http://www.adduonline.com/articles/aqd.htm
The Role of
Contracts(Aqd) in Islam
Throughout history Muslims have been renowned traders. Many of the Sahabah (ra)
were shrewd businessmen. Indeed, trading is an issue that has been implicitly
and explicitly encouraged in the Qur'an and Sunnah.
''O you who believe! Eat not up your property
among yourselves in vanities: But let there be amongst you Traffic and trade by
mutual good-will.'' [ 4:29]
''And when the (Friday) prayer is finished, then
may you disperse through the land, and seek of the Bounty of Allah: and
celebrate the Praises of Allah often (and without stint): that you say prosper.''
[ 62:10]
''Allah has permitted trade and forbidden usury.''
[ 2:275]
''And O my people! Give just measure and weight,
do not withhold from the people the things that are their due: commit not evil
in the land with intent to do mischief. That which is left you by Allah is best
for you, if you (but) believed! but I am not set over you to keep watch!''
[ 11:85]
Rasul-Allah (saw) was asked what type of earning was the best, to which
Rasul-Allah (SAW) answered, ''The work of a man's
own hand, and every pious sale''. [Hakim] Rasul-Allah (saw) said, ''A trustworthy and an honest and truthful businessman will
rise up with martyrs on the Day of Resurrection.'' [Ibn Majah,
Hakim] He (saw) also said, ''A truthful, and
trustworthy trader will rise up with the Prophets, the righteous and the
martyrs.'' [al-Hamim, Tirmidhi]
As Muslims, we should not consider that Allah (swt) left us to trade in
whichever manner we choose without giving us a guide. Allah (swt) sent
Rasul-Allah (saw) as that guide. A'isha (ra) reported that Rasul-Allah (saw)
said, ''He who does an act which is not in
accordance with our matter will have it rejected.'' The basis of all
trading is the contract. As we are encouraged to trade we are therefore
encouraged to understand the subject of contracts within Islam. Further to
this, it is not just merchants and entrepreneurs that are involved in trading.
All humans, not just Muslims, need to exchange in some form. Therefore, if we
are to perform our transactions in accordance with what has been revealed, it
is necessary for us to understand some basic principles of contract.
The Contract ('Aqd) in Islam
It is obligatory for us to honour our contracts and agreements.
''O you who believe! Fulfil all your covenants''
[ 5:1]
''Fulfil (every) engagement, for (every)
engagement will be enquired into (on the Day of Reckoning)'' [17:34]
Contracts may be generally described as the effective mode of acquisition of
ownership and transfer of property or services. It expresses the combination of
offer and acceptance. The
contract, 'aqd or tie forges legal relations between two parties over a
particular matter. It is formed with the declaration of offer al-ijaab
(offer) and al-qabool (acceptance). An example of ijaab
by a seller would be, ''I sold this to you for the price of...'' Al-qabool
would then be ''I accepted''. Regardless of how elaborate a transaction may be,
this simple model is the basis of all Islamic contracts.
Contracts and agreements should preferably involve the spoken word. The maximum
degree of clarity must be given by the one who makes the offer, and the maximum
degree of clarity must be ascertained by the one who accepts. This is the
underlining principle of contracts in Islam. The period between the offer and
its acceptance should not be longer than what is customary. The offer should not
be made conditional (t'aliq) upon an occurrence outside the agreement.
For example, the contract is invalid if a person sells his car under the
stipulation that the purchaser shall not sell it again. ''I will sell 'x',
provided you sell it back to me, should you decided to sell it.'' [Sarkhasi,
Mabsoot]
On the authority of 'Urwa, 'A'isha (ra) said Burairah came to me and said, ''My
people (masters) have written the contract for my emancipation for nine ounces
(of gold) to be paid in yearly instalments, one ounce per year; so help me.''
'A'isha (ra) said (to her), ''If your masters agree, I will pay them the whole
sum provided the allegiance will be for me.'' Burairah went to her masters and
told them about it, but they refused the offer and she refused the offer and
she returned from them while Allah's Messenger (saw) was sitting. She said, ''I
presented the offer to them, but they refused unless the allegiance would be
for them.'' When the Prophet (saw) heard that and 'A'isha told him about it, he
(saw) said to her, ''Buy Burairah and stipulate that her allegiance will be for
them, as the allegiance is for the slave-freer.'' 'A'isha (ra) did so. After
that Allah's Messenger (saw) stood up amidst the people, glorified and praised
Allah (swt) and said, ''What is wrong with some
people who stipulate things which are not in Allah's laws? Any condition which
is not in Allah's laws is invalid even if there were a hundred such conditions.
Allah's rules are the most valid and Allah's conditions are the most solid. The
allegiance is for the slave-freer'' [Sahih al-Bukhari]
General Islamic rules concerning contracts
According to Imam Ghazali,
''a Muslim who makes up his mind to adopt trade as
a profession or to set up his own business should first acquire a thorough
understanding of the rules of business transactions codified in the Islamic
Shari'ah. Without such understanding he will go astray and fall into serious
lapses making his earning unlawful.''
