ISLAMIC MODEL OF e-BUSINESS

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

PRINCIPLES OF CONTRACT IN e-BUSINESS

Section 2 of the Contracts Act, 1950 states that an agreement enforceable by law is a contract, and every promise and every set of promises, forming the consideration of each other, is an agreement. In simpler way, a promise is formed when a proposal or an offer is accepted.

In Shari’ah, the law of contract can be found through the Qur’anic revelation, which states that;

“O ye believe! Fulfil (all) obligations.”(Al-Maidah 5:1)

‘Aqd’, literally means conjunction, or to tie between two ends of something. In this point, ‘aqd’ refers to the meeting of the offer and acceptance with conformity and formally approved by the Shari’ah.

Contract In Cyberspace and E-Business

To form a valid contract, three elements are required:

A Contract will be unenforceable if it does not satisfy any of the requirements. In E-Business, E-Mail and the World Wide Web can also form a legal contract, as contract law recognizes the virtual or digital agreement.

The UNCITRAL Model Law on E-Commerce states that;

“In the context of contract formation, unless otherwise agreed by the parties, an offer and the acceptance of an offer maybe expressed by means of data messages. Where a data message was used in the formation of a contract, that contract shall not be denied validity or enforceability on the sole ground that a data message was used for that purpose or stored by electronic, optical or similar means, including electronic mail.”

From the quote, it is understood that in e-commerce, the contract that is formed through the cyberspace is considered valid and enforceable, as well as in the Shari’ah rules of contract.

Shari’ah law of contract, emphasized that according to the Shafi’es, in the session, that there must be a unity where the offer and acceptance are made, and the seller and the purchaser are present, or the session where the offer reaches to the knowledge of the offeree who is not present, and it is not necessary that the offer would be immediately accepted (this is applicable for an E-Mail contract). But there have a long break for the acceptance because; it indicates a refusal of the offer. However, if the offeree is obsessed with some other matters, the session is considered invalid because it affects the acceptance.

Islamic contract law requires that the consideration must be lawful and legal. Islamic contract law also have additional conditions required to ensure that the contract formed is free from “ghar’ar”and “riba’”, because, Islam strongly prohibits against “ghar’ar” and “riba’”. In the Quran, the prohibition of “Riba’” or usury is clearly stated

“O’ ye who believe! Devour not usury, doubled and multiplied; but fear God; that ye may (really) prosper.”(Ali Imran 3:130)

“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 God hath permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, hall be pardoned for the past; their case is for God (to judge); but those who repeat (the offence) are Companions of the Fire: they will abide therein (forever).”

“God will deprive usury of all blessing, but will give increase for deeds of charity: for He loveth not creatures ungrateful and wicked.”(Al-Baqarah 2:275-276)

Islam too strongly prohibits against uncertainty and forces that the price must be in existence and determined at the contract session and cannot be altered at a later date, and cannot left the subject to be determined by a third party. It is required that the value, price and species must be determined exactly in a contract.

FALSE ADVERTISEMENT

Advertising is part of company’s overall marketing strategy. It is one of the best way to promote and at the same time, is designed to provoke emotions and provide the customer with a compelling reason to buy the company’s products.

However, some companies use the advertisement to generate maximum profit and sales by either misleading or providing false claims about their goods and services.

Some recent examples that businesses sometimes get into lawsuits over alleged false advertising are stated below:

Visioneer Corp. v. Umax Corp. (1998)

The false advertisement is fall under the Section 18 Contract Acts 1950, which states that:

“MISPRESENTATION” includes-

In this topic, we’re specifically referred to the Sub Section (a), which states that “Mispresentation” which is the intention to deceive other people to buy his product and give false information about the product that sell, in order to hide the defected product.

