Shariah Requirements in the Contracting Parties

8/12/2019 Shariah Requirements in the Contracting Parties

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THIS ASSIGNMENT IS A PARTIAL FULFILLMENT

FOR SH1002

CERTIFIED ISLAMIC FINANCE PROFESSIONAL (CIFP)

INCEIF

Student Name: FASHOLA OLAYINKA

NURUDEEN

Student ID: 1100275


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Question:

Discuss the main Shari`ah requirements in the contracting parties in order to have a valid

contract.


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1.0 I ntroduction.

The philosophy of law on Islam differs from the western philosophy of law quite

significantly. The Islamic philosophy says this world was created by only one God known as

Allah and all materials on earth and in the universe were created by Him and He alone

managed this creation. There were angels to help him but without the help of angels He was

just as capable of accomplishing this monumental task without any problem in whatever way

He wished and planned.

Allah has created this earth and all things therein. Among the creatures on earth, the best

creation of Allah is the human being (known as ashraful makhlukat in the Arabic terms)

which is mentioned in the religious book of Muslim known as the Quran. The Islamic

Scholars accept this philosophical concept of creation of the human being without a doubt

and the Islamic philosophers (known as Ulama) say that Allah has provided all the basic

principles of law in the performance of a social conduct in the Quran which must be applied

in the society to act in a civilized manner at all times. The legal principles which have not

been provided in the Quran or hadis (the sayings and deeds of the Prophet Muhammad), are

left to the human being to interpret and act upon them accordingly based on the precept of a

civilized society. The government through the Parliament can make the necessary laws for

the society but these man-made laws will not be contradictory with the basic legal principles

provided in the Quran and the hadis. This is the basic concept of the Islamic legal philosophy.

The Islamic religion emphasizes on the importance of the law of contract. The Islamic law of

contract has detailed provisions to ensure viable business transactions between the

companies. Islam only prohibits earnings through usury or interest in business as clearly

mentioned in the Al-Quran. Allah (God) says in the holy Quran: Taking interest on loan is

prohibited for you but doing business is permitted for you(The Quran, Surah (Chapter) 2,

Verse 275.) This verse


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of the holy Quran is exhorting the business community not to lend money with a fixed rate of

interest. As a matter of fact, it encourages the rich people to give interest-free loans (qard al-

hasan) to the poor and the needy people to help them solve their daily needs for survival. On

the other hand, this verse encourages the rich people to also invest their money in business

because the profit they gain from business is halal (permitted) as business creates

employment opportunity for the people as well as contributes to the GDP growth of the

country. On the same line of reasoning, the Islamic banks are operating some interest-free

financial transactions based on the profit-loss sharing mechanism. The Islamic banking

transactions are also conducted by using the Islamic contract law principles.

This write-up is meant to examine the Islamic contract with particular emphases on the

requirements that makes a contract to be valid with regards to the contracting parties. The

first section discuss briefly about the concept of contract in Islam, followed by the elements

that constitute a valid contract. It went further to discuss who the contracting parties are and

the qualities that must be possessed by the contracting people before the contract can be

adjudged as been valid.


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2.0 Contract in I slam.

An aqd in Islamic law is defined as the obligation which is the result of an offergiven by

one party and the acceptance given by the other party, in a way where its legal effect is

expressed on the thing contracted upon. The word aqd literally means to tie, to fasten,

to link together. It is said, for example to tie the rope (aqd al-habl), to bind two ends of

something, and thereby form a strong connection.

Some Muslim jurist referred to contract in a more general term, to cover covenant drawn by a

man, and they called aqd what is formed under the will such as testamentary disposition (al-

wasiyyah), endowment (waqaf) and oath (al-yamin) as well as what is formed under two

wills.

