Theory of Contract (Aqd)

Humans need mutual support though trading, exchange and

other means but they always must respect each others rights:
The Quran says:
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O you who believe! do not devour your property among
yourselves falsely, except that it be trading by your mutual
consent.(04:29).
Therefore, wealth should not circulate in unlawful way among
a particular group of people.
Another verse says:
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And do not eat up your property among yourselves for vanities,
nor use it as bait for the judges, with intent that ye may eat up
wrongfully and knowingly a little of (other) people's property.
(02:188).

Another verse says:

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O ye who believe! Lo! many of the (Jewish) rabbis and the
(Christian) monks devour the wealth of mankind wantonly and
debar (men) from the way of Allah. They who hoard up gold and
silver and spend it not in the way of Allah, unto them give tidings
(O Muhammad) of a painful doom (9:34)
Another verse says:

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For the iniquity of the Jews We made unlawful for them

certain (foods) good and wholesome which had been lawful
for them;- in that they hindered many from Allah's Way;
That they took usury, though they were forbidden; and that
they devoured men's substance wrongfully;- we have
prepared - for disbelievers among them - a grievous
punishment. (04:160,161).
The word batil includes a range of prohibited dealings and
unlawful transfer of ownership from one to another without
anything in return.
Ex: Usury, gamble (maysir), ambiguity (gharar), giving short
measure and taking others property by false means.
- Cheating, fraud, bribery and breach of trust.
- Taking others property through misinformation, wrong
advertising and labeling.
- All transactions on prohibited (haram) things or even the
provision of means for people to spend on haram things.
- Any dealings that harm the society and prevent people from
prosperity and salvation in both worlds.
- Involvement of an ineligible person in transactions which
might lead to unbearable debts.
 Definition of Contract (Aqd)
Literally: to tie (rope), bind (two ends), fasten (belt);
covenant, agreement, fulfillment, undertakings, obligation
and determination.
Technically: A legally binding obligation which has
consequences for its subject.
The Quran says: }...{
O ye who believe! fulfill (all) obligations!... (05:01).
- Although fulfillment of promise is strongly recommended
by Quran (17:34, 61:2, 23:8) it still does not amount to a
contract, therefore, cannot be enforced by law.
- However, if promise takes a conditional form then it
becomes binding. Ex: if A tells B to sell a certain property to
C and assures him to be the guarantor if C does not pay the
price then his promise becomes obligatory.
It is similar to BBA and Murabahah used in Islamic banks.
Ex: A customer promises to the bank that if the latter
purchases a certain property he would buy the same
property and pay a certain amount for a certain period.
- However, the contract itself must be recognized by Shariah,
therefore, an agreement to steal or destroy a certain property
or goods is not recognized by law and as such
unenforceable.
- A contract should not contain any usury, ambiguity and
other prohibited conditions.
- Aqd in Islamic law includes unilateral contracts: creation
of endowment (waqf) or writing off loans (ibra) and
bilateral contracts: sale, rent, mortgage and partnership
contracts.
- Aqd is synonymous with Iltizam (commitment).
 Pillars of Contract
Prerequisite Mutual consent of the parties
The Quran says:
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O you who believe! do not devour your property among
yourselves falsely, except that it be trading by your mutual
consent.(04:29).
The Hadith says: (
)
It is unlawful to take the property of a Muslim except by his
consent (Ahmad)
- Consent is a hidden phenomenon, therefore, the scholars had
to introduce detailed principles that would indicate the
consent of both parties.
 Majority of schools:
1) Expression (sighah) - includes offer and acceptance
2) Contracting parties (al-aqidan)
3) Subject matter (mahal al-aqd)
Hanafis
- Offer and acceptance only
1) Expression (sighah)
- Through verbal communication or spoken words are
preferable but no specific phrases are required.
Any phase or words used in a contract should show a
definite and present intention to form a particular
contract (waqf, sale, mortgage, rent.)
- Words used in a contract must be either in past tense
or present perfect.
No future or present tenses mere promise.
- Consent may be inferred from: conduct, gestures
(stock exchange), written offer and acceptance (must
be clear, in a formal way and signed or ATM) or any
other method accepted by customs of people.
- It may also be without words = Muatat (Ex: buying
an item with a price tag).
 Conditions of Offer and Acceptance

a) Clarity:
In order to avoid uncertainties and ambiguities (gharar) words
used in a contract should indicate and express the consent
of both parties with certainty.

b) Conformity of offer with acceptance:

The acceptance should correspond to the offer (ex: two
computers are offered for RM 3000 the buyer is not
allowed to buy one of them for RM 1500; if an item is
offered for sale in RM the buyer should not suggest other
currencies)
c) Continuity between offer and acceptance
- Must be done at the same bargaining session
(majlis al-aqd).
- The session of contract: period of time in which
offer is made, negotiated and accepted while both
parties remain in the same session.
- However, it is not necessary for the parties to be in
the same place, it could be done through telephone.
- Both parties should reach an agreement during the
bargaining session.
- Acceptance after parting is not valid, because the
offer is ceased to exist. Instead it will be considered
as an counter offer.
Bringing in unrelated topics after an offer was made is an
indication of willingness to avoid the contract, therefore, the
acceptance made after this interruption is not valid.
- Due to rapid changes on the market the offer may be
restated or may remain as in previous one.

