Right of Option

8/10/2019 Right of Option

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RIGHT OF OPTIONS

(KHIYARAT)


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DEFINITION

Wahbah al-Zuhaili

Khiyar is an option to continue ordiscontinue the contract due to certaincircumstances.

Sheikh Mohsin

Both party were given the option to choose tocontinue the sales or to discontinue (fasakh) accordingto the rules or certain circumstances.


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TYPES OF KHIYAR

Khiyar divided to 5:-

(i) Khiyar Majlis- the condition of withdrawing from the contract as long as the meetings of theparties continue

(ii) Khiyar Syarat (Al-Shart) -optional condition, where one of the parties stipulates for aperiod of three days or less

(iii) Khiyar Aib (Al-Ayb)-option from defect, the option of dissolving the contract ondiscovery of defect

(iv) Khiyar Tayin-option of determination, where a person having purchased two or threethings of the same kind, stipulates a period to make his selection

(v) Khiyar Rukyah- option of inspection, option of rejecting the thing purchased after sight


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KHIYAR AL-MAJLIS

(OPTION OF MEETING)


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KHIYAR MAJLIS

Definition:

Optionduring the meetingmeans each one the parties has

the right to confirm or cancel the contract in the negotiationstage of the contracy, as long as the two parties still there and

have not left.


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KHIYAR MAJLIS

Literal: based on thedoctrine of Khiyar Al-Majlis:

(a) gives each of theparties to a contract ofsale the option ofwithdrawing from thecontract so long as theyhave not physicallyseparated; and

(b) There is no time limitto the Majlis (meeting)which only ends whenone party leaves themeeting place.

According to NGCoulson :-

This principle onlyapplies to contractsmade in a face to

face meeting and itspurpose is to ensurethat the parties areas sure about thetransaction.


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Continue..

According to Al-Jaziri, there are 2 parts,whereby:

(ii) Technical

so long as the parties do not leave the placeof contract, any of them (seller or purchaser)can cancel the deal.1stPart

however, if it is stipulated that the contracthas been finalized even if the parties do notseparate, Khiyar Majlis will not beavailable.

2ndPart


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Different

Khiyar al-Majlis is different from Majlis Aqad in the application

because Majlis aqad is a gathering place or the place for such agreement

or place of business. As for Khiyar Al-Majlis the purpose is to give aright and choice to the related party either to proceed or cancel the

agreement aslong the Majlis not be dissolved.

According to MazhabsShafie and Hambali:

Pursuant to surah Al-Maidah;

the parties which are binding to a contract and other party no right

to revoke the contract


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LEGALITY

(i) Al-Sunnah

(ii) Al-Hadis

(iii) Ijmak

(iv)Qias


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LEGALITY

(i) Al-Sunnah

Ibn Umar reports that Prophet (PBUH) said :

if two men conduct a sale each one of them has the right of choice until they part or until one of them

gives the choice to the other and they conclude the sale the sale is then confirmed.

(This hadith is narrated by al-Bukhari and Muslim)

Hakeem Ibn Hizam reports that the

Prophet(PBUH) said :

the two sale parties have the choice until they are truthful and clear their sale will be blessed if they

tell lies(deceive ) and hide secrets, the blessing of their sale will be annihilated

(Riwayat Bukhari Muslim)


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View from the 4 Mazhabs

Mazhab Shafie and Hambali

The Ulamashave a different view pertaining to this Khiyar. According toMazhab Shafie and Hambali, Both of them agreed with the Khiyar Majlis

and stated that this contract is not binding and undecided as long the

parties still in the place to execute the contract. Both parties still have

the rights either to accept or cancel . However, when one of the party or

both parties apart which each other or get out from the designated place

automatically the contract is concluded and parties are bound to it.

In addition, according to Mazhab Shafie it is an obligation to the party

that accept that offer to accept immediately once the offer is out to give

a chance to the parties to re-think about the offer and enough time to

apply Khiyar Al-Majlis.


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Mazhab Hanafi and Maliki

However according to Mazhab Hanafi and Maliki, once the contract is concluded with a

positive offer proposal and acceptance, it is ultimate and binding and neither one theparties has the choice of backing down from it. They provide as evidence the Quraniccommandment to the believers to keep their contract referring to Surah Al-Maidah ayat 1:Omankind, satisfied and concluded the agreements.

The above surah stated that Muslim is binding with their contract and according to this 2Mazhab the application of this Khiyar is contradict with the stated surah.

Mazhab maliki also rejected this Khiyar Majlis because Madinah people did not practicedKhiyar al-Majlis during our Prophet time.


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KHIYAR AL-SYARAT

(OPTION OF CONDITION)


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Khiyar Al-Syarat

It is a right given to the parties or another person to

confirm or cancel the contract during an agreed period of

time.

