ASSIGNMENT

January 2021 SEMESTER

SUBJECT CODE : MFM621

SUBJECT TITLE : Fiqh Muamalat

LEVEL : MASTER'S DEGREE

STUDENT’S NAME : SAID MOHAMED MAHAD

MATRIC NO. : M60101200175

PROGRAMME : MBA

ACADEMIC FACILITATOR : DR. ABDIAZIZ AHMED IBRAHIM

LEARNING CENTRE : MOGADISHU UNIVERSITY

INSTRUCTIONS TO STUDENTS

1) This assignment consists of SIX (6) uestions. Answer ALL questions.

2) Plagiarism in all forms is forbidden. Students who submit plagiarised assignment will be penalised.

3) References MUST be included and taken from reliables sources. Please use the APA Referencing Style and
cite your work appropriately.

4) This assignment carries a 100% weightage toward final grade.

5) The submission date for this assignment is BEFORE or ON _______ 2021. Please submit your assignment
answer via _______________.

THERE ARE 2 PAGES OF QUESTION, INCLUDING THIS PAGE.

DECLARATION BY STUDENT
I certify that this assignment is my own work and is in my own words. All sources have been acknowledged and the
content has not been previously submitted for assessment to Asia e University or elsewhere. I also confirm that I have kept
a copy of this assignment.

Signed: _____________________________
ANSWER 1

I) Sale of baby cow in its mother’s womb.

Sale of a baby cow in its mother‟s womb is a kind of Gharar, let‟s first discuss Gharar.

Gharar has meanings that encompass: uncertainty, risk, hazard and deceit. The Arabic root for
gharar means deception - but in practice the term is used quite widely.

Gharar is an important concept in Islamic finance, with most derivative products rejected by scholars due to
excessive uncertainty.

“According to Al-Qarafi, the definition of gharar is that which has a pleasant appearance and a hated
essence. The origin of gharar can be divided into two categories, namely: tadlis (cheating in business) and
ghabn (to deceive).” (Al-Qarafi, 1998)

“All businesses involves some level of risk, therefore unlike riba, gharar is a relative concept when it comes
to uncertainty, risk and hazard - with a certain level of uncertainty being tolerated. However, when it comes
to deceit or fraud, gharar is an absolute concept.

Nature of Gharar

We already understand the seriousness of riba (interest) within Islam - with anyone dealing in such an
activity facing war from God and his messenger. Two of the main reason Ibn Juzay (Maliki scholar)
provides for gharar are as follows:

1. Uncertainty over subject matter: sale of stray animal or unborn calf in the mother's womb
2. Uncertainty over price: the sale of X at time t+1, where the price will also be determined at t+1.”
(Usmani, 1998)

Qur'an, Hadiths and Gharar

Surah an-Nisa (4:29) "...squander not your property amongst yourself unjustly (batil) except it be a trade
among you by mutual consent..."

“Scholars have cited numerous examples of hadiths, where gharar is prohibited. According to a strong
hadith, narrated by Muslim, Ahmad, Abu Dawud, Al Tirmidhi, Al Nasa'i, Al Darami and Ibn Majah on the
authority of Abu Hurayra the Prophet prohibited the pebble sale and the gharar sale.

Other examples include:

1. Selling the birds in the sky or the fish in the water

2. The catch of the diver, unborn calf in its mother's womb
3. The sperm and/or unfertilized eggs of camels” (Usmani, 1998)
 II. Sale of a junk food to a four years old kid.
“A contract by a minor for necessities is binding on both parties. Necessities are determined by
reference to the minor‟s „existing life style‟ and must be necessary for maintaining that lifestyle.
Maintaining this lifestyle generally means food, clothing, shelter and access to medical treatment. In
defining supply of necessities, the courts have usually given the concept a wide interpretation – such
as a contract of apprenticeship. However, in order for a contract of apprenticeship to meet the
supply of necessities test, it must also be for the child‟s benefit. At common law … the contracts of
an infant were voidable except such as were necessarily to his prejudice; these last were void.‟
However, infants have a limited capacity to contract. To succeed, the plaintiff had to prove the
contract within this limited capacity, which his Honour defined as follows: An infant may contract for
the supply at a reasonable price of articles reasonably necessary for his support in his station in life
if he has not already a sufficient supply. To render an infant‟s contract for necessaries an
enforceable contract two conditions must be satisfied, namely, (1.) the contract must be for goods
reasonably necessary for his support in his station in life, and (2.) he must not have already a
sufficient supply of these necessaries.” (LJ, 2018)
So, Sale of a junk food to a four years old kid is valid since it is necessity.

