Section 2
Islamic Contract
Chapter 9
Islamic contract
In Islamic jurisprudence what is the ruling of putting a condition on a contract or agreement?
There are four basic rules for judging the validity of conditions in a contract:
- A condition, which is not against the contract, is a valid condition.
- A condition, which seems to be against the contract, but it is in the market practice, that type of condition is not void, if its voidness is not proven with the clear injunctions of the Holy Quran and Sunnah. For example 'A' buys an air conditioner on a condition that the seller will provide him five-year guarantee and one year free service. This type of condition does not invalidate the contract.
- A condition that is against the contract and not in the practice of market but it is in favor of one of the contractors or subject matter, this type of condition is void. For example if 'A' says he sells a car with a condition that he will use it on a fixed date every month, this contract will be void.
- A condition, which is against the contract, not in the market practices and not in favor of any contractor, is not a void condition.
Now a question arises what is the ruling of void condition, whether it invalidates the contract or not?
The answer is that there is a detail about the impacts of void condition. Sometimes a void condition invalidates the contract and sometimes it does not invalidate the contract, however, the condition itself is annulled.
To elaborate this, Islamic jurists and scholars have written that the compensation (Uqood Muawadha) like sale, purchase, lease agreements become void by putting void condition. However, non-compensatory (voluntarily) agreements (Uqood Ghair Muawadha) like contract of loan (Qard-e-Hasanah), do not become void because of void condition. The void condition, however, becomes itself ineffective. For example if 'A' gives to 'B' a loan with a condition of premium at the time of repayment, this condition of interest is void. However, this condition does not invalidate the contract, therefore all transaction done by this borrowed money, will be valid. But the condition of interest itself is revoked; therefore ‘B’ is not liable for the payment of interest.
Rights, Responsibility and Obligation in a contract:
In Islamic Fiqh, some contracts are such that rights and obligations are also attached to the Agent doing the contract on behalf of the Contracting Party eg. Sales Contract, Ijara, Istisna, Salam etc. While in others Principal has all the responsibilities, rights & obligations eg. Nikah.
Chapter 10
Sale
Sale (Bai) is commonly defined in shari'ah as "the exchange of a thing of value by another thing of value with mutual consent". More specifically it means "the sale of a commodity in exchange of cash"
1.
Valid Sale (Bai Sahih):
A sale becomes valid if the following elements are present as well as the conditions in the attached chart # 2 are complied with:
· Contract (Aqd)
· Subject Matter (Mabe'e)
· Price (Thaman)
· Possession or delivery (Qabza)
2.
Void/Non Existing Sale (Bai Baatil):
Sale will be void if any one of the conditions of offer and acceptance (1.1), conditions of Buyer & Seller (1.2) and sold good conditions (2.1 - 2.5) are not complied with. In a void sale, the buyer does not have title to subject matter and seller does not have title to price. Both subject matter and price cannot be used lawfully. The produce of both shall be unlawful.
3.
Existing sale but void due to defect (Bai Fasid):
Sale will exist but will be void due to defect if the conditions of contract (1.3), sold good conditions (2.6 & 2.7) and conditions of price (3.1 & 3.2) are not complied with. However, if the defect is rectified the sale becomes valid. In a fasid 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 matter will be impermissible. He must return it to the seller.
4.
Valid but disliked sale (Bai Makrooh):
A sale will be Makrooh when the transaction is complete and one gets possession of the goods but is disliked eg. sale after Juma Azaan, sale after hoarding or where a third party intervenes to buy something which was under negotiation of sale between other parties.
Types of Sales
Following are the common types of sales
1.
Bai Musawamah: It refers to normal sale in which cost price is not known.
2.
Bai Murabaha: It refers to a sale in which cost and sale price is known to the buyer.
3.
Bai Muqayada: It refers to barter sale excluding currency sale.
4.
Bai Surf: It refers to the sale of gold, silver and currency.
5.
Bai Salam: It is a kind of sale in which payment is spot while the delivery of the good is deferred.
6.
Bai Istisna: It refers to such sale in which commodity is transacted before it comes into existence. It is basically an order to manufacture.
7.
Bai Muajjal: It refers to such sale in which payment is delivery is spot while payment is deferred but cot is not known.