False advertisement with intention to deceive is strictly prohibited in Islam. In the Holy Quran, it is clear stated:

“O ye believe. Eat up you property among yourselves in vanities. But let these be amongst you traffic and trade by mutual good will: Nor kill (or destroy) yourselves: for verily God hath been to you Most Merciful!”(Surah Al-Nisa’ 4:29)

From the revelation, Allah had forbidden the Muslims to cheat others, which is considered brotherhood among the Muslims, and an offence to oppress other people by deceiving them in order to gain more profits for his own benefits. It is an unethical business that Islam had forbid. Imam Al-Bukhari had stated in the hadith that,

“Rasulullah SAW said that buyer and seller must be truthful and honest in order for the transaction to be blessed (barakah). If they are not truthful, tell lies and conceal the truth, the transaction will not be blessed by God.”(Al- Bukhari Muslim)

Businesses must be done with honest, without any intention to deceive other people, or otherwise, it will not blessed by Allah. In other hadith, Abdullah Ibn’ Umar R.A. stated,

“The prophet has forbidden the sale of fruits on trees until it has ripened.”(Al-Bukhari Muslim)

This hadith provides that the sale of fruit which are still on trees cannot be sold because it has the element of uncertainty. The fruits may or may not turn up to be good, and should it turn out bad, it would be similar to cheat the buyer to buy something which is not expected quality.

The above hadith also could be extended in false advertisement, because it involves the sales of good which are uncertain and it also has the element of trickery to it

FRAUD OF CREDIT CARDS

Purchasing goods and services over the Internet had been practised since the early nineties. Retail stores that advertised their products through the Internet generally required the credit card numbers from the customer. Customers only need a credit card in order to purchase the product and services by key in its number in a blank provided by the site. The retail stores then take the data that is sent to them by the customer, and pass it to the customer’s acquiring bank for processing. The acquiring bank processes the credit card transactions received through a point of sale (P.O.S.) terminal in a retail store.

The disadvantage of this kind of transactions in e-commerce world is the intervention of the third party, who uses various kinds of technologies to steal and obtain the credit numbers. Credit numbers that is stolen is without the concent nor knowledge of the original parties to the contract. In the end, the numbers that is stolen would be used for his own benefits.

Legally speaking the act of fraud deceiving others or framed is governed by Section 17 Contracts Act 1950, which states that:

“FRAUD” includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract.

In Syari’ah rules, fraud of credit cards can be equated to stealing and stealing is especially prohibited in Islam, which can be seen from these Quranic verses:

“As to the thief, male or female cut off his or hands: a punishment by way of example, from God, for their crime: and God is Exalted in power.”

“But if the thief repents after his crime, and amends his conduct, God turneth to him in forgiveness; for God is Oft-forgiving, Most Merciful.” (Al-Maidah: 38-39)

The punishment provided for stealing is harsh because it involves taking away the right of others. It goes to show that Islam protects every individual’s property. The evidence in the Syari’ah rules also can be viewed in the hadith of the prophet, which are:

The Islamic Credit Card

The credit card that generally used today is a credit card based on the modern banking system which is basically implemented with interest for their service. For example, Maybank and Citibank had imposed a minimum payment within the range of 5% to 10% out of the amount that must be paid by the credit card user. The balance out of the payment will be brought over into the next month and for this service, these banks had imposed an interest within 1.3% to 1.5%out of the balance as their service charge every month.

The Islamic credit card which was introduced by the Arab Malaysian Bank (AmBank Group), also called Al-Taslif , is based on the Shari’ah rules and principle which is called Bai’ Al-Innah which govern installment payments over a fixed period. The Al-Taslif Credit card can be used with the assurance that it has been given with the users spending needs, following with Islamic values and rules of Shari’ah. These are the examples of the AmBank Al-Taslif Credit Card:

Al–Taslif Gold Card

Al-Taslif Silver Card

The Al-Taslif Credit card will be charged with a low banking cost of 1.25% per month or 15% per year on the outstanding balance. If the user decide to pay only the minimum amount each month, they will not be charged to additional banking cost. In other words, it’s interest free, because Islam had prohibit interest or Riba’ in the Islamic transactions

“O ye believe! Fear God, and give up what remains of your demand for usury, if ye are indeed believers.”

“If ye do it not, take notice of war from God and His Apostle: but if ye turn back, ye shall have your capital sums: deal not unjustly, and ye shall not be dealt with unjustly.”

“If the debtor is in a difficulty, grant him time till it is easy for him to repay. But if ye remit it by way of charity, that is best for you if ye only knew” (Al-Baqarah 2:278-280)

GAMBLING ONLINE

In today’s society, computer technology plays an important role in many forms of e-commerce. Entertainment too plays an important role, especially in the field of online casino. Net gambling is becoming more and more popular as people don’t have to go out far to the real-time casino.

