SHARIAH RULES IN FINANCIAL
TRANSACTIONS
Prof. Dr. Zainal Azam Abd.
Rahman
Islamic contracts from binding
effect perspective
• Sahih (valid contract) and the fulfillment of
pillars and conditions of validity
• Batil (void contract) and non-fulfillment of
pillars and major conditions of validity
• Fasid (defective contract): the Hanafi
theory of pillars of aqad being only offer
and acceptance
• Implications of being in the category of
fasid
Islamic contracts from mutuality of
exchange perspective
• Contracts with consideration take effect upon
valid formation of the contract: once duly formed
the implication and binding effects can be
enforced by the relevant parties
• For contracts without consideration, full and
binding effects will take place after delivery of
the subject matter (ain) to the other party
• Cancellation of contracts without consideration is
possible
Islamic contracts from desired
objective perspective
• Uqud al-Tamlikaat: to grant ownership and right
• Uqud al-Isqataat: to waive right or claim
• Uqud al-Itlaqaat: to widen limitation put by
contracts/conditions
• Uqud al-Taqyidaat: to limit freedom granted by
contracts and conditions
• Uqud al-Sharikah: to share ownership and
profit
• Uqud al-Tawthiqaat: to provide
security/collateral
• Uqud al-Ishtihfazat: to provide for safe-keeping
Islamic contract from construction
of the sighah perspective
• Uqud munjazah: contracts whose effects
can be enforced immediately after the
formation
• Uqud mudafah: contracts whose effects
are suspended to future time/events
• Uqud muállaq: contracts whose effects
depend on fulfillment or occurance of
certain conditions
Islamic contracts from the perspective
whether they are named or otherwise
• ‘Uqud al-musamma: contracts whose
names are known from earliest period of
Islamic law
• ‘Uqud ghayr al-musamma: new contracts
that do not come within the ambit of the
named contracts
• Whether acceptability depends on this
factor or not?
PROHIBITED ELEMENTS IN
CONTRACTS
• Duress( ikrah)
• Mistake (ghalat/khata’): as to parties,
subject-matters
• Inequality (ghubn): serious and nonserious ghubn
• Deception (taghrir): verbal and non-verbal
deception
• Illegal goods/assets
• Illegal motives/purposes
SALE-BASED PRINCIPLES
• Legal and illegal sales
• Al-Musawamah, al-amanah, almurabahah,al-tawliyyah
• Al-naqd, bi-thaman ajil/biltaqsit
• Al-salam, Al-Istisna’
• Bai al-dayn, bai al-wafa’, al-tawarruk, bai
al-inah
PROFIT-SHARING PRINCIPLES
• Sharikat al-amwal/al-milk: partnership based on
joint-ownership@musha’
• Sharikat al-uqud: partnership based on contract
• Al-Mudharabah: capital + management/labour
• Al-Musharkah: capital/mgt + capital mgt
-Inan: partners are agents
-Mufawadhah: partners are agents and
guarantors
-wujuh: credit reputation and assumption of
financial liability for credit obligation
= modern corporation?
LEASE-BASED PRINCIPLES
• The distinction between ayn
(corpus/physical componant) and manfaah
(usufruct/use/benefit/utility)
• Milk al-raqabah@ legal ownership
• Right to utilise/use
• Sale of usufruct or granting right to use for
consideration/price
• Granting of usufruct for free and iarah
FEE-BASED PRINCIPLES
• Ijarah ‘ala al-a’mal: contract of
service/contract for service
• Ajir khass: employee
• Ajir mushtarak: independent contractor
• Al-Wakalah bil ujur: hiring an agent
• Ujrat al-mithl: equitable
fee/salary/remuneration
BENEVOLENT CONTRATS
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Granting of ownership or usufruct for free
The need for offer and acceptance
The significance of acceptance
The significance of actual delivery of the
subject matter
• Binding effect of concluded aqad
• Practical application
SUPPORTING CONTRACTS
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Rahn
Wakalah
Kafalah
Hiwalah
Sarf
Wadiah/amanah
PRE-REQUSITE OF SHARIAH
SALE CONTRACT
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Shighat al-aqd and its conditions
-to express intention to form contract
-must be clear enough to express intention
-ijab and qabul
-implication on contract
Contracting parties and their legal capacity
-qualities that create capacity
-quality that negate capacity
Subject-matter of the contract
-must be in existence
-must be given full specification
-must there be possibility of delivery
-must be legal
Price paid or consideration
-can be certain amount of money
-certain quantity of goods
-certain type of services