The concept of contract in Islamic jurisprudence is a very fundamental one. It is based on the

moral and religious principles as shown and explained in the different quranic verses and

hadith. The Quran orders the obligation and contracts be fulfilled and that debts due on a

fixed term be put in writing unless they concern present goods. It laid down general

principles by which dealings in all maters should be made. The words of the Quranic verses

in general apply to all contract and covenants concluded between man and man and

ALLLAH, as can be seen from the following verse:

O ye who believe! Fulfill all obligations Surah Al-Maidah, verse 1

Fulfill the covenant of ALLAH whom you have entered into it, and break not your

oath after you have confirmed them: indeed you have made ALLAH your surety; for

ALLAH knows all that you do Surat an-Nahl verse 91

And take not your oaths, to practice deception between yourselves with the result that

someones foot may slip after it was firmly planted and you may have to taste the evil


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consequences of having hindered (men) from the Path of ALLAH and a might wrath

descend on you Surah Al-Nahl 16:94

It can be concluded from the verse above that:

To every contract which is made, or oath which is taken , ALLAH is the witness andtherefore, it must be fully observed

Contract is a solemn act entered into and binding between parties, and must be carriedout with all sincerity and honesty

The consequences of making false contract are severe


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3.0 Elements of a vali d contract.

A contract is an agreement which is enforceable by law and only legal agreements are

contracts whereas illegal agreements are not contracts. To draft a valid contract there must be

some basic legally enforceable elements which are basically similar and applicable either in

the Islamic law of contract or the English law. The elements involved in a contract are stated

below:

An offer (Ijab) An acceptance (qabul) A free consent A consideration An intention to create a legally binding relationship The objective and consideration of the contract should be legal A certainty of legitimate performance A capacity (ahliyah) A formality.

3.1 Offer (Ijab)

When someone wants to make a contract, he has to make a proposal to the other person to

obtain his consent to the act or abstinence. This is known as an offer.

For example, if A wants to sell something to B, it is required that A has first to make an offer

to B that A wants to sell a particular thing for a certain price, whether B is willing to buy or

not. Thus, making an offer to another party is an element of a contract in the Islamic law.

There are three kinds of offer in the Islamic law of contract. They are:

i. Verbal offer (kalam)

ii. Offer by conduct (amal)

iii. Offer in writing (kitabah)


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3.1.1 Verbal offer (kalam)

An offer can be verbal in which it is expressed in words to sell something to someone else

and is not written down. A verbal offer is acceptable in Islam from which an acceptance is

good for an immediate sale. However, when the sale will take place in a future time, it is

recommended that the terms of the offer and the acceptance should be written down concisely

so that no disagreement can arise later due to ambiguity.

A classical Islamic jurist said that the verbal words for an offer should be in the past or the

present tense but not in the future tense, because the offer should have an immediate effect to

the offeree.27 If someone says: I will offer to sell my car in future for RM 10 000 then the

offeree says I will accept it to buy it in future. Do the expressions here make good offer and

acceptance? In fact no offer has been made yet so there cannot be an acceptance at the

present time.

3.1.2 Offer by conduct (amal)An offer can be made by conduct, that is, without any verbal words or gestures being

exchanged or expressed.

For example, seller X is selling rice from a pile of rice. The price per kilogram is written on

top of the pile at $3 per kilogram. Buyer Y gives $6 to the seller and the seller gives the buyer

2 kilograms of rice. Here no verbal communication is made between the offerer and the

offeree. The offer and acceptance has been concluded by conduct. Offer and acceptance by

conduct is recognized in the Islamic law of contract.

3.1.3 Offer in wirting (kitabah)

An offer can be made in writing to potential customers. It is the best way of making a

contract as the terms of offer and acceptance are in writing and signed by the parties in which


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case if any dispute arises later, it can be resolved by referring to the written terms of the

agreement.

3.1.4 Invitation to treat (Al-Muasah)In the Islamic law of contract, an invitation to treat is known as al-muasah. An invitation to

treat is not an offer. It is merely an invitation to make an offer to buy something.

There are different types of invitation to treat in the English common law which are

recognized in the Islamic contract law as al-muasah.29 Different types of invitation to treat

are as follows:

Displaying of goods in shop, Advertisement, Reply to inquiry, Auction sale Tender

3.2 Acceptance (qabul)

In the Islamic law of contract, acceptance is known as qabul. When an offer is accepted by

the offeree, it is said that an acceptance has been made. When there is an effective

acceptance, an agreement is made between the parties which become legally binding for

them. An acceptance can be verbal, by conduct or in writing. Under the Islamic law, in order

to effect a contract the offer must be accepted by the offeree and the acceptance must be in

the same meeting (majlis) not later. The Islamic law of contract emphasizes on an immediate

acceptance of an offer to make a valid contract. However, it seems that such requirement of

an immediate acceptance of an offer in the same meeting between the offerer and offeree may

not be plausible in the modern business world as businessmen need time to think about the

possibility and viability of making a contract and to finally decide positively.


