Bay’ al-wafa

Bay’ al-wafa’ is a contract whereby the owner of an estate (house or land) sells it, with a condition that he will have it back once he returns its price to the buyer (See Articles 118 and 396-403 of Majallat al-Ahkam al-Adliyah). In other words, he who needs cash sells is estate in cash, with the condition that whenever he returns the cash to the buyer, the latter returns to him his estate. Thus, it is a sale contract with an attached condition of abrogation, the seller returns the cash and the buyer returns the estate.

This sale contract has various other names with the Fuqaha’ who dealt with it, such as bay’ al-’uhdah (custody sale) because both parties pledge to return the substitute or the alternative after a specific period or because the buyer guarantees the item; bay’ al-idah or bay’ al-wa’d (promise sale) because the sale happens as a result of a binding promise instead of a condition; bay’ al-amanah (trust sale) because the item sold is entrusted with the buyer; bay’ al-nass (people’s sale) because people used it frequently and became used to it; al-bay’ al-jaa’iz (allowed sale) because some fuqaha’ have legitimized it to the point that there is no other contract being legitimized as such and al-bay’ al-mu’ad (the retuned sale) because there is a sale and a repurchase. It seems that this kind of sale is as old as the Fifth Century after Hijra.

The people of hiyal (stratagems) have artificially made it a controversial contract: Is it allowed or is it forbidden? Is it a sale or a rahn (mortgage, collateral) for those who allowed it? The reality is that it does not bear any controversy; it is simply a usurious stratagem, i.e. a usurious loan in a form of a sale. There is an amount that is advanced and then returned and the financier benefits from the estate during the period of the loan, either by usage or exploitation. This means that the benefits derived from it are either living in a house, or planting a land. The estate may even be rented out to a third party or to the seller, and the financier benefits from the rent in return for his finance.

If the estate was rented out to the seller, this means renting the estate (or selling it on installments) to who sold it in cash. Such renting could be ijarah muntahiya bi al-tamleek (a renting contract that ends with ownership) or a sale with installments in a form of a sale contract, in other words a sale under the guise of renting. Renting is used here nstead of sale with installments so that the seller keeps the ownership of the item, based on guarantee or mortgage/collateral. In fact, this is better for him than the mortgage or the collateral, because in this case the item remains his ownership while in case of mortgage or collateral, the item belongs to the buyer.

This transaction of sale and leaseback is similar to Bay’ al-wafa’ contract or bay’ al-istighlal which can be considered as a form of Bay’ al-wafa’ contract, allowed by some fuqaha’, as mentioned earlier, but not by Majma’ al-Fiqh al-Islami in Jeddah in 1412AH (1992). Without doubt, the people of stratagems were hoping that it would be allowed. Now, they are trying to allow it under another name. One form of stratagems is to call things with other names that are not relevant, in order to make them acceptable to the public.

Bay’ al-Istighlal (the exploitation sale) is to sell an estate with a promise condition, whereby the seller leases out his estate and whenever he pays back the price, he gets back his estate (See article 119 of Majallat al-Ahkam al-Adliyah). It is called Bay’ al-Istighlal (exploitation sale) because the buyer exploits the estate sold. In other words, he benefits from its rent by way of renting it to the seller. Thus, Bay’ al-Istighlal is a form of bay’ al-wafa’, whereby the estate is leased to the seller. Bay’ al-wafa’ is itself a form of bay’ al-eenah, which is not allowed by the hadith (Musnad Ahmad 2:42, Sunan Abi Dawud 3:274, Nayl al-Awtar 5:233) because the main feature of bay’ al-eenah is that the merchandise returns back to the seller. In al-eenah contract, there are two sales in one: one with a spot specific price and the other with a deferred higher price. For example, someone sells an item for SR1000 and buy it back cash for SR900, which means he borrowed SR900 to be repaid SR1000. Thus, the riba in bay’ al-eenah is the difference between the two prices. As for bay’ al-wafa’, riba will arise in the use of the estate involved or its exploitation, as explained above. Riba can arise in a sale or a loan by raising the price for the borrower or by reducing it for the lender, just as riba can arise from a loan for a loan. Imam Ibn Batta reported on the authority of Al-Awza’i that the prophet (pbuh) said: “There will come a time on people where they allow riba contract under sale contract” (Ibn Taymiyyah, 3:130 and Ibn al-Qayyim, 3:178).

The reader might wonder why the contemporary concern in bay’ al-wafa’, when it is an old sale. The reality is that although it is old, there are many attempts to revive such old contracts, which are no more than stratagems for riba. On 23rd and 24th Shawwal 1424AH (17th and 18th December 2003) a fiqhi seminar was organized in Riyadh where a paper by Nazih Hammad was presented under the title: “Renting the estate to who sold it” as well as four comments. The first was of Siddiq al-Dharir, the second was that of Mughammad Taqi Othmani, the third was by Hussein Hamid Hassan and the fourth by Abdus-Sattar Abu Ghuddah.

Nazih Hammad mentioned in his paper that the earlier scholars disagreed on the legitimacy of renting an estate to who sold it. The majority of scholars do not allow it, in opposition to Malikis and Ibn Taimiyyah from Al-Hanabilah. This is not right Renting an Item to Who Sold It, Is It Different from Bay’ Al-Wafa’ Contract? because what the Malikis and Ibn Taymiyah allowed is: “I sell you my house for such an amount provided that you sell me your animal for such an amount”. Two different items are involved here but in our case, we are talking about one item that returns back to the seller. It goes on cash sale and come back on installment or on Ijarah muntahiya bittamlik. This is similar to the prohibited bay’ al-eenah. So, it is not true as Nazih Hammad claims that the allowance of this contract applies to the case under discussion. Siddiq al-Dharir agreed with him but based his argument on the principle of natural permissibility of things, even concerning compound contracts which are made up of more than one contract, each of which may be permitted on its own but not allowed when put together in one contract, such as sale and loan in one contract.

With this, Dharir contradicted his saying, in his book Al-Gharar (1967, p.98): “I believe that the approach of the Islamic jurisprudence realizes the stability of transactions, by emphasizing the principle of not allowing the multiplicity of contracts in one and making it a basic rule”. The basic rule for him, then, was the prohibition of multiple contracts in one transaction.

Both Osmani and Abu Ghuddah confirmed in their comments on Hammad that many Shari’ah councils believe that al-eenah disappears with time: a year, in which market changes occur (price changes). This is hard to digest! Where does this year come from? Besides, market changes can happen anytime.

