Applied Islamic Banking

By:
Prof. Dr. Mohd. Ma’sum Billah
masum@applied-islamicfinance.com
masum2001@yahoo.com
+6019-3699542

Islamic law of contract finds its principles and doctrines from the divine verses in the Holy Qur’an and the Sunnah and the interpretaion of the Islamic Jurists and scholars of these divine verses. However, when we need to apply these principles of contract in the society, such application of these fundamental principles wants further expansion in the aspect of scope and classification of contract based on the fundamental divine theories. However, it must always be remembered that the expansion and elaboration for the simple reason that man must not depend on any source other than these basic divine principles in the Holy Qur’an and the Suunah in their commercial life. Hence, in the secound phase of this paper, an attempt has been made to classify various kinds of contract, which apply to the contemporary societies together with their provisions which are not contrary to the divine doctrines of contract. These contracts are not only justified by the divine principles of Allah, the Almighty as enshrined in the Holy Qur’an and the Suunah, but also by the doctrines of Ijthihad (الاجتهاد) and public interests ( المصالح المرسلة Masalih al-Mursalah ) which are also approved by the divine doctrines. THE CLASSIFICATION OF CONTRACT ACCORDING TO ITS NATURE

There are many kinds of contracts practised in the contemporary society but not all of them are justified by the divine doctrines such as contracts which involve unlawful elements in the eyes of Allah, the Almighty such as usury, bribery, gambling etc., or doctrines whose subject matters are unlawful such as wine, pig, dead meat, blood etc. Thus, the classification of contract according to its nature are justified by the divine doctrines are as follows:

CONTRACT OF SALE

“to change property for property and it is either mun’aqid ( by a concluded bargain) or ghair mun’aqid (without a concluded bargain).”

The term ‘contract of sale’ signifies the “delivery of a definite object which possesses legal value in exchange for something equivalent in value called the price.” According to Ibn Arfa, sale is a contract of obligation by which each party transfers to the other the property of something for other than simple usage of pleasure. An additional limitation is that the contract is communicative of which one of the consideration shall be of legal tender and the other shall be a specific object. In other words, a contract of sale is an agreement of an exchange of goods by goods or goods by properties or peroperties by properties or goods by price or properties by price, between two or more contracting parties.

The term al-bay’ al-mun’aqid (enforceable contract of sale) signifies a contract of excahnging goods where one party proposes and the other accepts it. It can be of four types: Sahih , fasid , nafidh or mawquf . Thus, in a contract of sale, the seller is called al-ba’i’ , the buyer al-mushtari while the goods al-mabi’ .

According to the Hanfi school of law, there are basically two types of sale, ie., the special sale and the general sale. The specail sale is categorised according to its meaning, object and price.

Sale can also be categorised according to its object into the following catogories:

(Mutlaq) – an absolute sale of object for money whether it has an immediate effect or not.

In the light of price, a sale can also be categorised into the following categories.

(Musawwamah) – a resale with an agreement that no reference can be made to the original cost price.

A contract of sale is considered void in the view of Islamic law in the following circumstances

(Muzabanah) – A sale of a known quantitiy for an unknown quantity or price such as the sale of fruits, lands or corns which quantity is unknown.

(Thanniyyah)- A sale of fruits on trees after leaning of some fruits from the subject matter of sale.

(Muhaqala) – A sale of corn in exchange of like quanitiy of wheat by conjuction.

Muawamah – A sale of fruits which are still on trees for the period of one year, two years or more regardless of whether the fruits appear or not.

A sale of food-grains and other stuff but one party takes his full quanitiy for hisown consumption and that of his family.
A sale of commodities before they come into the possession of the buyer.
A purchase of corns and food stuff on the way before the merchantises actually reach their destined places.
A sale over another sale for a higher price offered or for any other cause.
A sale of lease of water and grass.
A sale of undelivered goods which price has been promised.
A bargain with the poor and needy.
A sale which involves the exchange of goods still not in existence such as a bird in the sky, a fish in the water, milk in the udder and likes.
A sale of pork, wine, blood and other prohibited goods in the eyes of Allah, the Almighty.
A sale of any goods or article which cannot be seperated without damage or injury, or which quality and exixtence cannot be ascertained and judged.
A sale of absconded slave, women’s milk, bristles of hog, human hair and undressed hiders. It is however valid to sell bones, woold skins or horns of all animals other than human and hogs.
Any contract of sale which involves one or more elements contrary to the divine provisions Allah, the Almighty mentioned in the Holy Qur’an and the Suunah such as bribery, usury, gambling, stolen property etc.

“ an agreement for association on the condition that the capital and its benefit be common between two or more persons.”

“an agreement between two or more persons to carry out a particular business with the view of sharing profits by joint investment.”

Another Muslim jurist, Mohammad Akram Khan define a “sharikah” or partnership as:

“a contract between two or more pwrsons who launch a business of financial enterprice to make profit.”

In all the above definitions, the idea of partnership is to share profit over the business while the share of loss. Thus, a partnership needs to be defined as a contract between two or more persons in carrying out a particular business with a view of not only sharing the profit but also loss and liability between the partners relying on the terms of the contract. Dr. Omar Chapra thus views that a contract of partnership does not only signify the only the sharing of profit over the business but also the sharing of loss and liabilities between the partners.

A contract of co-partnership is an agreement between at least two parties of which one party provides capital while the other provides the labour and both parties will share the profit, loss and liabilities according to the propertionate that they agree upon during the contract. The Mejella defines a contract on co-partnership as:

“ a kind of partnership on the condition that the capital is to be found by one, and the labour and work by the other.”

In practical, a contract of co-partnership may be formed in any of the following models:

An agreement between a bank and a businessman whereby the bank provides the money for the businessman who operates a business over it and the profit, loss and liabilities over the business will shared by the partners according to the agreement.
An agreement between two ordinary persons to operate a partnership business in which one person provides the money while the other will carry out the business with his skill, whereupon they will share the profit, loss and liabilities over the business according to the agreement.
An implied or express agreement between a bank and the money depositor(s) that the depositor(s)will deposit the money to the bank when, at the same time, there is a second express agreement between the bank and an investee whereby the bank provides the money and the investee will carry out the business, and the subsequnetly the money depositor(s), the bank and the investee will share the profit, loss and liabilities over the business according to the agreement.

A contract of agency is an agreement between two parties of which one party will appoint another party to act on his behalf. The agreement is to authorise a power to represent him or to exercise the power on his behalf in any matter that is instructed by him. In a contract of agency the person who authorises the power is called the pricipal and the person who is appointed to exercise the power is called the agent and the subject matter of which the authority is given to exercise the power is called the object . In its operation, however, the power of exercise is not to be vested in the agent in any of the following circumstances.

If the agent takes an oath on behalf of the pricipal.
If the agent has been appointed by the principal to perform an illegal act.
If the agent has been instruscted by the principal to divorce the pricipal’s life on his behalf.
If the agent has been appointed by the principal to give the consent of marriage of the virgin daughter of the principal.
If the agent has been asked by the principal to sell his (the prinicipal’s) house.
Any other matter which is not covered by the condition of the agreement.

A contract of manufacturing is an agreement between two parties in making or manufacturing a particular article of which one of the parties will offer a labour or artist to make a particular article for a definite price with a certainty of quality and quantities of articles within a prescribed period. The price of the article is to be paid once the article is ready.

It is to be noted here that a contract of manufacturing is based on the custom or practices which was originated from the period of the Holy Prophet (saw) and justified by equityand by the necessities of business.

Hiring means a lease or hiring and a contract of hiring or leasing is an agreement between two parties on a particular subject matter to transter the temporary title of that particular subject matter. For instance, one party offers a particular property to another who accepts it for a fixed period. In a contract of hiring, the person wh offers the property is called lessor or hirer while the person who enjoys over the property after the acceptance is called lessee or hiree.

