Islamic Commercial Law PDF

Chapter 1 : Historical Development Islamic commercial transactions had existed in the early days of Islam. There are always close connection between Islam and commerce, for examples: 1. Allah has described Mecca as a centre of trade and commerce particularly in surah Qurasyh a...

Chapter 1 : Historical Development Islamic commercial transactions had existed in the early days of Islam. There are always close connection between Islam and commerce, for examples: 1. Allah has described Mecca as a centre of trade and commerce particularly in surah Qurasyh and many other verses of al-Qur'an. 2. The Prophet had come from a commerce family. 3. The Prophet (P.b.u.h) has said, which means "Nine of ten of the sources of wealth are from commercial transaction". 4. Islam considers trade and commerce not only as a mean to exchange goods but also as a social responsibility as well as Jihad economy. 1. Foundation Period (Prophet’s Era) Mekah Period (13 years): ○ Focus on establishing faith and moral values, with limited economic and commercial regulations. ○ Early rulings related to honesty in trade and prohibitions against unfair practices. Madinah Period (10 years): ○ Detailed commercial laws and principles revealed, including contracts, trade, partnerships, loans, and prohibition of riba (usury). ○ Practical examples and rulings provided by the Prophet Muhammad (PBUH) in his dealings and judgments. 2. Khulafa al-Rashidin (Rightly Guided Caliphs) Continued expansion of the Islamic state introduced new commercial and economic issues. Caliphs and sahabah (companions) used ijtihad (independent reasoning) and consensus (ijma) to address emerging fiqh muamalat issues. Establishment of principles such as amanah (trustworthiness), transparency in trade, and the enforcement of contracts. The Evolution of Fiqh faced six Stages22 : 1. Foundation 2. Establishment 3. Building 4. The Flowering 5. Consolidation 6. Stagnation and Decline. ​ Islam: Submission to the will of God and obedience to His law. Derived from the Arabic root "Salima," meaning peace, purity, submission, and obedience. ​ Shariah: The path to be followed; laws established by Allah for all aspects of human life. Derived from the verb "shara'a," meaning to make or establish laws. ​ Fiqh Muamalat: The understanding of commercial transactions permitted by Shariah, based on the Quran, Sunnah, and other sources of Islamic law. Shariah Overview: ​ Aqidah (Belief & Faith) ​ Akhlaq (Moralities & Ethics) ​ Ibada (Man-to-God Worship) ​ Muamala (Man-to-Man Activities) ​ Political Activities ​ Economic Activities ​ Social Activities ​ Banking & Financial Activities Sources of Shariah: ​ Al-Quran: The word of Allah, revealed to Prophet Muhammad, containing 114 chapters and approximately 6,235 verses. Serves as a blueprint for the Islamic way of life. ​ Al-Sunnah: The sayings, actions, and silent approvals of Prophet Muhammad, which complement and clarify the Quran. Components of Shariah: ​ Aqidah (Belief & Faith) ​ Akhlaq (Morality & Ethics) ​ Fiqh (Legal Rulings) Characteristics of Shariah: ​ God-given ​ Based on Divine revelation ​ Comprehensive ​ Emphasizes general welfare ​ Fixed and eternal Importance of Shariah: ​ Provides guidance for business transactions ​ Regulates human activities and decisions ​ Safeguards the interest of all parties ​ Ensures transactions are legal and parties are capable Components of Fiqh: ​ Ibadat (Rituals) ​ Munakahat (Family Laws) ​ Muamalat (Commercial Transactions) ​ Jinayat (Crimes & Punishments) Shariah vs. Fiqh: ​ Shariah is broader, divine, and unchanging. ​ Fiqh involves human reasoning and may adapt to circumstances. Sources of Fiqh: ​ Al-Quran ​ Al-Sunnah ​ Ijma' (Consensus) ​ Qiyas (Analogical Reasoning) ​ Istihsan (Juristic Preference) ​ Istishab (Presumption of Continuity) ​ 'Urf (Customs & Social Habits) Fiqh Muamalat: ​ Deals with commercial transactions and contracts. ​ Ensures transactions are conducted according to Shariah principles. ​ Is the backbone of the Islamic financial system. Chapter 2: Concept of Property (Al-Mal) in Islam Prepared by: Sharifah Faigah Syed Alwi Al-Mal in the Quran ​ Al-Mal and the universe are created by Allah (Quran 3:191). ​ Humans are trustees, not primary owners (Quran 57:7). ​ Property should be utilized equitably for the benefit of all (Quran 2:292). Acquisition and Disposal of Al-Mal ​ Acquire property rightfully (Quran 2:188). ​ Dispose of property according to Shariah (Quran 28:77). ​ Wasting wealth is prohibited (Quran 2:205). Definition of Property (Al-Mal) ​ Literal Meaning: Anything owned by someone. ​ Al-Shafie’s Definition: Anything with commercial value that, if destroyed, requires compensation. ​ Jumhur Ulama’s Definition: Something with value that, if destroyed, requires compensation. Imam Hanafi’s and Al-Hawi’s Definitions ​ Imam Hanafi: Al-mal is something highly desired and can be kept long-term. ​ Al-Hawi: Al-mal is a beneficial creation of Allah that can be owned or managed. Criteria for Classifying Property as Al-Mal Must be valuable. Can be owned and is useful. Utilized based on Islamic principles. Can be acquired or owned. Cannot be air, sea, jungle, etc. Potentially acquirable items are considered al-mal. Must not be used against Shariah principles. Rights (Haq) and Benefits (Manfaah) ​ Haq: Authority recognized by Shariah. ​ Manfaah: Beneficial to humans, can be based on movable or immovable property. Classification of Rights ​ Rested on Property: Maintenance, inheritance, jointly owned property. ​ Not Rested on Property: Guardianship, custody. Types of Rights ​ Right of Allah: Obligations like prayer, fasting, charity, pilgrimage. ​ ​ Right of Human Beings: General and specific obligations like compensation, inheritance, maintenance, custody, contract. ​ ​ Joint Rights: Iddah, qisas, diyat (blood money). Classification of Al-Mal 1. Classification of Tangible Assets (Ayn) Definition: Mal al-‘Ayn refers to tangible, physical property that can be physically handled, seen, and measured. Examples: Land, buildings, vehicles, livestock, and commodities like gold, silver, and food items. ​ Mal Manqul (Movable Property) ​ Hanafis: Anything movable with or without changing form. ​ Malikis: Anything movable without changing form. ​ Ie : tradeable goods , currencies, measurable ​ Mal ‘Aqar (Immovable Property) ​ Hanafis: Property that can’t be moved from its place. ​ Malikis: Anything that can’t be moved or moved without changing original structure. ​ Ie : land, building Mal Mutaqawwam (Valuable) ​ Property possessed and permissible by Shariah. ​ Ie : vehicle , gold , real estate Mal Ghair Mutaqawwam (Invaluable) ​ Non-possessed by someone or non-permissible property by shariah. ​ Ie : fish on the ocean / khinzir  Mal Mithly (Homogeneous) ​ Property with insignificant differences.and easily replaceable. ​ Measured goods (Kayli): Items sold by volume, such as liquids or grains. ​ Weighed goods (Wazni): Items sold by weight, such as gold, silver, and other metals. ​ Counted goods (Adadi): Items sold by number, such as eggs or manufactured items. ​ ​ examples: ​ -Grains: Wheat, rice, and corn that are measured by weight or volume and are considered identical in nature. ​ -Currency: Paper money and coins that are standardized and interchangeable. ​ -Beverages: Bottled water, soft drinks, and juices that are uniform in quantity and quality. ​ Mal Qimiy (Heterogeneous) ​ Non-substitutes or different value substitutes. ​ Rare items / luxury goods ​ Ie : gems Mal Istihlaky (Consumable) ​ Used by changing or destroying original form. ​ Ie : food and beverages Mal Isti’maly (Usable) ​ Used without changing original form. ​ Ie : electronic device / furniture , tools & equipment Manfaah Beneficial to humans, part of property. Classified as incomplete property. Methods of acquisition: borrowing, renting, waqf, wasiat, ibahah. Opinions on Manfaah ​ Hanafis: Not property, cannot be inherited, contract ends upon expiry. ​ Other Schools: Part of mal, can be bought, sold, inherited until contract expiry. Methods of Acquiring Manfaah ​ Borrowing: Giving away benefit without consideration. ​ Renting/Ijarah: Selling benefit at a price and period. ​ Waqf: Voluntary contribution for societal benefit. ​ Ibahah: Permission to use or consume. ​ 2. Intangible Asset (mal ghayr al ayn) Definition: Mal Ghayr al-‘Ayn refers to intangible property that cannot be physically handled or seen but has value and can be owned and transferred. ​ Intellectual property. ​ Rights from intellectual activity in various