Hammad discussed the renting ending with ownership of the estate to who sold it and allowed it on the basis of the restrictions of Majma’ al-fiqh al-Islami 2000. But by booking at these restrictions, especially number one and two, I believe that they are theoretical restrictions that cannot be realized in practice. The actual realization of these restrictions means it would no longer be an ijarah muntahiyah bi-al-tamleek (renting leading to ownership). This is what can also be taken against the comment of Hussein Hamed Hassan. It seems to me that this kind of approach in issuing fatwa is like holding the stick in the middle. If it passes, the mufti would say: did I not tell you? But if it does not, he would claim that the conditions were not met.

What is important is that renting the estate to who sold it is a stratagem in order to get around the prohibition of bay’ al-wafa’ (promise sale) by Majma’ al-fiqh al-Islami, giving it a different new name among the many new names given to this contract, which can also be considered as a form of bay’ al-eenah. Branches of Islamic banks and windows of conventional banks should avoid and refrain from the use of such compound contracts which lead to sale and loan or mutual loans or eenah or tawarruq (especially if it is in a form of eenah but under the name of tawarruq) or similar contracts such as bay’ al-wafa’ (promise sale) or bay’ al-istighlal (exploitation sale) or any of the old and well-known riba based stratagems.

I had made it clear earlier and warned against such practices in a verbal intervention in the first seminar of Dallah Al-Barakah held in Madinah in 1403AH. Al-eenah and tawarruq are compound contracts. If the rule concerning the ’simple single contract’ is the permissibility, the rule concerning the compound contracts (multiple contract in one) is the prohibition. This is based on the hadith of the Prophet (pbuh) which prohibits two sale contracts in one and two transactions in one. The promise, if not binding and was jointed to a contract, this does not make the contract a compound one. However, if it is binding, then it becomes a condition that leads to the compounding of the contract. It is well known that a condition changes the ruling. For instance, a non-conditional riba is allowed but a conditional riba is not, and if someone lends someone an amount without

condition and later borrowed from him, this is allowed but if he lends him on the condition that the latter lends back, this is not permissible.

It is important to note that the secular laws which allowed “the promise sale” cancelled it later when they allowed lending at interest because there was no longer any need for it. This is another proof that the promise sale and similar contracts are but means and excuses to justify riba loan, hidden under the guise of sale. The way out of this “promise sale” is that the seller sells definitely his estate in cash without any condition attached to it and when he has the means to buy it back at the market price he can do so.

I wonder about the fiqhi mentality that propagates the prohibition of riba and yet goes on allowing it at higher rates, under various pretexts and stratagems. This is like closing the “white” door and opening tens of “black” windows, to the point where the ijtihad of contemporary fuqaha’, if we can call it ijtihad, focuses on no other than the inherited old stratagems. It seems that the whole of fiqh has been reduced to mere stratagems. Without doubts such stratagems make the banking operations more costly, complex and ambiguous. Ayub al-Sukhtiani commented by saying: “had they faced it, i.e. came to it through its door, it would have been much more easier” (Bayan al-daleel fi Butlan al-tahleel, p.374). Ibn Taimiyah says: “The clear cut riba is more beneficial to them than these stratagems. The legislator is wise and merciful, He does not prohibit what is beneficial and allows what is less beneficial, He does not prohibit what is harmful and allows what is even more harmful. If he has prohibited such transactions, then his prohibition of these transactions (stratagems) is even stricter”. If it happened that he has allowed it, then the permission of clear riba would have been more acceptable” (ibid). Ibn al-Qayyim says: “Our Sheikh (Ibn Taimiyah) used to prohibit the issue of tawarruq. He was asked many times to review his decision, while I was in his presence, but he never did and he said: “the reason why riba was prohibited exists in it with the extra cost of buying a commodity and selling it at loss. Shari’ah does not prohibit a lower harm (riba) and allows what is more harmful (al-tawarruq)” (I’lam al-Muwaqqi’een, 3:182).

Islamic Perspective of Ownership

I. INTRODUCTION

Ownership and right to property is the inherent right of a man to exercise his rights over property which he possesses and control with obligations connected therewith in the property acquired, such as to use for his own pleasure, to transfer and to extinguish his right by way of transfer if he chooses. (Note: the term inherent is use to denote that relationship).

Every human being has a right as inherent to his status to make such use of his physical and mental faculties as he chooses, provided he does not interfere with similar liberty of others. It is by the exercise of this inherent right that rights and obligations connected with property are mostly acquired, transferred or extinguished

Ownership by western Jurists:

Austin’s definition; “Ownership means a right which avails against everyone who is subject to the law conferring the right to put thing to user of indefinite nature.” Full ownership according to him is “a right indefinite in point of user, unrestricted in point of disposition and unlimited in point of duration.”

According to Hibert, “Ownership involves four rights and those are the right of using the thing, excluding others from using it, the disposal of the thing and the destruction of the thing.”

 Salmond defines it as; “Relation between a person an right that is vested in him.”

 According to Buckland, “Ownership is ultimate right to the thing or what is left when all other rights vested in various people are taken out.”

The word used by Muslim jurists for ownership is milkiyah and that used for property is mal. The term al-milk, however, is sometimes used for ownership and at other times for the subject matter of ownership.

Ownership is defined by Muslim jurists as: “the relationship that exists between a person and a thing that gives absolute control and right of disposal over it to the exclusion of others.” Some of them also define it a “the relationship between man and property that has been established by the shari’ah through which he exercises exclusive control and right of disposal over it as long as there is no shar’i restriction.” This, however does not change the essential nature of the definition with respect to “control” and “exclusion of others”.

II. VARIOUS KINDS OF OWNERSHIP

Islamic concept of ownership has classified the ownership into many kinds and types. Here are I attempted some of its classifications;

A. Major Categories of Ownership

We can distinguish between three major categories of ownership: Private Ownership, Public Ownership, Waqf (voluntary sector).

1. Private Ownership

Islam recognizes the individual’s property and permits the ownership of all types of property acquired by lawful means. The authority of this sanction may be elucidated from the following verses:

“And for men is the benefit of what they earn. And for women is the benefit of what they earn.” (4:32)

“And give to orphans their property, and don’t substitute the worthless (things) for good ones.” (4:02)

Islam also recognizes the right of inheritance and obviously it can only be recognized by a system in which the people have the right of ownership. Islam considers the rich trustees and claims them to vindicate their trust-worthiness by so dealing with their wealth that it becomes wealth radiative and not wealth reflective. These trustees are answerable before Allah for the manner in which they discharge the trust reposed in this. The holy Quran says:

“And Allah has made some of you excel others in means of sustenance. So, those who are made to excel give not away their sustenance to those whom their right hands possess, so that they may be equal there in.” (16:71).

