#14031 - Islamic Law Contract Schacht Reading - Islamic Law

Islamic law

Contract law notes – Joseph Schacht

Islamic law does not recognise the liberty of contract, but it provides an appreciable measure of freedom within certain fixed types.

Liberty of contract would be incompatible with the ethical control of legal transactions. A means of achieving it exists in the abstract obligation which is based on the acknowledgement of a debt without regard to its cause of origin – this can be used to ensure a valuable consideration for any kind of performance, even though it be not envisaged by the types of contract provided.

The concept of custom plays an important part in the law of obligations, but its function is essentially restrictive because transactions are allowed only in so far as they are customary.

There exists no general term for obligation; the nearest approximation to it is ‘care as a duty of conscience’; the debtor has the performance in ‘his care’.

The most common ground for an obligation arising is the contract (akd) this is the field of pecuniary transactions (mu’amalat).

The conclusion of the contract is essentially informal.

The contract is a bilateral transaction and it requires an offer (ijab) and an acceptance (Kabul) both made normally in the same meeting of the contracting parties; the withdrawal (ruju) of the offer before the acceptance is made is possible, and so is the stipulation of the right of rescission.

One category of contracts is the exchange of monetary assets or rights (mu’awada maliyya contracts).

Pecuniary transactions without a counter value, are concluded by offer and acceptance such as the donation or the loan of non-fungible objects.

Offer and acceptance can be expressed in the form of compliance with an order. Acceptance is not required in the case of unilateral dispositions with immediate legal effect.

Unjustified enrichment: - it is a general principle of Islamic law based on a number of passages in the Quran, that unjustified enrichment, or receiving a monetary advantage without giving a counter value, is forbidden, and that he who receives it must give it to the poor as a charitable gift – this applies for instance to reletting a hired object for a greater sum, or to reselling a bought object, before payment has been made for it, for a higher price.

Riba is defined as a monetary advantage without a counter value which has been stipulated in favour of one of the two contracting parties in an exchange of two monetary values. The prohibition applies to objects which can be measured or weighed and which, in addition, belong to the same species.

Forbidden are both, an excess in quantity and a delay in performance. If only one of these two conditions is realised, an excess in quantity is allowed, but a delay in performance remains forbidden.

The hire of two objects, one for the other, is allowed only if they do not belong to the same species.

The prohibition of a delay in the exchange of goods which are subject to the rules concerning Riba finds its logical complement in the general prohibition of an exchange of obligation for obligation, and the prohibition of unjustified enrichment is further strengthened by the prohibition of combining two contracts, of concluding one contract as part of another, because this could lead to the stipulation of a monetary advantage without giving a counter value.

A contract concluded in contravention of the rules concerning riba is fasid (voidable). If two unequal quantities of the same species are exchanged, the contract is valid as far as the smaller quantity and its equivalent are concerned, and the excess quantity must be returned.

The whole prohibition applies to sale and barter but also to the amicable settlement. It is directed against speculation in food and in previous metals, and against any transactions which equal to giving and taking interest, including some old-fashioned ones, such as supplying the seed in exchange for a larger amount of corn from the harvest.

Some examples of types of transactions in actual use during the early period of Islamic law include: the exchange of animal for meat, of wheat for flour, of dried dates for fresh dates on the tree (the so called muzabana), a similar contract concerning corn ( the so called muhakala).

Rish (hazard) – starting from the Koranic prohibition of a certain game of hazard, Islamic law insists of a certain game of hazard, Islamic law insists that there must be no doubt concerning the obligations undertaken by the parties to a contract.

The object of the contract, in particular, must be determined – this requirement is particularly strict as regards objects which can be measured or weighed, which are subject to the prohibition of riba; no undetermined quantity is permissible here, not even if the price of a unit of weight or measure be stated. For the same reason it is forbidden to sell dates which are still unripe, to be delivered when they have ripened, because it is unknown whether they will ripen at all.

The price too and the counter-value in general must be determined; the kind of coins in which the payment is to be made must be mentioned; but it is permissible to sell for a counter-value which is present and is shown, even though it be not defined. – Similar rules apply to the values exchanged in other contracts, e.g. the usufruct and the rent in a contract of lease – the same is true of any specified term – but a distinction is made according to the nature of the contract, and vague expressions which are rejected in the salam contract are admitted in the contract of suretyship. From this requirement and from the prohibition of riba together derives the requirement in the case of goods which are subject to the rules concerning riba, that possession must be taken and their weight or measure checked before they are resold.

There are only two exceptions from the general prohibition of aleatory transactions: -

1. In favour of prizes for the winner or winners of horse races, on account of their importance as a raining for the holy war.

2. For the winner or winner of competitions concerning knowledge of Islamic law.

Questions of liability form one of the most complicated subject matters in the Islamic law of obligations.

Liability may arise from the non-performance of a contract, or from tor, or from a combination of both.

The depositary and other persons in a position of trust are not liable for accidental loss, but they lose this privileged position through ta’addi (fault, tort), illegal acts which are incompatible with the fiduciary relationship, such as using the deposit, whether the loss is caused by the unlawful act or not.

The concept of ta’addi, however, is not restricted to the doctrine of liability, it means tort in general; in other words, liability arising from non-performance of a contract is reduced to liability arising from a tort.

Extinction of obligations – the normal case is the fulfilment, especially the payment of a debt; the debt can also be set off against a claim.

The acquittance (ibra) of the debtor by the creditor likewise extinguishes the debt; it must be unconditional and not subject to the stipulation of a term, but it can take place in the form of a legacy. It has the same effect as the relinquishment of a claim. Both forms of remission must be distinguished from the cancellation (faskh) of a contract and from the friendly settlement.

The faskh (cancellation) brings about a condition as if a contract never existed; it can be produced unilaterally, by khiyar (stipulated right of cancellation). In its turn it must be distinguished from the reversal (ikala) of a sale, which is regarded as a new sale.

The sulh (good-natured settlement) is not only procedural, although its aim is the elimination of dispute; it is always possible as an agreement of the parties to modify an existing obligation by which the creditor, for consideration (badal), waives his original claim.

If the debtor acknowledges his original obligation, the sulh amounts to replacing a concrete debt by an abstract one; in this case the rules relating to riba must be taken into account.

If the debtor does not acknowledge his original obligation, the sulh is a separate transaction.

The sulh is not confined to the law of obligations; claims arising from the law of slavery, family law, and penal law can also be settled by it but not off course had punishments.

Another way of extinguishing an obligation is by transforming it into a new one by the hawala, literally ‘transfer’. This is, in the first place, mandate to pay, i.e. I owe something to A and charge B to pay my debt. It can also be an assumption of my debt by B. The practical advantage in both cases is that I have a claim against B which is equal to or higher than the claim of A against me – this is not necessarily a debt, it can also be a claim for the return of an object, e.g. a deposit.

Acknowledgment: -

The acknowledgement known as the ikrar has a procedural and material aspect- it is one kind of legal evidence, and although it is in theory weaker than the evidence of witnesses – it is in practice the most conclusive and uncontrovertible means of creating an obligation on the part of the person who makes it.

For example if a contract of sale is proved by the evidence of witnesses, a number of pleas are open to the buyer in rebuttal of a claim for payment of the price; but A’s acknowledgement that he owes the sum in question to B cannot be withdrawn or qualified by a subsequent plea.

The importance of the ikrar is that it creates an abstract obligation without regard to the cause of its origin.

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