fields. ​ Recognized as al-mal by majority jurists. Chapter 3 Definitions  ​ Ownership (Milk): ​ The expression of the connection between man and thing/property which is under his exclusive control and disposition. ​ According to Al-Taffazani: "The power of exclusive control and disposition." ​ According to Mejelle (Sayuti & Qarafi): "Something of which man has become the owner whether it is in either physical form (ayn) or benefit (manfaah) or both." ​ Public Property: ​ Property meant for public use, such as main roads, public gardens, and rivers. No one has the right to own such property. ​ Waqaf and Baitul Mal Property: ​ Property that can be owned but is not allowable by syara’ for private ownership. ​ Mubah Property: ​ Property that is unowned and allowable by shariah, such as spring water, animals in the jungle, and empty land. Types of Ownership ​Complete Ownership (Milk al-Tam): ​ Permanent and unrestricted ownership. ​ The owner of both property and benefits ​ Owner has the right and freedom to obtain the benefit of the property or dispose it to others. ​ No compensation is required if the owner destroys or damages the property, except for certain cases (e.g., animals). Characteristics of Milk al-Tam ​ Permanent and not restricted to a certain period of time. ​ Owner can transfer ownership through sale, gift, or inheritance. ​ Owner has the right to use and dispose of the property as they see fit. Examples of Milk al-Tam ​ Private Property: ​ A house or land owned by an individual with full rights to use, benefit from, and dispose of it. ​ Personal Belongings: ​ Items like clothing, jewelry, and personal effects owned by an individual. ​ ​ Incomplete Ownership (Milk al-Naqis): ​ Ownership only the object or only the benefits manfaah Characteristics of Milk al-Naqis ​ - no absolute control over the property concerned ​ - the ownership is not transferable ​ - the manfaah owner is the trustee which liable for any damage ​ - the ownership is restricted to a certain time limit Types of Milk Al Naqis 1. Milk al Ayn- refers to object but not the manfaah, ie owing a house or piece of land to be leased or mortgage 2. Milk al manfaah - refers to the ownership of the benefits but not the physical form of property. ie borrowing, waqaf, leasing, ibahah 3. Huquq al-irtifaq- ownership of benefits that is shared by the public Examples of Milk al-Naqis ​ Co-Ownership: ​ A property is owned by multiple individuals, each with a share or specific rights. For example, a house owned by two siblings, each with rights to use certain parts of the property. ​ Conditional Ownership: ​ A property is owned under specific conditions, such as a lease agreement where the owner retains certain rights while the lessee has temporary use rights. ​ Methods to Acquire complete Ownership Mubah Property ​ Ihya al Mawat: ​ Reclaiming uninhabited land and developing it. ​ Al-Sayd (Animal Hunting): ​ Capturing animals from the wild for ownership. ​ Al-Kala’ wa Ajam:  ​ Collecting natural resources like grass from the field. ​ According to the Prophet Muhammad SAW: human shares 3 things fire water grass on the field ​Mineral ( al ma’din) & treasure hunt (al rikaz) : Transfer of Ownership ​ Contracts: ​ Uqud al Tabarru’at (contracts of gratuity), e.g., hibah and wasiyah. ​ Uqud al Mu’awadat (contracts of exchange), e.g., contracts of al-buyu’. ​ Inheritance/Wasiah: ​ Transfer of assets to heirs through the fara’id system or wasiah. ​ Compensation/Indemnity: ​ Transfer of property as compensation for damages or losses. ​ Al-Syuf’ah: ​ The right of a co-owner to demand pre-emption in the sale of jointly owned property. Chapter 4 Legal Term: Al-Ahliyyah (Ahliyyah) Definition: Al-Ahliyyah (Ahliyyah) refers to the legal capacity or competency of an individual to enter into contracts and perform legal transactions. It encompasses the ability to acquire rights, exercise them, and fulfill obligations. Ahliyyah is a critical concept in Islamic law, ensuring that individuals have the necessary legal standing to engage in valid transactions. Stages of Ahliyyah: 1. Ahliyyah al-Wujub (Capacity for Acquisition of Rights): Definition: The ability of a human being to acquire rights and obligations. Stages: i) Ahliyyah al-Wujub al-Kamilah (Complete Capacity for