For the validity of a contract of hiring, the following elements must be available:

A contract of arbitration is an agreement between the parties who enter into a mutaul agreement on a particular subject matter that if in case of any dispute or disagreement that arises over the transaction, the dispoute or disagreement will be settled through the appoinment of a third party as an arbitrator.

“ a contract between two contending parties in which both agree to appoint a third person as an arbitrator to settle their disputes” and “it can be between more than two parties.

A contract of insurance is a mutual agreement between two parties for a mutual co-operation in protecting one’s life or property from any unprotectable and unavoidable risk, danger or tragedy. This doctrine of mutual protection and co-operation is based on the below divine sanction, when Allah, the Almighty says to the effect:

“Help ye one another in righteousness and piety but help ye not one another in sin rancor…”

Thus, in a contract of insurance, there will be two parties of which one party is called the assured or the insured who will enter into an agreement with another party (the insurance company) called the insurer on a particular policy that the assured will pay a certain amount of money to the insured on instalment basis with the new of protecting the assured from any unavoidable and unforseenable risk or tragedy that might occur to one, his life or property.

Hence, in the case of an occurance of a tragedy or catastrophe on the assured’s life or property, the insurance company as the isurer will provide financial remedy for the contract. That is why such contract is known as an agreement of mutual co-operation as the insurance policy is entertained into by the parties with the view of helping one another on the basis of brotherhood, mutual co-operation and goodwill and most importantly, such contract of insurance between the isurer and the assured operates based on the Islamic principles of co-operation

A contract of gift is an agreement between two parties of an unqualified transfer of a particular object (such as goods, propertym etc.) without any consideration () . In a valid contract of gift, the following elements must be available:

“(Suretyship) kafala is to add obligation to obligation in respect of a demand for soemthing that is to say it is someone adding himself to another person, and himseld undertaking a demand which is binding on that person.”

In a contract of suretyship, the person who is undertaken the responisibility of transaction is called ‘kafil’ , the person is who is undertaken by the kafil is called ‘makful anhu’ , the person for who the ‘makful anhu’ is undertaken is called ‘makful lahu’ and the subject matter of such contrct is called ‘mkful bihi’

In a commercial transaction a contract of guarantee comprises of two separate agreements between three parties on two separate subject matters. The first agreement is between two parties where one party agrees to supply goods or property to the other party on credit for a particular price of which the first party is called the creditor and the second is called the principal debtor. Meanwhile, the second agreement is between the creditor and a third party is called surety or the guarantor who will undertake full responsibility of liability in case of any default in the settlement of the debt by the principal debtor.

To put it in a nutshell, a contract of gaurantee, according to Prof. Abd al-Rahman Idoi, is a form of contract by which a third party undertakes to be responsible or liable for the debt of another. Hence, if the principal debtor in such a contract, fails to settle the debt on time, the surety is bound to settle the debt on the debtor’s behalf. However, if in a case whereby the surety dies before settling the debt, the debt will have to be settled upon his estate.

“A ‘bailment’ is the delivery of goods by one person to another for some purose, upon a contract that they shall when the purpose is accopmplished, be returned or otherwise, disposed of according to the directions of the person delivering them…”

In a contract of bailment the person delivering the goods is called the bailor while the person to whom the goods are deliverd is called the bailee.

Anwar Ahmad Qadri views that bailment is a deposit in which the owner of property places his property in the custody of another for safe keeping and the transaction between the two parties can be terminated at will by either party. Anwar further explaind that the property deposited in the contract is considered as a trust and therefore if the person holding it, negligently or deliberately, by wrongful action causes or allows that property to destroy or perish, that person will the responsible of that loss. However, if the loss of that property is not caused by any wrongful act of deliberance or negligence of the person, the person holding that property will not be held liable for that loss.

An example of the bailment in the contemporary world is as a person who makes a transaction with an interest free bank by opening a current or saving account.

Cost, insurance and frieght (the C.I.F.) is a contract of international trade and shipping of the carriage of goods by sea which was introduced by the English Law. Eventhough as such, the C.I.F. contract is not contrary to the Islamic provisions due to the fact that Islam does not impose any territorial limitations on one’s business. In other words, the Islamic divine provisions are very flexible and practical, and as far as trade anc commerce is concerned, Islam gives the freedom to mankind to involve in trade and business wherever man likes, either locally or internationally as long as every aspect involved in the transaction confirmes with the divine laws revealed by Allah, the Almighty. Hence, the term ‘trade and business’, in the eyes of Islamic law includes both local and international. Allah, the Almighty says in the Qur’an to the effect:

"And when the prayer is finished then may you dispense through the land, and seek the bounty of Allah (swt) (through trade, business, etc.) …. "

In the above verse of the Qur’an, the term "bounty" is of general in nature, which means any kind of bounty of Allah (swt) sought by any legal means which of course include the bounty of Allah (swt) obtained by way of either local or international trade and businesses.

A C.I.F Contract means a contract for the price that the buyer has to pay the cost of goods together with the insurance of the goods during the transit and the freight or carriage of the goods to the port of destination. In other words, in a C.I.F Contract, there are normally two subordinate contracts made by the seller of which the first is a contract of affreightment or contract of carriage of the goods by sea where the shop owner (carrier) signs a document known as the bill of lading upon receipt of the goods, while the second is a contract of insurance in accordance with which the underwritten deliver a policy of insurance.

The Free on Board (F.O.B) contract is also another form of contract of international trade, which is also not contrary to the Islamic provisions. A F.O.B contract is defined as follows:

"a contract of sale of goods where the seller pays the cost of shipment and makes delivery as soon as the goods are placed on board, the buyer bearing the risk of whether there are lost or not. The seller must give notice to the buyer to enable him to insure the goods. The risk does not pass to the buyer, nor does the property until the goods are actually on board".

From the above definition the principles that could be found in the F.O.B contract is as follows;

"… and fulfill every promise, for (every) promise will be enquired into (on the day of judgment)".

Baillie, a writer, suggests that in a sale of slave, for instance, if the seller, after the conclusion of the contract, informs the buyer that "I have vacated for you" but the buyer, instead, refuses to take possession of the slave, the buyer will be fully responsible for the loss if the slave dies in the journey.

A mortgage transaction is allowed in Islam, and it was widely practiced during the period of the Holy Prophet (saw). Until today, it is still widely practiced not only in the Muslim society but also in other non-Muslim societies. A mortgage transaction is allowed by the divine injunction in the Qur’an when Allah (swt) says to the effect:

"And if you are on a journey and cannot find a scribe, pledges (may be taken) in hand but if you trust one another, then let him who is trusted fulfill his trust, and let him be conscious of Allah, his sustainer."

Thus, a contract of mortgage or bailment is an agreement between two parties of sound mind on a particular security, for a particular debt and for a particular period. The person who gives the pledge and takes the debt is called mortgagor or pledge ( , Rahin) or bailer while the person who takes the pledge and gives the debt is called ( , Murtahin ( or mortgagee or pledged or bailee. The person to whom the pledge and the pledged deposit the pledge is called ) , ‘adl) the pledged property is called Marhun or Rahn and the debt of that mortgage is called a debt ) , Marhun bihi ( .

In a contract of mortgage, the offer is made by the mortgagor (Rahin) by saying that "I have made this things a pledge against my debt to you", and the acceptance by the mortgagee by replying that “I have accepted or consented”. In the course or mode of offer and acceptance, the parties need not express the word "Rahn".

Thus, here are some basic principles on the operation of a contract of mortgage or bailment which cover the aspects of rights and duties of the parties involved:

According to the Shafie Schools, the mortgagor or bailor is allowed to enjoy over his pledged property, but the Hanafi School does not allow such enjoyment by the mortgager over such pledged property;
The mortgagor or bailor has the right to recover his pledged property upon the settlement of his debt. However, he cannot claim back his pledged property and sell it for the purpose of such settlement;
It is the duty of mortgagor or bailor to settle the debt and recover the property according to the agreement.