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Under the Islamic law of contract there must be a consideration in a contract. If there is no

consideration, the agreement will not be valid as it is not enforceable by law. A consideration

needs not be adequate as an inadequate consideration is enough to validate a contract as long

as the parties give consent freely to the agreement upon which they are satisfied.33 If a

contract is not caused by a misrepresentation, fraud, coercion, undue influence and other

attendant legal ambiguities then the contract is valid even though its consideration is not

adequate. For example, A sells his car to B for RM 5,000 while the market value of the car is

RM 10,000. If A sells the car with a free consent and he is not forced by someone to sell the

car or he is not unduly influenced to sell the car and if he is satisfied with the price, we can

say that the contract will not be invalid due to a merely inadequate consideration.

3.2.1 Communication of acceptance

An acceptance must be communicated to the offeree to form an effective acceptance. The

communication of acceptance is complete the moment it comes to the knowledge of the

offeree. If the acceptance does not come to the knowledge of the offeree, it would not be an

effective acceptance and no contract will be formed.

This is the majority view of the classical Muslim jurists who are also of the opinion that when

an offer is made to a person who is not present near the offeror, the majlis (meeting)nwill

continue until the offeree receives the offer. For example, if the offer is sent by a letter

through the post office, the majlis will continue until the offeree receives the letter and he

will be given some time to accept the offer, but not for long

3.3 Free consent

For a contract to be valid, the agreement must be made by a free consent of the parties in the

contract. A free consent of parties is also known as consensus of parties without any form of

coercion, either directly or indirectly. If the contract is caused by a coercion or a fraud or

undue influence, it would be a voidable contract. Hence, the contract must be based on free


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consent from both parties. A free consent of parties is very important in the discharge and

execution of the Islamic contract law.

In a hadith the Prophet (pbuh) said: Verily trade is based on a mutual consent. (As-

Sharbini. 1994.Mughni Al-Muhtaj, 2: 325). Regarding a free consent Allah SWT says in the

Quran: O ye who believe, squander not your wealth among yourselves in worthless

dealings, but let there be trade by mutual consent(Quran, 4:19.). In this verse Allah

(the Creator) emphasizes on the importance of executing a trade contract by a mutual

consent. Thus, it is a fundamental principle in the Islamic law of contract that both parties

must demonstrate a free consent while conducting a transaction. The proof of a free consent

between the offeror and the offeree is very significant and highly required as the essence of

the Islamic contract law aqd.

3.4 Intention to create legal relation

Under the lslamic law of contract, an intention to create a legal relationship is significant. If

there is a lack of intention to create a legal relationship, the agreement may not, in all

probabilities, be enforceable by law. However, the party that claims that there is a lack of

intention to create the legal relationship has to prove beyond a shadow of doubt of its tangible

existence. Usually, the agreement which has a consideration is regarded as having an

intention to create a legal relationship between the parties. Business contracts are usually

considered as having the intention to create a legal relationship in one way or another. Some

social agreements may lack the intention to create a legal relationship and it depends on the

case by case basis and circumstances of the agreement. For example, A is a friend of B and A

promises to give qard al-hasan (interest-free loan) to B for an amount of $2,000, but later

refuses to conclude the deal.


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Here, the contract may not be enforceable due to a lack of consideration. This is an example

of a social contract where there is a lack of intention to create a legal relationship between the

parties.

3.5 The objective and consideration should be legal

It is important under the Islamic law of contract that the objective of a contract should be

lawful and legally binding otherwise the contract will be invalid and not enforceable by law.