“And give them of wealth of Allah which He has given you.”

The Qur’anic verses quoted above thus make it clear that the wealth and all other instruments of wealth are mainly TRUST put in the hands of rich, with view to afford mutual benefits to all. No one is absolute master because real ownership and mastery over everything and every person vests only in Allah; others in these respective forms are no more than mere Trustees, answerable before Allah for the manner in which they discharge the trust reposed in them.

Islam gives guarantee for the safety of the property of the citizens and inflict heavy punishment on culprits. Thieves and robbers, who endanger the safety of property of the citizens and do not honour their rights are very severely punished by Islamic State. Islam condemns those who usurp the property of other people. It is explained in Qur’an:

“And (as far) the man and woman who committed theft, cut off their hands as punishment for what they have earned, an exemplary punishment form Allah.” (5:38)

“And swallow not up your property among your selves by false means.” (2:188)

Private ownership is essential prerequisite for a free society. Abolition of private property implies elimination of freedom. Freedom is most sacred in Islam. Life in Islam is worth living when it is a life of freedom. An individual is free to maximize his gains. But maximizing gains or at least getting some profits in the Islamic context is vastly different from capitalism. According to Islam, means of business should always be fair and legal. Wages should be fair and just. Production should be acceptable according to the Islamic norms i.e. it should be beneficial to the society. No “Haram” (prohibited) items should be produced. Similarly, spending of the fruits of ownership should also be within the limits set by Islam. The Qur’an tells us that we should always get our money in Halal (permissible) way.

Limits on Private Ownership

Islam recognizes the individual’s right of ownership but does not leave him entirely free to use this right in any way he likes. Islam has allowed private ownership in principle but has subjected it to such limitations as would render it absolutely harmless. It has authorized to community to enact necessary legislation to organize private ownership and to change it whenever the public interest demands it.

It is true that the government has an important role in checking the greed of the individuals. When we say that private property is essential in Islamic framework, it is not that shortcomings of private property are ignored. Private property can be misused. So, Islam tries to correct this imbalance from the very beginning in the following ways:

• Man is not considered to be the ultimate owner of property and wealth because he is not the creator. Allah is the creator of men as well as land and wealth. So that property could be used in the name of Allah.

• Morality, religion and ethics should determine human behavior. The government should intervene in order to ensure that performance of private property is not in contradiction with the interest of the society in general. The door is open for the Islamic government to play its constructive role in the economy, on the condition that there should be a real maslahah (public interest).

2. Public Ownership and Government Sector

We must distinguish between the public ownership and government ownership of the property. In past, fuqaha (jurists) have spoken about the streets and rivers, etc. and have maintained that these are owned by the community and not by the government. The prophet PBUH has stated that people are full partners in water, grazing and fire. These belong to community and the government should utilize them for the benefit of all. By the same token other jurists and scholars have added public utilities like transportation, etc. All other public utilities may be seen in the same way through Qiyas (deduction). The jurists have also spoken about al-ma’adan al-zahira (minerals on the face of earth) which are not supposed to be owned individually.

3. Waqf (Voluntary Sector)

Waqf is not mentioned in Qur’an explicitly, but it is implicit in the teachings of the Qur’an and sunnah and was done by the companions of the prophet PBUH during his life. Waqf is meant to take resources away from the private ownership and allocate them to the benefits of those who need the fruits or results of such projects.

The institution of al-waqf al-islami (Islamic trust) has played a great and important role in history of Muslims and gave the right answers to such question: why Islamic education of the past was independent of the government? Why our jurists were independent? Why our medical programs flourished to the extent that hospitals were built even for animals? Because of institution of Waqf. Thousands and thousands in Al-Azhar, in Al-Aqsa, in Egypt, in India and elsewhere got their education through the waqf.

The waqf is independent from the control of both the private sector and the government. It belongs directly to the society and is perpetual source of income to its beneficiaries. Unfortunately, most of these institutions have vanished for a number of reasons including the growing powers of our contemporary governments.

B. Types of Ownership

Ownership (al-milk) is classified in various ways. Some of these are given below:

1. Classification on the basis of participation. Ownership is classified on the basis of the person participating in the ownership into three types:

• Sole ownership. This is ownership by a single person of a particular property with all the attached rights and control.

• Co-ownership also called sharikat al-milk. When two or more persons jointly hold property it is called co-ownership. It is treated as a kind of partnership in Islamic law.

• Communal or public ownership. These are things that are jointly shared by the entire community including land, grass, fire. An individual does not have the right to exclude another person from such things, unless it has been converted to his personal ownership or possession through a legally valid mode of acquisition.

2. Classification on the basis of corpus (‘ayn) usurfruct (manfa’ah), and use (istimta’).

A person may own a thing as well as the benefits flowing from it, although he may temporarily alienate the benefits through contract, like an owner renting out this house to another person or mortgaging it as security for a debt. The Hanafis do not make a distinction between the ownership of the corpus and ownership of benefits or services for purposes of ownership. Both are attached to the same thing. The owner may contract out the use of the thing to another, but that does not make the other person the owner.

The benefit of this rule is that the other person not being the owner of the benefits does not have a right of further disposal in them. Thus, a tenant in a house cannot further sublet it. The majority of the jurists do make distinction, with some of them distinguishing between the right to manfa’ah and the right of intifa’. The word istimta’ pertains to conjugal rights. They arise from the marriage contract.

3. Classification on the basis of complete and incomplete ownership.

The word al-milk is also used to qualify other legal categories that are related to ownership, but are not ownership, but are not ownership proper. The word al-milk or ownership is employed in three senses. Milk ar-raqabah (proprietary right), milk al-yad (possession), milk at-tasarruf (right of disposal).

Thus, milk ar-raqabah is ownership proper that includes both exclusive control and the right of disposal. Possession or milk al-yad consists of exclusive control and the right the right to keep others out of such control, but it does not include the right of disposal. Milk at-tasarruf involves the right to dispose of property on behalf of the owner. This type of ownership belongs to the guardian, the executor and the agent and with some restrictions to the mortgagee and the bailee as well.

4. Classification on the basis of primary and incidental rights.

Primary rights are associated with the property itself, while incidental rights are those that may be related to other property because of the primary rights. These incidental rights give rights to easement like the right of passage (haqq al-murur), the right to flow of the water (haqq al-majra), the right to water (haqq al-shurb), right to discharge rain water to another’s land (haqq al-masil). These rights correspond to easements in English law. An easement is to be enjoyed as in the past and cannot be enlarged or altered. It is loss by disuse.

