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Islamic Contract3-21 MA’QUD ALAYHI: SUBJECT-MATTER OF CONTRACT Prof. Dr. Zainal Azam Abd. Rahman.

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Presentation on theme: "Islamic Contract3-21 MA’QUD ALAYHI: SUBJECT-MATTER OF CONTRACT Prof. Dr. Zainal Azam Abd. Rahman."— Presentation transcript:

1 Islamic Contract3-21 MA’QUD ALAYHI: SUBJECT-MATTER OF CONTRACT Prof. Dr. Zainal Azam Abd. Rahman

2 THE CONCEPT OF SUBJECT MATTER: MA’QUD ‘ALAYHI  In barter trading both assets exchanged can be considered subject-matters of the contract  Depends on whose perspective the assets are looked at  In an economy where there is money as medium of exchange, money not considered as subject matter but price in sale contracts  Contract needs subject-matter to be valid Islamic Contract3-22

3 3 CLASS OF SUBJECT-MATTER OR MA’QUD ALAYHI  Tangible assets  Usufruct of asset  Work/labour of individual  Debt or receivables  Rights and privileges

4 TANGIBLE/REAL ASSETS  Moveable and non moveable  Qimiyy and Mithliyy  Ma’sum and ghayr ma’sum  Present or absent  Ordinary goods/commodity or money Islamic Contract3-24

5 RIBAWI SUBJECT MATTERS  CHARACTERISTICS OF RIBAWI ITEMS –Money/medium of exchange –Foodstuff –Items having standard weight, measures, units  The rule of parity for exchanging ribawi items  The cash/spot rule  Contemporary issues Islamic Contract3-25

6 USUFRUCT OF ASSET  Usufruct is similar to real/tangible asset if it is valuable can be considered mal/property according to the Majority  Why usufruct is treated differently ( not as mal) by the Hanafi –-element of control –-element of durability –-ownership/tradability –-exception to general rule Islamic Contract3-26

7 WORK/LABOUR OF INDIVIDUAL/ANIMAL  Human being is not saleable except with regards to slaves  Human parts are also not saleable  The use of labour or works as subject matter in ijarah, jualah, istisna’, musharakah, mudarabah, muzaraah  Nature of services that can be secured –-as employeee (ajir khas) –-as independant contractor (ajir mushtarak) Islamic Contract3-27

8 DEBT OR RECEIVABLES  possible situations that can impact hukm: –Selling to the debtor –Selling to third parties –Debt can be either monetary sum or certain goods to be delivered –In exchange for another debt or sum of money –The price is paid in cash or deferred term (debt) –Or in exchange for tangible asset/goods Islamic Contract3-28

9 DEBT… –Whether debt is confirmed/certain or prospective/potential –Whether payment to buyer is certain or doubtful/gharar/uncertainty –Whether (if ribawi in nature) sold at par or not/issue or riba –Whether debt sold or to be sold is due or not Islamic Contract3-29

10 DEBT NOT DUE SOLD TO DEBTOR FOR DEFERRED (DEBT) OR CASH PRICE  Not permissible according to four schools  Gives rise to al-kali’ bil kali’: debt for debt if payment is also deferred  If payment is in cash still the relevant issues are not addressed –-selling something not in one’s possession –-as such doubtful as to capability of delivery/payment to purchaser –-debtor not party to the sale contract –-time of delivery not due yet –-if sold at discount leads to giving value to mere time in ribawi transaction if the debt is a sum of money I/paymentslamic Contract3-210

11 DUE DEBT SOLD TO DEBTOR FOR DEFERRED PRICE (DEBT)  Not permissible as in the above situation  View of Ibn Taymiyyah and Ibn Qayyim regarding al-Kali’ bil Kali’ in relation to sale by description for future delivery where the price is not paid in cash: whether it is prohibited  and the issue of selling salam object for cash before taking delivery for a profit margin Islamic Contract3-211

12 DUE DEBT SOLD TO DEBTOR FOR CASH PRICE  Permissible according to the four schools  Hadith Ibn Umar regarding sale of camels and collecting payment in different currency  Not permissible in two situations –In sarf or currency excahnge –In paying for advance purchase price in salam contract Islamic Contract3-212

13 DEBT NOT DUE SOLD TO A THIRD PARTY FOR DEFERRED PRICE (DEBT)  Ijma’: not permissible as it leads to al- kali’ bil kali’- debt for debt –-sale is for a transfer of ownership –-it is a sale from Shariah perspective –-selling something not in possession Islamic Contract3-213

14 DUE DEBT SOLD TO THIRD PARTY FOR DEFERRED PRICE (DEBT)  MAJORITY/FOUR SCHOOLS: not permissible due to  1. selling something not in one’s possession  2. selling something not capable of delivery  3. full of uncertainty: denial by debtor  4. very close to debt for debt  NOTES: AYN IS READY ASSET THAT IS PRESENT IN FRONT OF THE PARTIES WHEREAS DEBT/DAYN IS SOMETHING NOT THERE IN PHYSICAL SENSE Islamic Contract3-214