Online casino is one of the applications of the e-commerce, which creates an electronic market place that requires a community of buyers and sellers. In online gambling, payment between the gambler and the gambler operator must be made through clearing house, normally a bank. The procedure of online gambling is that the gambler pays directly into the gambling operator’s account, normally using his credit card. If he wins, the gambling operator would pay his jackpot into the gambler’s account or deduction from the gambling operator’s bank account. On the other hand, if he loses, the money will be deducted from his own account.

Every transaction in which gain loss is obscure is known as “Qimaar” and “Maisir” in the Shari’ah terminology. “Maisir” means a game of haphazard in all matters – particularly a game of chance by means of divinatory arrows. “Maisir has various types of categories. Some of these types of “Maisir” are seeking omen or fortune by divinatory arrows, back gammons, chess, cards and etc. These are a few sites taken from the internet that provides online gambling:

Even though online gambling is a legal operation, but it brings more harm than good. Generally, many states and countries want to prohibit net gambling because of 4 reasons:

Betting online too uses the same procedure. This type of gambling usually takes place in the sports events which are; gamblers put high stakes of money betting on teams which they believed would win.

As a result, all the above connotations are vividly found in the word “Maisir”. Imam Malik had devived gambling in two categories:

The Holy Quran on the prohibition of gambling states that;

“ They ask thee (O’Prophet) about ‘Kahmr’ (intoxicants) and games of chance (gambling). Say: In both of them there is great harm although there is some advantage as well in them for men, but their harm is much greater than their advantages.” (Al- Baqarah 2:219)

 “ O’ ye who believe, verily wine and games of chance, (ungodly) shrines, and divining devices are abomination of Satan’s work. Avoid them, that ye may prosper.” (Al-Maidah 5:90)

“ Only would Satan sow hatred and strife among you, by wine, ,and games of chance, and turn you aside from the remembrance of Allah, ,and from Prayer: Will you not, therefore, abstain from them?” (Al-Maidah 5:91)

Aside from the Holy Quran, the prohibition on gambling is also enshrined in various hadiths of the Prophet.

“ Whosoever plays backgammon is as if he dyes his hands with the flesh of swine and its blood.” (Al-Bukhari Muslim)

“ Whosoever says to his Companion: Come let us play a game of haphazard, should give alms (as an atonement).” (Al-Bukhari Muslim)

It is incumbent upon all the Islamic Governments to launch a movement in their countries against gambling and its forms just as lottery and should prescribe punishment for the defaulter.

It is also clear that gambling brings no beneficial to the country. People who earned money from gambling is considered “haram” as he did not earn in the proper way or in the hard way. In economy, the citizen’s work for the growth of economy, which is beneficial for both parties. Citizens earn their money from the companies, which hired them for their knowledge, skills, and consultations. Gambling in other hand, weakened either side of the parties, which is, corrupts morals making people sluggish in waiting for providence by whimsical, earns and giving up activities essential for making earning such as agriculture, industry, and business.

THE INVASION OF COPYRIGHTS SUCH AS BOOKS, AUDIO AND VIDEO.

Various companies nowadays had published their own website to publish their products on the Internet. For example, Amazon.com is a company that provides books and Compact Discs which consists of audio such as music and video such as movies. Before the Internet era had begun, books, music and movies can only be found in the places such as libraries and music stores, but now, with single click, these could be gained in an easy way.

Though some of the companies had tried hard to sell their products through the Internet, some of these could be gained by downloading the desired books, songs, and movies for free. This could be done by downloading particular software that is open software which could be accessed by million of users worldwide. This software provides facilities to share these sources between the users around the world without a single payment. Usually, this kind of software requires users to subscribe and register their name to log on into the software. Some of the software’s are:

It is agreed that some irresponsible individual or company had taken advantage from the technology and access to the information to provide these copyright works for free.

Books, music and other work of art are categorized as “intellectual property” that needed to be protected by the law. The Internet challenges existing laws on the protection of intellectual property rights need to be stretched as technology nowadays is increasingly advanced. As a matter of fact, the Internet could be a pirate’s dream. And books, music and movies are reproduced easily with a few clicks of the mouse, and often difficult to differentiate an original from a copy. Therefore, the protection of Copyright in Cyberspace needs to be considered.

