Theory of Islamic Contract

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FIQH FOR ECONOMISTS I
ECON 3510

GROUP ASSIGNMENT
THE THEORY OF CONTRACTS

MEMBERS
MOHD AMINUL HAKIM BIN HANI SALMAN1124539
AHMAD ZUBAIDI BIN MAHMUD1127783
AHMAD SYAHIR BIN MOHD ZAKARIA1123419
SITI SHARINA BINTI SEMAN1120902
NURHANI BINTI ABDUL RAHMAN1118618
NURASHIKIN BINTI MOHD PILUS1125834

INTRODUCTION

Basically, human beings are dependent with each other to fulfil their needs and wants. We need to interact, communicate, trade and collaborate with others. Specifically ‘aqd or contract means a connection of the words of one party (ijab) with the words of the other party (qabul) which constitutes legal implication on the subject matter. In term of sale contract, the contract made by contracting parties is somehow a habitual obligation of humans to be fulfilled in order to make a valid agreement of exchanging goods. As it is stated in the Al-Quran,

Translation: O you who have believed, fulfil [all] contracts. Lawful for you are the animals of grazing livestock except for that which is recited to you [in this Qur'an] - hunting not being permitted while you are in the state of ihram. Indeed, Allah ordains what He intends.

Human are not self-sufficient to fulfill all their needs by their own, without any help from others. Humans need to do some trading, interaction, cooperation among each other. Human needs to trade in what he has to acquire, what he needs but he does not have. With this method they will be able to fulfill their mutual economic needs. As emphasized by The Quran, the sanctity of private ownership strongly forbids devouring others’ properties in unlawful ways.

“O ye who believe! Do not devour your property among yourselves unlawfully, but let there be among you trade by mutual consent”. (4:29)

Verses 4: 160-161 states: “For the iniquity of the Jews We made unlawful for them certain (foods) good and wholesome which had been lawful for them; in that they hindered many from Allah’s way (160). That they took usury, though they were forbidden; and that they devoured men’s substance wrongfully; we have prepared for those among them who reject Faith a grievous punishment”.

The Quran also states: O ye who believe! There are indeed many among the priests and anchorites, who in falsehood devour the wealth of men and hinder (them) from the way of Allah. And there are those who buy gold and silver and spend it not in the way of Allah: announce unto them a most grievous penalty”. (9:34)

The word batil itself covers a huge range of prohibited dealings and transactions. It also covers all unlawful practices that transfer ownership and wealth from one to another, without any return.

EXAMPLE OF UNLAWFUL PRACTICES (BATIL)
1) Usury and gambling
2) Cheating, fraud, and breach of trust.
3) Wrong advertising and labelling

All dealings that harm the society and prevent people from attaining prosperity in this world and the Hereafter also cover in the word batil itself.

A transaction must not involve prohibited practices on the transfer of ownership wealth from one to another. Since these mutual agreements may take in various forms and conditions, there are different types of unilateral and bilateral contracts. The well-developed Islamic theory of contract lays down the principles of mutual agreement. These rules and regulations can be apply to all types of commercial transactions whether they are bilateral or unilateral, or concluded by individuals or organizations. It explains the details on rules and regulations on the formation of a contract.

OBJECTIVE

The objective of Islamic law of contract is to establish a valid contract agreement under Islamic law relate to the legal status of the parties seeking to sign the contract, the way the contract is presented/accepted, and finally the subject and consideration of the actual contract. In terms of the contract content, Islamic-derived law stresses that the subject of the contract must not...
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