Acquisition): Description: Found in individuals after birth and before reaching the age of puberty. Capacity: Complete capacity for acquisition of rights and obligations. Example: A child can acquire rights and obligations, but their execution is typically handled by a guardian until they reach the age of legal puberty. ii) Ahliyyah al-Wujub al-Naqisah (Deficient Capacity for Acquisition): Description: Established for a fetus (janin). Capacity: Only some rights are established for the fetus; no obligations are imposed. Example: A fetus can acquire certain rights such as freedom from slavery, inheritance, bequest, and parentage, but cannot be held liable for obligations. 2. Ahliyyah al-Ada’ (Capacity for Execution of Rights): Definition: The capability of a human being to issue statements and perform acts to which the Lawgiver has assigned certain legal effects. Stages: i) Ahliyyah al-Ada’ al-Kamilah (Complete Capacity for Execution): Description: Attained when an individual reaches full mental development and the external standard of puberty. Capacity: Full capacity to perform legal acts and fulfill obligations. Requirements: Puberty: Indicated by physical signs such as wet dreams for males and menstruation for females, or reaching the age of fifteen according to some jurists. Rushd: Discretion and maturity in handling financial matters. ii) Ahliyyah al-Ada’ al-Naqisah (Deficient Capacity for Execution): Description: Found in individuals from the age of mumaiyiz (able to discriminate) to the age of puberty, or in those with incomplete mental development. Capacity: Partial capacity to perform legal acts. Implications: Beneficial Transactions: Allowed, e.g., accepting gifts. Harmful Transactions: Not allowed, e.g., granting divorce, making a trust (waqf), or bequest (wasiyyah). Mixed Transactions: Valid if ratified by a guardian and produce a significant result for the parties concerned, e.g., sale, hire, partnership. Summary: Ahliyyah al-Wujub: Capacity for acquisition of rights, divided into complete and deficient stages. Ahliyyah al-Ada’: Capacity for execution of rights, also divided into complete and deficient stages. Chapter 5 Classification of Contracts in Islamic Law I. Classification According to Nature/Circumstances A. Unilateral Contract (al-’aqd al-infiradi) ​ One-sided promise without consideration ​ Accepted by Islamic jurists ​ May involve uncertainty (gharar), which is tolerated ​ Examples: gifts, donations B. Bilateral Contract (al-’aqd al-thuna’iyyah) ​ Involves offer (ijab) and acceptance (qabul) ​ Aims for commercial gain ​ Gharar not tolerated ​ Requires legal capacity C. Quasi Contract (shibh al-’aqd) ​ Not a true contract but creates obligations ​ Enforceable to restore rights ​ Example: returning money paid by mistake II. Classification According to Legal Consequences A. Valid Contract (sahih) ​ Essence and attributes aligned with Shariah ​ Legally effective and enforceable ​ Divided into effective (nafidz) and dependent (mawquf) ​ ​ Effective Contract (Nafidh): ○ An effective contract is one that is issued by a person who has proper authority over the assets involved, either through ownership or agency. ○ This type of contract is considered sound and fully enforceable. ○ An example of an effective contract is a sale transaction conducted by someone who has fulfilled all the necessary conditions, resulting in the exchange of the subject matters of the contract. ​ Dependent Contract (Mawquf): ○ A dependent contract is one that is concluded by a person who has the capability to conclude the contract but does not have proper authority over the asset. ○ This could occur when someone sells an asset that belongs to another party without the owner's consent or authorization. ○ In such cases, the contract is considered dependent on the authorization or consent of the asset's rightful owner. If the owner consents, the contract becomes effective; if not, it remains invalid. ○ ​ B. Invalid and Deficient Contract (fasid) ​ Lawful in substance but flawed in description ​ Example: sale without specified price C. Void Contract (batil) ​ Both substance and description unlawful ​ Example: selling a bird in the sky (gharar) D. Binding Contract (lazim) ​ Not cancellable without consent of both parties E. Enforceable Contract (nafiz) ​ Can be binding (lazim) or non-binding (ghayr lazim) F. Dependant Contract (al-’aqd al-mawquf) ​ Concluded by a person without proper authority ​ –Impediments to contracts in Islamic law are classified into three categories: 1. Impediments regarding the contracting parties. 