There are several general rules about trading agreements that we should all
acquaint ourselves with. We are all directly or indirectly involved in these
types of agreements. As stated, one of the key issues is clarity. Many ahadeeth
concerning buying and selling indicate that clarity in the agreement is paramount:
Ibn 'Umar (ra) related that Rasul-Allah (saw) said, ''If palm trees are sold
after they have been pollinated, the fruit belongs to the seller unless the
buyer makes a stipulation about the inclusion.'' [Muwata, Muslim]
Hakim bin Hizam (ra) related that Rasul-Allah (saw) said, ''Both parties in a business transaction have the right to
annul it so long as they have not separated; and if they speak the truth and
make everything clear they will be blessed in their transaction; but if they
tell a lie and conceal anything the blessing on their transaction will be
blotted out.'' [Muslim]
Ibn 'Umar (ra) also
related that Rasul-Allah (saw) forbade the sale of fruits until they were
clearly in good condition, he forbade it both to the seller and the buyer. [Muslim]
Jabir bin 'Abdullah (ra) related that Rasul-Allah (saw) forbade the sale of a
heap of dates, the weight of which is unknown, in accordance with the known
weight of dates. [Muslim]
There are many unique mannerisms that Islamic traders should adopt. These are
very different to those adopted in the West. Moreover, these manners are not
just a gentleman's code of ethics, rather they are the direct product of the
sayings of Rasul-Allah (saw). It is forbidden to buy and sell with any undue
advantage over other traders. For example, trading in ignorance of the current
market prices.
Ibn 'Umar (ra) related that Rasul-Allah (saw) said, ''Do not go out to meet merchandise on the way, (wait) until
it is brought into the market.'' [Muslim]
Abu Hurayrah (ra) related that Rasul-Allah (saw) said, ''Do not meet the merchant on the way and enter into business
transaction with him, and whoever meets him and buys from him (and in case it
is done, see) that when the owner of the (merchandise) comes into the market
(and finds that he has been paid a lower price) he has the option (to declare
the transaction null and void).'' [Muslim]
Abu Hurayrah (ra) related that Rasul-Allah (saw) said, ''The townsman should not sell for a man from the desert
(with a view to taking advantage of his ignorance of the market conditions of
the city).'' [Muslim]
Ibn 'Umar (ra) related that Rasul-Allah (saw) said, ''No-one amongst you should enter into a transaction when
another is bargaining.''
Ibn 'Umar (ra) related that Rasul-Allah (saw) said, ''A person should not enter into a transaction when his
brother is already making a transaction and should not make a proposal of
marriage when his brother has already made a proposal except when he gives
permission.''
These two last ahadeeth have many implications for sale such as auctioning and
gazumping(raise the price of something after agreeing on a lower price), which
may involve Muslims.
Today's situation
We now live in a situation in which Islam is not implemented in its correct
form anywhere in the world. This fact has left Muslims focusing on ritual
aspects of Islam. For example, prayer and fasting etc. Generally, there is a
good understanding of the rules of prayer amongst the Ummah. However, there
remains a general lack of knowledge of contract law. There are many problems
that we face in modern life that we can not take for granted. We can not assume
that the ways in which we buy, sell, rent and hire are all allowed in Islam. In
an article like this, space does not allow comprehensive answers to questions
about trading. However, we should question many of the common trading methods
employed today. To follow are a few examples of trading methods that we should
consider.
The verbal offer and
acceptance is certainly the best contract in Islam. This manner of transaction
can easily be performed even in the modern age and even in Europe or
''The duty of feeding, clothing and nursing
mothers in a seemingly manner is upon the father of the child.'' [
2:233]
Abu Hurayrah (ra) narrated that Rasul-Allah (saw) said, ''Three persons I am their opponent on the day of judgement;
a person who gave in my name and then betrayed, one who sold a free person and
used his price, and the person who hired a labourer and did not give his wage.''
Rasul-Allah (saw) also said, ''Whosoever hired a
person he has to inform him about his wage.''
In today's situation both the employer and employee must honour the work
contract not for the sake of humanity but for the sake of fulfilling Allah's
(swt) command. However, this has implications for trade unions and strike
action. Withdrawal of labour in industrial action is a violation of the
original contract and is therefore forbidden in Islam. Trade unions are
established to protect the rights of the worker. Whilst in Islam, only the
Islamic State is allowed to protect worker's rights. It is not allowed for
Muslims to participate in such 'industrial action'. However, this is the normal
way of settling disputes in a Capitalist system.
Pre-Islamic contracts
It is clear from the seerah of Rasul-Allah (saw) that the business ethic of the
pre-Islamic Arabs was riddled with corruption. Indeed, the dishonesty in
jahiliyyah is condemned in the Qur'an.