The mortgagee or bailee is entitled to keep the property until he receives the repayment of the debt from the mortgagor;
The mortgagee or bailee has the right to claim the money debted and he may bring an action against the mortgagor if the mortgagor refuses to settle the debt according to the agreement;
The mortgagee or bailee is not entitled to enjoy over the property pledged;
The mortgagee or bailee himself (or any member of his family) is under the duty to take care of the pledge property.

A contract of compromise is an agreement between two parties and a disputed matter to be settled outside the court of law. The Mejella defines such contract as:

"a contract removing a dispute by consent (of both parties) and it becomes a concluded contract by offer and acceptance.”

"an agreement between two contenders to have the right to take the disputed matter to the court of law”

Hence, a contract of compromise is allowed in Islam. In fact, it is a commandment of Allah (swt) who has always commanded mankind to reconciliate a compromise among the disputed believers in any circumstance. Indeed, Allah (swt) says to the effect:

“The believers are but a single brotherhood: so make peace (compromise) and reconciliation between your two (contending) brothers”

“If two parties among the two believers fall into a quarrel make ye peace between them: but if one of them transgresses beyond the bonds against the other; then fighted ye (all) against the one that transgresses until it complies with the command of Allah (swt); But if it complies; then make peace (compromise) between them with justice and fair”.

A contract of employment is an agreement between the employers and, the employee, master and servant, or company and worker on a particular work for a particular consideration. This kind of contract is well developed in Islam whereby the Prophet (saw) had always emphasized in many traditions on the rights and duties of the employer and the employee.

"Narrated by Ibn Umar (r) who said that the Holy Prophet (saw) said: (Oh employer) you (have to) settle the salary of the salary of the employee before his sweat dry.

"Narrated by Imam Abu Hurairah (r) who said: "The Holy Prophet (saw) said: Allah (swt) declared that there will be quarrel between three types of people in the resurrection day: one of them is the one who enters into a contract by My name and breached it, secondly the one who illegally caught a free man and sold it and consumed the money, and finally the person who used a worker for his work and did not pay his salary".

From the above two traditions or ahadith of the Prophet (saw), it is understood that Allah, the Almighty and the Prophet (saw) himself had often emphasized on the rights and duties of the employers and the employees in a contract of employment.

A contract for education normally means an agreement between a student and any institutions of higher learning. The student agrees in this type of contract, to become a student at that educational institution, pursues his higher education and abide with all laws and regulations imposed on him by that institution. On the other hand the educational institution is under the obligation to enroll the student and provide all the agreed facilities to him. Usually, in this type of contract, an institution of higher learning will issue an offer to the selected student, an enrolment into that institution for the purpose of advancing his studies in the chosen field while the student will accept the offer by sending a reply card or letter. This is the first type of contract for the education.

The second type of contract for education revolves around a sponsor (either in the form of government or other bodies and institution) offering to sponsor fully or partly the cost and expenditure, of the student education at an institution of higher learning while the student who has been offered the sponsorship accepts the offer made to him by agreeing to pursue his higher studies at the agreed institution and abide with all conditions and regulations imposed on him by his sponsor.

Both types of contract for education as illustrated above are binding as there were offer and acceptance from the respective parties. Furthermore, the principle behind such contract is really based on the divine doctrine of mutual co-operation and good will for the purpose of Islamization of Knowledge. Allah, the Almighty has always stressed on this divine doctrine when He (swt) says to the effect:

A contingent contract is a kind of uniteral contract, which has been defined as:

"a contract to do or not to do something, in some event, collateral to the contract, does or does not happen.”

In a contingent contract, there is one party who offers something to somebody for the performance or non-performance of any action. The contract is binding upon the offeror unilaterally once the object of the offer is fulfilled. For example, ‘A’ offers to pay ‘B’ RM50.00 if B recovers from his sickness. Here, the contract is binding upon ‘A’ as he must fulfill his offer if ‘B’ recovers from his sickness. If ‘B’ however, dies before the recovery, the contract is, of course, unenforceable.

Islamic law recognises contingent contract as valid contract and uniterally binding upon the offeror. This position is clearly seen from the following divine injunction when Allah (swt) says to the effect;

From the above-mentioned verse of the Qur’an, it is clear that as far as Islamic law is concerned, each person is bound to fulfill his promise and that is exactly what contingent contracts seek to achieve. In short, the natures of contingent contracts are clearly in harmony with the divine Qur’anic provision.

A contract of marriage is a conditional agreement between two parties (a man and a woman) with a mutual consent to be life partner of each other and it is different from the contract of sale and other kinds of contracts. In a formation of a valid marriage, the following conditions must be fulfilled.

In a breach of the contract of marriage (divorce), the remedies are available but not in the same nature as the remedies available in other types of contracts. These remedies are as follows;

"Let the woman live (in iddah) in the same style as ye live, according to your means: Annoy them not, so as to restrict them. And if they carry (life in their womb), then spend (your substance) on them until they deliver their burden: And if they suckle your (offspring) give them their recompense....

A contract of betrothal is a form of promise to marry in the near future. In the contemporary world, it is widely known as an engagement. The term "betrothal” is however defined in the dictionary as:

“a mutual promise of marriage" or "a mutual promise or contract between a man and a woman competent to make it to marry at a future time".

Hence, once there is a betrothal (or an engagement) between the future husband and wife to marry in the future that contract or promise is binding as Allah (swt) says to the effect;

"... And fulfill (every) engagement, for (every) engagement will be enquired into (in the Day of Judgment)"

Relying on the above divine doctrine, all types of promises (or engagements) which also include a promise to marry is binding upon both parties and should there be any bread of such promise, the breacher shall have to pay the following remedies:

A social contract implies an agreement between the representatives of the people in the society in order to ensure peace and harmony in all aspects their lives. Such contracts contribute towards the establishment aim of securing peace and harmony as well as protecting the people's rights, freedom and obligation.

The Prophet (saw) had, himself entered into a social contract or agreement with, the people of Qura'ish called "Sulh al-Hudaibiah". Another form of social contract which had been entered into by the Prophet (saw) was the contract of Aqaba or what is known as "Bai'ah al-'Aqabah", a 'social contract which the Prophet (saw) made with some people of Medina from the tribes of ‘Aus’ and ‘Khazraj during one pilgrimage season at a place called ‘Aqabah’. The content of the contract of ‘’Aqabah’ are is as follows:

“We will not worship any but God, we will not steal neither will we commit adultery, nor kill women or children, we will not slender in any wine nor will me disobey the Prophet in anything that is right".

An international contract is usually held between the states or countries for the purpose of economic development of the theories and practices of knowledge and any other matter, which brings the states into a developing status. The significance of such international contracts is to reconstruct the states upon the noble principles of discipline and development. Allah (swt) has indeed encouraged all believers to do good to each other as all Muslims are of a single brotherhood when He (swt) mentions to the following effect in the Qur’an:

"The believers are but a single brotherhood; so make peace and reconciliation between your brothers…”

"Barter" is a contract of exchange of goods. Muhammad Akram khan defines it as selling a commodity for another commodity.Abdur Rahim has,defined barter as when "a determinate article is sold for another determinate article"while another writer defines it as when "one of the parties binds himself to give one thing in consideration of the other's promise to give another thing …

All of the above definitions imply the same meaning and nature of the contract of exchange of goods or barter, though the expressions used are different- We could hence infer from the above definitions that a barter transaction is different in nature and practice from a sale of goods as it involve the exchange of goods by goods, money by money or property by property.

