Presentation on theme: "SHARIAH RULES IN FINANCIAL TRANSACTIONS Prof. Dr. Zainal Azam Abd. Rahman."— Presentation transcript:
SHARIAH RULES IN FINANCIAL TRANSACTIONS Prof. Dr. Zainal Azam Abd. Rahman
Islamic contracts from binding effect perspective Sahih (valid contract) and the fulfillment of pillars and conditions of validity Batil (void contract) and non-fulfillment of pillars and major conditions of validity Fasid (defective contract): the Hanafi theory of pillars of aqad being only offer and acceptance Implications of being in the category of fasid
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 parties For contracts without consideration, full and binding effects will take place after delivery of the subject matter (ain) to the other party Cancellation of contracts without consideration is possible
Islamic contracts from desired objective perspective Uqud al-Tamlikaat: to grant ownership and right Uqud al-Isqataat: to waive right or claim Uqud al-Itlaqaat: to widen limitation put by contracts/conditions Uqud al-Taqyidaat: to limit freedom granted by contracts and conditions Uqud al-Sharikah: to share ownership and profit Uqud al-Tawthiqaat: to provide security/collateral Uqud al-Ishtihfazat: to provide for safe-keeping
Islamic contract from construction of the sighah perspective Uqud munjazah: contracts whose effects can be enforced immediately after the formation Uqud mudafah: contracts whose effects are suspended to future time/events Uqud muállaq: contracts whose effects depend on fulfillment or occurance of certain conditions
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 contracts Whether acceptability depends on this factor or not?
PROHIBITED ELEMENTS IN CONTRACTS Duress( ikrah) Mistake (ghalat/khata’): as to parties, subject-matters Inequality (ghubn): serious and non- serious ghubn Deception (taghrir): verbal and non-verbal deception Illegal goods/assets Illegal motives/purposes
SALE-BASED PRINCIPLES Legal and illegal sales Al-Musawamah, al-amanah, al- murabahah,al-tawliyyah Al-naqd, bi-thaman ajil/biltaqsit Al-salam, Al-Istisna’ Bai al-dayn, bai al-wafa’, al-tawarruk, bai al-inah
PROFIT-SHARING PRINCIPLES Sharikat al-amwal/al-milk: partnership based on Sharikat al-uqud: partnership based on contract Al-Mudharabah: capital + management/labour Al-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?
LEASE-BASED PRINCIPLES The distinction between ayn (corpus/physical componant) and manfaah (usufruct/use/benefit/utility) Milk legal ownership Right to utilise/use Sale of usufruct or granting right to use for consideration/price Granting of usufruct for free and iarah
FEE-BASED PRINCIPLES Ijarah ‘ala al-a’mal: contract of service/contract for service Ajir khass: employee Ajir mushtarak: independent contractor Al-Wakalah bil ujur: hiring an agent Ujrat al-mithl: equitable fee/salary/remuneration
BENEVOLENT CONTRATS Granting of ownership or usufruct for free The need for offer and acceptance The significance of acceptance The significance of actual delivery of the subject matter Binding effect of concluded aqad Practical application
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 contract Contracting parties and their legal capacity -qualities that create capacity -quality that negate capacity Subject-matter of the contract -must be in existence -must be given full specification -must there be possibility of delivery -must be legal Price paid or consideration -can be certain amount of money -certain quantity of goods -certain type of services