If the objective of a contract is to perform some form of illegal act or immoral acts, then the

contract will be invalid. Similarly, the consideration or a subject matter of the contract should

be legal, legitimate and lawful because if any of these elements is absent, the contract will be

invalid. For example, if the subject matter of a contract is haram (prohibited) in Islam, then

the contract will be illegal and not enforceable by law due to the nature of the spirit of the

contract which may be against the grain of judicial prudence and justice. Hence, a contract to

sell pig meat or dangerous drugs, such as, heroin or different types of wine etc., is legally

considered as invalid because to from a valid contract under the Islamic law of contract, the

objective and consideration must be lawful and must fall within the ambit of legal

enforceability.

3.6 Certainty

Under the Islamic law of contract, the terms of an agreement must be definite, clearly defined

and unambiguous. The terms must be expressed or clearly and precisely written down so that

no element of uncertainty can be presumed in the contract. If the terms or subject matter is

uncertain and ambiguous, the contract will become void. A term in the contract is considered

uncertain if it is not very clear to be understood. For example, company X has agreed to buy

100 tons of rice from company Y for an agreed price. This agreement may become void due

to an uncertainty as it does not mention what type of rice to be delivered, the time frame

within which the goods must be delivered as well as the quantity of rice if it is be delivered


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on a partial basis and the terms of payment involved thereupon. This example can be

considered as quite crucial as there are different types of rice with the same name in which

case the sample of the rice should be clearly spelled out to be made available before delivery

and other pertinent matters to be clearly itemized and specified in order to avoid elements of

uncertainty in the contract.

It is the requirement in the Islamic contract law that the subject matter of a contract must

exist at the time when the contract is made and it should be possible to be delivered at the

agreed time of delivery. If the subject matter does not exist when the contract is made the

element ofgharar (uncertainty) may occur and can invalidate the contract. The Islamic law

of contract usually discourages the making of a sale contract on non-existent or future goods

as they cannot be seen when the contract is made as the type and quality of the goods is not

known and whether it would be available at all for delivery on the time fixed in the contract.

However, non-existent goods or invisible commodities can be a subject matter of a contract if

the nature of the subject matter and its quality are properly described, well defined and is

predominantly available for delivery on the appointed time.

3.7 Capacity (ahliyyah)

Under the Shariah (Islamic) contract law, capacity is known as ahliyyah. Capacity is the

ability to make a contract under a fully sane physical condition with a healthy mental

awareness. Not every person can make a legal contract, such as, a minor, an insane person

and any person incapable of making a decision due to physical and mental defect, etc.

3.8 Formality

Formality means the writing and signature requirement of a contract and the contract might

be required to be witnessed by others. The Islamic law of contract emphasizes on writing

down the terms of a contract which is to avoid a dispute between the parties as one or more

parties may, after long period of time, forget what they had actually decided or agreed upon.


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However, under the Islamic law of contract, an oral contract is valid if it can be proven by

reliable and capable witnesses. In a conventional law, an oral contract is also valid but the

conventional law encourages people to write down the terms of the contract in all contracts if

possible. Nonetheless, some contracts should be in writing because of the nature of contract.

Marriage contract, transfer of real property, etc., must be in writing and signed by the parties

involved. There are parliamentary laws in many countries that stipulate to write down some

contracts and the law provides that if the parties do not write down the contract and duly sign

it, the contract would be considered as invalid. As mentioned above, the Quran requires

people to write down a loan contract in Surah (Chapter) 2, Verse 282. This verse also requires

witnesses to testify the contract when any dispute arises out of this contract.


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4.0 The Contracting Parties.

Generally contract involves more than one party; however, there could be exception to this

rule, whereby you have a unilateral contract. A unilateral contract is a contractual obligation

on the part of only one party. It includes:

Contract of promise of reward where a person makes a promise to another to give himreward for a certain job to be done

Contract of waqaf where a person makes a promise to donate his property for waqafpurpose

Contract of discharge where an obligor discharges his oblige voluntarily of a fight dueto him and the right shall be extinguished

Bequest and contract of surety where a guarantor undertake to settle the debt to thecreditor on behalf of the debtor.