The barter transaction was widely practiced during the lifetime of the Prophet (saw) and the companions and it continues to be practiced until today. Its validity in the eyes of the Syariah divine principles is reflected in the following tradition of the Prophet (saw) when He (saw) said to the effect:

"Narrated by Ibn Umar R: The Holy Prophet (saw) said: The selling of wheat for what is usury except if it is handed from hand to hand and is equal in amount similarly the selling of barley for barley s usury except if it is from hand to hand and is equal in amount, and dates for dates is usury except if it is from hand to hand and is equal in amount.”

Imam Malik(r) in the barter transaction which exchange the same kind of commodities, mentioned: "it is generally agreed on the way of doing things among us that the meat of camel, cattle, sheep and so on is not to be bartered one for one, except like for like, weight for weight, from hand to hand- There is no harm in that. If it is not weighed,, then it is estimated to be like for like from hand.

In an exchange of goods of different kinds, the quantity or amount of the two different commodities are not necessarity equivalent as there is no harm if the quantity of the goods are different. Imam Malik (r), again observed to the effect:

“There is no harm in bartering the meat of fish for the meat of camels, cattle and sheep on two or more for one, from hand to hand… "

As regard to money or currency exchange the Holy Prophet (saw) had explained in one of the traditional that the consideration should not exceed the subject matter if the currencies are of the same kind- In other words, in an exchange of currency which are of the same kind, the quantity of both currencies must be the same the Prophet (saw) said to the effect:

"Narrated by Abul Minhal R. who said: I used to practice money exchange and I asked Zaid bin Arqam (r) (about its justification). He ( r ), said that the Holy Prophet (saw) said that… if it is from hand to hand there is no harm in it…”

However, if the exchange involves currencies which is of different kinds the consideration may exceed the subject matter which means that the quantity of the two different currencies are not necessary equivalent.

“Narrated by Abdur Rahman bin Abu Bakar (r) that the Holy Prophet (saw) allowed us to sell gold for silver and vice versa as we wished"

Based on the above-mentioned authentic tradition of the Prophet (saw), the proposed procedures for the operation of barter transaction in the contemporary society are as follows:

A barter transaction could either be in commodities, properties or currencies;
The exchange of such commodities property or currencies could either be of the same or different kinds;
Should the barter transaction involve commodity, property or currencies of the same kind the quantity or amount of both the subject matter and the consideration must always be the same and any excessive amount is equivalent to Riba (usury) and renders the transaction void;
Should the barter transaction involved commodities, property or currencies of different kinds, any unequivalence between the quantity or amount of the subject matter and the consideration may be accepted as in such transaction, the quantities or amounts need not be the same;
As regard to the exchange of currency the following procedures are hereby proposed;
The subject matter and the consideration can either be of the same of different currencies;
Should the currencies involved in the barter transaction are of the same kind the amount or value both subject matter and consideration must always be the same;
Should the currencies involved in the barter transaction are of different kinds the amount or value of both subject matter and consideration may not necessarily be the same;
Should the currencies involved are of the same kind but are in different forms (such as dollar and cents) both the subject matter and the consideration must be of equivalent in value;
If the subject matter and the consideration of the currency exchange transaction are of different in name but same in value, the consideration of the transaction must be an equal in value to the subject matter. If this does not involve an element of interest ( ربا ) for example an exchange of U$l-00 is consideration of RM2-50 which are equal is value.
If the subject matter and the consideration of the transaction are of different is both name and value, the consideration must be equal to the subject matter in value, because a less or more consideration to the subject matter in value is a Riba (interest). For example an exchange of RM1.00 is consideration of U$1.00 is a Riba (interest).
In a currency exchange transaction, quantity or name are irrelevant to the validity. The important here to observe is the equality is value between the subject matter and the consideration in the transaction. Thus, a less or more consideration to the subject matter declares the transaction void due to the involvement of element of Riba (interest).

It is often practiced in the contemporary society that once the land owner wished to construct on his land any kinds of buildings, roads and other kinds of facilities, he has to employ employee who has the expertise of such constructions in order to ensure the success of such projects. In employing such employers for the purpose of carrying out such constructions, the landlord and his employer/s must enter into a contract, which is known as the construction contract.

The landlord will provide a site on which the construction will take place;
The landlord will enter into a contract with the contractor who will in turn take the sole responsibility of completing the construction in accordance with the stipulated terms in the contract;
The contractor may enter into another other agreements with other people who are usually involved in such particular constructions:

The architect who will prepare the design or plan of the building to be constructed;
The civil engineer - who will advice and investigate on the technical matters of the project; and
The sub-contractor who will take the responsibility of doing the construction by providing the required labours and the means and tools for the construction in accordance with the terms of the agreement.

Therefore, there are normally more than one agreement in a construction contract. In other words, the privity of contract is between;

Hence, if there is any default in the project or construction, the liabilities are in the following nature:

"..… and fulfill (every) promise, for (every) promise will be enquired on the day of Judgment”.

In the light of the above, divine doctrine is a promise which is binding on the party who makes it. Hence, in the case of a construction contract, the main-construction has agreed to undertake the whole construction project and is therefore liable to the landlord in case of any default in the project .

The maincontractor may, however, bring an action for any default in the construction project against the architect, the civil engineer and the subcontractor owing to the presence of privity of contract between them to recover the damages that the main-contractor has to pay to the land lord. The main-contractor, however can only bring an action, against the person responsible for the default of the construction. For instance, if the default is caused solely by the architect the main contractor can only bring an action against him and not anyone else Allah (swt) says to the effect:

As a whole, there are many kinds of contract, other than the ones which have already been mentioned above, practiced in the modern world such as the contract of professional carrier, the contract of demand and supply of goods and so on and all these contracts are, indeed, in harmony with the basic Islamic principles as enshrined in the Qur’an and the Sunnah. In other words, the religion of Islam which is comprehensive and practical in nature, permits the performance and construction of any kind of contract as long as, all aspects of the contract such as its nature, modern operation and subject matter are made in accordance with the divine principles of Allah (swt). Such permissibi1ity of performance of the contracts are held in reliance of the Islamic doctrine of Public Interest with the vision of allowing the society to develop themselves in copying with the increasing demand of the modern life. Such is the flexibility and comprehensiveness of Islam as a way of life.

A valid contract may be formed in various circumstances. Some may exist in the form of unilateral contract, some may be in the form of bilateral contract and others may even be in a mixture of both. A contract may, thus, be classified according to its circumstances into the following four categories:

A unilateral contract is defined, as a transaction by one party only or by which one party binds himself.

"one in which the offerer promises to pay for an act done by the other party, the acceptance takes the form of performing the act. The offer, and resulting contract, is unilateral, that is, one-sided because only one party makes a promise".

Hence, in the above instances the promises made are binding on the offerers themselves and will become enforceable once an offeree comes forward and fulfills the conditions and requirements made for the acceptance of such offers. In other words, in the first example, if an offeree comes forward and proves that he has suffered from a disease or illness as the result of consuming the offerer's advertised product, then the promise or offer made earlier by the offerer to compensate any consumer effected by their product is binding on the offerer himself. Likewise, if any offeree as in the second example, comes forward and recover the lost item, the earlier promise made by the offerer to reward such recovery will then become binding on the offerer who has made the promise.

Under Islamic law, a unilateral contract is recognized as seen in the following Qur’an verse when Allah, the Almighty specifies to the effect:

"And fulfill (every) promise, for (every) promise will be required into (on the day of Judgment."

Another clear authentic evidence in the Qur’an, which shows how a promise can be unilaterally binded on the person making it, is the following divine verse when Allah (swt) says to the effect:

"When thy lord drew forth from the children of Adam (A) from their loins " their descendants and made them testify concerning themselves (saying): "Am I not your Lord (who cherishes and sustains you)?” They, said: "yes! We do testify…”

In this verse, the admission and promise made by the creative on the Queness of Allah, the Almighty is unilaterally binding on them.

