْيـِهـ ۚ َك ٰفى ِبالّلٰـ ِه َحِسْيًبا‬
‫]‪[Surah An Nisa, Verse 6‬‬
Islamic Law of
Contract (II):
Subject Matter-
Goods /
Commodities /
Services:
• Islamic law stress
about the subject
matter of a contract
in the following
matters
Islamic Law of
Contract (II):
Subject Matter-
Goods /
Commodities /
Services:
END 1. Ability to Deliver
2. Lawfulness
3. Existence
Islamic Law of
Contracts (III)
Islamic Law of
Contract (III):
Subject Matter
(Ability to Deliver)
• Delivery, on the
other hand, indicates
that the object must
be capable of certain
delivery.
• The classical jurists
therefore prohibited
the sale of things
which can not be
Islamic Law of
Contract (III):
Subject Matter
• Similarly things
which leads us
towards conflicts are
strictly prohibited in
Islam.
• The example is a
bird in the air or a
fish in water.
Islamic Law of
Contract (III):
Subject Matter
• The trade in trained
birds like Eagle
which can be handed
over to the others are
allowed because its
neither leads us
towards conflict nor
the contractor is
unable to handover.
Islamic Law of
Contract (III):
Subject Matter
• There are two kinds
of Delivery:
1. Physical Delivery /
Physical Possession
2. Constructive
Possession
Islamic Law of
Contract (III):
Subject Matter
Physical Possession:
• Physical delivery a
thing means giving it
to other party by
hand to that he has
the asset with him
physically.
Islamic Law of
Contract (III):
Subject Matter
Constructive
Possession:
Delivery of goods in a
manner where other
party takes no physical
delivery of the
commodity.
Islamic Law of
Contract (III):
Subject Matter
Constructive
Possession:
END • The commodity has
come into his control
and all the rights and
liabilities of the
commodity are
passed on to him
including the risk of
Islamic Law of
Contracts (IV)
Islamic Law of
Contract (IV):
Lawfulness:
• Lawfulness requires
that the object should
be lawful, that is
something which is
legally permissible to
traded in or in other
words which covers
the definition of
wealth
Islamic Law of
Contract (IV):
Lawfulness:
• Also inherent in the
lawfulness of the
object should be
legally owned by the
parties to a contract
Islamic Law of
Contract (IV):
Existence:
• The issues of the
existence pre-
supposes that the
object of a contract
should in existence at
the time of contract.
• Thus, it is illegal, to
sell something else
that does not exist
Islamic Law of
Contract (IV):
Consideration:
• As for as
consideration is
concerned, we mean
price / Rent / Fare or
any other
compensation given
in exchange of
something.
Islamic Law of
Contract (IV):
Consideration:
• Islamic law allows it
to be a monetary
price as well as non-
monetary exchange.
• Non-monetary would
mean that it could be
a commodity given in
exchange like in the
barter system.
Islamic Law of
Contract (IV):
Consideration:
• Islamic prohibition
against uncertainty
requires that the
consideration should
be in existence and
determined at the
time of the contract.
Islamic Law of
Contract (IV):
Consideration:
• Consideration can not
be left to be
determined on a later
nor can it be lift
subject to the
determination by a
third party.
Islamic Law of
Contract (IV):
Consideration:
• About consideration
we can say
conclusively that
END clarity in terms of
Specifications,
Quantification and
Ability to deliver
Islamic Law of
Contracts (V)
Islamic Law of
Contract (V):
Consideration
(Specifications):
• It means that the
be very specifically
defined in term of
medium and currency
Islamic Law of
Contract (V):
Consideration
(Quantification):
also be very
specifically defined in
term of quantity and
detail
Islamic Law of
Contract (V):
Consideration (Ability
to deliver):
object should be
capable of certain
delivery.
• For example selling
against a currency
that is not used in the
market is not
acceptable agreed.
Islamic Law of
Contract (V):
Wording of
Contract-offer &
acceptance:
• A contract is
completed when offer
from one party and
acceptance from
other match.
• Expression of both
offer and acceptance
could be verbal or
Islamic Law of
Contract (V):
Wording of
Contract-offer &
acceptance:
• Islamic law of
contract requires that
the offer and
acceptance should be
jointly connected with
no unnatural gap
between offer and
acceptance.
Islamic Law of
Contract (V):
Wording of
Contract-offer &
acceptance:
• Unnatural gap means
that any delay does
not usually occur
between offer and
acceptance in such
types of transactions.
Islamic Law of
Contract (V):
Wording of
Contract-offer &
acceptance:
• The session in which
offer and acceptance
takes place is called
Majlis Al-Aqd in
Islamic law.
Islamic Law of
Contract (V):
Wording of
Contract-offer &
acceptance:
• In contracts use of
tense is very
important because
the words should
reflect a contract that
is being contracted in
present not in future.
Islamic Law of
Contract (V):
Wording of
Contract-offer &
acceptance:
• The contract should
not be contingent
upon any event in
future.
• The example is made
to illustrate the
concept further;
Islamic Law of Contract (V):