Another right is known as rights of a neighbour (haqq al-jiwar). This right may also lead to the right of Pre-emption. The Punjab Pre-Emption Act 1991 defines right of pre-emption as a right to acquire by purchase an immovable property in preference to other persons by reason of such right.

The term pre-emption is usually used for the translation of haqq shuff’ah, it means the acquiring a vendor’s property for the price for which the vendor has sold it. The right of pre-emption comes into operation only when the vendor has actually sold the property for until the contract of sale has been entered into the matter resting solely upon his intention cannot be said to be free from uncertainty.

III. RIGHTS OF OWNERSHIP

One of the most pivotal and crucial issues is that of ownership of various elements of production. A hot debate is going on among scholars of the age and it is perplexing to pen down that no conclusive result has been achieved yet. There remains a gulf of difference on this theme.

a. True and Absolute Ownership

Some are of the view that actual ownership rests with Allah, being the Creator and the man holds property as a trust for that he is accountable. Acquisition and disposal of property are recognized on certain conditions laid down by Shariah. Absolute ownership of individuals is not according to tenets of Islam, because it belongs to God solely.

A few writers assert that Real Owner has given proprietary rights to the whole society and they are against individual’s rights of ownership, as has been depicted by Abdul Qadir Udah in this passage: “The society through its functionaries such as rules and councilors has authority to organize ways and means of utilizing wealth. All wealth belongs to Allah, but Allah has made it fr good society. The rule in Islam is that all rights belonging to Allah are for good of society which sits in authority over them and not individuals. The society can abrogate individual ownership of benefits of property subject to condition that suitable compensation is paid to owner of benefits involved. Though Islam allows ownership with limits, it authorizes society, as entity for enduring rights of God and for organizing utilization of wealth, to subject individual ownership of particular kinds of property to limits, when necessitated by public good. This may apply to ceilings on agricultural holdings or to urban property.

Sayyed Qutb and Maulana Maudoodi hold somewhat different opinions, however they declare that rights of ownership are allowed. But their emphasis is on ensuring of basic needs of every individual.

Abdul Hamid Abu Sulaiman describes in these words: “A strict equality in ownership of natural resources would require very frequent redistribution of those resources among members of society. This would be disruptive to economic activity and social relations. First alternative to avoid frequent redistribution and permit private ownership; second, to redistribute equally among members of society that part of income which is due to natural resources, thus achieving equality and justice.”

M.N Siddique remarks, “The individuals, state and society each have claim on property rights in view of the principle that Islamic state has jurisdiction over individual rights, being embodiment of God’s vicegerency on earth and representatives of people. This jurisdiction is however, functional, depending upon values and objectives cherished by Islam.”

b. Land Ownership

The claim for land nationalization is sought to be proved from these Qur’anic verses. Although there is no direct bearing to this matter, yet some writers put their contention on these passages.

“All that the heavens and earth contain belongs to Allah. Whether you reveal or conceal your thoughts, God will bring you to account of them. He has powers over all things. “ (2:284)

“Return to Our faith or We will banish you from Our land. We shall destroy wrongdoers and let you dwell in the land after them.” (14:13, 14)

“Unto Him belongs whatsoever is in the heavens and the earth and religion is His for ever. Will you then fear any other than Allah?” (16:52)

“For We shall inherit the earth and all who are thereon and they are returned unto Us.” (19:40).

“It is His, whatever the heavens and the earth comprise and all that lies between them and underneath the soil.” (20:6)

“He laid the earth for creatures, therein are fruits, blossom-bearing palm, husk covered grain and scented herbs.” (55:10-13)

The supporters of land nationalization argue on the basis of above mentioned verses and say that all land is owned by the ruler, being vicegerent of God and that individuals have no right of ownership. But they are not justified in it. According to God as He is the Creator of whole universe, even the very life of a Muslim is belonged by Allah. Hence, concept of land ownership is not refuted and moreover it is not confirmed that land is a national property.

The private ownership of land was a custom during and before the period of Prophet. The grants were made by the Prophet himself followed by four pious chalips. There are few reliable Traditions to this effect. Al-Quma bin Wail relates that his father said a piece of land was granted to him by the Prophet in Hadhramaut.

It is related by Abu Bakr’s daughter, Asma, that Prophet gave her husband, Zubair bin Awwam, a land piece in Khybar that had date-palm and other trees.

Urwah Bin Zubair narrates that the Prophet granted him one piece of land from groves of Bani Nadheer which had been made state land.

Umar bin Dinar is said to have related, “When the Prophet came to Medina, he granted some land to Abu Bakr and Umar, the Great.”

It is related by Abu Rafia that Prophet had granted a tract of land to some of his relatives but could not develop or cultivate it and during Hadhrat Umar’s reign, they sold it for 8 thousands dinars. He grant of this form of lands was called Iqta, being inheritable and this was common practice in Arabia.

It is established fact that Islam is not against proprietary rights of land. However, it disfavours the bad form of feudalism and landlordism, because there arises exploitation and centralization of land in few hands and then unequal of wealth which is followed by oppression and corruption, ending with disruption and destruction of a nation.

IV. CONCLUSION

Numerous verses in the Qur’an give a clear indication that everything is owned by Allah (God) and that property in the absolute sense belongs to Him, and to Him alone. However, the right of ownership vests in God alone does not mean that we as human beings do not have the right to own property, it simply puts this individual right of ownership within a broader context. Ownership is basically our responsibility as trustees of God on earth. It is clear in the Quran that there is no objection on the individual right of property. For instance, God tells the Prophet:

“Take from their property charity”. (A-Tawbah 9:104).

In this verse, God uses the term ‘their property’, showing that there is no contradiction between God’s ultimate ownership to the universe and our right as humans to own within the restrictions that God has provided.

One of the restrictions on property in Islamic law is the legitimate acquisition of property, as the sanctity and right to defend property has to be recognized. Another restriction is not to allow your use of your property to cause harm or problem against other people.The Prophet PBUH once said;

“One should not harm himself or others” (Narrated by Muslim).

This requires considering other’s benefit while using your property. For example, monopolizing people’s basic necessities is restricted in Islamic law.

Hibah (gift)

This is a token given voluntarily by a debtor to a debitor in return for a loan. Hibah usually arises in practice when Islamic banks voluntarily pay their customers a 'gift' on savings account balances, representing a portion of the profit made by using those savings account balances in other activities.
It is important to note that while it appears similar to interest, and may, in effect, have the same outcome, Hibah is a voluntary payment made (or not made) at the bank's discretion, and cannot be 'guaranteed.'{akin to Dividends earned by Shares, however it is not time bound but is at the bank's discretion) However, the opportunity of receiving high Hibah will draw in customers' savings, providing the bank with capital necessary to create its profits; if the ventures are profitable, then some of those profits may be gifted back to its customers as Hibah.