- Majority of schools: an offer can be withdrawn at any time

before the acceptance takes place.

- Malikis: an offer cannot be withdrawn within the session

until the offeree accepts of rejects it. So the offeror is bound
by his offer untill it is accepted or rejected or the session is
over.
Hanafis and Malikis:
A contract is binding once the offer and acceptance
took place though they remain in the same session.
Shafiis and Hanbalis:
The contract is valid and possible as long as they have
not parted. Therefore, each of the parities has right
to break the contract while in the same session.
The difference is because of the Hadith:
The two parties to a sale still have the option as long
as they have not parted
Hanafis and Malikis: before offer and acceptance
Shafiis and Hanbalis: actual parting
 2) Contracting parties (al-aqidan)
Ahliyyah: Legal capacity of a person to establish rights for
himself or to undertake obligations.
- Therefore, consent of child or lunatic is NOT accepted.
a) Passive or Receptive Capacity (ahliyyah al-wujub)
- Incomplete capacity: ability to receive rights but not
obligations (ex: foetus provided he is born alive ) = share
in inheritance, will or waqf as a beneficiary. However, he
is not entitled to any rights which require acceptance such
as a gift in favour of foetus.
- Complete capacity: rights + obligations from birth till
death. In case of children, their guardians will act on behalf
of them while entering any contract. Children are under
obligation to pay Zakat, Zakat Fitr and taxes.
Hanafis: Zakat is a type of worshipping, so children are not
obliged to pay Zakat since they are not obliged to pray until
they reach the age of majority.
Majority of schools: It is not imposed on the person of the
child but on his property. However, it is still must be done
through his guardian.
- Obligations received by child do not include criminal
liabilities as he can not be punished for crimes he committed.
b) Active or Legal Capacity (ahliyyah al-ada)
- Capacity of performance is the most important element in
determining the validity of a contract. A person must have
an ability to manage his wealth, exercise his rights and
undertake obligation in the way recognized by Shariah.
The Quran says:

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Make trial of orphans until they reach the age of marriage; if
then ye find sound judgment in them, release their property
to them; but consume it not wastefully, nor in haste (hurry)
against their growing up. If the guardian is well-off, Let him
claim no remuneration, but if he is poor, let him have for
himself what is just and reasonable. When ye release their
property to them, take witnesses in their presence: But all-
sufficient is Allah in taking account (4:6).
- Puberty and maturity (prudence) are two principal elements
for the capacity of performance.
- Hanafis: 18 (male) and 17 (female); Majority: 15 for both.
Hanafis and Malikis:
A distinguishing child (Al-Sabi Al-mumayiz ) (8 puberty)
has an incomplete capacity of performance, however, he can
distinguish between good and bad and, therefore, he can
conclude (without permission) contracts which are
beneficial for him such as accepting gifts or will.
- He cannot give gifts or become guarantor for someones
debt. But he may conclude contracts such as sale, purchase,
hire, partnership etc with the permission of his guardian.
Shafiis and Hanbalis:
A distinguishing child does not have requisite capacity,
therefore, he cannot enter into any contract with or
without permission of his guardian. However, his
guardian may conclude contracts on his behalf.
 Obstacles to capacity or Restraints (Hajr)
- Restraining someone from dealing with his property.
The Hadith says:






The actions of three categories of persons are not accounted
for vis--vis a sleeping person until he wakes up, a minor
until he attains puberty and an insane person until he
regains his sanity (Abu Daud, Tirmizi, Baihaqi).
The factors which may disqualify him automatically:
minority, insanity, intoxication and idiocy.
By courts decision: prodigality, insolvency and death
illness.
Restraints are imposed to protect the rights both parties: the
restrained person and the other party.
 a) Insanity:
It is when a persons mental capability is affected. He cannot
make rational decision, therefore, his contract is invalid.
Insanity may be continuous and non-continuous. A contract
made by a person who is not suffering from continuous
insanity is considered valid.
b) Imbecility (weak-mindedness) or Idiocy (matuh)
Inborn weak and incapable state of mind. He is inconsistent in
his decisions and behavior. His speech is confused and has
a weak understanding.
His status is the status of a child who could distinguish
between good and bad. Therefore, he may perform
contracts which are in his interest (gift, will etc) without
permission from his guardian.