Islamic Law of Contract
{
Muhammad Aamir
Shariah Consultant
Al Mostaqeem Business Consultant
Types of commitment
‫وعدہ‬
(unilateral
promise)
‫عقد‬
‫مواعدہ‬
(contract)
(bilateral
promise)
Unilateral
)‫(وعدہ‬
It means promise.
 It basically refers to a unilateral
Undertaking or promise extended by one person to
another in which he offers to do something in
future.
Example:
 A promises to sell his car to B within the next 3
months for Rs.2.5 lakh, it is a unilateral undertaking
or wa’adah.

Unilateral
)‫(وعدہ‬
Enforceability:
 The consensus of present shariah scholar is that wa’da is
enforceable by law until and unless the promisor is not in a
position to fulfill it.
 In this case, if it is not due to any of his negligence then he has
to make good the loss to the promisee.
 For example in case where A promises to sell a horse to B and
the horse dies. But if it is due to his negligence then he has to
make good the loss to the promisee. For example: A promises
to sell a horse to B for Rs. 10,000 within the next month and
subsequently sells it to c before the month elapses.
Bilateral promise
)‫(مواعدہ‬
It means bilateral undertaking (promise) or
agreement.
 According to majority of the sharia scholars,
muwa’ada is not allowed in situations where aqd is
not allowed (e.g. forward contracts) and thus is not
enforceable by law.
 According to the some scholars of the sub-continent,
Muwa’ada is enforceable by law they argue that some
times Mua’adah is genuinely required, for example,
importer/exporter hedge foreign exchange.

Bilateral promise
)‫(مواعدہ‬
Since future contract is not allowed in Islam they can
hedge through bilateral promise to sell or purchase
on a future date for genuine purposes. However,
this procedure should not be adopted for
speculative transaction and or short selling.
 The difference between future contract and bilateral
promise is as follows:
 Unlike future contract, the contract in Muwa.ada is
not executed at the time of signing the agreement.
There fore a separate offer & Acceptance would be
required.

Contract
(‫)عقد‬
Tying Tightly
Contract
(‫)عقد‬
It means that an agreement
between the parties where
the offer is made and
acceptance is conveyed.
Types of Contract
‫معاوضہ‬
(with consideration)
‫ تبرع‬/ ‫غبر معاوضہ‬
(without consideration)
E.g. contract of sale &
purchase, ijara, Musharakah,
Mudarabah etc.
E.g. contract of loan ,
ariyah, wadiah
‫ضمنیہ‬
( supplementary/ supporting
contracts)
E.g. Mortgage, grantee.
Pillars of Contract
Wording
Subject
Matter
Parties
Wording
Verbal
Written
Action
Session
Unconditional
Seegha
Clear
Subject Matter
Lawful
Existent
Deliverable
Specified
Quantified
Compensation
Parties
Eligible
Sane
Mature
Legally
Allowed
Conditions in Contract
Against the
basic
objective
Not Against the basic
objective
Free Delivery
Market
Practice
One year free
service
Not Market
Practice
Not Favors
Favors
Charity on
Transaction
Get benefits
of subject
matter
With Consideration
Partnership
‫۔ مشارکہ‬1
‫۔ مضاربہ‬2
Exchange
‫۔ بیع‬1
‫۔ اجارہ‬2
Summary

A contract, whether it is a sale contract or Ijarah contract or
partnership contract, should conform to these basic rules;

Violation of these rules make the contract unacceptable to
Shari'ah;

As a matter of principle a contract in one sector may differ in
application of these rules from other contract in other sector;

Oil sector has different meaning for specification and
quantification from what sugar industry has;

Market norms of every sector are the decisive factors in this
regard;
ISLAMIC
{ SALES
CONTRACT
ISLAMIC SALES CONTRACT

Definition of Sale


Exchange of Mal with the Mal.


Exchange of thing of value with another thing of value with
mutual consent.
Maal means valuable thing which can be taken into possession
and can be hold on for a little time
Comprehensive Meaning of Sale