Since contract involves two or more persons, there are rules that must be met before the

contract can be valid within the Islamic jurisprudence. The contracting persons are those that

are involved in the contract, it can be two or more persons, these particularly individuals must

possess the following attributes before they can be involved in the discussion or negotiation

of any contract. These attributes are discussed below:

4.1 Puberty

Both contracting parties must have attained the age of puberty. Muslims jurist are in

agreement that puberty is established when proper evidence of sexual maturity is

forthcoming. The Prophet (SAW) was reported to have said to the effect that the action of

three category of persons are not accounted for viz a sleeper until he wakes up, a minor until


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he attains sexual maturity and an insane person until he regains sanity(Al Bayhaqi, Sunan al-

Kubra).

For the Hanafi, Maliki and ShafiI schools, the main natural signs constituting puberty are

voluntary or involuntary (nocturnal) emission of seminal fluid for boys and menstruation or

pregnancy for girls. Additional signs such as the appearance of coarse hair in some part of the

body, are also taken into consideration. It is reported by Aliyyah al-Qurazi who said:

I was amongst the captives of Quraizah. They looked for those who have grown coarse

hair and killed them and those who have not yet grown coarse hair were not killed. I

was one of those who have not grown coarse hair (Al Bayhaqi, Sunan al-Kubra, Vol

VI, p57).

If these signs do not appear earlier, the age of puberty is determined by reaching certain age

limits. Imam Abu Hanifah fixed the age of puberty for males at 18 years and female at 16

years base on the view of Ibn Abbas who interpreted the verse of Quran to the effect:

And come not nigh to the orphans property, except to improve it, until he attains the

age of full strength (Surah al-Anam, 6:152).

According to Shafis and Hanabalis school, the age of puberty is 15 years for both boys and

girls. They based their opinion on the hadith reported by Bukhari from Abdullah Ibn Umar

to the effect:

I offered my service to the prophet (SAW) when I was fourteen years old but he

refused me permission to engage in the battle. I next presented myself to the prophet

(SAW) when I was fifteen and he allowed me to join the ranks (in the battle of

Khandaq) (Ibn Hajar, Fath al-Bari Vol 5 p.276).


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Therefore according to the ShafiI, Hanabali and Maliki schools, there is a conclusive

presumption of law that a male or female who has reached the age of fifteen is physically

mature and therefore the age of fifteen is the minimum age of legal capacity to engage in

contract.

There is an irrefutable presumption of law that a female below the age of nine and male

below the age of twelve has not reached physical puberty. If a male, who has completed

twelve years, and a female who has completed nine years, has not reached a state of puberty,

they are called murahiq and murahiqah until they reach a state of puberty. Any claim tha t

a person between these ages limits (i.e 12-15 for boys and 9-12 for girls) has attained puberty

will succeed only if the proper evidence of sexual maturity is produced. Iman Abu Hanifah is

of the view that when a boy or girl approaches the age of puberty and they have declare

themselves adult, their declaration must be accepted because the attainment of puberty is a

matter which can only be ascertained by their testimony and their notification must be

accepted in the same manner as the declaration of a woman with respect to her courses.

The majority view of Muslim jurist is that puberty alone is not sufficient; it must be

accompanied by prudence. The view is based on the following verse of the Quran which says

to be effect:

Make trial of orphans until they reach the age of marriage. If then you find sound

judgment in them, release their property to them but consume it not wastefully nor

haste against their growing up (Surah Al-Nisa, 4:6).

This verse clearly requires prudence to co-exist to enable a person to have a legal capacity to

transact.


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From the above discussion, it is clear that the Shariah does not correlate puberty with

reference to the attainment of a certain age. Shariah concept of puberty and prudence reflects

the requirements may create difficulties and dispute as it is apparently not easy to ascertain

whether a person had attained puberty and prudence. As a result, many contemporary Muslim

countries have adopted the attainment of a certain age to determine maturity. In the field of

family law, Jordan, Tunisia, Iraq, Morocco, Pakistan and some states in Malaysia have

provided that with regards to capacity to contract marriage, a male attains maturity at 18

years, whereas with regards to female, there are slight difference from one country to another;

18 years for Iraq, 17 years for Jordan, 16 years for Pakistan and Malaysia and 165 years in

Tunisia and Morocco.

4.2 Maturity.

The parties involved in the contract must be mature before the contract can be valid.