2. Impediments regarding the sighah (offer and acceptance). 3. Impediments regarding the subject matter. Impediments Regarding Contracting Parties 1. Natural Causes (Samawiyah): ○ Minority: Not liable for certain legal responsibilities, but some financial transactions may be valid with guardian's permission. ○ Insanity (Junun): Contracts are void unless made during a lucid interval. ○ Idiocy: Limited mental capacity; contracts are valid only with guardian's approval. ○ Sleeping and Fainting: Temporary incapacity; no liability for unintended actions during this state. ○ Death Illness: Transactions are restricted; creditors' rights take precedence, and heirs have rights from illness onset. ○ Forgetfulness: Does not affect legal capacity; transactions remain valid. 2. Acquired Causes (Muktasabah): ○ Intoxication: Legal capacity remains, but capacity for execution is affected; contracts made under legal intoxication are treated leniently. ○ Ignorance: No excuse for liability; individuals are expected to seek knowledge. ○ Joke (Hezl): Generally does not affect legal capacity, except in serious matters like marriage and divorce. Impediments Regarding Sighah (Offer and Acceptance) 1. Mistake: ○ Arises from ambiguity, poor investigation, or miscommunication. ○ Can nullify a contract depending on whether the mistake is unilateral, mutual, or a mistake of law. 2. Duress (Ikrah): ○ Involves compulsion through threats. ○ Two types: complete duress (threat to life/limb) and incomplete duress (causing pain/grief). ○ Islamic law stipulates conditions for duress, including the threat being realistic, immediate, and unlawful. 3. Fraud (Tadlis): ○ Intentional deception to induce someone into a contract. ○ Types include actual fraud, verbal fraud, and hiding defects. ○ Victims have the right to nullify the contract, sue for damages, or use fraud as a defense. 4. Misrepresentation (Ghabn): ○ Deceit or twisting facts, often through overpricing. ○ Two types: trivial deception (ghabn yasir) and grave deception (ghabn fahish). ○ Victims of grave deception have various options depending on the jurist's opinion. ○ Impediments Regarding Subject Matter 1. Gharar: ○ Refers to uncertainty or risk.  ○ Transactions involving significant gharar (gharar fahish) are invalid, while minor gharar (gharar yasir) does not void the contract. 2. Jahalah: ○ Lack of knowledge about essential elements like quality, quantity, or price. ○ Similar effect to gharar, leading to invalidity of the contract. 3. Riba: ○ Prohibition of usury or unjust excess in exchanges. ○ Four types: riba al-nasa (excess due to delayed payment), riba al-qard (predetermined excess on loans), riba al-fadl (excess in exchange of similar goods), riba al-yad (excess in deferred exchanges). Solutions to Impediments 1. Consent: ○ The concept of khiyar (option) allows parties to decide whether to continue with a contract affected by fraud, mistake, duress, or misrepresentation. 2. Contracting Parties: ○ Use of wilayah (guardianship) to manage contracts involving parties with impaired legal capacity. ○ Two forms: ikhtiyariyyah (by choice, like appointing an agent) and ijbariyyah (by legal coercion, like court-appointed guardianship). 3. Subject Matter: ○ Clear identification and legality of the subject matter. ○ Use of legal devices (helah) to resolve issues, though this practice is debated among jurists. Chapter 6 part 1 contracts of sale Chapter 6: Contracts of Sale (Part One) 1. Introduction The primary contract in Islamic commercial transactions involves: ○ Commodity for another commodity (barter). ○ Commodity for money (ordinary sale). ○ Money for money (sarf). 2. Definition of Sale (Al-Bay’) Literal: "bā’a" means "sold" and "bay’" means "sale" or "trade". Technical: Exchange of one item for another on mutual consent. ○ Hanafis: Exchange of an owned commodity (māl) for another in a specified manner. ○ Shafi‘īs: Exchange of an owned commodity for another with the exchange of ownership. 