Every thing which has a value and of which there is a sale and
purchase norm available
‫‪Types of Sale‬‬
‫بیع باطل‬
‫بیعصحیح‬
‫بیع مکروہ‬
‫بیع فاسد‬
‫‪Nature‬‬
‫‪Of‬‬
‫‪Contract‬‬
Types of Sale
‫نافذ الزم‬
• Transaction
Done
‫نافذ غبر الزم‬
• Any
Condition
‫بیع صحیح‬
‫موقوف‬
• Be related
to someone
else
‫‪Types of Sale‬‬
‫بیع مساومہ‬
‫بیع مرابحہ‬
‫بیع تولیہ‬
‫بیع وضیعہ‬
‫ثمن ‪P r i c e /‬‬
‫‪Types of Sale‬‬
‫بیع مقایضہ‬
‫بیع صرف‬
‫بیع سلم‬
‫بیع مطلق‬
‫‪Subject‬‬
‫‪Matter‬‬
Elements of Valid Sale
Wording
Contractors
Subject Matter
Price
Delivery
Void Sale
‫بیع باطل‬
A sale that does not meets some or all basic requirements
laid down by Shari'ah for its contractual nature;
A sale
that
executed:
• By ineligible parties; or
• For exchange of a
impermissible thing; or
• For a thing which is not
owned by seller; or
• For a thing which is not
deliverable;
Hung Sale
‫بیع فاسد‬
– A sale that meets basic requirements of its contractual nature
– but contains an impermissible element;
A sale that executed:
•With element of Gharar;
•For an unspecified thing; or
•With unknown price;
•Conditionally or contingently;
•Sale of one Toyota corolla from a lot of cars with
explaining the specifications;
Disliked Sale
‫بیع مکروہ‬
Sale is valid but not liked due to certain conditions like:
Sale after
juma azan
Sale after
hoarding
Interruption
in an
ongoing deal
between two
Agency (‫)وکالۃ‬Contract
‫‪‬‬
‫التفویض و االعتماد علی الغبر (ف قہ المعامالت)‬
‫‪‬‬
‫رپسدرکان‪،‬اامتعدرکان‪،‬اےنپاکمےکےئلیسکوکانبئرقمررکان‬
‫‪‬‬
‫تعاونوا علی البر والتقوی وال تعاونوا علی االثم والعدوان (المائدۃ)‬
‫‪‬‬
‫وہللا فی عون العید ماکان العید فی عون اخیہ (صحیح الیخاری و مسلم)‬
‫‪‬‬
‫فال ت کلنی ا لی نفسی (صحیح ابن حیان ‪)970‬‬
‫‪‬‬
‫رسول ہللا صلی ہللا علیہ وسلم نے‬
‫‪.1‬‬
‫میکحنبزحامریضاہللہنعوکرقابیناکاجونررخدیےنےکےئلاانپولیکانبای‬
‫‪.2‬‬
‫رضحتاوبرکبدصقیریضاہللہنعوکجحےکزامےنںیماانپولیکانبای‬
‫‪.3‬‬
‫زوکۃیکووصیلےکےئلاحصہبرکامریضاہللمہنعوکاانپولیکانبای‬
Elements of Agency
Principal )‫(مؤکل‬
Agent)‫(وکیل‬
Types of Agency
Restricted
Un
restricted
Compensatory
Non Compensatory
Agency Contract
A person cannot become agent of both parties in a
contract
All rights and obligations will be on the principal
(‫ )مؤکل‬from the contractor/agent.
1.
2.
1.
all rights and responsibilities will remain with the
agent.
3.
1.
4.
5.
6.
7.
nikkah(contract of marriage)
Agent buy a car and doesn't disclose his agency
If principal/agent dies then the contract will end
If principal suspend the agent and inform him
If agent denies from the cause
If the purpose of agency has been fulfilled
Agency in Murabaha
Agency Agreement is not the condition the bank can
make direct purchases from the supplier and
through third party, agency agreement is required.
 Goods must be specified in the agency agreement.


Specific agency
When the purchase of commodity is not of consistent nature.
Master /global agency
When the purchases are on continuous basis

Wakalatul Istismar
)‫(وکالۃ االستثمار‬
Portfolio management or investment agency contract.
In this contract the investor gives his capital to
investment manager to invest into the various
specified investments, such as Equity, trade,
Murabahah, Ijarah, commodity trade etc.
 The investment agent is not profit & loss sharing,
rather it is fee based contract.
 The compensation of the agent may be a fixed
amount lump sum or based on percentage of
investment.

Wakalatul Istismar
)‫(وکالۃ االستثمار‬



The investment agent may be given a performance bonus
for good performance or to achieve a target return.
The investment agent is given the specified fee. Whether
the business is on profit or loss. The investment agent is
considered as Ameen(trustee) of the assets of investment.
The investment agency contract is used these days in the
fund management, such as Murabaha fund mutual fund,
equity fund, property fund etc.
Guarantee )‫ ضمان‬/‫(گارنٹی‬
Letter of
guarantee
(L/C
Letter of
credit (L/C
Securities
Promissory
note
Bonds
Securities
Mortgage

Collateral
Hypothecation
All the above mentioned forms of guarante and/ or securities are
allowed against a debt.
 All permissible liquid/illiquid asset can be mortgaged.
 These securities are not allowed in case of Amanat such as
musharakah, Mudarabah or equity etc.
 However, if Ameen’s misconduct or misusage is proved, he is liable
for the loss of asset, therefore, to save from such a case a security
may be demanded.
Securities
Any income of secured/collateralized asset should be
given to the mortgagor.
 Interest based securities cannot be used as collateral.
 Security cannot be charged more than the due amount.
 Floating charge is also allowed in shariah.

‫حزاکم ہللا خبرا‬
HAVE A FABULOUS DAY

End