According to Muslim jurist maturity is : Good and proper dealing with wealth from a

worldly point of view. If someone is a wrongdoer from the religious view point, yet from a

worldly view point he is capable of dealing with money and wealth properly without wasting

or misusing it he is considered to be mature.

In Islamic law, Muslim jurist divided the minor into two categories, that is, minor who are

not of age of reason and minor who are of age of reason. All contracts and transactions by

minor who are not of the age of reason are void even though the transaction is beneficial to

him. For example taking a gift, or detrimental to him, for example, making a gift, or

something for which the benefit or detrimental to him cannot yet be ascertained as a sale,

lease, profit sharing, partnership and other transactions. For the protection of the interest of

the minor Islamic laws provide that in order to execute a valid contract, the minor must be

presented by his guardian.


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The age of reason is the end of infancy and the beginning of discerning majority. There is

no fixed age where an infant is deemed to have attained the age of reason. The test is

subjective it has been defined as the period when the intellectual growth of the minor allows

him to speak reasonably and to manage soundly his financial interest; and when he is able to

distinguish between a purchase and sales, or a profit and loss. This accord with the view of

Hanafi School. The other jurists are, however, of the view that normally the age of reason is

attained after seventh year.

The effect of a contract entered into by a minor who has reached the age of reason may be

valid, void or voidable. It depend on the benefit and the detriment occasioned to the minor.

The minor who has reached the age of reason is authorized to conclude beneficial contract

without the authorization of his guardian for example the acceptance of a bequest or gift.

Such contracts are valid. He his forbidden to conclude transactions or contracts which are

detrimental to him e.g making bequest or gift or which are potentially harmful to him e.g

loans, guarantees which are for the benefits of others. Such contracts are void even though

they are authorized by his guardian. Whereas contracts which are neither potentially

beneficial nor potentially harmful for example (sale, hire) are voidable. They are valid if

subsequently ratified by the guardian and void if guardian rejected it. This is the view of

Hanafi and Maliki schools.

The Hanabalis are of the view that it is valid with the permission of the huradian and void if

transacted without permission. The Shafiis are, however, of the opinion that the contract is

void if entered without the permission of the guardian and that it cannot be ratified by the

guardian.

It seems clear that there are two important criteria in evaluating legal capacity in Islam to

determine the validity or otherwise of a contracting parties in a contract; the age of puberty


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O you who believe! Intoxicant and gambling, (dedicated of) stones, and (divination by)

arrows, are an abomination of Satans handiwork. Eschew such (abominations) that

you may prosper.Surah al-Maidah 5:93

Abu Hurairah narrated the Prophet SAW to have said to the effect:

An adulterer, at the time he is committing illegal sexual intercourse is not a believer,

and a person, at the time of drinking an alcoholic drink is not a believer, and a thief, at

the time of stealing, is not a believer(Sahih al-Bukhari).

Iman Abu Hanifah has defined the intoxicated person or drunkard as being unable to

distinguish the earth from the sky, length and width of male or female. Abu Yusuf held that

an intoxicated person is one who behaves in a state of delirium. This accord to the verse of

the Quran to the effect that:

O you who believe! Approach not prayer with a mind befogged (intoxicated) until you

can understand all that you saySurah al-Nisa 4:43.

Thus a person who does not know what he utters is intoxicated. All the other jurists subscribe

to this view. According to predominate views of all the school of law where a person takes

liquor by accident to drinks it as a medicine, his legal competence is affected and shall not be,

liable for his action while intoxicated. Where liquor was taken voluntarily the schools differ

in their opinion. The Hanafi holds that the legal competence of the man is not affected by

voluntary intoxication. Therefore, all transactions entered into by him while intoxicated are

valid in the same manner as when they are entered into whilst he is sober. The ShafiI and

Hanbali School are inclined to deny legal competence to the intoxicated. The Maliki School

gives an intoxicated person the option of rescinding a legal act upon regaining his faculties.


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In the middle east countries provisions are made in respect of contract entered into by persons

of unsound mind. Article 108 of the Iraqi Civil Code differentiate between a person who is,

continuously mad and one who is occasionally of unsound mind and provides that a person

who is continuously mad is at law like an infant below the age of reason and a person not

continuously mad is at law like a person of sound mind.