Answer 2
I) Essential Elements of A Valid Contract

“A contract is an exchange of an act or promise between two or more individuals or business entities. It
involves one party (or a group of parties) offering something of value to another party (or group) as payment
for a service, item, action, etc. For instance, a Residential Lease is a contract between a landlord and
tenant in which the tenant pays the landlord rent in exchange for a place to live.There are more aspects to a
valid contract than just agreeing to some terms and signing a piece of paper. In fact, a valid contract is
made up of several elements and, if any of the required elements are missed, the contract could be
considered invalid and incapable of being enforced.” (Camarneiro, 2018)

Elements of a valid contract

“Offer and Acceptance: „An offer occurs when one party presents something of value that they wish to
exchange for something else of value. The offer is usually the terms that make up the contract. For
instance, when a caterer wishes to create a Catering Contract with a client, the offer is the terms of the
catering service, which includes the catering schedule and the cost of the service. After an offer is
presented, it can be accepted or declined. Acceptance simply means that the offer presented was
accepted.” (Camarneiro, 2018)
“Consideration: Consideration is essentially the benefit both parties receive for performing the contract
(i.e. a service for money). Oftentimes, consideration is money, but it can be a service, an object, or anything
else of value. In fact, consideration can even be a right, interest, or benefit. For instance, if you and your
neighbor agree to share access to each other‟s backyards, you and your neighbor are offering a right to
each other (i.e. the ability to use each other‟s backyards). In this case, the consideration is a right, which is
being exchanged for another right.” (Camarneiro, 2018)

“Mutuality or Intention: At some point, we may have heard the phrase “meeting of the minds”. This
phrase is typically applied to mutuality or intention and simply means all the parties involved in the contract
actually intended to create a valid, enforceable contract. In business dealings, it is often understood that the
parties expected to be bound to a contract, but things can get tricky with promises formed between family
and friends. For instance, a son tells his mother that he will tile his mother‟s floor over the weekend in
exchange for one of her old cars. After the son tiles the floor, the mother refuses to transfer the car‟s Bill of
Sale to him. In this example, there is a chance that the mother was joking or humoring her son when she
agreed to trade her car as payment. So, although there was an accepted offer and consideration, a court
may still be unsure if the mother intended to form an actual contract with her son.” (Camarneiro, 2018)

“Legality: Legality refers to the subject matter of the contract and whether it is legal. This element may
seem unnecessary; however, it simply prevents individuals from trying to form contracts involving unlawful
promises or consideration. For instance, in states where online gambling is illegal, like Utah, an individual
would likely be unable to form a contract where they pay someone‟s online gambling debts in exchange for
a service.” (Camarneiro, 2018)

“Capacity: Not everyone is eligible to form a contract, which is where capacity comes in. Capacity means
that a person has the legal ability to sign the contract. It can involve mental capacity, as in the ability to
understand the contents of the document (i.e. a sound mind). This can include individuals with cognitive
impairments, individuals who are incapacitated, and more. This does not include individuals who fail to
understand the document for no legitimate reason. For example, someone can‟t claim they did not have the
capacity to sign a contract simply because they didn‟t understand a word used in the document.”
(Camarneiro, 2018)

II) The general Islamic rules concerning contracts

“Muslim jurists have agreed that mutual consent is considered as the main/fundamental element of
contract.” (Ibrahim, 2016)

“O you who believe! Eat not up your property among yourselves unjustly except it be a trade amongst you,
by mutual consent. And do not kill yourselves (nor kill one another). Surely, Allah is Most Merciful to you.”
(al-Nisa‟, 4:29)
“They have agreed also that a contract becomes valid, enforceable and binding when all its essential
elements and conditions are fulfilled accordingly. They, however, disagree on the issue of freedom in the
contract that relates to right to create new contract and make stipulation in contract.