Wording of Contract-offer & acceptance:
On 10th January Khalid (seller) sells a PC to
Hammad (buyer) with the condition that the
sale would be completed if the (Khalid) wins
the tennis match on 15th January. As sale has
been attributed to an event in future it would
not be allowed.
Islamic Law of
Contract (V):
Wording of
Contract-offer &
acceptance:
• Similarly a contract
END should not be
conditional.
• This condition is
introduced in the
Islamic law of contract
to avoid any conflict
between two parties.
Types of Contract
in Islam
Types of Contracts
in Islam:
• A contract can be of
two nature:
1. Compensatory
Contract / Financial
Contract.
2. Non Compensatory
Contract / Social
Contract
Types of Contracts
in Islam:
Compensatory
Contract:
• This is a contract in
which there is
exchange of either
goods or services
against an agreed
compensation /
price / Fee / Charges
Types of Contracts
in Islam:
Compensatory
Contract:
• The examples are;
1. Trade
2. Leasing
3. Employment
4. Partnership
5. Paid Agency
6. Services against fee
Types of Contracts
in Islam:
Non Compensatory
Contract / Social
Contract:
• This is a contract in
which there is
exchange of either
goods or services
without any
compensation /
price / Fee / charges
Types of Contracts
in Islam:
Non Compensatory
Contract / Social
Contract:
• The examples are;
END 1. Gift (Hiba)
2. Nikah
3. Money Lending
4. Guarantee
(Damanat)
5. Non-paid agency
General Principles
of Contracts (I)
General Principles
of Contracts (I):
• Conditions required
for compensatory
contracts;
 Permissibility as
General Rule
 Free Mutual Consent
 Prohibition of Riba
 Prohibition of
Gharar
(Uncertainty)
General Principles
of Contracts (I):
for compensatory
contracts;
 Principles of
Entitlement to profit
with Risk & Liability
for Loss
 Legality of motives
behind a contract
General Principles
of Contracts (I):
for compensatory
contracts;
 The contract should
confirm to the rules
set by Shariah for
execution of
contracts
General Principles
of Contracts (I):
Conditions required
for contracts
(permissibility as
General Rule):
 Lawfulness and
Legality of subject
matter (Services or
goods) of the
contract.
 Exchange of
impermissible goods
or services are not
General Principles
of Contracts (I):
Conditions required
for contracts (Free
Mutual Consent):
 Free mutual consent
of both parties is an
END essential element of
contract.
 This is ensured
through law of offer
and acceptance
General Principles
of Contracts (II)
General Principles
of Contracts (II):
Conditions required
for contracts
(Prohibition of Riba):
 The contract should
not contain any
element of Riba
(explicit or implicit)
 All such contracts
that involve in Riba
are invalid
General Principles
of Contracts (II):
Conditions required
for contracts
(Prohibition of Gharar):
 The prohibition of
uncertainty is very
important here.
 Almost majority of
rules are derived
from this basic rule
of Gharar.
General Principles
of Contracts (II):
Conditions required
for contracts
• It includes;
 Prohibition of
wagering contracts
like short sale
 Prohibition of Qimar
(Gambling) &
Maysir (Game of
chance)
General Principles
of Contracts (II):
Conditions required
for contracts
• It includes;
 Prohibition of Fraud
& Deception.
 Prohibition of
complexity in
structure of contract
like Bayatan-e-fil bai
(combining two
inconsistent contracts)
General Principles
of Contracts (II):
Conditions required
for contracts
(Principles of
with Risk & Liability for
Loss):
• This is an important
law which describe
rights and
responsibility of
contracting parties
General Principles
of Contracts (II):
Conditions required
for contracts
(Principles of
Loss):
• According to this
rule everyone has
right of benefit or
Profit if he bears the
responsibility of risk.
General Principles
of Contracts (II):
Conditions required
for contracts
(Principles of
Loss):
• The application of
this rule, however, is
different in exchange
of goods & services
and joint ownership
contracts.
General Principles
of Contracts (II):
Conditions required
for contracts
(Principles of
Loss):
END
• Every contract has
set of rules derived
from this basic rule
Profit with Risk &
Liability for Loss.
General Principles
of Contracts (III)
General Principles
of Contracts (III):
Conditions required
for contracts (Legality
of motives behind a
contract):
• A contract should
not contradict the
objectives of shariah
i.e. it does not meant
for twisting the
transaction to
develop a prohibited
structure.
General Principles
of Contracts (III):
Conditions required
of motives behind a
contract):
 Hiyal (subterfuges)is
not allowed
 Bay al-inah (Buy
back agreement) is
also prohibited on
pre agreed price
General Principles
of Contracts (III):
Conditions required
of motives behind a
contract):
 Bay bil-wafa (Sale
with promise of
repurchase-
redeemable sale) is
prohibited.
 Sale of debt (Bay ud
dain) is also
prohibited
General Principles
of Contracts (III):
Conditions required
for contracts (The
contract should confirm
to the rules set by
shariah for execution of
contracts):
 The contract,
compensatory or non
compensatory, has a
set of rules that need
to be complied with
General Principles
of Contracts (III):
Conditions required
for contracts (The
contract should confirm
to the rules set by
shariah for execution of
contracts):
END
 These rules explain
the conditions related
to parties, subject
matter, compensation
and other related
issues of a particular
contract
Basic Elements of a
Contract (I)
Basic Elements of a
contract (I):
some basic elements
which are as
following:
 Parties / persons to
contract
 Wordings of Contract
(Means Medium)
 Subject matter of
contract (the thing /
task meant by the
Basic Elements of a
contract (I):
some basic elements
which are as
following:
 Compensation
(Remuneration / Price
for exchange)
 Basic Frame work of
the contracts (Rights
and Responsibilities)
Basic Elements of a
contract (I):
some basic elements
which are as
following:
 Sane ( Mature enough
to understand the
nature of transaction)
Basic Elements of a
contract (I):
some basic elements
which are as following:
 Eligible to enter in such
a contract
END  Should have authority
(ownership or agent
to execute)
 Legally allowed for
executing of such
transaction(Govt.
ban-license / permit
requirement etc)
Basic Elements of a
Contract (II)
Basic Elements of a contract (II):
Basic Elements of
Contract (II):
Wording of a contract
should:
 Contain offer from
one party and