3. Legality in the Quran and Sunnah Quran permits trading and forbids usury (2:275). Sale transactions must be done by mutual consent and legal means (4:29, 2:282). Sunnah emphasizes consent in sales and honesty in trade. Ijma’ (consensus) approves sales provided all conditions are satisfied and terms adhered to. 4. Pillars and Elements of Sale Pillars: 1. Seller (al-Baa’i’) 2. Purchaser (al-Musytari) 3. Good to be sold (al-Mabi’) 4. Price (al-Thaman) 5. Offer and acceptance (al-Sighah of Ijab and Qabul) Elements: 1. Contracting Parties: Must have legal capacity (sane, adult, free, mutual consent). 2. Sighah (Offer & Acceptance): Must correspond in content, be within a reasonable time, and indicate consent. 3. Subject Matter: Must be lawful, deliverable, known, and existing at contract time. 4. Consideration: Any valuable thing, typically money, must be deliverable and known in quality and quantity. 5. Types of Sale Based on Legal Effects:  1. Valid Sale (bay’ sahīh) 2. Invalid Sale (bay’ fāsid) 3. Voidable Sale (bai’ bātil) Based on Payment & Delivery: 1. Spot Sale 2. Deferred Sale Methods of Determining Price: 1. Barging Sale (bay’ al-musāwamah) 2. Sale by Tender (bay’ al-muzāyadah) 3. Trust Sale (bay’ al-amānah) Different Types: 1. Original Sale (al-bay’ al-asli) 2. Barter Sale 3. Sarf (money for money) sale by exchange of money for money - selling cash for cash 1. Deferred Sale price is absent & subject matter is present 2. Sale for Deferred Delivery when subject matter is absent but price is present 3. Sale of Debt for Debt 6. Forbidden Sales Various types of sales are prohibited due to elements of uncertainty (gharar), ignorance (jahālah), and usury (ribā). Examples include: ○ Sale by touching (bay’ al-mulāmasah) ○ Sale by throwing stones (bay’ al-hasāt) ○ Sale by throwing articles (bay’ al-munābadha) ○ Sale of goods not possessed or inspected (bay’ al-muwāsafah) ○ Sale of an animal for meat (bay’ al-hayawān bi al-lahm) ○ Sale of fish in water (bay’ al-samak fi al-mā’) ○ Two sales in one (bai’atān fi bai’ah) ○ Sale and loan contract (bay’ wa salaf) ○ Reasons: Invalid sale Sale of Shari’ah-prohibited subject matter Subject matter commonly used for illegal purposes Sale containing Riba Sale containing gharar & jahalah Chapter 6 part 2 (al khirayat) Introduction Under strict Islamic law, contracts cannot be modified once valid. Various options are permissible for the larger benefit of society, providing a reassessment or cooling period for parties to rationalize or reverse decisions, minimizing conflicts. ​ Conditions for Options:  ​ Must apply to binding and revocable contracts (e.g., trading, leasing). ​ Irrevocable contracts (e.g., marriage) cannot use options. ​ Contracts must involve exchange of counter values or benefits. ​ Conditions for Options to Expire: ​ Acceptance of the offer before the deadline. ​ Expiry of the deadline with no action taken. ​ Destruction or defect of the goods. ​ Death of the offered party. 1. Khiyar al-Majlis (Option of Session) ​ Definition: The right of each party to withhold acceptance or rejection of the offer until the end of the meeting. ​ Applicability: Recognized by Shafie and Hanbali schools, but not by Hanafi and Maliki schools. ​ Conditions: ​ The contract must involve an exchange of counter values or benefits. ​ The consideration must be lawful. ​ Hadith Reference: Narrated by Hakim bin Hizam and Abdullah bin Umar, the Prophet emphasized the importance of this option to prevent hasty decisions. 2. Khiyar al-Syart (Option of Condition) ​ Definition: The right to cancel or confirm the contract within a stipulated period. ​ Applicability: Based on the hadith: "Muslims are bound by their conditions except the condition which prohibits the lawful or permits the prohibited." ​ Conditions: ​ The period of the option must be certain. ​ The period must run from the time of conclusion of the contract. ​ The option must be agreed in good faith. ​ Legal Reference: Article 300 and 301 of the Mejelle. 3. Khiyar al-Ayb (Option of Defect) ​ Definition: The right of a buyer to return a defective item discovered after taking possession. ​ Applicability: Applies when a defect exists prior to and at the time of cancellation. ​ Conditions: ​ The buyer must be unaware of the defect at the time of the contract and of taking possession. ​ The contract must not have excluded guarantees for defects. ​ Hadith Reference: Narrated by Wathila bin Asqa’, the Prophet emphasized the importance of disclosing defects to avoid divine wrath and curses. 