According to Jumhur, permissibility is a general rule in contract unless there is a prohibition from the
sources of Islamic law that prohibit it or it is in contravention with the sources of Islamic law. The authorities
from al-Qur‟an and hadith show that a valid contract must be based on mutual consent of the contracting
parties. If this condition is fulfilled, the contract becomes enforceable and binding.” (Ibrahim, 2016)

“O you who believe! Fulfill you contracts.” (al-Ma‟idah, 5:1)

“Contract in Shari‟ah, Aqd, means a tie or a knot binding two parties together. The contract is a declaration
of offer and acceptance. Unlike the English law which developed through the work of judges, Islamic law of
contract developed through the work of Fugaha (jurists), based on the principle laid down by the Quran and
the narrations from the Prophet (P.B.U.H). The Qur‟an contains a large number of specific contracts, and
axioms of wide application m the area of contractual relationships. These include various commercial
contracts such as sale, hire, guarantee, security and deposits. In some of the verses of the Qur‟an where
such contracts are stated, foundation for rules of new contracts were initiated, in others recognition and
legitimization of already existing practice at the advent of Islam are confirmed. The Islamic contract law is
wider in scope than the English or French because it embraces some dispositions which are not considered
contract in either English or French legal systems. Endowment is an example of such dispositions.” (Elgari,
2018)

“Contrary to some western writings, Shari‟ah does have a general theory of contract. Therefore, Shari‟ah
has facilities to accommodate uncatalogued agreements. Contracting an arrangement that is not falling in
the categories of recognized nominate contracts is not forbidden in Shari‟ah. Furthermore, conditions
attached to an irrevocable contract have been used by Muslims to extend the applications of such
contracts. Moreover, declaration of intention and consenting is central to the law of contract in Shari‟ah.
Though contracts in Shari‟ah are not as consensualist as ones in English law, consenting is central to the
law of contract in Islam, for without consent a contract will not have a binding force. Furthermore, the
intention to create a contract is actually more important in Shari‟ah than the formalities of a contract. This
shows that Shari'ah capability to respond to people's needs is limited by people's ability to understand its
rules.” (Elgari, 2018)

Classification of contracts in Shari’ah

“There are several classification for contracts in Shari‟ah. What we are concerned with, however, are those
doing with Islamic banking.
Definitive and suspensive contracts

A contract is definitive when the offer and acceptance are both categorical and the contract is validly
concluded. A contract is suspensive when the offer and acceptance are kept in suspense i.e. for future
effect. The latter is not permitted in Shari‟ah, particularly in sale contracts. Hire contracts, to majority of
scholars, may be suspensive.

Binding (or obligatory) and facultative (or permissible)

Some contracts are binding, Lazim, once concluded they cannot be revoked except by mutual consent of
the two parties. Some are facultative, Jaiez, which can be revoked by either party, and in some cases by a
given party.

An example of the binding contracts are the contracts of sale, hire and lease... etc. An example of the
permissible contracts are agency, deposit, and Mudarabah. These can be revoked by either party any time.
While the contract of security (rahn) can be revoked any time, this can only be done by the beneficiary, i.e.
the creditor.

Some contracts start as facultative and then turn to be binding such as donation. Donation becomes
binding only after delivery. Distinguishing obligate from facultative is important. However, such classification
is itself subject to Ijtihad. For example, the Mudarabah contract in Islamic banking is no longer facultative
but binding for the duration of the contract. Contemporary jurists think that it was quite logical for
Mudarabah to by facultative in the old days since it had no time limit. Once a maturity has been agreed on
by the two parties, it makes no sense to give either one the right, still, to revoke any time without the
consent of the other. Furthermore, most investment opportunities require time, which means that, unlike the
old days, investment assets cannot be liquidated before maturity.

Correct and corrupt contracts

A contract is correct (sahih) when it is valid, effective and enforceable. A contract is considered corrupt
(faced) when it is none of the above and referred to as a void one. Some contracts are salvageable when
they become corrupt. For example if the reason for corruption is a non- permissible condition in the
contract, then removal of such condition will correct it. For example a Mudarabah contract with a condition
that the agent guarantees capital for rubb-ul-mal is corrupt. It can be valid again by just removing this
condition. If the reason for corruption is the object of the contract, like purchase of non-permissible goods
such as wine then it can‟t be salvaged.

Contracts of Exchange and Contracts of Gratuities

Contracts of exchange are those where the two parties interchange price on the one hand and a good or a
service sold on the other. Sale, hire...etc. are all examples of exchange contracts. Contracts of gratuities
are those which are done for benevolence purposes such as donation which is considered in Shari‟ah a
contract. Distinction between the two is important particularly when Gharar is present.
Specific or nominate contracts

Shari‟ah includes certain pre-designed contracts derived from the Quran, Sunnah and Ijma. These are,
basically, sale hire, agency, guarantee, donation, partnership and Mudarabah.

Islamic Shari‟ah, nevertheless does have its own theory of contract and hence, allows contracting
arrangement not falling in the categories of recognized nominate contracts, given that they are within the
parameters of Shari‟ah. A new contract may not be completely new, but an amalgamation of a number of
nominate contracts. The modern Murabaha contract may be considered an example.” (Elgari, 2018)

The General Islamic Rules concerning Contracts

The key principles relevant to configuring contracts in accordance with the principles of Shari‟ah can be
summarized as follows:

The charging or receiving of interest (riba) is prohibited

“Under the principles of Shari‟ah, money is considered to be a tool for measuring value and a medium of
exchange, and has no intrinsic utility. Accordingly, under Shari‟ah, an investor should realise no profit or
gain merely for the employment of money. The return to an investor must be linked to the profits of an
enterprise and derived from the commercial risk assumed by that investor. Investors should therefore share
in the income generated by the ownership of assets or the profits or revenues of the business in which they
invest.

The underlying sukuk assets must be Shari’ah-compliant

The assets or businesses underlying the sukuk must be Shari‟ah-compliant and therefore cannot be
related, for example, to gambling or to the production or sale of alcohol or pork.

Prohibition on uncertainty (gharar), speculation (maysir) and exploitation of ignorance (jahl)

Shari‟ah prohibits intentionally induced uncertainty or unnecessary risk in contracts (gharar), transactions in
which the outcome is entirely dependent on chance or speculation (maysir) and transactions in which one
party gains because of the other party‟s ignorance (jahl). Transactions containing uncertainty with regards
to an essential element of the underlying contracts such as price, time of delivery or subject matter may not
be compliant with Shari‟ah. All rights and obligations relating to an investment certificate must be
transparent and clear.” (Naveed, 2015)
ANSWER 3

II) The importance of muamalah in life of men

“Muamalat literally means mutual dealings. Muamalat is the plural term of muamalah (mutual dealing) which
is derived from the root word of amala (mutually deal) and amila (work). As discussed before, the most
basic meaning of Fiqh Muamalat refers to the Shariah rulings related with the interpersonal relationship
between a person and others. Thus, it covers matters related to marriage, divorce, criminal procedures,
disputes settlement, business and financial dealings, rulers‟ rights and responsibilities, citizens‟ rights and
responsibilities, international communications and etc.” (JALIL, 2014)

“Shariah comprises the set of laws that exist under ibadah (devotional acts) and muamalah (transactions).
The nature of ibadah and muamalah is different as the former is regulating the relationship between the
man and His Creator while the latter is regulating the relationship between man and his fellow men. Indeed,
the methodology of the Shariah in dealing with these two aspects also varied. Whilst ibadah have been
dealth with in detail in the Quran and Sunnah, muamalah, on the other hand, have been discussed in
general terms and subject to various interpretations. An in-depth study of the Shariah and its sources
shows that devotional acts are sanctioned by explicit injunctions from the Shariah. Hence, what is not
commanded cannot be made obligotary. As for transactional acts, the principle governing them would be
permissibility and absence of prohibition. So, nothing is prohibited unless it is prescribed by Allah and His
Messenger.” (HASAN, 2011)

Benefits of Muamalah

1. Acquire wealth by way chosen by Allah SWT

2. A person is able to use his wealth in the form of charity

3. A person who uses his wealth for the benefit of other people will have their reward from Allah SWT

4. A person who spends his/her wealth in the way of Allah will obtain the blessings of living in this
world and in the hereafter.

‫سى ِل ِه َوأَن ِفقُىا ِم َّما َجعَلَ ُكم ُّم ْستَ ْخلَفِينَ فِي ِه فَالَّذِينَ آ َمنُىا ِمن ُك ْم َوأَنفَقُىا لَ ُه ْم أَج ٌْز َك ِبيز‬ َّ ِ‫آمنُىا ب‬
ُ ‫اَّللِ َو َر‬ ِ
Meaning: “Believe in Allah and His messenger, and spend (in charity) out part of the property (the gift of
God) has made you heirs, then those of you who believe and spend (in the way of the real God) then fixed
have a great reward.” (al-Hadid, Verse 7)
Importance of Muamalah

 “To upgrade the status of mankind to a respectable position through faith and discipline

 To encourage human beings to participate actively in commercial activities

 To avoid misunderstanding among the transacting parties

 To ascertain and enforce the rights and duties of the parties

 To establish the spirit of brotherhood as the primary objective.” (HASAN, 2011)

III) The issue of Gharar under Islamic law and why it’s prohibited in Islam

“Gharar is contractual uncertainty. An exchange contract that exhibit gharar is void. The meaning of gharar
is, nevertheless, very intricate. In Shari‟ah an exchange contract should spell out clearly the rights and
obligations of the parties involved. If part of these rights or obligations is uncertain then gharar is present.
For example if one sells, for $ 5, an item which will be decided by a draw of number from the hat of the
seller, is purely a gharar contract. Clearly the obligation of the buyer is disposed off fully via the payment of
the price. But there is uncertainty about the other parties obligations, is it going to be an automobile or just a
pencil. Certainly this example is exotic and can be found only in games of chance. However, the
possibilities of gharar is all exchange contracts is very significant. For example if 1 sell an item to a buyer
and tell him the exact price will be revealed to you later, this is also considered a gharar contract, even if
the buyer is willing to accept this uncertainty.” (Elgari, 2018)

The famous jurist Ibn-Qayyim defines gharar as a sale in which the seller is not in the position to hand over
the subject-matter. The contemporary scholar Dr. Zuhayli has explained gharar as follows: “A contract
which contains a risk to any one of the parties which could lead to his loss of properties”.

Fairness in Business Transactions

“It‟s important to note that no verse from the Quran could be found which directly prohibits gharar as it is the
case of riba. Riba is clearly prohibited by a number of verses of the Quran. However, it‟s very clear
that Quran prohibits all types of business transactions and contracts which cause injustice and inequality for
any of the contracting parties. Especially, if it happens with the party who has weaker position in bargaining,
then it would be worst.” (Elgari, 2018)

For instance, the Quran says in Surah al-Nisa: “O you who believe, do not devour each other‟s property by
false means or unjustly, unless it is trade conducted with your mutual consent. Do not kill one another.
Indeed, Allah has been Very-Merciful to you.” (al-Nisa‟, 4:29)
Lack of Clarity on Price or Obligation

“Gharar can be simplified as an uncertainty which caused due to lack of clarity regarding the subject matter
or the price or the obligations of the parties. In other words, gharar means a lack of clarity and ambiguity in
the basic elements of a contract. There are various forms of gharar. For instance, the delivery of one item is
not in the control of the relevant party or the payment of price is unknown.” (Elgari, 2018)

Prohibited in Many Ahadith (sayings)

“The Prophet Muhammad (peace be upon him) has explicitly prohibited ghararin various ahadith (sayings).

The famous companion Abu Hurayrah narrated that Prophet Muhammad ‫ ﷺ‬has prohibited gharar in all
business and sale transactions. It‟s also reported in hadith books that Prophet Muhammad ‫ ﷺ‬has forbidden
two types of contracts namely al-mulamasah and al-munabadha.” (Elgari, 2018)

Examples of Major Gharar

 “Selling goods which are not in the control of seller and he is not be able to deliver them - for
example: you are a fisherman and you sell 100 KG of fish that you haven't caught yet.
 Making a contract conditional on an unknown event - for example, I sell you my business if my
business does more than $1 million in sales by the end of the year.
 Gharar due to complexity of contract - this happens sometimes when two or more contracts are
combined together and they become dependent on one another. An example of this is the is
mentioned and further explained in our coming article on Diminishing Musharakah.
 Future sale - meaning doing a transaction now but the item(s) of sale and the price with both be
delivered at a future time” (Elgari, 2018)

ANSWER 4

I) Explain the general principles of muamalah.

“Basic Principles in Muamalah

1. Permissibility as a General Rule

2. Conformity with Maqasid al-Shariah

3. Conclusion of Contract by Mutual Consent

4. The Principle of Wide Circulation of Wealth

5. The Principle of Transparency in Commercial Dealings

6. Justice and Fair Dealings

Permissibility as a General Rule: The status of all matters other than rituals is permissible until evidence
is given that a certain matter is prohibited.
Conclusion of Contract by Mutual Consent: Mutual consent means that the contract entered into by the
parties shall be free from any elements of coercion, fraud, misrepresentation or other illegal means.
Conformity of Contract with the Maqasid al Shariah: The transaction or contract entered by individuals
shall be accordance with the maqasid al shariah.
The Principle of Wide Circulation of Wealth: Wealth and property should be circulated among the
general public and actively transferred from one hand to another in the form of expenditures and
investment. The Principle of Transparency in Commercial Dealing All financial transactions must be
conducted in such a manner that all the parties are clear about all the important facts including the terms
and conditions of their dealings.
Justice and Fair Dealing: Justice is the general principle of shariah that needs to be observed in all
Islamic transactions and contract.” (Hasan, 2011)

II) Identify general prohibitions in conducting muamalah in Islam.

“All economic activities are legally permissible as long as these activities do not transgress any of the tenets
of shariah. In line with this maxim, it is the unanimous opinion of all four major Islamic shariah School of
thought (Hanafi, Maliki, Shafii and Hanbali) that all forms of business transactions that transgress any of the
tenets of shariah are considered invalid.” (Hasan, 2011)

General Prohibitions:
 Riba (usury, interest)

 Gharar (uncertainty combined with cheating)

 Maisir (gambling)

 Khilabah and tatfif (Fraud and deception)

 Jahl (ignorance)

1. “Riba (Usury): Al-Jassas defines riba as a loan given for a stipulated period with stipulated
increase on the principal payable by the loan-taker. Riba also defined as an increase that has no
corresponding consideration in an exchange of property for property.” (Hasan, 2011)

The prohibition of riba is deduced from the following verse:

“Those who devour usury will not stand except as stand one whom the evil one by his touch hath
driven to madness. That is because they say: Trade is like usury, but Allah hath permitted trade and
forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for
 the past; their case is for Allah (to judge); but those who repeat (the offence) are companions of the
fire: They will abide therein (forever).” (al-Baqarah, 275)

2. “Gharar (Uncertainty): Gharar or uncertainty makes a transaction un-Islamic as it will result in an

unjust or unfair outcome for the parties involved. It is where the quantity and the quality involve in
the transaction is not predetermined and known which may makes the contract void or voidable.”
(Hasan, 2011)

The prohibition of gharar can be deduced from the following verse: Meaning:

“O ye who believe! Eat not up your property among yourselves in vanities, but let there be amongst
you traffic and trade by mutual good-will, nor kill (or destroy) yourselves, for verily Allah hath been to
you Most Merciful.” (al-Nisa‟, 4:29)

3. “Maisir (Gambling) The word maisir means getting something too easily or getting a profit without
working for it. Islam forbids all forms of business in which the monetary gain comes from mere
chance or speculation and not from work. Unlike gharar which is tolerated to a certain degree, maisir
is not accepted at all.” (Hasan, 2011)

The prohibition of gharar can be deduced from the following verse: Meaning:

“O Believers! Intoxicants and gambling - and divining arrows are an abomination of Satan‟s
handiwork. Leave it aside in order that you may prosper.” (Al-maidah, 90)

4. “Khilabah and Tatfif: Literally means fraud and cheating.

contract without which he

would have not enter it.
or adulteration in merchandise.” (Hasan, 2011)
“Woe to those that deal in fraud, those who, when they have to receive by measure, exact full
measure, but when they have to give by measure or with to men give less than due. Do they not
think that they will be called to account on the Mighty Day.” (Al-Mutaffiffin, 1-6)
5. “Jahl (ignorance): Jahl refers to lack of knowledge, ignorance or ambiguity in the terms of a contract.

In Islamic financial transactions, it would not be acceptable if one party to the contract gains due to the
other party‟s ignorance.” (Hasan, 2011)
 ANSWER 5

I) Capacity of an insane person (majnun)

“Sanity is the condition of accountability, and insanity is a breakdown of sanity, meaning that the
individual‟s words and deeds cannot be interpreted in the usual manner except in rare instances. It was
said that insanity is a breakdown of rational thinking that distinguishes between good things and bad
things, and can see the consequences of things, so that there is no sign of discernment and no deeds
are done that reflect discernment.
There are many rulings which apply to the one who is insane, and which are discussed in various areas
of fiqh. One of those rulings is that the insane person is not required to do physical acts of worship, such
as purification, prayer, fasting and Hajj, and they are not valid on his part. He is required to give zakaah,
if he has wealth; his guardian should pay it on his behalf. He is also required to pay penalties and
compensation if he damages or destroys something, because this comes under the heading of dealing
with the situation, not of accountability. The insane person is to be deemed legally incompetent, so
transactions of sale and purchase on his part are not valid, and his word is not to be taken seriously in
matters of divorce, gift-giving, and so on. Insanity is regarded as a defect with regard to marriage, and
requires annulment of the marriage. No retaliatory punishment (qisaas) is to be carried out on one who is
insane, and he is not to be subjected to the hadd punishment for zina and the like. The insane person
may inherit, and his guardian may dispose of his wealth in accordance with what is in his best interests.
If he dies and has wealth, it is to be inherited from him.” (al-Munajjid, 2020)

II) Mal al-Mutaqawwim

“According to the Hanafi school of thought (mazhab), a category of mal that is capable of legal
(shari‟a-compliant) ownership and legal transfer. This category includes all things that possess value
from the perspective of shari‟a, and therefore are subject to the full range of lawful transactions
(shari‟a-compliant commutative and noncommutative contracts) such as sale (ba‟i), rent (ijarah),
pledge (rahn), and gift (hibah). Mal mutaqawwem, in general, can be traded at a price. Examples
include commodities such as wheat, rice, and oil, and assets such as lands, houses, equipment, and
shares of stock. Items such as loans and bonds are not mal mutaqawwem because shari‟a forbids
trading borrowed funds for the purpose of making profit.” (al-Munajjid, 2020)

III) Bay’ al-Salam

“In Islamic finance, it refers to a type of sale in which payment for future-delivery goods is made in
advance at the time of contract. The seller (al-muslam ilihi) undertakes to supply prespecified goods
or commodities (known as al-muslam fihi) to the buyer (al-muslim) at a future date in exchange for
an advance price fully paid at the date the contract is entered into. Ba'i al-salam involves the sale of
a yet non-existent underlying good or commodity against a price paid outright. In principle, such a
transaction is prohibited by shari'a due to the non-existence or unavailability of the underlying
 physical commodity. However, ba'i al-salam is an exception on the condition that the commodity (in
terms of quality, type, grade, etc) is unambiguously defined and the date of delivery is clearly
predetermined and agreed upon. The underlying commodity of a ba'i al-salam can almost be any
object which is able to be definitely described and determined without ambiguity that may lead to
dispute between the two counterparties. But some items or objects such as gold, silver or currencies
cannot underlie a salam contract because they basically constitute a mean of exchange, not
commodities per se (actually they are subject to the rules of ba'i al-sarf). Ba'i al-salam is an Arabic
term that denotes an advance payment sale, where bay' stands for sale, and al-salam means
advance payment. This type of sale is also known as ba'i al-salaf.” (HASAN, 2011)

