Question

1.Discuss valid, void and voidable contracts in Islamic commercial law. (6marks)

2. Describe three (3) elements for al-ahliyyah al-ada’ al-kamilah to establish a valid transaction. (9marks)

3. Discuss four (4) conditions of a valid contract pertaining to the subject matter

of Islamic sale of contract.

4. Discuss two (2) rationales of hikmah behind the prohibition of riba in Islam. (6

marks)

5. Define these following terms.

i. Riba al-buyu’

ii. Riba al-Fadhl

iii. Major gharar

iv. Minor gharar

6. Define the mal ghair al-ayn in relation to property.

7. Discuss five (5) categories of al-mal’ ayn (tangible property) in Islam and

support your answer with relevant examples.

8. Differentiate two categories of ownership and suggest two methods of the

acquisition of the complete ownership

Subject: fiqh muamalat

Answer 1

1) Valid Contract: For a contract to be deemed valid, as per Islamic commercial law, four elements have to be met. The 1st element of valid contact involves the competency of offeror and offeree. As for the parties to a contract, they must be legally competent to enter into a contract. The 2nd element of valid contact invovles offer (ijab) and acceptance (qabul). Offer means a specific action that reflects consent or willingness of its maker that presumed from the word first uttered by one of the contracting parties. The 3rd element contract is subject matter (mahal al-‘aqd). Subject matter (wealth in commercial transactions) is defined as something which can be secured for use at the time of need. A contract has to have a place or reference (mahal al-‘aqd) which is the subject matter of the contract. The 4th element of valid contract is legal capacity (ahliyyah). Capacity is one of the elements of a contract for the purpose of acquiring legal rights and mutual benefits and to facilitate the imposition of the obligations on the parties. The right to contract and the obligations can only exist where there is capacity to contract.

Void Contract: A contract shall be deemed void if one of its major conditions is not fulfilled. A void contract does not confer any rights or transfer of property and cannot be validated by consent as well as cannot confer any beneficial consequences. In a commercial transaction, the buyer in certain circumstances has an option either to fulfill the contract or to make it void for the existence of defect in the goods.

Voidable Contract: On the other hand, voidable, if conditions of lesser importance, such as specifications of the subject matter, are not fulfilled. Incomplete but the parties has the free option to either continue or rescinding it. If the contract is caused by a coercion or a fraud or undue influence, it would be a voidable contract.

2) The three elements of al-ahliyyah al-ada’ al-kamilah to eshtablish a valid transaction are:

a) those who have legal capacity (ahliyyah)

b) those who have authority towards the contracting parties, i.e. guardianship (wilayah)

c) those who are given authority by the contracting parties under contract of agency (wakalah) (and not unauthorised agents

3) Four conditions of a valid contract pertaining to the subject matter of Islamic sale of contract are stated below:

a) Existable: The subject matter of sale must exist at the time of sale. Thus, a thing which has not yet come into existence cannot be sold. If a non-existent thing has been sold, even with mutual consent, the sale is void according to shari’ah. Eg. ‘A’ sells the unborn calf of his cow to ‘B’. The sale is void.

b) Valuable: The subject of sale must be a property of value. Thus a thing having no value according to the usage of trade eg. a leaf or a stone on a roadside cannot be sold or purchased.

c) Usable: The subject of sale should not be a thing which is not used except for a haram purpose, like pork, alcohol etc.

d) Capable of ownership/title: The subject matter should not be anything, which is not capable of ownership/title for eg. sea or sky.

4. The two rationales of hikmah behind the prohibition of riba in Islam are:

a) Ensure full consent and satisfaction of the parties in a contract: Full consent can only be achieved in full disclosure and transparency and through perfect knowledge from contracting parties of the counter values intended to be exchanged.

b) Unlawful appropriation of other people’s property: Considering the serious dimensions of fasad and akl bil-batil to which riba has been related, the message seems to be: charging interest belongs to a mind-set that leads to disruption of civil society.