Since all promises are binding according to the above divine principle of the Qur’an, a promise in a unilateral contract also has the same effect and hence is binding on the offerer who makes it and not on the offeree who accepts it. Some of the good examples of a unilateral contract as found in Islamic Law are the contract of reward or any offer made by a company, factory or manufacturer to compensate any consumer for any defects or illness suffered as the result of consuming their products.

The nature of a bilateral contract is somewhat different from the unilateral one. This is because, a bilateral contract is commonly practiced transaction in the society which involves two parties, an offerer and an offeree, who are both under the obligations to perform each part of the contract. The bilateral contract is binding upon both the offerer and the offeree: the offerer being under the obligation to fulfill while the offeree, the duty to perform his part of the contract as the consideration to the offer made by the offerer. This phenomenon is of course different from that of a unilateral contract whereby the promise made is binding only upon the offerer who makes the offer and not the offeree who is under no obligation at all.

The Mejella defines a bilateral contract as when "two parties taking upon themselves and undertaking to do something. It is composed of the combination of an offer and an acceptance ."

According to another legal source, where the offer takes the form of a promise to do something in return for the promise of the offeree to do something, the offer is bilateral. Hence, a bilateral contract involves promises made by both parties whereby, in accepting the offer promised by the offerer, the offeree binds himself to perform his own promise.

One Law Dictionary defines a bilateral contract as the one, which the parties are under an obligation reciprocally towards each other whereby for instance one party, in a contract of sale and purchase, becomes bound to deliver the thing sold while the other to pay the price.

Another dictionary defines, a bilateral contract as a contract in which each of the two parties is bound to fulfill obligations towards the other.

A bilateral contract is, like a unilateral contract, recognized by Islamic law and is binding on both the offerer and the offeree. Allah (swt) mentions in the following verses to the effects:

"And fulfill (every) promise, for (every) promise will be required into (on the day of Judgment).”

The only difference between a bilateral contract and a unilateral contract is, like we have already mentioned, a bilateral contract binds both parties, the offerer and the offeree, who are under the obligations to perform their respective promises while a unilateral contract binds only the offerer who makes the offer.

A clear instance, of a bilateral contract is hereby illustrated below: "A" offers to sell his car to "B" for RM50,000/- upon certain terms and conditions while "B" accepts the offer with all the terms and conditions made. At this point, the bilateral contract between "A" (the offeror) and "B" (the offeree) has been concluded and binding on both "A" and "B" whereby "A" is under the obligation to sell his car to "B" while "B" is under the obligation to pay the price, both of them being subjected to all the terms and conditions of the contract. If any one of the parties breaches any terms or conditions of the contract, the other party has the right to seek remedy for a breach of contract.

It is to be noted here that under the common law, the principles relating to both bilateral and unilateral contracts are also available and very much identical to that of the Islamic Principles. The only difference between the two is that the principled available under Islamic law on these issues are purely common law principles on these issues are based on the statutory provisions, case laws and practices.

A quasi contract is a contract alike. However, it may sometime become enforceable and sometimes unenforceable. In one dictionary, a quasi contract has been defined as

"an act or event from which, though not a consensual contract, an obligation arises as if from a contract for instance, an executor or administrator is bound to satisfy the liabilities of the decreased if he has contracted to do so.”

In the light of the above definition, an example of an enforceable quasi contract is when the decreased appoints an administrator for his estate to manage his property on his behalf after his death. Here, once the decreased passes away, the administrator is acting as a trustee and is therefore under the responsibility to handle, manage and utilize the property on behalf of the decreased accordingly to those who are entitled. Allah (swt) says regarding this to the effect:

"Verily Allah commands you to render back your trusts to those whom they are due …”

However, as we have already mentioned, a quasi contract may sometimes become unenforceable by law and a clear example of this is a contract of a minor. This means that if a minor enters into a contract with “X” that contract is a quasi contract due to the minor’s in competency to contract and such quasi contract cannot be enforced in law. The holy Prophet (saw) once said regarding the incapacity of a child to contract to the following effect:

"The pen (of Law) has been lifted away from three persons, form a minor till he becomes major, from an insane person till he regains sanity and from one asleep till he awakes”

In short, a quasi contract is a contract alike which has two possible legal consequences. It can sometimes be enforceable in the court of law, as in the case of the appointment of one person as the administrator of the property by the deased during his lifetime. However, quasi contract, at another time can be unenforceable, such as in the case of the contract of a minor.

A contract need not necessarily be entered into by just one individual or person. In some situations, it can even be entered into by a group of people. For example, in a case whereby a property is jointly owned by a group of owners and these owners wish to sell it to the purchaser, these owners may sell that property with the condition that they are in complete agreement to do so. Likewise, if an owner of a land wishes to sell his land to a group of people who has common interests over that land the owner of that land may do so. In both examples such contracts are known as joint contracts and they are binding on all the parties of the joint party involved in those contracts, making these joint contracts enforceable in the court of law.

In the case of any breach of contract by any of the partner of the joint party of the joint contract, all partners must share the responsibility of such breach. In other words, if one of the several partners of the joint party breaches a condition of the contract, the other effected party may bring an action against each and every partner of the joint party in law.

It is to be observed that in the application of a joint contract, none of the partners of the joint party has the right to do anything, which might be injurious to the rights of the other fellow partners. For instance, in the case of a guarantee where the creditors are more than one (and this act as a joint party in a joint contract), one particular creditor cannot, without any consultation and agreement from the other creditors, grant an extension of time to the debtor. This is because such act might be injurious to the other creditors and unless such extension of time in the payment of the debt is consulted and agreed upon by all creditors, none of the creditor may act injuriously towards the other creditors in the joint party.

Under Islamic law, a contract can also be categorised based on its legal consequences. These classifications are solely for the sake of public interest based on the provision of public interest which are justified either expressly or implied by the divine sanctions, in the Holy Qur’an. These classifications are as follows:

A valid contract is an agreement, which is enforceable while creating an obligation and legal liability on the contracting, parties. A valid contract is different from a void, avoidable and invalid contracts in terms of its nature and legal consequences. The Mejella defines it as , which in its substance and attributes is according to the law.

In other words, a valid contract under Islamic law requires the following elements:

In other words, a contract, which fulfills all the above-said requirements, is a valid contract thus making it enforceable in law and binding upon the contracting parties. If any party to the contract breaches any term or condition of a valid contract, he will have to bear full responsibility of that breach and pay its remedies according to the law. The fact that the person who breaches the valid contract has to be fully responsible for that breach is, indeed, based on the divine Qur’anic injunction when Allah (swt) says to the effect:

"Fulfill all the contractual obligations”

It is difficult to distinguish between a valid contract and an enforceable contract because the difference between the two is very slight.This difference could be highlighted by the fact that valid contract may not necessarily be enforceable in law whereas an enforceable contract is, of course, always enforceable.

To illustrate this point further, let us see the following Example. For instance, the offerer or seller enters into a valid contract of slaw of a property with the offeree or buyer by fulfilling all the conditions and requirements for a valid contract already mentioned before this. Supposing that after the conclusion of this valid contract, there comes a threat to its enforcement due to the fact that the property already sold out, turns to be of unmerchantible quality. Then, in this situation, this valid contract of sale cannot be enforced in law unless and until the offerer or seller replaces the defect property with one, which is of merchantible quality. In other words, the contract, in this circumstance, is a valid one by virtue of the fulfillment of all requirements required for a valid contract but is unenforceable due to some defects to the subject matter i.e. the unmerchantible property.