15 DUE DEBT SOLD TO THIRD PARTY FOR CASH PRICE  VIEW ONE (Hanafi, Hanbali and the most obvious (azhar) among Shafi’I views): not permissible due to uncertainty/gharar of delivery like selling run away animals  VIEW TWO (one view in Shafi’I school, a view attributed to Imam Ahmad that are said to be the correct view by Ibn Taymiyyah and Ibn al-Qayyim: it is permissible  VIEW THREE (Maliki school): 1. debt of salam if not in the form foodstuff (to be delivered by the salam seller to the purchaser) for whatever price 2) other kind of debts are saleable with 8 conditions: –-cash price –-debt in the form of something allowable to be sold prior to taking delivery –-not involving exchange of money for –-to be sold for other than its genus that needs to in the form of goods/real asset not money –-debtor is known (solvency/status) and residing in the jurisdiction –-debtor has admitted being indebted/no denial –-no enmity between purchaser of debt and the debtor –-the purported sale is not to cause problems to the debtor  VIEW FOUR (Shafi’i school as held by many of its jurists): allowable to self debt of whatever nature if due on conditions: –-debtor had admitted his indebtedness –-debtor is solvant –-the debt is dayn mustaqirr/confirmed or established debt –-the price is paid in goods or reals assets Islamic Contract3-215

16 GENERAL CLASS DISCUSSION  Conventional finance and commercialization of credit/lending  Debt market and risk by own design  Financial crisis as a result of market distortion  Due to interference with the law of supply and demand because of such commercialization of lending  The peril of riba finance is obvious to see  THE QUESTION: IS ISLAMIC FINANCE EQUALLY INVOLVED?? Islamic Contract3-216

17 NATURE OF RIGHTS  Rights of Allah, Rights of Man, Combined rights  Right granted by Shariah to avoid hardship or injustice to the person concerned, cannot be exchanged with price or tanazul for a fee  Right granted by Shariah not for the above reason specifically –-cannot be sold –-cannot be inherited –-cannot be given for free/hiba –-can only be exchanged in sulh or tanazul for a fee Islamic Contract3-217

18 RIGHTS AND ITS CLASSIFICATION  Rights can be looked at as: –Right of ownership (complete and incomplete) –Right to acquire ownership (ownership will materialize at a later time when that right is eventually exercised –Right of ownership compared to right to make use (haqq al-intifa’) –Rights personal to the holder only not transferable freely –Rights allowed to be sold for a price –Rights not allowed to be sold but can be subject of sulh/tanazul –-full complete right of ownership (al-milk al-tamm) compared incomplete right of ownership (al-milk al-naqis) – al-milk al-tamm compared to beneficial right and haqq al-intifa’ -al-milk al-tamm give to holder full power of disposal and control and assumption of risk and gain of the asset -haqq al-intifa’ only gives right to use not power of disposal -beneficial right gives incomplete power of disposal and control to the holder Islamic Contract3-218

19 PRIORITY CAN NOT BE SOLD  Priority in ihya’ al-mawat case by tahjir  Concession/alienation by government/iqta’  By being first to control abundant items/mubah  By being the first to occupy open market space  By being the first to be in the first raw in the mosque or other public spaces open for all Islamic Contract3-219

20 HUQUQ MA’NAWIYYAH: INCORPERIAL RIGHTS  Intellectual property rights –-copyright –-patent –-license –-trademarks –goodwill Islamic Contract3-220

21 GENERAL CONDITIONS GOVERNING DEALING IN RIGHTS  The right must be fully established at that material time; not potential right  It is granted not specifically for a particular holder for the purpose of avoiding injustice or harm to him personally  Such a right is transferable to other person not personal to the holder  It is possible to define the boundary or nature/attribute of the right such that intolerable uncertainty/gharar can be avoided  That right is generally accepted based on customary practices/uruf Islamic Contract3-221

22 Islamic Contract3-222 SPECIFICATION OF THE SUBJECT MATTER  Jins/genus  Naw’/category  Sifah/attributes  Quantity  Specifications needed to avoid possible dispute between parties  If subject-matter is present, buyer has right of inspection  Contemporary issues

23 Islamic Contract3-223 DELIVERABILITY OF SUBJECT-MATTER  Must be in seller’s ownership and possession  Meaning of ownership: complete and partial  Implication of possession  Possession of movable and non-movable asset  The rationale for the ruling: uncertainty and issue of risk and avoidance of dispute  The issue of frustration of contract when asset is destroyed before delivery to the other party  Contemporary issues

24 Islamic Contract3-224 EXISTANCE OF SUBJECT- MATTER  Non-existent can not be contracted as a general rule  Ability to deliver is questionable  The Hanbali view on this is peculiar to this mazhab  Exception in the case of salam and istisna’ where sales are based on description  Contemporary issues

25 Islamic Contract3-225 PERMISSIBILITY/HALALNESS or LEGALITY OF SUBJECT-MATTER  Halal for Muslims to posses or acquire  Recognised for non-Muslim to possess but not Muslims  Impure things can not be acquired  Permissible works  Permissible employment of asset in ijarah  Dealing with individuals whose assets are essentially of haram origin  Dealing with non-Muslims  Selling of goods likely to be used for illegal purposes  Contemporary issues

26 SUITABILITY OF SUBJECT MATTER  Durability of the subject matter for rahn  Life span of asset in ijarah/;leasing  Asset that can be properly described in salam  Specific object or an object fully described in some contracts  Purpose of the contract and the likelihood of used of the subject-matters Islamic Contract3-226

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