The law of copyright could be seen in Section 4 of the Copyright Act 1969, which specifies works eligible for copyright. There are six categories of such works:

In addition, Section 102 (a) of the Copyright Act also states that,

“Copyright protection subsists…in original works of authorship fixed in any tangible medium of expression, now known or later developed. From which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.”

The basic requirements that a work of art must meet to qualify for copyright protection are that;

A lot of cases that involved invasion of the copyright especially books. Some literary books that were uploaded into the Internet can be downloaded by anyone who wants to read it for free. This would lead to the suits filed by the authors against the irresponsible party that distributes their works free for the readers. This is considered as stealing because the right owner of the works couldn’t have his own royalty.

Similar to music, in recent case, a band filed suit against Napster, a company that crates software that provides free music and songs for the subscribers without permissions from the rights of the owner. The company had been ordered to shut down its business after the band won the injunction against the company ordering it to block access to all the copyrighted music.

The original creator of a work has the exclusive rights to block their works from being distributed without permission, and have right to reproduce their copyrighted work. They also have rights to destroy or disavow a work if it is changed, altered or mutilitated.

Let’s now have a look on Shariah rules on copyright. In Islam, invasion of copyrights and distribute the copyright works without permission in determination for his own benefits is equal to stealing, which s forbidden in Islam. In the Holy Quran, it is clear states that:

“And not eat up your property among yourselves for vanities, nor use it as bait for the judges, with intent that ye may eat up wrongfully and knowingly a little of (other) people’s property.”(Al-Baqarah 2:188)

However, according to Mufti Taqi Usmani, the views of the contemporary scholars are different on the concept of “intellectual property”, and none of them has the clear contravention of the injuctions of Islam as laid down in the Holy Quran and Sunnah. As a result, Islamic rules could propagate a law in favour of the concept of “intellectual property” without any violating any provision of the Holy Quran and Sunnah.

Therefore, the nearest that could be taken from the Quran is the statement that had been given above from Al-Baqarah; as wll as had been founded in Surah Al-Nisa’, which states that:

“O ye believe! Eat not up your properties among yourselves in vanities.”(Al-Nisa’ 4:29)

INVASION OF DATA AND PRIVACY

The recent incident of hacking into government website has instigated the government to reconsider the security features of such websites. This scenario is not only faced in Malaysia alone, but throughout the world. IDefense, an independent corporation based in the United States reported that more than 3.6 millions of websites registered in the Internet in 1999. Up till June 2000, the number of websites had increased up to 1.5 billions websites are created, which an average of 1.5 millions websites are created and registered everyday. Out of this amount, thousands of websites are being hacked at the same time.

In E-Business, dozens of companies greatest concerns for business is the security on their websites in order to eliminate the invasion from other parties, or hacked which may result in loss of data and potential economic losses. This is an example on one of the E- Business site that had been hacked:

eBay is an online auction site. In 1999, the site had been hacked and changed as below:

The hackers used the name MagicFX and broke into the online auction site, altering the company's main page and gaining extensive access to other content. The break-in gave the culprit the ability to change auction prices, post fake ads, divert traffic and take down the entire network.

Most of the companies rely on firewalls to prevent unauthorised access by the hackers from gaining the information’s that stored within the network. “Firewall” is one of the famous security tool that filter off unauthorised access by third parties and at the same time permits access only to those with the appropriate authorisation and authentication and there are different types of firewalls operating to the needs of business, depending on the level of security.

It is stated in Computer Crimes Act 1997 that:

Access of any kind by any person to any program or data held in a computer is unauthorised if-

For the purpose of this act, a modification of the contents of any computer takes place if, by the operation of any function of the computer concerned or any other computer-

The invasion of privacy is not only within the boundary of hackers, the access into the private E-mails without any permission too is one of the invasions of privacy in the cyberspace. This kind of invasion is called ‘Spams’, which means, the unwanted mails that have been sent to the e-mail users. Most of these unsolicited e-mails come with subject lines such as:

Subject: Fwd: Here’s another

Subject: Re: How are you?

Subject: Just Me…

Subject: Have you seen this?

Spam is a growing problem that affects the e-mail users. They fill the mailboxes with junk mails that contain the advertisements and pornographic Websites. The problem with spam is that it can be rather attractive and thus pulling the viewers to respond and once they are in, the more unwanted mails would be sent to them. These are some quotes from the Internet users that have experienced dealing with the spam.

