Presentation on theme: "SHARIAH RULES IN FINANCIAL TRANSACTIONS"— Presentation transcript:
1 SHARIAH RULES IN FINANCIAL TRANSACTIONS Prof. Dr. Zainal Azam Abd. Rahman
2 Islamic contracts from binding effect perspective Sahih (valid contract) and the fulfillment of pillars and conditions of validityBatil (void contract) and non-fulfillment of pillars and major conditions of validityFasid (defective contract): the Hanafi theory of pillars of aqad being only offer and acceptanceImplications of being in the category of fasid
3 Islamic contracts from mutuality of exchange perspective Contracts with consideration take effect upon valid formation of the contract: once duly formed the implication and binding effects can be enforced by the relevant partiesFor contracts without consideration, full and binding effects will take place after delivery of the subject matter (ain) to the other partyCancellation of contracts without consideration is possible
4 Islamic contracts from desired objective perspective Uqud al-Tamlikaat: to grant ownership and rightUqud al-Isqataat: to waive right or claimUqud al-Itlaqaat: to widen limitation put by contracts/conditionsUqud al-Taqyidaat: to limit freedom granted by contracts and conditionsUqud al-Sharikah: to share ownership and profitUqud al-Tawthiqaat: to provide security/collateralUqud al-Ishtihfazat: to provide for safe-keeping
5 Islamic contract from construction of the sighah perspective Uqud munjazah: contracts whose effects can be enforced immediately after the formationUqud mudafah: contracts whose effects are suspended to future time/eventsUqud muállaq: contracts whose effects depend on fulfillment or occurance of certain conditions
6 Islamic contracts from the perspective whether they are named or otherwise ‘Uqud al-musamma: contracts whose names are known from earliest period of Islamic law‘Uqud ghayr al-musamma: new contracts that do not come within the ambit of the named contractsWhether acceptability depends on this factor or not?
7 PROHIBITED ELEMENTS IN CONTRACTS Duress( ikrah)Mistake (ghalat/khata’): as to parties, subject-mattersInequality (ghubn): serious and non-serious ghubnDeception (taghrir): verbal and non-verbal deceptionIllegal goods/assetsIllegal motives/purposes
8 SALE-BASED PRINCIPLES Legal and illegal salesAl-Musawamah, al-amanah, al-murabahah,al-tawliyyahAl-naqd, bi-thaman ajil/biltaqsitAl-salam, Al-Istisna’Bai al-dayn, bai al-wafa’, al-tawarruk, bai al-inah
9 PROFIT-SHARING PRINCIPLES Sharikat al-amwal/al-milk: partnership based onSharikat al-uqud: partnership based on contractAl-Mudharabah: capital + management/labourAl-Musharkah: capital/mgt + capital mgt-Inan: partners are agents-Mufawadhah: partners are agents and guarantors-wujuh: credit reputation and assumption of financial liability for credit obligation= modern corporation?
10 LEASE-BASED PRINCIPLES The distinction between ayn (corpus/physical componant) and manfaah (usufruct/use/benefit/utility)Milk legal ownershipRight to utilise/useSale of usufruct or granting right to use for consideration/priceGranting of usufruct for free and iarah
11 FEE-BASED PRINCIPLESIjarah ‘ala al-a’mal: contract of service/contract for serviceAjir khass: employeeAjir mushtarak: independent contractorAl-Wakalah bil ujur: hiring an agentUjrat al-mithl: equitable fee/salary/remuneration
12 BENEVOLENT CONTRATS Granting of ownership or usufruct for free The need for offer and acceptanceThe significance of acceptanceThe significance of actual delivery of the subject matterBinding effect of concluded aqadPractical application
14 PRE-REQUSITE OF SHARIAH SALE CONTRACT Shighat al-aqd and its conditions-to express intention to form contract-must be clear enough to express intention-ijab and qabul-implication on contractContracting parties and their legal capacity-qualities that create capacity-quality that negate capacitySubject-matter of the contract-must be in existence-must be given full specification-must there be possibility of delivery-must be legalPrice paid or consideration-can be certain amount of money-certain quantity of goods-certain type of services