Acceptance from
other (Ijab-o-Qubool)
in session of contract
(Majlisul A’qd)
 This offer and
Acceptance can be
oral or implied (like
purchase in super
Basic Elements of
Contract (II):
should:
 Be present i.e. they
must create sense of
immediate effect
(words give sense of
future are not
allowed, “I will buy
it” does not make
sense of immediate
effect)
Basic Elements of
Contract (II):
should:
 It should be
unconditional and
Non-contingent.
END  Conditional wording
do not create
immediate effects, “I
will accept if my
father allow it” is a
conditional wording
Basic Elements of a
Contract (III)
Basic Elements of a
Contract (III):
Subject matter of a
contract should be:
 Lawful – Legally and
Islamically allowed.
 Subject matter and
the underlying cause
must be lawful
 The transacted object
must be legally owned
by the parties to a
contract.
Basic Elements of a
Contract (III):
Subject matter of a
contract should be:
 Existent – something
that exist, contract of
supply of mangoes in
END January.
 Deliverable – can be
transacted and
exchanged, sale of fish
in water or bird in air.
 Specified &
quantified in clear
Basic Elements of a
Contract (IV)
Basic Elements of a
Contract (IV):
Compensation
for exchange:
 Conditions apply to
subject matter also
apply here
 In case of barter
system the application
becomes important
because of the Hadith
of Prophet
Muhammad S.A.W.
Basic Elements of a
Contract (IV):
Compensation
for exchange:
 Lawfulness,
Existence,
Deliverability,
Specificability and
Quantifibility become
more important.
 In normal trade
specification of
currency is enough.
Basic Elements of a
Contract (V)
Basic Elements of a
Contract (V):
Framework of
contract:
 Framework of
contract means the
rights and
responsibilities of
parties under specific
type of that contract
which they are
executing.
Basic Elements of a
Contract (V):
Framework of
contract:
 Both parties should
bear the
responsibility and
have the rights which
are required by the
nature of transaction
 In case of rental
agreements
ownership remains
with lessor
Basic Elements of a
Contract (V):
Framework of
contract:
 In case of sale,
ownership transfers
after offer &
END acceptance so are the
risk of ownership.
 Every contract has
specific set of rules
which will be
explained when it
comes under
Ancillary or sub
Contracts (I)
Ancillary or sub
contracts: (I)
• Sub contracts are:
1. Promise (Wa’d)
2. Muaada
3. Hawalah
4. Kafalah (guarantee)
5. Wakalah (Agency)
6. Tawarruqe
(Monitization)
7. Jua’alah (Prize based
contract)
Ancillary or sub
contract (I):
Promise (Wa’d):
 It is a unilateral
promise for doing
something or act or
entering in a contract,
provided by one
person to another
 The enforceability of
promise is
acknowledged by
majority of present
day scholars.
Ancillary or sub
contract (I):
Promise (Wa’d):
 The enforceability of
promise by law is
acknowledged when
the nonperformance
of promisor is willful
and non justifiable.
Ancillary or sub
contract (I):
Muaa’da:
 It is bilateral promise
by both parties
 Majority of the
shariah scholars do
not allow Muaada
especially in a
situations where Aqd
is not allowed. The
example is “Forward
contracts”.
Ancillary or sub
contract (I):
Muaa’da:
 A forward contract is a
term referring to an
agreement between
two parties to
exchange, at a
prearranged future
date, goods in return
for a future payment,
the amount of which is
determined at the time
of the contract being
drawn up.
Ancillary or sub
contract (I):
Muaa’da:
 This fixed payment
is known as the
forward price.
 This conventional
forward contract is
deemed as un-
Islamic due to both
the delivery of goods
and payment being
made at a future
date.
Ancillary or sub
contract (I) Muaa’da:
 This is because the
contract is agreed and
binding even though
both payment and
delivery remains
uncertain.
END
 The forward purchase
in particular is not
permissible as it
breaches the sharia'a
principle of 'do not sell
what you do not own'.
Ancillary or sub
Contracts (II)
Ancillary or sub
contract (II):
Hawalah:
 Hawalah is
transferring debt to
another person
without or with
settlement of loan on
face value.
 Under this agreement
the debtor is freed
from a debt by
another becoming
responsible for it.
Ancillary or sub
contract (II):
Hawalah:
 Hawalah is also done
by shifting the
responsibility from
debtor to a third
person against his
(debtor’s) debt on
third person.
Ancillary or sub
contract (II):
Hawalah:
 Transfer of debt
should take effect
immediately, not to
be suspended for
period of time and
not to be concluded
on a temporary basis
or contingent on
future unlikely
events.
Ancillary or sub
contract (II):
Hawalah:
 It is permissible to
defer payment of the
transferred debt until
a future specified date
END  Hawalah is not a sale
of debt, it is in fact
change of Debtor or
creditor.
Ancillary or sub
Contracts (III)
Ancillary or sub
contract (III):
Kafalah (Guarantee):
 Literally, Kafalah
means “To take on
the responsibility for
the payment of
expense of a debt or
for a person’s
appearance in
court”.
 There are two forms
of guarantee:
Ancillary or sub
contract (III):
Forms of Kafalah
(Guarantee):
1. Kafalah, or surety
ship
2. Rahn or pledge /
Surety.
• Both contracts used
for guarantee or safe
return of loans to
their owners.
Ancillary or sub
contract (III):
Forms of Kafalah
(Guarantee):
• Kafalah, is not an
actual transaction,
but is rather used to
facilitate
transactions such as
international trade.
Ancillary or sub
contract (III):
Wakalah (Agency):
 The literal meaning
of Wakalat is
looking after or
taking custody. It
terminologically
means “Delegation
of power to an
eligible person for
doing something”
Ancillary or sub
contract (III):
Wakalah (Agency):
 Wakalah is possible
for those activities
that can be
performed by
principal himself.
 For example: (The
act of eating some
thing can not be
handed over to
wakeel)
Ancillary or sub
contract (III):
Wakalah (Agency):
 Wakalah is a trust
contract which
means agent is
bound to discharge
END
his responsibility in
the same way as an
Ameen discharges
his responsibility of
Amanat
Ancillary or sub
Contracts (IV)
Ancillary or sub
contract (IV):
Wakalah (Types of
Wakalah):
• Followings are the
types of wakalah:
1. Agency for legal
issues (lawyer)
2. Recovery Agency
3. Sale & Purchase
Agency (Power of
Attorney)
Ancillary or sub
contract (IV):
Wakalah (Types of
Wakalah):
4. Agency for business
and investment. This
type is also known as
Wakala tul Istismar

• This type is
commonly used in
some Islamic
Ancillary or sub
contract (IV):
Tawarruqe
(Monitization):
• Tawarruqe is an
arrangement
whereby a person, in
need of liquidity,
purchases a
commodity from a
seller on credit at
higher price, to sell
it in the market at
discounted price.
Ancillary or sub
contract (IV):
Tawarruqe (Monitization):
• This is not (Buy
Back) transaction.
• This is liquidity
generating
transaction through
onward sale of what
one person has
purchased
• It is strongly
criticized if it is done
in an organized way.
Ancillary or sub
contract (IV):
Jua’alah (Prize based
contract):
• This term is derived
from jo’l which
means prize.
• Its reference is taken
from the incident of
missing bowl of the
king of Egypt in
Hazrat Yousuf’s
time.
Ancillary or sub
contract (IV):
Jua’alah (Prize based
contract):
• Under this contract
a prize is prescribed
as consideration
END against performance
of a defined service
or result.
• It is based on output
and result oriented.
Sale (I)
Sale (I):
• Sale is exchange of a
valuable thing with
another valuable thing
with mutual consent
of persons or parties.
• In the books of Islamic
Jurisprudence it is
said in the way
‫ت ض‬
‫ھو م ب ادلۃ المال ب المال ب ال را ی‬
Sale (I):
• So the things which
are important in the
definition of sale are:
1. Exchange
2. Valuable
3. Mutual Consent of
persons or parties
4. Mall (Wealth)
Sale (I):
Exchange:
 The word exchange
indicates that it would
be in compensatory
contracts in terms of
both, oral or implied.
 The word exchange
will not be applicable
in non-compensatory
contracts.
Sale (I):
Valuable:
 Thing of value means
any thing value of
which is not cancelled
by the shariah like
sale of Pig or musical
END instruments or any
other subject matter
which is Haram and
not permitted by the
shariah
Sale (II)
Sale (II):
Mutual Consent:
 The word “Mutual
consent ” indicates
that the transaction
which is being
transacted should be
through mutual
consent of parties.
 Any agreement of sale
which implemented
forcefully will not be
allowed according to
the teaching of Islam.
Sale (II):
Mall (Wealth):
 The issue of definition
of wealth (Mall) is
debatable among
school of Fiqh.
 Some jurists define it
in a manner that it
becomes limited to
physical items only
 Some other think that
it includes non
physical items too
Sale (II):
Mall (Wealth):
 According to second
opinion the definition
of wealth includes:
 Matter
 Solid
 Liquid
 Gases
 Energy
 Light, heat and other
energy classes
Sale (II):
Mall (Wealth):
 According to second
opinion the definition
of wealth includes:
 Rights
 Intellectual rights
 Rights of specific
utilization
 Specific rights and
some other types of
rights
Sale (II):
Mall (Wealth):
 Conclusively we can
say that issues pertain
to wealth (Mall) are
now under discussion
of scholars and this
END issue of rights
requires more
research.
Types of Sale (I)