Wakalah (power of attorney)

This occurs when a person appoints a representative to undertake transactions on his/her behalf, similar to a power of attorney

Takaful (Islamic insurance)

Takaful is an Arabic word mean "guaranteeing each other’s". The central idea of Takaful (Islamic insurance) contract is that it is a financial transaction of a mutual co-operation between two parties to protect one of them from unexpected future material risk. In a Takaful transaction, the party called the participant (insured) pays a particular amount of money known as the contribution (premium) to the another known as Takaful operator (insurer) with a mutual agreement that the insurer is under a legal responsibility to provide the participant with a financial protection against unexpected loss, should it happens within the agreed period. However, in a case whereby the loss does not occur against t the insured within the specified period, the insured is entitled for the whole amount of paid-premiums together with the Share of profits made out of the cumulated paid-premiums based on the principle of al Mudharabah financing technique. In such a Tran’s action, both the insurer and the insured are mutually helping each other for financial protection. The concept introduced by Takaful is similar that of conventional insurance. Both of them are financial instruments that assist the unfortunate groups who are confronted with financial predicaments. These instruments are modern methods of shifting risks with a reward awarded to the parties that are willing to accept the exchange in these risks. The insurance concept, of "The fortunate many helping the unfortunate few" is a concept recognized by Islam. The surah Al-Maidah from the 2nd verse in the Al-Quran states:
"Help ye one another in righteousness and piety, but help ye not one another in sin and rancor" is regarded as the main source of how this concept of helping one another is inculcated by Islam.
It is the characteristics that demarcate Takaful from Conventional Insurance? In June 15 1972 Malaysian National Fatwa Committee conducted a research on the conventional insurance contract. The Malaysian National Fatwa Committee in its fifth conference decided that life insurance implemented by the current insurance companies as a muamalah is fasid (illegal/damaged) and is not in compliance with the Islamic principles under the 'aqd aspect because it contains elements of gharar (uncertainty), maisir ( gambling), and riba'.
Insurance is not a new concept within Islam. The principle of a person protecting himself against loss or misfortune is even described in the Qur'an through stories of some of the prophets (pbut). In Arabic this concept is known as "takaful". It is acknowledged that the foundation of shared responsibility or Takaful was laid down in the system of "Aaqilah", which was an arrangement of mutual help or indemnification In case of any natural calamity, every body used to contribute something until the loss was indemnified. Similarly, the idea of Aaqilah in respect of blood money or any disaster was based on the concept of Takaful wherein payments by the whole tribe distributed the financial burden among the entire tribe. Islam accepted this principle of reciprocal compensation and joint responsibility.

Principles of  insurance:

(1)Utmost good faith

As a client it is your duty to disclose all material facts to the risk being covered.  A material fact is a fact which would influence the mind of a prudent underwriter in deciding whether to accept a risk for insurance and on what terms. The duty to disclose operates at the time of inception, at renewal and at any point midterm.

Indemnity

On the happening of an event insured against, the Insured will be placed in the same monetary position that he/she occupied immediately before the event taking place.  In the event of a claim the insured must:

 Prove that the event occurred

 Prove that a monetary loss has occurred

 Transfer any rights which he/she may have for recovery from another source to the Insurer, if he/she has been fully indemnified.

(2)Subrogation

The right of an insurer which has paid a claim under a policy to step into the shoes of the insured so as to exercise in his name all rights he might have with regard to the recovery of the loss which was the subject of the relevant claim paid under the policy up to the amount of that paid claim. The insurer’s subrogation rights may be qualified in the policy.

In the context of insurance subrogation is a feature of the principle of indemnity and therefore only applies to contracts of indemnity so that it does not apply to life assurance or personal accident policies. It is intended to prevent an insured recovering more than the indemnity he receives under his insurance (where that represents the full amount of his loss) and enables his insurer to recover or reduce its loss.  

(3)Contribution

The right of an insurer to call on other insurers similarly, but not necessarily equally, liable to the same insured to share the loss of an indemnity payment i.e. a travel policy may have overlapping cover with the contents section of a household policy.  The principle of contribution allows the insured to make a claim against one insurer who then has the right to call on any other insurers liable for the loss to share the claim payment.

(4)Insurable Interest

If an insured wishes to enforce a contract of insurance before the Courts he must have an insurable interest in the subject matter of the insurance, which is to say that he stands to benefit from its preservation and will suffer from its loss. 

In non-marine insurances, the insured must have insurable interest when the policy is taken out and also at the date of loss giving rise to a claim under the policy.

(5)Proximate Cause

An insurer will only be liable to pay a claim under an insurance contract if the loss that gives rise to the claim was proximately caused by an insured peril. This means that the loss must be directly attributed to an insured peril without any break in the chain of causation

Principles of Islamic insurance:

First of all, the operations of Takaful must be in line with the Shari’ah principles. A Takaful operation may be held void as initio if any aspect of its operation is proven to be contrary to the Shari’ah principles. 

The operation of Takaful is generally based on the governing principles of al-Mudharaba, profits and loss sharing financing technique, which is an alternative to the interest (riba), based financing technique as adopted by the conventional insurance practices. 

The operation of Takaful practices is generally supervised by an independent body called the Shari’ah Supervisory Council.7 It is the duty of the council to advise the Takaful operator in any given organization on their operations for the purpose of ensuring that no aspect of the company operations involves any element which is not approved by the Shari’ah principles. In other words, the establishment of a Shari’ah Supervisory Council for every individual Takaful operator is a prerequisite prior to the commencement of the Takaful operation. 

It is also within the fundamental principles of Takaful operation to maintain utmost good faith in Takaful operations. This is because a Takaful policy can at any time be called in question should either party (operator or participant) be able to prove the counter’s breach of good faith in the material matters or facts of each respective policy. Therefore, the duty to disclose material facts or matters is not imposed only on the operator and also the participant equally. 

The policyholders (takaful partners) pay premium to assist and indemnify each other and share the profits earned from business conducted by the Company with the funds.

Takaful companies normally divide the contributions into two parts, i.e., donations for meeting mortality liability or losses of the fellow policyholders and the other part for investment. Accordingly, the clause of Tabarru is incorporated in the contract.