Another classic example of a valid contract is unenforceable that can be seen in the second illustration below:

Supposing that all partners enter into a contract of partnership with a view of making profit. At this point, that contract of partnership is valid and enforceable. However if later one partner passes away his death could be a good ground for the dissolution of the partnership.The contract is however still valid but, owing to the subsequent death of one of its partners, it is unenforceable unless the remaining partners agree to continue their partnership with the representative of the deceased partner.

In short, we might say that not all valid contracts are enforceable.This is because, in some cases such as the ones that have been illustrated above, a valid contract, which satisfies all the, requirements of a valid, contract, might still become unenforceable due to a variety of reasons. However, we can safely say that all enforceable contracts are, indeed, valid contracts.

An invalid contract is an agreement between the parties where by the foundation of the contract is valid but the attributes of the contract is unlawful. In other words, an invalid contract is an agreement whereby the elements of offer and the conditions of a valid contract are also fulfilled. However, there are some illigalities involved in the contract.For example, if the object of the contract is unknown, or if there is any defect in the price of the goods sold, that contract becomes an invalid contract.

An invalid contract is not enforceable under Islamic law. According to Imam Abu Hanifah (r) an invalid contract cannot be completed by possession. Once it is concluded, it has to be revoked by either party.

In an invalid contract, the following rights and duties are available for the contracting parties:

Once the contract is concluded, the buyer has no right to claim the goods from the seller, nor the seller has right. to claim the price of the goods sold;
Once the contract is concluded, either one party or both, have the right to revoke the contract, regardless of whether the goods have been transferred or not, or whether the price has been paid or not;
If the price has been paid by the buyer, the buyer has the right to recover his paid money;
If the goods sold have been transferred by the seller to the buyer, the seller has the right to claim the goods back;
If the goods become perished in the hands of the buyer, the buyer is liable to compensate it;
The buyer has the right to keep the goods until the seller returns the price paid.

A void contract is an agreement which is merely null and incapable of confirmation. A void contract is further defined as the "one which never had any legal existence or effect, and such contract cannot in any manner have life breathed into it. In National Union Indemnity Co. V. Bruce Bros, the expression denotes that the parties to the contract have gone through the form of making a contract, but that none has been made in law because of lack of some essential elements of a contract, and such contracts create no legal rights, and either party there to may ignore it at his pleasure, in so for as it is executory. The Mejella defines a void contract as "a contract which is not good in its foundation ”. In other words, a void contract is a sale which has a defect in its essential aspects, such as a sale by an insane person. Moreover, a sale of a particular goods which do not exist or incapable of being delivered (i.e. not valuable are considered as a void contract.

A contract made by either or both parties who are legally incapable;
A contract made by-either or both parties upon mistake;
A contract made without a valid consideration;
A contract which involves immorality;
A contract which object is unlawful;
A contract which object of consideration is ascertained;
A contract which involves illegality against public policy;
A contract to restrain a legal trade;
Impossibility or frustration of performance in a contract is void;
A contract which foundation or substance is unlawful or illegal;
Any other contract or agreement which directly or indirectly contrary to the divine sanctions which would render it void abiuitio.

"A void contract has no existence in the eyes of the law, it does not confer a right, does not become obligatory and does not transfer any property."

Hence, based on the above quotation the effects of a void contract are as follows:

An unenforceable contract is different from a void contract and it appears in three legal consequences based on three circumstances. The three circumstances are as follows:

It is a contract, which cannot be enforced at all at any time and in any situation. Such contracts, which are unenforceable permanently, include a contract with a foundation or substance, which is illegal; a contract witch contains an illegal or unlawful subject matter; or a contract which is considered as unvaluable;and many such other contracts. To give a simple example, if "A" enters into a contract to sell port to "B", such a contract which, contains an unlawful subject matter according to Islamic law is void and is permanently unenforceable. Allah (swt) says to the effect:

“ Forbidden to you (for food) are dead meat, blood or the flesh of swine..”

A contract may sometime be unenforceable only for a particular time span. An easy example of such contract is a contract whereby both parties verbally agree to conclude it by signing a formal written agreement. We may conclude here that in this situation, such a contract cannot be enforced unless and until a formal written agreement is prepared and signed by both parties. In other words such a contract is unenforceable temporarily only, subject to the signing of a formal written agreement in future which would then render the contract enforceable.

After the conclusion of a contract, that contract will not necessarily be enforceable in law. This is because; there are situations whereby certain contracts appear in two legal consequences, a contract, which is unenforceable permanently or temporarily. An example of a contract, which has two legal consequences, is a voidable contract whereby the victimized party has the full option of terminating the contract. Hence such a viodable contract has two different legal consequences; it can either be permanently unenforceable if the victimized party chooses to terminate the contract, or temporarily unenforceable if he chooses to ratify it.

A voidable contract is different from that of a void contract in both its nature and lega1 consequence. It has been defined as a contract or agreement whereby one of the parties has the free option of either continuing with the contract or rescinding it. It must be remembered that from the moment when the contract is entered into, until the time when the party makes his choice, the voidable contract shall have the legal effect, which is intended to have. Such a voidable contract can however be dispute only by certain persons under certain conditions and the right of recession may be abounded by the party entitle to exercise it. If a third person acquires rights under a voidable contract of other transaction without notice and for value, they cannot after words be put in a worse position by it being set aside. Herein, a voidable contract differs from a void contract, for in the latter case, no third person can acquire such rights under the contract unless the party against whom it is void to affirm it.

"one which may be either avoided or confirmed by matter arising exposes facts".

Dr. M.A. Mannah points out that a "voidable contract arises where the outstanding obligation cannot be enforceable by both parties, but it is enforceable, at the instance of one party only, so that he may, if he chooses, enforce it, but not the other, or one of' the parties may evade his liability under the contract unless a third party has, in the meantime, acquired rights under the contract. The defect in this case is not incurable but may be condored, confirmed or ractified when the contract becomes unimpeachable. In fact, a "voidable agreement remains valid until rescinded.

The Malaysian Contact Act defines a voidable contract as "an agreement option of one or more of the parties thereto, but not at the option of the other or others.

Under Islamic law, there are however some circumstances whereby a contract is deemed to be voidable. These circumstances are mainly categorized into two:

There are some special circumstances whereby a contract is deemed to be voidable These special circumstances are follows:

According to the general principle, if one of the parties of the contract, or both, is an infant, the contract is deemed to be void. However, there are certain exceptions to this general rule whereby the contract, which involves an infant as one of its parties can become voidable. These exceptions are as follows:

In both situations the infant has a free choice to continue with the contract or rescind it.

If a contract is entered into by a person under an undue influence by another person who is in a position to dominate the will of the actual party, the contract is also deemed to be voidable. Some examples of persons who can be under an undue influence so as to let another party to dominate them are persons who are physical1y weak, old, sick, unconscious or have any fiduciary relationship with the person dominating them. Hence, if a contract is being entered into by such persons under such undue influence, the contract becomes voidable as the parties who are under the undue influence have a free choice of either to continue or rescind the contract.

If a party enters into a contract under the state of duress or coercion that contract will become voidable and the party who has been induced into the contract has the free option of either to continue or terminate the contract. The reason of the contract being voidable is because Islam does not regard an act, which is done under act duress as a valid one. The Prophet (saw) says to the effect:

"Allah (swt) has lifted away from my people the responsibility of acts done by mistake, in forgetfulness and under coercion "

"When consent to an agreement is caused by coercion ...... the agreement is a contract voidable at the opinion of the party whose, consent was so caused”.

Hence, the legal consequence of a contract being entered into by any of its party in the state of duress is avoidable and it could only become enforceable if the party under such duress opts to continue with that contract.

There is a circumstance whereby a contract is entered into by a person under fraud, which is to say that the consent of that particular party to the contract has been obtained by the fraudulent act of the other party. In this situation, such a contract is deemed to be voidable and the party whose consent had been obtained fraudulently by another person has a choice of whether to continue with the contract or rescind it.

