We will start our discussion of Islamic Contract with three terminologies of Islamic Jurisprudence which are pertinent to be understood at the out set of this write up. They are:
It refers to a unilateral undertaking or promise extended by one person to another in which he promises to execute a contract in future. E.g. to sell or buy something in future. Since it is a unilateral promise, no question of future sale arises, as future sale is not allowed in Islam.
For e.g. “A” promises to sell his car to “B” within the next three months for Rupees Two Hundred and Fifty thousand (Rs. 250,000), this is unilateral undertaking or Wa’da.
Consider another example “A” has promised to purchase a Horse “B” for PKR 10,000/-. As a result of promise to purchase “A”, “B” has purchased a horse for PKR 8,000/- from the market to sell it to “A” for PKR 10,000/-. On the promised date of purchase. “A” refused to purchase the horse from “B”. As result of breach of promise by “A” the horse was sold by “B” in the market for PKR 7,500/- at a loss of PR 500. This loss of PKR 500 being the actual loss as a result of breach of promise by “A” be claimed by “B” from “A”.
An Aqd’ or contract is bilateral agreement that is executed between two or more parties.
Example: Contract of Sale, Contract of Marriage etc.
These are compensatory contracts where one person sells something to someone else for a price or compensation, for example, sale of pen “A” to ”B” for PKR 50/-.
These are non-compensatory contracts where one person gives something to someone else without any compensation for example a contract of loan gift.
Four essential elements are required to constitute a valid Aqd.
The contractors must not be mahjoor i.e. restricted to make a contract. Islamic Shariah identifies three types of people as Mahjoor.
Alfaz e Aqd should be absolute and immediate and non-contingent to a future event as a future contract is not allowed in Islam. Also, the wordings should be unconditional. If the wordings of the contract are conditional, the condition must adhere to the following rules of Islamic jurisprudence.
There are four basic rules for judging the validity of a contract:
Now a question arises what is the ruling of void condition, whether it invalidates the contract or not? The answers lie in detail about the impacts of void condition. Sometimes a void condition invalidates the contract and sometimes it does not invalidate the contract, however, the condition itself is annulled.
To elaborate this, Islamic jurists and scholars have written that the compensatory contracts (Uqood-e-Mu’awadah) like sale, purchase, lease agreements become void by putting a void condition. However, non-compensatory (voluntary) contracts (Uqood Ghair Mu’awadah) like contracts of loan (Qard-e-Hasanah), do not become void because of void condition, however, the void condition, itself becomes ineffective. For example, if “A” gives to “B” a loan with the condition of premium at the time of repayment, this condition of interest is void. However, this condition does not invalidate the contract, therefore all transaction done by this borrowed money, will be valid. But the condition of interest itself is revoked, therefore “B” is not liable for the payment of interest.
The subject matter should exist, should be valuable, usable under Shariah, capable of ownership & title and delivery & possession. Also, it should be specified, quantified and the seller must have its title and risk at the time of the sale. For example, a certain mobile phone.
It should be quantified, specified and ascertained at the time of executing the contract. For example, a price of PKR 300 should be noted that Ma’qood Bihi (Consideration) is not requisite for Uqood Ghair Mu’awadah.
We will discuss two more issues in Aqd’ here.
It means accumulation or mixing of two different contracts in such a manner that execution of one becomes contingency on execution of another. This is not allowed by the Holy Prophet صلی اللہ علیہ و آلہ وسلم in Hadith and it renders a contract void. This is the reason why hire purchase contract is not allowed in Islam.
It means the appointment of an agent (Wakil) on behalf of contractor to carry out a contract or trade on behalf of the principal. There are two types of wakalah contracts: