Lecture # 03

Islamic Law of Contract

Attaullah
attaullah501@gmail.com
Iqra University
 Outlines
• Contract
• Essentials of valid contract
• Types of condition
• Types of contract
• Sale
• Basic Elements of Sale
• Types of Sale
• Deferred Sale
• Rules for Deferred Sale
• Khiyar
• Iqala
• Concept of Agent
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 Contract(‫)عقد‬

A contract is called “Aqd”

Lexical meaning is to tie something.

Definition:
A contract tied up between two person/parties is
called “AQD”.

It can also be called ‘Agreement’, ‘Pact’.

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 Essentials of Valid Contract

1. Contractors-parties to a contract
2. Subject matter-Goods/commodities/services
3. Consideration-compensation
4. Wordings of contract

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 1. Contractors

i. Legally competent to enter into contract

ii. Mature, measured by prudence(‫ )حكمة‬and puberty
iii. Sound mind

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 2. Subject Matter
i. Existence
ii. Lawfulness
iii. Capable of ownership/Title
iv. Capable of delivery (Possession)
1.Physical possession: giving it to other party by
hand.
2.Constructive possession: means Commodity
comes into his control and all rights and liabilities of
the commodity are passed on to him.
v. Precise determination

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 3. Consideration
i. May be in monetary or non monetary terms.
ii. Existence and determined
iii. Specified
iv. Quantified

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 4. Wording
i. Offer and acceptance should be jointly
connected with no unnatural gap between offer
and acceptance.
ii. Used of present or past tense
iii. Non- contingent (‫)کسی اور چیز پرمعلق نہ ہو‬
iv. Unconditional

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 Types of Condition

1. A condition which is not against the basic

objective of the contract is valid condition.
2. A condition which seems to be against the basic
objective of the contract ,but it is in the market
practice and its viodness is not proved with the
clear injunctions of the holy Quran and sunnah is
a valid condition.

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 Types of Condition

3. A condition which is against the basic objective

of the contract, not in the market practice and not
in favor of any contractor is valid condition.
4. A condition that is against the basic objective of
the contract and not in market practice and in
favor of one of the contractors or subject matter,
is a Invalid condition

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 Types of Contract

1. Compensatory contracts (‫)عقود معاوضہ‬

•A contract in which compensation is given to the other party like
sale, lease

•These contracts become defective with invalid condition and

excessive uncertainty

2. Non compensatory contracts (‫)عقود غیر معاوضہ‬

•A contract in which no compensation is given to the other party like
Hiba, Aariya, Waqf, Wasiyat etc

•Not defective due to invalid conditions and excessive uncertainty

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SALE (‫)بیع‬

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 What is sale?

• Exchange of thing of value with another thing of

value with mutual consent (‫)رضامندی‬

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 Basic elements of sale

1. Contract (offer an acceptance from other)

2. Subject matter (goods/commodities to be sold)
3. Price (anything given as consideration)
4. Possession or delivery

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 1. Contract

i.Counter parties
–Legally competent, mature and sound mind
ii.Offer and acceptance
–Non- contingent
–Unconditional
–Not in future tense

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 2. Subject Matter or Sold Good

i. Existing
ii. Valuable/ Lawfulness
iii. Capable of ownership/title
iv. Capable to delivery
v. Specific & quantified
vi. Title and risk of seller to the good

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 3. Price

i. Specified & certain

ii. Quantified

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 4. Possession or Delivery

• Physically or Constructively

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 Types of sale
1. Valid(Sahih): Contract, subject matter ,price and
possession are present with their conditions.

2. Defective(Fasid): conditions of contract, sold good

conditions and conditions of price are not compiled
with.

3. Void(Batil): In which sale is not occurs on valuable

thing or not meet with some sale conditions.

4. Valid but disliked(Makrooh): like

• sale after Juma Azan
• sale after hoarding
• sale by intervention of a third party while two are negotiating 19
 Types of sale

Shariah Status of void Sale:

• Transaction is completely null and void.
• Ownership doesn't transfer.
• For Seller taking price is not Halal.
• Transaction is haram from its inception.

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 Types of sale

• Shariah Status of Defective:

• The subject matter should not be possessed by the buyer
• If possessed with the consent of the seller, title or ownership
will be passed to the buyer but usage of subject matter will be
impermissible
• Buyer must return the goods to the seller
• However if the defect is rectified the sale becomes valid

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 Deferred sale

Deferred Sale ( Bai Mou'jal)

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 Rules for Deferred Sale

1. Price should be fixed.

2. Time/date should be fixed.
3. Deferred price may be more than cash price.
4. Once the price is fixed it can not be changed due to
late payment.
5. In case of installments the installments dates and
amount should be known.

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 Rules for Deferred Sale

6. A condition may be put that in case any installment

is not paid/delayed the remaining installments will
become due immediately.
Sadqa ( AAOIFI Clause No. 5/6)
Agent ( AAOIFI Clause No. 4/11)

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 Khiyar

What is Khiyar?

“Right or option of the buyer or seller to cancel a

contract of sale”.
 Types of Khiyar

1.Khiyar-e-shart
2.Khiyar-e-Roiyyat
3.Khiyar-e-Aib
4.Khiyar-e-wasf
5.Khiyar-e-Ghaban
 Iqala

“Iqala is act of cancellation of a sale contract where

both parties freely consent to cancel the contract i.e.
each party will give back the consideration (money
and subject matter)received by them”.
 Concept of Agent (Wakeel)

“To substitute an agent for the principal to perform

on behalf of that principal an act which admits of
representation”.
 Rights and obligations of agent

1.Agent can be any person capable of executing a transaction.

2.The agent is bound to act and perform as per specifications
and guidelines given by the principal.
3.He will be accountable in case of violation of instructions of
principal.
4.All actions of agent will be considered as coming from the
principal.
5.All risk of good purchased by agent will be with the principal.
6.It is non binding contract, any party cancel the contract by
noticing other party.
7.Agent is entitled a fee for his efforts.
Jazak'ALLAH

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