IV) al-Wakalah

“The contract of Wakalah is about the provision of service. Some of these services include sale
and purchase, letting and hiring, borrowing and lending, assignment of debt, guarantee, pledge,
gifts, bailment, taking and making payments, litigation and relinquishment, admission an d
acknowledgment of rights. Islamic banks use the concept of Wakalah in various Islamic
products such as Musharakah, Mudarabah, Murabaha, Salam, Istisna´a and Ijarah. It is also
used in payment and collection of trade bills, fund management and securitisat ion. Banks
normally charge fee for agency services rendered by them on behalf of their clients. An agency
contract could be specific or general; it could be both commutative and non -commutative; the
nature of activity to be undertaken should be clearly defined to avoid any disputes. For
example, if Wakalah is for the sale or purchase of specific goods, the kind, quality and other
necessary attributes of the commodity should be clearly mentioned.
The principal should have the power and competence to deal and own the property. For
example, an insane or a minor cannot appoint agents to act on their behalf. However, it is not
necessary for the person appointing an agent to have attained a minimum age. Also, a principal
may appoint an agent to conduct any business transaction activity that the person would be
able to undertake. However, Agency is not permissible in activities prohibited in the Shari´ah or
acts of dishonesty such as theft and usurpation of property or conducting Riba -based business.
It is also prohibited to appoint an agent for acts such as prayer, fasting, giving evidence, or for
taking an oath. The agent must act in accordance with the instructions of the principal and
exercise due care and skill. If he is appointed to sell goods on behalf of the principal, he cannot
purchase these goods as a buyer. Similarly, if the principal restricts the agent to certain limits,
the agent is bound to observe them.” (al-Munajjid, 2020)

V) Bay al- ‘Inah

 “A loan in the form of a sale, called 'inah (facade) because it is a sale in appearance only. This is
accomplished by one's buying back what one has sold for a lower price than that for which one originally
sold it. The difference, ostensibly profit, is actually a loan.
According to some jurists, inah is defined as a sale of a commodity on credit and repurchasing it for
a lesser amount in cash. Therefore, there are 2 transactions of sale:
a) At deferred price
b) At a lower cash price
Types of inah
1) Parties make an explicit statement of their intention to enter into a twin contract. Here, parties
expressly declare through the contract that the vendor in the first contract that takes place on
deferred payment will repurchase the asset at a cash price lower than the former deferred price.
This is invalid and impermissible by consensus of all jurists
2) Parties enter into a twin sale where commodity is sold to 2nd party on credit and seller
repurchases it at a cash price lower than the former credit price without any condition in the
contracts that necessitate it.
3) Tripartite arrangement of inah (tawarruq)” (Hasan, 2011)

ANSWER 6

I) Meaning of Zakat

“Zakat is an Islamic finance term referring to the obligation that an individual has to donate a certain
proportion of wealth each year to charitable causes. Zakat is a mandatory process for Muslims and is
regarded as a form of worship. Giving away money to the poor is said to purify yearly earnings that are
over and above what is required to provide the essential needs of a person or family.” (LIBERTO,
2021)

Zakatable Assets

“Assets which have the potential to grow are Zakatable Assets. Assets on which Zakat was due during
the early Islamic Era and are still applicable include: gold, silver, business merchandise inventory,
livestock, agricultural produce, buried precious metals or minerals (rikaz), profits from investments,
accounts receivable, real estate business investment inventory (acquired for gain). Assets on which
Zakat is due today which were not prevalent in the past include: cash, crypto currencies, stocks, mutual
funds, stock options, employee stock purchase plan, private companies, corporations and partnerships,
retirement and education plans (401K, IRA, 529 etc.), real estate business investments in property
owning companies, trusts, lump sum payments in terms of compulsory pension and provident funds,
severance packages, income-tax refund.” (LIBERTO, 2021)
 8 Groups Who Are Entitled To Receive Zakat (Mustahiq Zakat).

1. The poor
2. The needy
3. Zakat administrators
4. Those whose hearts are to be reconciled, meaning new Muslims and friends of the Muslim
community.
5. Those in bondage (slaves and captives.)
6. The debt-ridden.
7. In the cause of God.
8. The wayfarer, meaning those who are stranded or traveling with few resources.

II) Calculation for Zakat Payable

Zakat Payable = $30,000,000,000 × 2.5% = $750,000,000

House for personal use is non-zakatable

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