Types of Sale (I):
 With regards to
subject matter, sale
has two types:
 The sale of commodity
in exchange of cash is
called “Bai-e-Mutlaq”
(General Sale)
 The sale of a
commodity in
exchange of another
commodity is called
“Bai-e-Muqayazah”
(Barter Sale)
Types of Sale (I):
 With regards to
subject to its legality
sale has four types:
 Valid Sale (Bai Sahih)
 Void / Non existing
Sale (Bai Baatil)
END  Hung Sale – Existing
but defective (Bai
Fasid)
 Valid but disliked sale
(Bai Makrooh)
Types of Sale (II)

Types of Sale (II):
Valid Sale (Bai
Saheeh):
 A Sale that meets all
requirements laid
down by Shariah for
its contractual nature.
 In a valid sale
following elements of
sale contract are
present
 Contract
 Subject Matter
 Price
 Possession
Types of Sale (II):
Void (Bai Baatil):
 A Sale that does not
meet basic
requirements of its
contractual nature.
 Sale will be void if
any one of the
condition of offer and
acceptance &
conditions of Buyer &
seller and sold
conditions are not
complied with
Types of Sale (II):
Hung Sale (Bai Fasid):
 A Sale that meets
basic requirements of
its contractual nature
but contains an
impermissible
element.
 This type of sale is
known as Bai Fasid.
Types of Sale (II):
Hung Sale (Bai Fasid):
 In this type of sale if
the defect is rectified
the sale will become
valid.
 In this sale the buyer
should not possess the
subject matter.
 If possessed with the
consent of the seller,
title or ownership will
pass to the buyer but
usage of subject
Types of Sale (II):
Valid but disliked Sale
(Bai Makrooh):
 A sale that meets
basic requirements
of its contractual
nature but executed
in bad / unethical
manners.
valid but not liked in
shariah.
 The examples are:
Types of Sale (II):
Valid but disliked Sale
(Bai Makrooh):
1. Sale after Juma
Azan – Violation of
commandment of
Allah to attend
END Jumah prayer
without delay
2. Sale by intervention
of a third party
while tow parties are
negotiating.
Types of Sale (III)

Types of Sale (III):
• With regards to
payment of price
1. Spot Price Sale (Bai
‫ع‬ ‫بی م‬
Muajjal ‫ع ج ل‬
It means spot
delivery
of subject matter
and
price payment
2. Deferred Price sale
‫ ب ی ع موج ل‬. It means
• With regards to
payment of price
3. Advance sale
(Advance payment of
price with deferred
delivery)
4. Future Sale (Both
price and subject
matter are deferred.
Only allowed in
manufacturing sale
• A seller has two
options either to
disclose the cost
price or not.
• A sale where no
disclosure of cost is
END made is called
“Musawamah”
Bargain sale.
Types of Sale (IV)

Types of Sale (IV):
• With regards to
disclosure of cost of
goods to buyer (trust
sales) the sale has
three types.
1. Cost to cost sale
2. Cost plus margin
sale
3. Loss Sale
Types of Sale (IV):
Cost to Cost sale:
 As we know that sale
is the combination of
two things i.e. Cos +
Profit.
 We can write in a
way Sale = Cost +
Profit
 Sale is always
assumed 100%. If
we separate the
profit from sale it
Types of Sale (IV):
Cost to Cost sale:
 So cost to cost sale is
based on no gain no
loss.
 It is also known as
Break even sale.
 In Arabic it is called
“Tawliyyah”
Types of Sale (IV):
Cost plus margin sale:
 In this type of sale
the seller is obliged
to disclose the cost of
(subject matter)
goods and offer the
sale of the goods
more than the cost
price.
called in Arabic
“Murabaha”
Types of Sale (IV):
Loss sale – Sale with
Loss:
 In this type of sale
the seller sell the
goods (subject
matter) less than the
END cost for any reason.
called in Arabic
“Wazeeah”
Types of Sale (V)

Types of Sale (V):
‫خ‬
Khiyaar (‫ ) ی ار‬Options in
sale:
 The term khiyar
refers to the option
or right of the buyer
or seller to revoke a
contract of sale;
 The objective of these
option is to provide
protection to buyer
or seller from any
unexpected
eventuality
Types of Sale (V):
‫خ‬
sale:
 There are five types
of khiyaars which
can be used in a
sale:
 Khiyaar-e-Shart
(Optional condition)
 Khiyaar-e-Roiyyat
(Option of
inspecting goods)
Types of Sale (V):
‫خ‬
sale:
 There are five types
of khiyaars which
can be used in a
sale:
 Khiyaar-e-Aib
(Option of defect)
 Khiyaar-e-Wasf
(Option of quality)
 Khiyaar-e-Ghaban
(Option of cheating in
Price)
Types of Sale (V):
‫خ‬
Khiyaar-e-Shart (‫ی ار‬
‫ش‬
‫ ) رط‬Optional
Condition:
 This option give
both the Buyer or
seller a right to
revoke the sale
within the specific
period.
 After expiry it can
be “option of buyer”
or “option of seller”
both.
Types of Sale (V):
‫خ‬
‫ش‬
Condition:
 The should be
stipulated time for
this condition either
from the buyer or
from the seller.
 If the buyer puts the
condition, it is called
Khiyar-e-Mushtari.
Types of Sale (V):
‫خ‬
‫ش‬
Condition:
 If the seller puts the
condition, it is called
Khiyar-e-Bai
END (Seller).
 This khiyar (option)
will not be
transferred to the
hairs.
Types of Sale (VI)

Types of Sale (VI):
‫خ‬
Khiyaar-e-Roiyyat (‫ی ار‬
‫ )روی ت‬Option of
inspecting goods:
 This option give
right of returning
the goods after the
inspection.
 This option is
applied as a built in
option in all
contracts.
Types of Sale (VI):
‫خ‬
Khiyaar-e-Roiyyat (‫ی ار‬
‫ )روی ت‬Option of
inspecting goods:
 For example if “A”
buys a machinery
from “B” without
seeing. However,
“A” has the option
to return the
machinery to “B”
after its inspection.
Types of Sale (VI):
‫خ‬
Khiyaar-e-Aib (‫ی ار‬
‫ )عی ب‬Option of Defect:
 This option give the
buyer a right to
return the goods if
found defective
 It is the
responsibility of
seller to provide
goods without
error / defect or
clearly tell about the
Types of Sale (VI):
‫خ‬
 The prophet
(S.A.W) states that
“He is not amongst
us who indulges in
fraud”.
 Therefore the buyer
has the right to
return the goods if
defected because it
depreciates the value
Types of Sale (VI):
‫خ‬
 For example ‘A’
buys batteries from
‘B’. However, ‘A’
has the option to
return them to ‘B’ if
the batteries are
found to be defective
or not in working
condition.
Types of Sale (VI):
‫خ‬
Khiyaar-e-Wasf (‫ی ار‬
‫ )وصف‬Option of
Quality:
buyer a right to
return the good if
they do not qualify
specific standards or
agreed parameters.
Types of Sale (VI):
‫خ‬
Khiyaar-e-Wasf (‫ی ار‬
‫ )وصف‬Option of
Quality:
 For example “A”
buys a car from “B”
who has specified
END automatic
transmission but
“A” receive the car
with manual
transmission.
Types of Sale (VII)