4. Khiyar al-Ru’yah (Option of Inspection) ​ Definition: Allows a buyer to reject an unseen item upon inspection. ​ Applicability: Recognized by the Hanafi school but not by the Shafie and Hanbali schools due to concerns about uncertainty (gharar). ​ Conditions: ​ The subject of the contract must be a specified, unseen thing. ​ The buyer must not have seen the thing before. ​ Hadith Reference: Justified by the hadith: "Whoever purchases a thing without seeing it, has the liberty of rejection after sight of it." 5. Khiyar al-Tadlis (Option of Misrepresentation) ​ Definition: Allows cancellation of the contract if fraud or misrepresentation occurs. ​ Applicability: Triggered by any act of fraud affecting the consideration payable. ​ Conditions: ​ The complainant must have suffered material damage. ​ The fraudulent act must be cunning enough to deceive an ordinary person. ​ Legal Reference: Fraud is considered a serious moral wrong in Islamic jurisprudence. 6. Khiyar al-Ta’in (Option of Determination) ​ Definition: Allows a choice among similar items within a specified time frame. ​ Applicability: Used to avoid uncertainty regarding the subject matter of exchange. ​ Conditions: ​ Limited to 3 items. ​ Must be of the same class but different quality or kind. ​ Price of all objects must be fixed. ​ The option must be specifically expressed. ​ Legal Reference: Hanafi school allows this option based on the principle of darurah (necessity). 7. Khiyar al-Wasf (Option of Description)  ​ Definition: Allows rescinding a contract if the prescribed standards for goods are not met. ​ Applicability: Applies to contracts where the qualities, quantities, and measurements of goods are described. ​ Conditions: ​ No strict time limit; must be exercised within a reasonable time from discovery of the fault. ​ The burden of proof falls upon the seller or provider of services. ​ Legal Reference: Ibn Qudama emphasized the importance of this option to protect the buyer from faulty goods. chapter 7 Riba (Usury) Definition: Any unjustified excess over the capital in loans or trade. Prohibition Basis: ○ Surah al-Baqarah (2:275-281): Trade is permitted, but usury is forbidden. ○ Surah al-Nisa’ (4:29): Prohibits eating up property through unjust means. Types of Riba: Riba Al-Duyoon (Riba on Debts): Represents extra amount on deferred payments due to borrower’s inability to pay on time. Common in most conventional financial products and services. Riba al-Duyun (in Loans): ○ Riba al-qardh: Imposed from the beginning.Interest charged on loans, where the lender demands an extra amount over the principal lent to the borrower. ○ Riba al-jahiliyyah: Imposed after default.An additional amount charged by the lender when the borrower is unable to repay the principal on the due date. Riba Al-Buyu’ (Riba on Sales): Prohibited by the Prophet Muhammad (pbuh). Includes both immediate and credit exchanges. Results in Riba Al-Fadhl (excess in exchange of commodities measurable through weight or measure). Based on the hadeeth about six commodities (gold, silver, wheat, barley, dates, salt) Riba al-Buyu’ (in Trade): ○ Riba al-fadhl: Inequality in exchanged goods.For example, exchanging 1 kg of wheat for 1.2 kg of wheat. ○ Riba al-nasiah: Delay in the exchange of good Gharar (Uncertainty) Definition: Risk, uncertainty, or deceit in contracts. Prohibition Basis: ○ Various Hadiths, such as the one prohibiting the sale of "pebble" and "uncertainty." Types of Gharar: ○ Gharar yasir (Minor): Permissible as it is minor and taken into account in pricing. ○ Gharar fahish (Major): Prohibited due to significant uncertainty. Examples: ○ Sale of unknown outcomes (e.g., birds in the sky, unborn animals). ○ Contracts with uncertain terms (e.g., conditional sales). ○ Maysir (Gambling) Definition: Any game of chance where wealth is acquired by chance. Prohibition Basis: ○ Quranic verses, such as Surah al-Ma'idah (5:90-91), which explicitly prohibit gambling and intoxicants. Impact: ○ Leads to enmity and hatred. ○ Diverts from the remembrance of Allah and prayer.