In Egypt, Libya, Kuwait and Yemen the respective Civil Code deprives a person suffering

from mental illness from legal competence to execute contractual obligations. In Bahrain, a

persons capacity to enter into a contract is subject to the condition, inter alia, that he is of

sound mind. A person of sound mind for the purpose of making a contract is a person capable

of understanding a contract and all its obligation for its interest. In Lebanon, Article 216 of

the code of obligation and contract, 1934 provides that acts of persons of unsound mind are

completely null and void.

4.4 Particular Cases of Interdiction.

A person may be denied the competence to deal with all or some of his property or stand in a

position to sign a contract or engage in certain transactions. Such person or individual is said

to be under interdiction, not to protect his own interests, as is the case with those who lack

prudent judgment, but to protect the interest of others. Textual authorities commonly cite

three main instances such as interdiction

4.4.1 Insolvency (Iflas)

If a person becomes insolvent (muflis) that is when his debt exceed his or when he attempts

to place his assets beyond the reach of his assets or even in some cases when he delays

payment, the court may upon the petition of creditors, (or even ex-officio in the ShafiI

School) issue an injunction forbidding the insolvent person from disposing his assets. The

insolvents asset refer to the current assets existing at the date of the judicial interdiction


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according to Hanafi and Maliki Schools whilest the ShafiI and Hanbali Schools make future

asset also subject to judicial interdiction. The insolvent is then not allowed to conclude

contracts purporting to reduce his assets.

4.4.2 Death Illness (Marad al-Maut)

In contrast to ordinary illness, death due illness deprives the individual the capacity to

contract under Islamic law. Death due illness is an original concept of Shariah. It consist of

four elements:

A grave illness (such as tuberculosis or cancer) The patients awareness of his illness The death of the patient within one year of the onset of his illness An act detrimental to the patients heirs or creditors.

The object of this concept is to protect the interest of the patients legal heirs and creditors.

Therefore death due illness may be claimed by the heirs creditors of the deceased to annul a

sale, gift, a legacy or an acknowledgment of debt made to their detriment. However, the heirs

and creditors may, if they agree ratify the same.

4.4.3 Prodigality after Puberty.

A person may reach the age of puberty accompanied with the state of prudence and continue

to be prudent, but there a person may later suffer prodigality or he may reach the age of

puberty in a state of prodigality.

The majority of jurists holds that a prodigal has to be interdicted which attains sound mind.

But Abu Hanifah, holds that when a prodigal reaches the age of twenty-five years, he will not

be interdicted, similarly when a person who reach the age of puberty with sound mind but

later suffer prodigality. Interdiction of such a person is only in regards to dispositions


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involving property such as sales, hire and pledge and it must be made by the order of the

court.

4.4.4 PledgorUnder Islamic law the pledgor has no competence to deal with the property he has handed

over to the pledge, otherwise the right of the latter will be nullified.


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5.0 Conclusion

The validity of a contract in Islam base on the Shariah provisions as it centers around the

contracting parties entails that the contracting parties must possess three qualities, that is,

puberty, maturity and sanity at all times.

He the contracting party is considered to be fully capable of contracting and fully negotiating

and concluding different types of contract independently. However if an individual is

pubescent but insane, he is not allowed to go into a contract. Likewise if an individual is sane

and pubescent but not matured he is not allowed to conclude a contract independently. Rather

he has to do it with the consent of his guardian. If an individual who is not pubescent reaches

the age of seven or above and his able to distinguish between good and bad he will still not be

allowed to conclude a contract independently unless accompany with a consent from his

guardian.


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6.0 References.

Abdul Jalil M.D and Muhammad K.R, 2010. Islamic Law of Contract is Getting Momentum.

International Journal of Business and Social Science Vol. 1 No. 2; November 201.

Ahcene Lahsasna, 2011. Shariah Aspect of Business and Finance. Enhanced edition of CIFP

module 2011, INCIEF.

Bakar, Mohd Daud. 2000. Contracts in Islamic Commercial Transactions and Their

Application in Modern Islamic Financial System.

Razali JH Nawawi, 2009. Islamic Law on Commercial Transactions, CERT publication,

Malaysia.

Documents

Shariah Requirements in the Contracting Parties