As to how much of the contribution is meant for mortality liability and how much for investment account is based on a sound technical basis of mortality tables and other actuarial requirements. Both the accounts are invested and returns thereof distributed on Mudarabah principle between the participants and the Takaful operators.

Takaful contracts may comprise clauses for either protection or savings/investments or both the benefits of protection as well as savings and investment.

1. The protection aspect of Takaful works on the donation principle according to which individual rights are given up to indemnify the losses reciprocally.

2. The savings aspect ensures that individual rights are protected under Mudarabah principle and the contributions along with profit (net of expenses) are paid to the policyholders at the end of policy term or before, if required.

Differentiate between Islamic insurance and insurance:

The fundamental difference lies in the fact that in the Takaful concept, the premium is paid on the basis of tabarru’. This changes the contract because with tabarru', it is the participants themselves who are carrying the risk and not the insurance company. The Takaful operator is clearly not the owner of the fund but truly its custodian. As such, the Takaful operator cannot use the contributions except as intended by the donors i.e. for mutual help. By including the concept of tabarru’, the element of gharar would be eliminated, which consequently eradicate maisir from the transaction. This is because with tabarru’, the contract is no longer that of exchange, thus eliminating the problem of deliverability. In addition, the tabarru' factor also inculcates the spirit of solidarity, brotherhood and mutual help. Takaful companies invest their funds in financial instruments, which are not forbidden by Islam. General Takaful companies maintain two separate and distinct accounts - one known as the Participants Fund and other Shareholders Fund. Takaful companies must have Shariah Supervisory Council to monitor their operation to make sure they do not engage in forbidden practices such riba;

Wadiah (safekeeping)

In Wadiah, a bank is deemed as a keeper and trustee of funds. A person deposits funds in the bank and the bank guarantees refund of the entire amount of the deposit, or any part of the outstanding amount, when the depositor demands it. The depositor, at the bank's discretion, may be rewarded with Hibah (see above) as a form of appreciation for the use of funds by the bank.

Islamic Law of Contract

DEFINITION

• Literally, the word “al-’Aqd” means to tie (between two ends), to fasten, to link together.

• In legal view, it has two interpretation either general interpretation or specific interpretation.

• In general term, it means anything that is intended by a person to do/perform; either based on his own will, eg,

  endowment (waqaf), divorce (talaq); or depended on wills of at least two [arties, eg, sale (al-bay’), marriage (nikah)

•Specifically ‘aqd means a connection of the words of one party (ijab) to the words of the other party (qabul) which

  constitutes legal implication on the subject matter.

‘AQD v. CONTRACT

• From the definition, the term ‘aqd is more or less the equivalent of the technical term of ‘contract’ in Western Jurisprudence.However, ‘aqd does not necessarily involve agreement (which is a necessary element in a conventional contract) because the term is also used to describe a unilateral juridical act which is binding and effective without the consent of the other party. For example: Talaq.Furthermore, in Western Jurisprudence a contract is only enforceable if there is a consideration that moves  from the promisee. On the other hand, in Islamic Law an ‘Aqd does not necessarily involve consideration. For example: Wasiah (wills), hadiah (gift).

• Additionally, the Western Jurisprudence defines contract as a promise or set of promised. According to Islamic Law a promise may not be legally enforced although it is strongly recommended by religious and moral values to be fulfilled. (Surah al-Saf 61:2) (However Hanafi School of Law is of the view that a promise coupled with condition is legally enforceable) Therefore a breach of promise to marry does not give a cause of action according to Shari'a but may be enforceable by civil law.

LEGAL AUTHORITY

Among the legal authority that show the recognition of ’aqd in Islamic Law as follow:• “O ye who believe! Fulfill all obligations (Surah al-  Maidah5:1)

• Similarly in surah al-Taubah 9:4, it states that “… So fulfil your engagements with them to the end of their term, for Allah loves the righteous.”

• From the hadith, the Prophet (PBUH) expressly stated that “Muslims are bound by their conditions (Narrated by Al-Bukhari), … except condition to make lawful what is unlawful and to make unlawful what is lawful (narrated as the continuance to the first hadith by al-Asqalani)

• According to Hanafis, the elements of ‘aqd include anything that manifests the meeting of two intentions either through conduct, gesture or  writing.

Therefore the elements of contract include only Ijab & Qabul. Some other matters are not considered as elements of a contract however their existence is necessary. For example it is necessary that there must be contracting parties in order to have ijab & qabul. Similarly there must be the subject matter upon which the parties have the agreement to indicate that there is the meeting of two intentions.

 SIGHAH

• Mutual consent of parties is the basis for formation of a contract. This is emphasised in the Qur’an, eg, in surah al-Nisa4:29 where it says: “O   you who believed! Eat not up your property among yourselves in vanity, but let there be among you trade by mutual consent.”Similarly the Prophet is reported to have said: “It is unlawful to take the property of a Muslim except by his consent.”However consent is an intangible mental fact. Therefore this intention must be manifested in sufficient form of words/conduct that indicates a definite intention to contract.

• Sighah is a method to manifest the intention to contract. It consists of Ijab & Qabul.

• Sighah is defined as the utterances that indicate the between the contracting parties.Prof. Dr. Ala’ Eddin Kharofa defines it as the utterances

expressing the wills of two parties, showing the purpose of contract ad bringing it into existence after it had been a hidden and unknown thing or intention.

• The contract is said to be concluded when the connection between the ijab (offer) and qabul(acceptance) takes place. (Article 104 of the   Mejelle).It is unanimously agreed that verbal communication will be the best way to manifest the consent of the contracting parties.

• The Malikis & Hanbalis accept as a sufficient manifestation of consent anything that is customarily regarded as indicative consent.

• The Shafi’i accepts writing as manifestation of consent.

• The Hanafis are of opinion that writing, conduct and even gesture are acceptable to manifest consent

IJAB

• The party who first manifests his willingness, by the use of the appropriate formula, to make a contract is said to be making an ijab.  This definition is similar to the word “offer” as used in conventional contract.

Others are of the view that ijab is the utterance that manifests the consent of the owner of the property (subjectmatter of the contract) either it comes first or later. Hence if a buyer in a sale of goods transaction offers to buy the goods from the seller by saying: “ I bought this book from you for 100”. To which the seller replied: “I sold that book to you for 100”.In this situation, according to Hanafis’ view, it was the buyer who

has said the ijab being the first person who manifested the intention/willingness to contract. On the other hand, according to the others’ view, the word of seller is the ijab since he was the owner of the book, though his utterance came later.