As an illustration to the above situation, lets say that "A" enters into a contract of selling a book to "B" with the guarantee that the book is of a certain high standard. If “B” later finds out that the book sold to him does not reach that particular standard, as promised by "A", "B" is said to have entered into the ear1ier contract by the fraudu1ent act of " A" w ho conceals the book’s actual standard. In such a case "B"’s fraudulent act and "B" after learning the actual fraud, may think of whether to continue or rescind the contract which, he has already entered into Islamic Law looks at a fraudulent act as a grave sin. The Prophet (saw) says in one of his traditions to the effect:

"Do not tie up the udders of she-camels and sheep. If one among you buys a she- camel or sheep with its udders tied up, he has two options after milking it: either to retain it or to return it with a measure of dates".

Imam Shafie, Malik, Harnbali, Ibadin, Ibn Mas'ud, Ibn Amr, Ahu Hurairah, Abu Yousuf and the others are of the view that a contract made under fraud is voidable and thus it is, to the option of the party (victim) to ratify or to cancel the contract.

Based on the above principles and juristic opinions, a contract made upon a fraudulent act is voidable and it gives the free option to the effected party either to continue the contract or to set it aside.

In a contract whereby a party gives an information about any aspect of the contract which is in fact not true but the other party to whom the information has, been given believes it; If a party misleads the other in any manner to enter into the contract but this later found out by the other party; An example of a misrepresentation is when "A" offers to sell a cow to "B" but "B” found out later after the conclusion of the contract that the subject matter is not a cow but an ox. Hence, this contract falls into the category of a contract under misrepresentation whereby a party misrepresents any particular aspect of the contract (be it the subject matter, condition and so on) so as to mislead the other party to believe it and conclude the contract.

Allah (swt) has also reminded mankind of the danger of one doing an act, which is contrary to what one preaches, Allah (swt) says to the following effect:

"Grievously odious is it in the sight of Allah (swt) that ye say which ye do not"

Therefore, the legal consequence of a contract, which is entered into by misrepresentation is that, it is deemed to be voidableand the party will have the opinion of either continuing or terminating that contract. If the victimized party chooses to continue, the contract will become valid, but if he chooses to rescind it, the contract will become void.

There are also various options in Islamic law under various circumstances whereby the party to a contract has the right either to accept the contract or reject it. These options are known as al-Khair - A contract, which gives such options is thus voidble in its nature.

The reason why Allah (swt) has provided certain options for the parties to a contract under certain circumstances is that Allah (swt) always wishes to simplify the affair of mankind so as to avoid any misunderstanding and overcome any problems in their commercia1 lives. In one of the Qur’anic verses, Allah, the Almighty says to the effect:

"Allah intends every facility for you; he does not want to put you in difficulties"

"It is permitted to make a condition in a sale, "given to the seller or buyer, or" both together, an optio, within a fixed time to make valid the sale by assenting to it, or to annul it.

The various options available in contracts under various circumstances which would render the contracts voidable are, hence, as follows:

The idea of the option of session or is that once a contract is concluded by the offer and acceptance of the offeror and the offeree respectively, either party, or both may have the legal right of option to reject the contract or continue with it while, both of the parties are still in the session or . In other words, the option of session is available to either party or both as long as they have not physically separated yet from the actual place where the contract has been concluded. It is to be observed that once both parties have left the session, this right of option will no longer be available to both of them.

According to Coulson, there is also no time limit in exercising Khiar Al- Majlis . He further explains the meaning of physical separation in this type of option by saying that if the contract is concluded between the parties " in an open or large enclosed space such as the court yard of a mosque, the separation takes place when one party turns away from the other and walk a few paces or goes out of earshot". Coulson also explains that if the parties to the contract is in a large building, then "the movement from one room to another constitutes separation", and "if they are in a small house, the separation occurs only when one party steps outside the house.

The idea of the option of session in contract was originated by the people of Hijaz. According to Schacht, it was originated from Mecca, and was taken up by traditionists and eventually it has been acknowledged by Imam Shafie and Imam Ahmad Ibn Hambal (r) However, the idea of Khiar al-Majlis was rejected by the Hanafi and Maliki schools of law.

The principles of the option of session are legalized based on the following tradition of the Prophet (saw):

"Abul Rada reported: During a raiding party, we struck camp and one of our soldiers agreed to sell his horse to another. Both of them remained in the camp for the rest of the day, and throughout the right. On the following morning when we were preparing to depart, the seller saddled and watered the horse. Then the buyer came along and claimed the horse as his the seller refused to hand it over and suggested that Abu Baraza, a companion of the Prophet (saw), should settle the dispute. They found Abu Baraza, at the far end of the camp. When they told him what had happened, he said: "You will agree will you not, that I should decide between you on the basis of a decision, of the Prophet (saw) (who) said: the parties to a sale have the option as long as they have not separated. I can see that you two have separated".

Hence, based on the judgment given by Abu Baraza in the above case the seller had exercised his right of option at to rescind the contract of sale during the session .

There is another tradition of the Prophet (saw) which clearly reflects the right of option of session available for t he parties in a contract.The Prophet (saw) says to t he effect:

"The Holy Prophet (saw) said: The seller and the buyer in a contract have the right of option to cancel or continue (with) the contract as long as they have not perted or till they part ".

"Narrated by Abdullah bin Umar ( r ), Verily the Holy Prophet (saw) said: Every contracting party (the buyer or the seller) has the option of canceling or continuing the contract until they separate or the sale is an optional”.

"Narrated by Ibn Umar ( r ), the Holy Prophet. (saw) said: The buyer and the seller have the option to cancel or confirm the bargain before they separate from each other or if the sale is optional "

"An option by stipulation in a contract is when one of the parties stipulates the condition that he may have the option, for a maximum period of three days to continue or cancel the contract. The option of either continuing or canceling the contract by way of stipulation of the above said condition can be exercised by one or both partied to the contract and is lawful provided that the option can only be opened for a maximum period of three days.

The jurists have mixed views on the limitation of time for khiar al-shart . According to Imam Abu Hanifaa, Imam Shafie and Imam Zufer, the condition for this type of option should not exceed three days, while two disciples were of the contrary opinion that the condition of should be left open for an unlimited period. The first group in holding that the period of the opinion by stipulation is, at most, three days, relied on the following tradition where the Prophet (saw) said to the effect:

"The Holy Prophet (saw) said to Habba al-Ansari, who was complainnig of being cheated in his transaction: When you buy or sell, at the moment of sale, make a declaration to the effect that there shal1 be no cheating and I reserve for myself the option for three days.”

Meanwhile the second group, which pointed that the period of this type of option is unlimited, used the following argument that Saydina Umar ( r ) had extended the period of option, up to two months.

The option of description reflects a right of option, which is vested in the buyer of a particular item or goods, to continue or to cancel the contract and this option depends on how far the standard of the goods (either in terms of its quality or quantity) meets the description given by the seller earlier. If the standard of the item or goods does not meet the description given earlier by the seller, the buyer has the option of whether to ratify or abandon the contract as he so wishes. Therefore this type of option is known as the option of description.

There is no particular limitation of time in exercising khiar al-wasf but the option should be exercised within a reasonable period from the moment at which the fault is discovered or ought to have been discovered by the claimant as the effected parity in that contract.

The opinion of sight can be exercised in a commercial transaction where there is an agreement of sale and purchase between two contracting parties ona particular item or goods, but that item or goods is unseen a legal right of option whether to rescind or continue with the contract after actually seeing the goods for himself. According to the Hedaya, if anyone purchases any particular goods without seeing it, the sale is still valid and the purchase has the right of option whether to ratify the contract or resend it after seeing the actual goods sold”.

