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

Islamic Contract3-2 1

MA’QUD ALAYHI: SUBJECT-MATTER OF CONTRACT

Prof. Dr. Zainal Azam Abd. Rahman

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



CLASS OF SUBJECT-MATTER OR MA’QUD ALAYHI

Tangible assets Usufruct of assetWork/labour of individualDebt or receivablesRights and privileges

TANGIBLE/REAL ASSETS

Moveable and non moveable Qimiyy and Mithliyy Ma’sum and ghayr ma’sum Present or absent Ordinary goods/commodity or

money


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


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


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)


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


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


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 Contract3-2 10

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


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


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


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


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 money @sarf

– -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


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??


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


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


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


HUQUQ MA’NAWIYYAH: INCORPERIAL RIGHTS Intellectual property rights

– -copyright– -patent– -license– -trademarks– goodwill


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



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


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


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


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

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

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