“For me, spam is a nuisance and very annoying. Every time I log on, I will receive them. Receiving such mails can get a bit irritating but forgivable as it is like receiving junk snail mail. But sometimes it really gets on my nerves, especially when I’m busy searching for important information and spam mail start popping up on the screen.”

-Adreanne Khoo,

Sales Manager

“Spams are irritating. It take up my mailbox space, and I have to spend time deleting it.”

-Farahiah Senin,

Student

“I’ve been using e-mail since Form Five. It’s about six years now. From my point of view, spams are unwanted chain e-mail that were sent to many people for many purposes. I have no idea how they got hold of my e-mail address. I’ve faced many difficulties that the mails congested my mailbox. As a heavy duty e-mail user, it’s quite disturbing. I still do receive spam nowadays even though I tried to block them. Somehow, if you block 10 spam mails, literally hundred more will litter your mailbox. You can never win.”

-Nor Hazlinah Soad,

Instructional Designer

Government had tried to deal with this kind of invasion. On the 1 st November 2001, the Malaysian Communications and Multimedia Commission took over the Postal Service Act and Digital Signature Act 1997 in order to get rid of the spams and other invasions. But however, to this date, there is no specific law that covers spamming on e-mails. According to Major Husin Jazri, the Director of NISER,

“Spamming or unsolicited Commercial E-mail, is not explicitly spelt out in any of the Malaysian Act. However, there are sections in Communication Multimedia Act that implies spam, which contains pornographic images.”

It is considered as ‘Haram’ in the law of Islam dealing with the invasion of other people’s property, because it is done without the permission and consent of the owner. In the Holy Quran, it is stated:

“Serve God, and join not any partners with Him; and do good to parents, kinsfolk, orphans, those in need, neighbours who are near, neighbours who are strangers, the companion by your side, the wayfarer( ye meet), and what your right hands posses: For God loveth not the arrogant, the vainlglorious.” (Al-Nisa’ 4:36)

Also, it is stated in another revelation that:

“On those who believe and do deeds of righteousness there is no blame for what they ate(in the past), when they guard themselves from evil and believe, and do deeds of righteousness,-(or) again, guard themselves from evil and believe,-(or) again, guard themselves from evil and do good. For God loveth those who do good.

CONCLUSION

It is not deniable that E-Business plays an important part in the modern business world. From this research, though there is quite a large of aspects and factors of the E-Business that could be governed by the Shari’ah Law, but some of the facts that had not yet been discovered that could be implemented with the Shari’ah. However, it is strongly agreed that no facts that cannot be govern by the Shari’ah as Allah the Creator had already guide us through His revelations. There must be sources from the Holy Quran, Sunnah and Hadith that waiting to be discovered in order to implement into the modern technology. From this research, for example, the invasion of intellectual property is debatable within the Muslim scholars, which some of them had strongly agreed that the concept of property in Islam could only be applied to the tangible objects. The E-Business itself is currently governed by the modern constitutional law, which every country had implemented their own rules and regulations for the cyberspace world, and the Shari’ah Law is just a few, or none at all. The rules of Allah cannot be excluded although the time had changed from then, the days of Rasulullah SAW till now. It’s strongly believed that if none of the Shari’ah rules had been laid down, then we’re not the true believer of God, who created us to obey Him and follow the rules and regulations that had been set down for us from Him, to guide us in everyday life. The punishment that is set down by human is not entirely in line with the Shariah law. It is very important especially to the Muslims to know and learn the E-Business and the cyber world technology that is in line with the Shari’ah Law. It is encouraged to do research not only by the Muslim scholars, but by every Muslims. This is because, we are allowed to structure and develop new ideas based on the research, in order to gain benefits for the brotherhood of Islam. As a matter of fact, every Muslim is entrusted (Al-Amanat) by Allah to govern the humankind because we were given ‘aql’ by Allah. So it is our responsibility to bring the good things for the benefits of mankind. Hopefully in the future, there’s a law and regulation that is within the streamline of Shari’ah Law that can be discovered and implemented in the modern world especially the cyberspace technology and E-Business for guidance to all Muslims in order to be blessed by Allah S.W.T.

“And Our command is but a single (Act) like the twinkling of an eye.”