• When the ijab is made verbally, the classical jurists unanimously agreed that both present and past tense may be used to express a valid offer while words used to show intention to offer in future or to ask for confirmation are not enough. The reason given is because the contract for sale shall have immediate effect and this may not be reached unless the word used can accommodate this purpose However it need not be strictly interpreted especially as contract proposals need not take place through the use of Arabic language. Words such as “I have sold” is not the only

word to be considered as valid offer. Other words may be used so long as they reflect the intention of the offeror to make an offer.

This is especially in the light of the principle that in contracts, attention is given to the purpose and meaning, and not to the words and form.

The same principle will be applicable when an offer is communicated by writing as it is simply a mere substitution of verbal communication. Thus, when an e-mail sent offering a specific object for sale for a specific price, this amounts to a valid offer which will be binding on the offeror upon its acceptance by the offeree.

Gestures

represent an exception that may be used by dumb people. Article 70 of the Mejelle stipulates that for dumb people, a sign or gesture is equal to speech.

By conduct, a person may intimate his intention to contract. In Fiqh it is better known as  

This simply refers to the conduct of a seller, displaying commodities for sale attached to them its price and a simple statement such as “first come first served” (offer to sell).(Ijab according to all jurists) Likewise is the conduct of a buyer who takes the commodity and pays its

price (offer to buy) (Qabul, according to Hanafis) and in return to this, the seller delivers the commodity to the buyer without any expression of words. (Ijab, according toOthers).

QABUL

• What is uttered later by the other contracting party that indicates his agreement upon and consent to accept the offer made by the first party is termed as qabul (Hanafis)Thisdefinition is similar to the word “acceptance” as used in conventional contract.

Others are of the view that qabul is made by the buyer or the person to whom the subject matter of the contract is addressed regardless as to whether this comes first or later.Hence if a buyer in a sale of goods transaction offers to buy the goods from the seller by saying: “ I bought this book from you for 100”. To which the seller replied: “I sold that book to you for 100”. In this situation, according to Hanafis’ view, it was the seller who has said the qabul being the later person who manifested the intention/willingness to contract that is by accepting the offer. On the other hand,according to the others’ view, the word of the buyer is the qabul since the ownership of the book will be transferred to him although he was the first party to indicate the willingness to contract.

• Basically there is no specific proclamation or utterance that needs to be used to signify acceptance. Except in contract for marriage where the jurists are differed in opinion, generally there is no specific words or terms required to constitute acceptance (Art. 3 of the Mejelle)

• When the acceptance is made verbally or in writing,it is necessary that it does correspond to each element of the offer without any condition, limitation or modification (Art. 177 of the Mejelle) Otherwise it will unlikely be considered as acceptance although it may be so if the proposed modifications do not materially alter the terms of the offer.

• Acceptance may also be made through conduct For example, where there is an offer to buy, acceptance may take place by supplying the goods and likewise where there is an offer to sell and the commodity thus delivered, acceptance will be presumed once thecommodity is used.But conduct will not constitute acceptance unless it is clear that the offeree does the act with the intention (actual or apparent) to accept the offer. Silence may not however constitute acceptance. So,when the goods have been delivered, the offered is not obligated to return them to reject the offer. The offerror cannot bind the offerree owing to his failure to return the goods.

IJAB & QABUL

The above difference is merely the difference in the terminology which does not lead to any different legal consequence. This difference may have been the result of the normal practice whereby normally the seller, being the owner of the goods, will be the first person to make the offer to sell his goods and in replying to this offer, the buyer will agree to buy. In this situation, the difference of opinion will result in the same interpretation.

COUNTER OFFER

• Counter offer is defined as a statement by the offeree which has the legal effect of rejecting the offer and of proposing a new offer to the offeror.When an acceptance is communicated containing some modification to the original offer, this will amount to a counter offer rather than acceptance of the originaloffer.Islamic law similarly requires that acceptance shall "correspond" to all the elements of a standing offer.

However, unlike the position under common law or the law as applicable in Malaysia, Muslim jurists view that compliance may be either explicit or implicit. (Art. 177 of the Mejelle)

• By explicit it means the acceptance corresponds exactly to the offer, i.e. when the offeree absolutely accepts the offer in conformity with the terms of the offer. Acceptance is also made implicitly when it gives a better option to the offeror. For example when the seller offers to sell his goods for 500 and the buyer accepts this saying that "I took it for 550"

• As regards the latter, the common law position and that of the law generally see this kind of acceptance as a counter offer and there will be no contract at all formed on the basis of such communication.On the other hand, Muslim jurists are in the agreement that as long as the difference is for the betterment of the offeror, acceptance is taken for granted and effective. However, the contract only covers the terms as offered, i.e. from the above example, the price will be for only 500. This is binding upon both parties. The extra 50 is considered as another offer from the original

offeree/buyer that will only bind him once it has been accepted by the seller.( See Art. 178 of the Mejelle)

CONTRACTING PARTIES

• The contracting parties are the parties who exercise the sighah of ijab & qabul. In order to conclude a valid contract, the contracting parties must have legal capacity

• Al-Ahliyah/legal capacity has been defined by Muslim jurists as the ‘eligibility of a person to establish right for and obligation upon himself”.

There are some factors that may impede someone’s legal capacity. It can be categorised to two categories.

1. Involuntary Impediments or known as ‘Awaridh Samawiyyah that is the factors beyond one’s control. The factor exists without  the affected person’s choice. Eg insanity, imbecility (’atah), unconsciousness, sleeping,death illness. Due to lack of legal capacity makes these people cannot enter a valid ‘aqd.

2.Voluntary Impedimentsor also known as ‘Awaridh Muktasabah  that is the factors within one’s control.They exist due to the person’s own act and his choice. Eg drunkenness, prodigality (safah), insolvency. Since these factors exist due to these people’s own desire, their ‘aqd is valid although in some situations it may be suspended.

SUBJECT MATTER

Muslim jurists had laid down four conditions for the subject matter:

1. It must be in existance at the the time of the contract

2. It can be delivered

3. It can be ascertained

4. It must be suitable for transactions according to Shari'a

The subject matter must exist

.• Islamic law requires that subject matter must be in existence at the time when an ‘aqd is concluded. Otherwise an ‘aqd is void, even if the subject matter would exist in the future. Therefore the sale of the animal foetus yet to be born while it is still in the mother’s womb is void if the mother is not part of the sale.Exception is given to bay al-salam (ale by advance payment for the future delivery), bay al-istisna (contract of manufacture), ijarah (contract of hire) and musaqat (contract of irrigation) based on necessity and customs.