Types of Sale (VII):
‫خ غ‬
Khiyaar-e-Ghaban
(‫ ) ی ار ب ن‬Option of
cheating in price:
seller or buyer a
right cross check the
validity of price
charged or paid to
him.
‫خ غ‬
Khiyaar-e-Ghaban
cheating in 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.
‫خ غ‬
Khiyaar-e-Ghaban
cheating in price:
 Eg. 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’.
‫خ غ‬
Khiyaar-e-Ghaban
cheating in price:
 This option helps
seller from being
quoted
extraordinarily lower
price, similarly it give
right to buyer to
revoke the sale or ask
for return of excess
price if he is charged
more than the market
price extraordinarily.
Revocation of Sale
‫ق‬
‫ ))ا الہ‬:
 The sale can be
revoked by mutual
consent of the parties.
 The seller shall return
the exact price what
he has taken from
buyer.
 Revocation can not be
made a way of
engineering the
products for providing
Revocation of Sale
‫ق‬
‫ ))ا الہ‬:
 Neither the buyer
nor the seller has the
sole right to rescind
the contract after
execution of a
contract.
Revocation of Sale
‫ق‬
‫ ))ا الہ‬:
 Often the buyer wants
to rescind the contract
after buying goods. In
this case, it is
necessary that he gets
the seller’s consent.
 Therefore this mutual
agreement between
buyer and seller to
rescind the contract is
called “Iqala”.
Revocation of Sale
‫ق‬
‫ ))ا الہ‬:
 The Prophet
(S.A.W) states “He
who does the Iqala
(rescinding of the
contract) with a
Muslim who is not
happy with his
transaction, Allah
will forgive his sins
on the Day of
Judgment.”
Revocation of Sale
‫ق‬
‫ ))ا الہ‬:
 However, it may be
noted that the price of
the goods being
returned under Iqala
END will remain
unchanged.
 ”Iqala” is treated as a
new sale as if a new
contract is entered
into between the
parties rescinding the
original contract.
Meaning of Gift (I)

Gift (Hiba):
Meaning of Gift (Hiba):
 Hiba (gift) means to
transfer the
ownership of thing
to another person
without receiving
anything in return.
 Generally hiba
fulfills human needs
and the needs of the
society
Gift (Hiba):
 In other words Hiba
means that you gave
an item to a person
and he accepted it.
 That item will now
be his and it no
longer belongs to
you.
 In shariah this is
known as Hiba – a
gift or present.
Gift (Hiba):
 Islam encourages
the practice of Hiba
for helping the weak
people and for
fulfilling social
purposes.
 The owner can avail
of the right of
making Hiba of his
property only before
lying on his
Gift (Hiba):
 There are several
conditions for Hiba.
 One is that you have
to hand over the
item to the person
and he has to take
possession of it.
Gift (Hiba):
 If you tell him that
you are giving him
this item and he says
that he is accepting
it but you have not
handed it over to
him as yet, then this
giving of yours is not
correct according to
shariah rules of
Hiba.
Gift (Hiba):
 In verbal giving the
item will still be
considered to be
under you
ownership. However,
END if he takes
possession of it he
will become its
owner.
 The nature of the
possession in Hiba
Nature of the
Possession in Gift
(I)
Nature of the
Possession in Gift (I):
Offering Style in Hiba:
 You placed the item in
front of him in such a
manner that if he
wishes he can take it,
and you say to him:
“Here, take this.” By
placing the item in such
a way, he will also
become its owner. It
will be regarded as if
he picked it up and
took possession of it.
Nature of the
Offering Style in Hiba:
 You gave a person
clothing that is kept in
a locked trunk but did
not give him the keys to
the trunk. This will not
be regarded as taking
possession. Once you
hand over the keys,
possession will take
place and he will
become the owner of
the clothing.
Nature of the
Hiba in Non divisible Items:
 If you give a person a
portion of a certain item
which can not be
divided like bowl, glass
or an animal so once a
person takes possession
of such items he will
become owner of that
portion which you have
given to him and the
whole item will come
under a partnership
between both of you .
Nature of the
Hiba in Non divisible Items:
 If you give a person a
person a an item
which can be divided
like land, car or house
then it is not
permissible to give it
without dividing it.
Nature of the
Hiba in the partnership
based Items:
 Two persons
purchased a length of
material, a house or a
farm and each one
paid half the money
for it. As long as they
do not divide it, it is
not permissible for
any one of them to
give his share away to
anyone.
Nature of the
Hiba in the things
which is already in
the custody:
 A person who is
keeping the item as
END “Amanah” can receive
the same as a gift from
the owner.
 There is no need for
the owner to take the
possession of that item
again and give it back
to the same person.
Nature of
Possession in Gift
(II)
Nature of
Possession in Gift (II):
Giving to Children:
 When anything is
given to a child on
any occasion, the
purpose and object
is not to give the
child but to his
parents.
 All those gifts are
therefore not the
possession of the
Nature of
Giving to Children:
 The parents are its
owners and they can
do whatever they
wish with those gifts.
 However, if a person
gives an item
specifically for the
child, he will be its
owner.
Nature of
Giving to Children:
 If the child has
reached an age of
understanding, it is
sufficient for him to
take possession of
the item himself.
 Once he takes
possession of it, he
will be its owner.
Nature of
Giving to Children:
 If the child does not
take possession of it
or is incapable of
doing so, then by the
father taking
possession of it, the
child will become its
owner.
Nature of
Giving to Children:
 If the father is not
present, the child
will become its
owner by the
grandfather taking
possession of it.
 In the absence of
father and grand
father the guardian
of the child should
Nature of
Giving to Children:
 If the mother or
grandmother take
possession of the
item despite the
father or
grandfather being
present, it will not be
considered.
Nature of
Giving to Children:
 If the father or the
grandfather (in the
absence of the
father) wish to give
the child or grand
child a gift, it is
sufficient for them to
say: “I have given
this to the child.”
Nature of
Giving to Children:
 If the mother or
brother wish to give a
gift to the child and
this child is also under
their care, then by
their saying the above
words, the child will
become its owner.
 It is not necessary for
anyone to take
possession of the item.
Nature of
Giving to Children:
 When wishing to
give anything to
your children,
ensure that you give
it equally among
your children.
 The son and the
daughter should be
given equally.
Nature of
Giving to Children:
 If you give one of
your children more
than the others,
there is no harm in
this.
 However, you should
not have the
intention of causing
harm to the one
whom you gave less.
Nature of
Giving to Children:
 Anything that
belongs to an
immature child
should only be
utilized for him.
 It is not permissible
for anyone to utilize
it for their personal
purposes.
Nature of
Giving to Children:
 Even the parents
should not utilize it
for their personal
purposes nor for any
of the other
children.
Nature of
Giving to Children:
 If an item is given to
the child but the
actual purpose was
to give it to the
parents, then the
item will be
considered to be
under the ownership
of the parents and
they can use it.
Nature of
Giving to Children:
 If the parents have a
severe need for it on
account of poverty
and can not obtain it
END
from anywhere else,
then at such time of
need it will be
permissible for them
to take an item that
belongs to the child.
Nature of
Possession in Gift
(III)
Nature of
Possession in Gift (III):
Taking back something

that has been given:
 It is a major sin to
take back something
that you have given.
 After taking back
something the
person who had
originally given the
item will once again
become its owner.
Nature of

 There are some
certain things which
the person has no
right to take back
like an animal which
is fed or plot which
is built.
Nature of
 You gave a goat to a
person. After some
time it gave birth to
kids. You can take
the goat back but
you do not have the
right to take the
kids.
Nature of
 After receiving a gift
if the person dies
then the right to
take it back no
longer remains.
Nature of

 In case of the
exchange of gifts from
both sides (when the
END words of return are
mentioned) it is not
permissible to take it
back again.
 If the words are not
mentioned then it is
permissible to take it

05 Permissible Modes of Property 1

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Economic Ideology of Islam

Islamic Law of Contract (II):

‫ْم َّو ْر ُز ْو ْم‬ ‫َل‬ ‫َء َا َو ُم‬ ‫َو اَل‬

‫‪Islamic Law of Contract (II):‬‬

‫ٓو‬ ‫ْم ُر ًد ْد‬ ‫ْم‬ ‫ْن‬ ‫َذ‬ ‫َو‬

Islamic Law of Contract (V):

type is also known as

Wakala tul Istismar

Types of Sale (I)

Types of Sale (II)

Types of Sale (III)

Types of Sale (IV)

Types of Sale (V)

Types of Sale (VI)

Types of Sale (VII)

Meaning of Gift (I)

Taking back something

Taking back something

Taking back something

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