LAW 4010 Assignment: The feasibility of incorporating the Islamic law of contract principles in current common law system.

Associate Prof. Dr. Siti Salwani Razali Sect 1

1010718 Siti Nur Aina Zailan 1014752 Nur Hanisah Jaliluddin 5/2/2013

Contents Table of Content Introduction The elements of Common Law contract The elements of Islamic Law contract

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Conclusion and Recommendation

References Glossary

20 21

Introduction

Kharofa stated that the word aqd (contract) in Arabic language means tying tightly, as in tying a rope. Arabs used the word to speak about firm belief or willpower. They used to say aqd al ahd to mean make a covenant and aqd al yamin to mean give an oath. Al'Aqd carries the meanings of covenant and fulfillment, as we read in the Quran surah Al Maidah verse 1 the meaning: Ye who believe! Fulfill (all) obligations. Lawful unto you (for food) are all fourfooted animals, with the exceptions named: but animals of the chase are forbidden while ye are in the Sacred Precincts or in pilgrim grab: for Allah doth command according to His Will and Plan. In Islamic jurisprudence the word contract is used to mean an engagement and agreement between two persons in a legally accepted, impactful and binding manner. Moreover, the definition of Islamic law of contract also 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. Under Common law, a contract is an agreement having a lawful subject matter entered into voluntarily by two or more parties, both parties intends to create one or more legal obligations between them. The elements of a contract are offer and acceptance by proficient persons having legal capacity who exchanges consideration to create mutuality of obligation. Stoljar was described, a contract as when there are mutual promises between two parties to the contract, each party being both a promisor and a promise.

As we see that Adq definition has 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 promise. On the other hand, in Islamic Law an Aqd does not necessarily involve consideration. For example: Wasiah (wills), hadiah (gift).Even the adq and contract, equivalent in their term the feasibility for incorporating Islamic contract of law with current common law may be possible due to several aspects from common law practice that are contradict with Shariah compliance. For instance, the uncertainty that involve when binding a contract.

The elements of common law contract As we know, to conclude into some contract, the essential elements must be followed by the parties who are involved in the contract. Therefore the elements are must have a proposal, acceptance from the parties, consideration and lastly intention to create legal relation. When one or more of the elements are missing, the agreement cannot become a contract and will not be enforceable by law.

The elements of Islamic law contract (Aqd) From Islamic law perspective, the elements of contract involved to binding legal contract are sighah (Ijab & Qabul), contracting parties and subject matter. These elements were agreed by the majority of scholar while only Hanafi stated that the elements of contract in Islam were Ijab & Qabul which mean offer and acceptance. Some issues were arising where by the contract of common law practice lead to uncertainty. There are two aspects of the issue of uncertainty. Firstly, the language may be too vague in which case the court is likely to hold that there is no concluded agreement, the contract is void for uncertainty. The second aspect is that an unclear agreement and also incomplete. Therefore, the contract is void. In Islamic law practice, Quran explicitly forbid all commercial transactions that involve injustice. The Prophet has clearly forbidden gharar (uncertainty) and jahalah (lack of knowledge) which in contract is characterize by an unspecified element of quality, quantity or price. Islamic law of contract contribute some advantages toward human kind especially Muslim which are contracts in Islam-derived law fully respect the high moral principles of values expected of all Muslims. In addition, Islamic contract law is regarded as a product of divine intervention and has been in use for many centuries across the North Africa, the Middle East, and Asia. Then, contract law in Muslim countries supports only transactions which would be classified as ethical in the West. However, they also have disadvantages involve in Islamic contract law where by it can be highly complex, both in terms of its jurisprudence and in its application. Besides, technological innovations such as fax and email systems have created some grey areas as to what constitutes a single session of contract discussions. Therefore, careful consideration needs to be given to the implications of one

party failing to honour the contract, given that Islam prohibits any exploitation of another partys genuine misfortunes.

Above discuss about the comparison of man-made law and Shariah law that from Islamic point of view if we relate with current issue of contract, Islamic law contract is more to take care the right of human kind. The dishonesty in made of contract is prohibited by Allah. Moreover, by being sincere and honest will be rewarded by Allah S.W.T.

Next, the difference between Common Law and Islamic Law as regards to the issues in contract is that under Islamic Law there is a unique doctrine of mistake which has appeared to become a main solution to many issues concerning the contract. The mistakes are divided into three which are common mistake, mutual mistake and unilateral mistake. Both Common Law and Islamic Law concern about the situation due to if it happened while contract made, it can become void when mistake take place. Beside, regarding the legal capacity, in Islamic Law the parties to a contract are those involved in an agreement reached through the making of an offer and an acceptance. The ability to contract lies in the extent of ones capacity. Capacity is one of the elements of 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. Islamic law differs from the Common Law in term capacity known as ahliyyah which means ability. A person who has the ability in a certain area is capable of performing a certain act. However, in Common Law of contract, capacity is defined by Harold F.Lusk as the term capacity as used in law denotes the ability to perform valid acts that is the ability to incur liability or acquire legal right. Generally, every person is competent to enter into contract. The law, however, imposes limitation upon the capacity of some persons to them by a promise or to enforce a promise made to them. Under section10, all agreements are contracts if they are made by the free consent of parties competent to contract and under section 11 every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.

Nowadays, many sector especially Bank has practice the Islamic Law of contract that their product is offer with compliance of Shariah, for example AITAB or Al-ijarah Thumma Al-Bay is (a contract of leasing ending with sale) is widely adopted as an instrument to be used in motor vehicles financing. In general, this contract still do not has the specific act yet, however they are using act of Hire Purchase from Common Law by integrate into Islamic though. Islamic bank product still a something new in the society even though their fundamental of thinking is exist long ago in the religion itself. What is happened in the practice for the current time most of banks practice the Common Law. Therefore, it shows the Islamic Law of contract can merge into practices of Common Law as long as it not conflict with the Shariah compliance. In contrast from the practice of commercial bank, their contract of law for instance in agreement of loan, the payback payment was involve with usufruct or we know as riba. In Islam practicing riba is definitely prohibited by Allah S.W.T. Literally riba mean excess, increase, expansion and growth. Technically every excess in return of which no reward or equivalent counter value is paid a predetermined excess or surplus over and above the loan received by the creditor conditionally in relation to a specified time period a forced "increase of value" in "the medium of exchange" that is loaned. Allah Strongly Condemns and Prohibits Riba as:

O you who believe! Observe your duty to Allah, and give up what remaineth (due to you) from usury, if you are (in truth) believers. And if you do not, then be warned of war (against you) from Allah and His messenger. And if you repent, then you may have your principal (without interest). Wrong not, and ye shall not be wronged. (Al-Baqarah: 278-279)

Prophet Muhammad S.A.W also condemns riba as stated in hadith below:

The Prophet s.a.w. condemns those who take riba, give riba, witness to riba (transaction) and the writer of the riba transaction All jurists agree that riba is prohibited (haram) Prohibition of riba is evident both in Quran and Sunnah. Rationale or reasons for the prohibition of riba so as to better appreciate the wisdom behind the injunction are firstly due to the element of injustice in financing productive activities, second the element of exploitation in financing consumption by the rich toward poorer. Third, the inconsistent with Islams perspective on debt, contribute to negative effects of a credit society, negative effects on production, negative effects on distribution and etc.

References Islamic Law of Contract Malaysian business Law