The jurists are not in agreement as regards to the validity of the option of sight Imam Abu Hanifah actually held it to be valid, his argument being the following tradition of the Prophet (saw) who said to the effect:

"The Holy Prophet (saw) said: "Whoever purchases an article (or goods), and he has not seen it, he has the right of option whenever he sees it.

The principles on was actually practiced by Saidin Uthman b. Affan ( r ) and Talhah b. Ubayd ( r ) among, the companions of the Holy Prophet (saw) giving the right of the option of sight, to the purchaser. Imam Al- Sha’bi , Hassan a1 basari , Ibrahim al-Nakhaie and Muhammad b. Sirin were of the same opinion that a purchaser has the right of option of sight after actually seeing the goods sold, where he is free to choose at his own free will whether to accept or to reject it.

Imam shafi actually rejected the option of sight, in a sale and purchase contract as he said that the right of the option of sight is invalid because the purchaser does not see the goods when he enters into the contract.The goods in such a contract, he said, in unseen and itself uncertained hence rendering the contract itself invalid on the ground of uncertainty.

The option of designation, known in Islamic law as , surfaces in a contract of sale of goods when the object of the contract is not determined specifically by the seller. For Instance, if "A" agrees, in a contract, to sell to "B" any one of the ten books available, "B" in this situation has the following options:

The opinion for fraud or deceit - is-available in a contract of sale of goods when the seller, conceals any particular aspect of the goods to be sold, which leads the purchaser to be cheated. For example, "Y", the owner of a cow, wants to sell it to "B". Before offering the cow, the owner purposely put the cow in such a place where it is able to produce more milk than usual, the purpose being to conceal the usual habit of the cow and to get a higher price from "B" the buyer.Hence, under Islamic law, such concealment is not permissible,, and the contract trade in such a situation is held to be voideble at the option of the buyer or purchaser, who after realising the concealment in the goods or item sold, is free to ratify the contract or rescind it. The exercise of the option for fraud or deceit is, however, still subject to the purchaser's ability to prove within a reasonable time (from the time of the discovery of the deceit) that this agreement to the contract was obtained by the willful deceit or misrepresentation of the seller.

The Shafie school of law held that the right of option for, deceit or fraud can be exercised by the purchaser even after three days from the date of the discovery.

The principle relating to the right of option for fraud or deceit is laid down in the following tradition when the Prophet (saw) said to the effect:

"If a person buys a mussarrat, in ignorance of the fact that it is such, then he has the option between accepting it or returning it alone with measure of dates."

The right of option on the ground of mitake in a sale of goods was introduced by the followers. Islamic law in some cases provides the right of option for mistake which means that in certain circumstances, if there is a mistake by one or both parties in a contract of sale of goods the parties in that contract have the right to ratify the contract or rescind it as they wishes. This option is also Known in Islamic Law as khiar al-ghalat

The jurists are not in agreement as regards to when the option for mistake may be exercised. According to Ma’mar b. Rashid, the right of option on the ground of mistake in a sale of goods can be exercised only when the buyer or purchaser is able to produce a proper evidence of that particular mistake before his claim can be accepted. "Dr. "Niazi is of the opinion that the unilateral mistake should be considered as a good ground for exercising khiar al – ghalath (the option of whether to continue or to resin the contract ) unless if the mistake is caused by stupidity, or it would not have likely arised from the terms of the offer. 345 Meanwhile al – sha’bi totally rejects the validity of this option on the ground that the contract itself ':is a sale of deception (al-khuda") which is unlawful.

It is sincerely suggested here that the right of the option for mistake should be vested in both the seller as well as the purchaser,. This is because, in a contract of sale, a mistake might occur form either the seller or the purchaser himself. Hence, to vest this right of khir only in the purchaser might create an injustice to the seller should the mistake is committed or caused by the purchaser himself.

The principle of the option for mistake (Khiar al-ghalat) is clearly based on a divine verse of the Qur’an where Allah,the Almighty has often reminded mankind of the concept of mutual good will in business and trade, and to avoid from consuming each other's property by wrongful means. Allah (swt), hence, says to the following effect;

"O ye who believe! eat not each other’s, property by wrong means, but let there be amongst you trade and business through mutual good-will…."

Under Islamic Law, each individual in the society has the right to enter into any commercial or business transactions, with the exceptions of some persons who, according to Islamic law, do not possess legal capacity to enter into a transaction, such as a madman, prodigals and so on.

Meanwhile Islamic law still allows a blindman to enter into any commercial, business or other types of transactions by virtue of having different rules from the usual ones often used in ordinary transactions involving persons of full capacity. As the result of the contract of Islamic law’s recognition is concerned,the principle of the option has been preserved especially for them in order to uphold their rights in any transaction.

Baillee observes that the sale and purchase of a blindman is lawful according to three jurists; and he (the blindman) has an option when he purchases, but not when he sells. He further clarifies that according to most authentic reports, a description of the goods to be sold to a blindman is not an essential condition. This is because, instead of seeing with his own eyes, a blindman can only turns over and feels the goods to be sold to him with his hands and body in order to recognise it. However, according to Baillee, if the thing to be sold is cloth, a description of its length, breath and degree of excellence are nevertheless necessary in addition to handling; while feeling and description are also both required if the goods being sold is like wheat. Meanwhile , if the item being sold is fruit still on the top of the trees, a description is sufficient according to most authentic reports. A blindman's option is not extinguished, however, with regards to immovable property (such as trees) and other types of property which cannot be sufficiently known by touch, smell or taste, unless and until a description is given of the said property.

Such are the exceptional rules governing a transaction whereby one of the parties is blindman. In other words, these exceptional principles have to be observed when the seller sells any particular item, goods on property to a blindman in order to constitutes a valid transaction.Only after observing all these rules which would render the contract of sale valid and enforceable, will the blindman had the right to exercise the option of the the blindman (خيار الأعمى) and that too, as Baille points out, is limited only when the blindman is the purchaser in that contract. In short, if the goods which had been described to the blindman according to the prescribed means mentioned above found having defects he shall exercise the right of the option of a blindman of continuing wit contract or abandoning it.

There is an implied condition in a contract of sale of goods that the goods sold should be free from any defect and that it should be fit for the purpose, or in other words, of merchantible quality. Hence if a person purchases certain goods and afterwords discovers them to be defective at the time of the sale, Islamic law gives the right of option to the purchaser in such a situation either to accept the goods at the agreed price or reject them.

The purchaser, however has the right to exercise this type of option on account of any defect in the purchased goods on the following conditions:

In Islam, as the very concept of contract is founded on the docrines drawn from the Holy Qur’an and Sunnah, the classification of contract according to its nature, meaning, subject matter, circumstances and legal consequences etc also are surely in accordance with the doctrines of Islamic Shari’ah. Hence the validity of certain catagories of contract in common law may differ as far Islamic law of contract is concerned, because in Islamic law of contract is completely aimed at full benefit of of both parties involved in the process and secure everyone from all kinds fraud transactions, loss or deciet. Henceforth the new types of contract which evolved later on are being measured referring to the Islamic principles of contractual law.

Classification of contract according to its nature has been justified by the divine doctrines and this justification aimed at the public interest and well-being of the people involved in the contracts. Contract of co-partnership, agency, manufacuring, insurance, gift, marriage, education, ect. come under this classification. According to circumstances, it is classified into unilateral, bilateral, joint and quasi contract. Validity, enforceability, voidity, etc. are being decided under the consequences of contract. Dealing with infant, blindman on contract and fraud contract etc are also being come under the special circumstances.

Various options have been allowed by the Islamic Shari’ah so as to assure the safety of both parties involved in the contract. Fraud, misrepresenting contracts thus can be barred and to ensure the availability of designated product, well being of the society and to overcome disadvantages. Based on these options, either parties have right to accept or reject the contract which is drawn on agreeable conditions which are bound to Islamic principles.