The subject matter can be delivered

.• Islamic law requires that subject matter must be able to be delivered to the contracting parties. Otherwise an ‘aqd is void. Furthermore the delivery must be possible without causing any damage to the subject matter, otherwise the ‘aqd becomes voidable. If the parties tolerate the damage, then the contract is valid.Hence, it is void to sell a bird on the sky, fish in the sea or runaway horse.

The subject matter must be ascertainable

.• Islamic law requires that subject matter must be ascertainable and known to contracting parties. Sufficient knowledge about the subject matter is necessary to avoid future disputes.If the subject matter of the ‘aqd is of different kinds or articles, it is necessary to determine individually. But if it is of similar articles, it is sufficient to determine one to these articles in order to attain knowledge of the subjectmatter.

The subject matter must be legal

.• Islamic law requires that subject matter must be of commercial value, otherwise an ‘aqd is void.Therefore the sale of the wine, blood, pork is void even if these articles are of value to others or according to civillaw.Similarly, the sale of items that can be acquired gratuitously without purchase, such as fish in the sea, bird in the air, etc, But once acquired, it can become the subject matter of transaction.

TYPES OF CONTRACT

• Contracts, looking at its characteristics, may be divided into 2 types, namely valid contract and invalid contract. This division depends on the existence or non-existence of its pillars, foundations and conditions.For Hanafis, however, the validity of legal contracts assumes the tripartite distinction between: Shahih (valid) if both its foundations (Asl) and attributes (Wasf) are in accordance with the law; Bathil (invalid, null and void) if one of its Asl is not in accordance with the law; and Fasid (irregular or voidable) if its Asl is in accordance with the law but not its wasf.

Majority Opinion :1-Valid          2-Invalid

Hanafis:                1-Sahih (Valid)   2-Bathil (Void) 3-Fasid(Irregular)

Contract is considered valid when all of its pillars (elements) and conditions are satisfied. A valid contract has the legal effects whereby the contract is binding upon the parties with immediate effect after the contract has been concluded.

Invalid contract as a contract which its foundation is not legally recognised. When one of the necessary elements of a valid contract is missing the contract will be then invalid. Hence, when one of the pillars of contracts or its conditions is not satisfied, the contract will have no legal

effect. No title may be passed neither the ownership or price of the goods. The best example of this kind of contract is the sale of dead animals, blood, liquor and pork.

•Bey' is Bathil when the pillars of the contract are breached, or when its cause is imperfect. If one or more of the pillars are breached, such as when the contract issues from an insane person or a person lacking in competence, the contract is Bathil as though it has never been formed (Ghayru Muta'aqqid). Similarly, if the underlying cause (Sabab) of the contract is dissolved, and it concerns the object of sale as, for example, when it constitutes one of the unlawful objects, then the contract will also be considered as Bathil. Void contract has no legal effects at all and it can never be validated.

Fasid contract,on the other hand, is defined as when something in the contract, other than the pillars or the foundations, is defective. In other words, the contract is lawful in respect of its essence, but not with respect of its quality. An example of this is when a defect or imbalanc (Khalal) occurs in the price. Thus a Fasid sale of a commodity is binding (Shahih) except for the irregular condition which constitutes the price; this renders the contract valid upon the passing of possession. The buyer must pay its value in a lawful form . Fasid contracts can be validated through their ratification by the interested party, or because of prescription of the action which obstructs their validity. It can also be invalidated through the nullification of contract by either of the parties to the contract before the invalidating factor is removed.It shall be noted that the distinction is only applicable in contracts having the effect of transferring the ownership/title; or the contract establishing the duty upon both parties to the contract. For example in a contract of sale, contract of employment, gift, loans, hiwalah, partnership, etc.. On the other hand, no distinction is drawn between a void and irregular contract where the contract does not relate to the transfer of ownership. The best example for this will include the contract of agency, wills and marriage. Similarly the contract relating to the transfer of ownership which does not give rise to obligation from both parties to the contract, e.g., divorce, waqaf, guarantee and oath, as no distinction may be drawn in these examples between the void and irregular contract.

CONCLUSION

• From the above, it is clear that ‘aqd may have similar interpretation to contract. However, its general definition governs wider scope than that of contract. Elements/Arkan of ‘aqd has been interpreted as the element that must exist for an existence of an ‘aqd. However, the majority jurists and Hanafis have different opinion in this regard whereby the former considers anything necessary either as part or merely relates to an ‘aqd hence include sighah, contracting parties and subject matter. On the other hand, the later only requires only the part of the thing itself, ie sighah.

• The Muslim jurists also differ in interpreting the word ‘ijab’ and ‘qabul’. However the difference merely relates to terminology and does not lead to any different legal consequence. • As regard to counter offer, the position of Islamic law is similar to civil law where the counter offer substantially modified the original offer. However, implicit acceptance is acceptable in Islamic law as when the offeree has accepted an offer with additional in favour of the offeror. Civil law  regards any modification as counter offer, hence terminates the original offer without distinction if the modification made is in favour of the offeror or otherwise.

• Unlike civil law that simply distinguish one’s capacity as a major and minor, Islamic Law distinguish the capacity to four categories depending on the stage of one’s age/maturity. Besides the capacity, it is also important to ensure the absence of any impediments as any of the factors may

affect the validity of the ‘aqd. Finally, there are four conditions that must be satisfied in a subject matter for an ‘aqd to make it valid ‘aqd. The

subject matter must exist, must be capable of delivery, must be ascertainable and must be legal/suitable according to Shari'a.

• The distinction is drawn between valid contracts and invalid ones is clear. Once the conditions for a valid contract are satisfied, obviously it is enforceable and legally binding upon the parties to it. It was in their treatment of conditions of substantive law upon which depended the validity of contracts that Muslim jurists made the distinction between void and voidable contracts. They analysed the constitutive elements which they called the foundation, without which a contract could not be validly concluded, and taught that when a basic or "intrinsic" condition was lacking, there could only be the external form or similitude of a contract, but that contract would be non-existent in law. Such an act would be absolutely null and void.

On the other hand, the basic constitutive elements of a contract may be there; but one of them may be imperfect or vitiated by an initial weakness. That contract would then be only voidable. The vice may be subsequently cured, the contract may be strengthened later on, and the cause of relative nullity would disappear. Or, the person with whom it rests the action to challenge the validity of the contract, may choose to expose the vice or the weakness, and the contract would be voided.

• From the above discussion, it is obvious that the majority of Muslim jurists had adopted quite strict interpretation in determining the validity of a contract. They viewed that one a contract is not valid, it will be rejected altogether. While the Hanafi jurists have adopted more flexible interpretation.