Enforcement of Islamic Contracts: Issues in the Light of Contemporary Legal Frame Work.

Topics: Sharia, Islamic banking, Common law Pages: 21 (7036 words) Published: April 11, 2011


Historically, contracts are the applied practices that have been adopted by the human being from the very beginning of the human history for their physical survival in this natural world. The Islamic contracts basically adopted these pre-islamic concepts of contract. However what Islam innovated was prohibition of Riba, prohibition of Ghara, prohibition of Qimar (Gambling) and Maysir (Game of chance), and prohibition on Haram contract. Thus, it could be said that in Islam every contract is basically lawful so long it does not oppose any explicit text of the Quran and Sunnah.

Allah S.W.T says in the holy Quran at Surah Al- Maidah “O you believe fulfil your obligations”. A Muslims who breaches the contractual obligations does not only breaches a contract but also an express command of Allah S.W.T. There it would expose him not only to civil liability but also to the divine liability.

An individual relationship or transactions (Muamalat) of this world has a direct consequence to Akhira (Life hereafter). Therefore it is incumbent on each and every Muslimss to comply with Islamic law of contracts in order to be successful.

Centre to the Islamic law of contract is Justice. To realize this reality the creator through Al Quran and his messenger Prophet Muhammas (S.A.W) through his Sunnah in certain situation innovated certain concepts and in certain situations reinitiated the importance of certain concepts that have been then applied. For the purpose of convenience of this assignment these concepts going to be categorized as universal principles of Islamic contracts.

1. Prohibition on Riba
Riba is an Arabic word which literally means increase (al-ziyada), growth (al-numum), to raise, to become lofty. Riba is defined as “an increase that has no corresponding consideration in an exchange of property for property”. Abu al A’la al Mawdudi defined riba as “ a predetermined excess or surplus over and above the loan received by the creditor conditionally in relation to a specific period”. A contemporary scholar Nabil Salih defined it as “an unlawful gain derived from the quantitative inequality of the counter-value in any transaction purporting to affect the exchange of two or more species which belong to the same genus and are governed by the same efficient cause”.

The Prohibition of Riba has been emphasized in number of places in the Quran, Allah (s.w.t) says; ‘O you who believe: Fear God and give up what remains of your demand for usury if you are indeed believers. If you do it not, take notice of war from God and His messenger, but if you turn back you shall have your capital sums. Deal not unjustly and you shall not be dealt with unjustly’.

“And Allah has permitted sale and prohibited usury”

The Holy Prophet Muhammad (s.a.w) cursed one who charges Riba, gives it, records it, and witnesses it. He said ‘’They are all equal’’.

2. Prohibition on Gharar
Gharar means ‘uncertainty, hazard, chance or risk’. It is technical term, it is applied to uncertainty about the ultimate outcome of the contract which would lead to dispute or litigation. For example, sale of birds in the air or sale of fish in the water.

In today’s business sense, Gharar means to undertake a venture blindly without sufficient knowledge or to undertake an excessively risky transaction. For example, if someone sells his car without informing the buyer about the faulty engine, then the buyer is exposed to the risk. This risk is Gharar. The unfair element of risk is not allowed under the principle of Gharar. Islam emphasizes fair and transparent transaction. However a minor uncertainty is permissible due to the necessity.

Prohibition of Gharar has been advocated in number of ahadith in particular, ‘Ali (R.A.T.A)...
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