''Woe to those that deal in fraud, those who, when
they have to receive by measure from men, exact full measure, but when they
have to give by measure or weight to men, give less than due. Do they not think
that they will be called to account?'' [ 83:1-3]
The Jews, Christians and Persians at the time were again not noted for the
fairness in transactions. The first Muslims were on the one hand encouraged to
adopt trade as their profession and on the other hand exhorted to observe
truthfulness and honesty in the transactions. This was surely a unique
situation at that time. Similarly today the Islamic society should have a very
unique character.
Capitalism and contracts
Western style contracts and agreements are usually in the written form only.
Buying and selling agreements are always underpinned with the maxim caveat
emptor (the buyer alone is responsible for assessing the quality of a
purchase before buying) or buyer beware. Not only is it in the written form but
they involve reams of very small print. This small print is written in language
that is harder to interpret than Shakespeare's sonnets. This combination of jargon,
oxymoron and tautologies all contribute to enshrouding agreement with the
mystique of ambiguity.
Fulfilling obligations for services
Agreements are not
necessarily based on items and objects. Contracts to fulfil a service or duty
are common both in Islam and in the capitalist system. Marital services
are agreed upon in the 'aqd zawaj'.The marriage contract
stipulates that the husband should spend for the wife and children.But he is
not required to look after members of his wife's family financially.Similarly
the wife is not required to look after or serve every member of her husband's
family.And moreover the husband cannot claim any share in the wealth of his
wife or wife's family.But if the wife is willing to share then it is
allowed.Hence Islam did not leave the obligations and duties of marriage to be
decided by the mind of humans.It is not allowed for either partner to withdraw
marital obligations and duties. One can also make agreements for services from
a cleaner, book-keeper or a physician.
Another important contract that is often overlooked today is the contract of
ruling. The Khaleefah in Islam is charged with the duty of implementing the Law
of Allah over the people. This is laid down and defined contractually.
Unfortunately this is little understood by Muslims today. This is not because
we are ignorant but because of our situation. The time is such that there is no
living memory where this system of bay'ah (contract) actually existed as a
working example. Muslims can only read about it in books. Nonetheless it is
fard for Muslims to study this subject.
Ironically, we see Western systems of government nurture the citizens in such a
way that they understand the concept of the pledge to rule. The
''We the people of the
This small paragraph reminds the American people of the obligations
they have to the state and the states obligation to the citizens. Their system
of democracy is such that they believe that 'The People' are the actual rulers
and are charged with the duty of upholding the constitution. A direct parallel
in the actual detail of the American system cannot be drawn with Islam. Its
basis, democracy, is the antithesis of Islam. However, the principle of pledge
of obedience to the Khaleefah and the obedience of the Khaleefah to Allah (swt)
must be ingrained within all Muslim. It is this principle of nurturing the
citizens of the state to understand the position of pledges and duties that
oils the machinery of the state.
Conclusions
Buying and selling is an agreement. The procedure of buying and selling should
not be seen as a mundane and routine necessity. Rather, it is a normal human
action from which we can derive many rewards both in this life and in the
hereafter, i.e. it is an act of worship. The converse is also true. If one
performs the act of buying or selling in a manner that contradicts the law one
is sinful.
Many contracts made today are made without considering Islam. This is entirely
unacceptable. For although they do not involve camels, dates and slaves, the
principles laid down in the Qur'an and Sunnah are just as applicable today as
they where in the time of Rasul-Allah (saw). None of us as Muslims should take
any agreement lightly or assume that because that is the way things are done
today, then that is the way we should do them.
Lastly, we should remind ourselves of the one obligatory contract that none of
us are performing today. That is the contract of bay'ah to the Khaleefah. Ibn
'Umar (ra) related that Rasul-Allah (saw) said, ''Whosoever
takes off his hand from allegiance (bay'ah), Allah will meet him on the Day of
Resurrection without having any proof for himself, and whosoever dies while
there was no allegiance on his neck dies a death of the Days of Ignorance
(jahiliyyah).'' [Muslim]
Comments
Buying shares in a public limited companies is also a sort of
contract?. But does it fulfill the necessary requirements of the Islamic
Contract (Aqd) ? As for the public limited companies themselves, they
contradict the rules of the company structure in Islam. This is so
because the public company according to their definition states that it is a
contract in which two or more persons undertake that each one of them participate
in a financial agreement, by tendering a sum of money and thus sharing what
this agreement yields in terms of profit or loss. In other words it means that
there should be two or more parties in the contract. One party assumes the
offer, in the form that they initiate the offer of the contract by declaring
their agreement to enter into a partnership, while the other party expresses
their acceptance by agreeing with consent and approval. If the contract is
lacking the presence of a true offer and acceptance than Islam dictates that
nothing can be contracted and thus this cannot be termed a legitimate
contract in Islam. Dealing in stocks and shares intrinsically hides the parties
involved and there is no true offer and acceptance on behalf of those buying/selling
shares as there is no two way agreement (i.e. the purchaser does not need any
agreement from the other shareholders in the company to buy shares).
Accordingly the contract is invalid. Similarly insurance contract is invalid as
it contains a condition(t'aliq) upon an occurrence outside the
agreement.