Contradict with Prophetic tradition but accepted on 2

reasons:

1. Prophet accepted and sanctioned it

2. Some people may not be clever about trading and

need expert opinion

Applicable to binding, necessary and committing

contract which are cancellable even it was committing

to one party e.g. sae,rent partnership, warranty


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Issues

1. Who has the option of condition

Both or either one of the parties

Abu Hanifah, Malik, Ahmad Ibn Hanbal, the Zaidis and

Al-Shafieone of the parties may delegate it to thestranger

Parties may not be knowledgeable and need expert

opinion

Al-Shafie and Zufarnot permissible to delegate toanother person. Option was meant originally to be

used by contracting parties. The practice of delegating

it to another person means transferring the power over

the contract to a stranger


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2.Period of Option of Condition

Abu Hanifa, Zufar and Al-Shafie

-does not exceed 3 days-this period is given to the parties to determine

Abu Yusuf, Muhammad and Ahmad ibn Hanbal

-can exceed 3 days and may be longer provided that the time isdetermined and defined

-to give ample time to decide, so should not limitImam Malik

-originally 3 days but can be extended to sufficient time

-in case where the subject matter of contract was in a place which isvery far and could not be reached within 3 days

Zaidis-period should be set and made known provided it is within 3 days

Parties claim different agreed period-shorter one would be considered

Parties keep silent and do not specify the period3 days


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3.Cancellation of contract in the option of condition (verbal

/ action)

Abu Hanifa & Muhammad

-other party has to be informed of the cancellation

-this is to safeguard the interest of the other parties

Hanbalis, Abu Yusuf and Hanafi-the party who has the option can cancel the contract in

the absent of the other party without his consent

Zaidi

-The other party has to be informed of the cancellation


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4. Ownership of subject matter during the period of option

Abu Hanifa

-the ownership does not transfer to the buyer during the period ofoption, price also should not paid by the buyer to the seller duringthis period.

-but, if the option belongs to the seller alone, ownership not transferbut the price should go out of the ownership of the buyer

-to avoid having both price and sold object in the possession of the

sellerAbu Yusuf and Muhammad

-Price = ownership of the seller

-but if option be on the buyer, price does not go out of his possessionbut the sold object goes out the possession of the seller withoutentering the possession of the buyer

Abu Hanifah, Abu Yusuf, Muhammad and Malikis-the sold object does not go out of the ownership of the seller during

the period of the option

Shafie and Hanbalis

-the ownership should be transferred during the period of option


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5.Responsibility of the maintenance expenses of the subjectmatter and right to the increase

-Hanafi and MalikiResponsibility of the seller

-Other scholars

-responsibility of the buyer

6.Option nullified with death

-Hanafi and Hanbalis

-option is dropped and not transfer to the heirs

-consider it as personal right

-Malikis and Shafies

-option is transferred to the heirs as it is a financial right notpersonal right

-the option of condition is lost by the death of the parties who

has it


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7.Delegating the option of condition to others

-cannot withdraw except with the death of the third person

-agent cant delegate the option to another person except

with the approval of the appointer

If the agent dies, the right goes back to the original party

8. Differences in the option of condition

-burder of proofone who denies on the condition and he

has to deliver solemn oath in the absence of the

conclusive proof


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KHIYAR AL-RUYAH

(OPTION OF VIEWING)


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General rule

In order to conclude a valid binding contract the subject

matter must exist at the time of the contract in order to

avoid gharar or uncertainty.

But, this strict rule will caused hardship to the

contracting parties

Thus the Muslim jurist had allow exceptions to the strict

rule of existence.

As for example, bay al-salam (sale by advance payment

for the future delivery), bay al-istisna (contract of

manufacture), Ijarah (contract of hire) and musaqat

(contract of irrigation).


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But still all this kind of transaction still has its own stage

of uncertainty (gharar) because the party still has not

seen the subject matter yet.

Thus, to avoid uncertainty the purchaser given power to

opt whether to continue or rescind the contract

concluded between them after seeing and inspect the

subject matter.

This option known as option of viewing or option of sight

(khiyar al-ruyah). This option also known as option of

inspection because not only see but


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Purposes of khiyar al-ruyah

1. To avoid injustice that may lead to ignorance and

dispute among parties.

2. To protect the interest (istihsan) of Muslim and to

prevent any disputes among them.

3. To avoid unfairness when they have no experience or

ability to market place to buy things they have not

seen.


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Legality of khiyar al-ruyahHanafis, Malikis, and Hanbalis Shafiis

They admitted the legality of thisoption based on the authority of

hadiths reported by Ibn Abbas and

Abu Hurairah:

He who buy something which he has

not yet seeing has the option uponseeing it either to accept or refuse it.

Hanafis, Malikis and Zaidis give the

right of the option of viewing only to

the buyer

Hanbalis and Zahiris give the right to

exercise this option to the seller and

the buyer

Refused and remains with the strictrule of transaction.

Any transaction will be consider void

and invalid if the subject matter is not

existing and cannot be seeing.

Following is the authority of hadith:Prophet Muhammad S.A.W. forbid

cheating in selling

(Reported by Abu Muslim from

Hurairah)

Second, Shafiisdoes not accept the

hadiths mentioned by Hanafi, Maliki,

and Hanbali as authority which he

describes as weak or incorrect hadiths

(hadiths daif).


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Conditions of the Option of Viewing

1. The subject matter of transaction must define as to its

kind, genus, value to prevent any imbalance between

the parties obligation.

2. The party should not have seen the subject matter

before. If the party has seen the subject matter before,

the option will not applicable anymore. The viewing

can be in other form such as touch, smell, or taste.

3. The party can only exercised the option after the

purchaser have seen the subject matter.


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The Period to have the Option and its

Duration

For example, if the contract is related to foods stuff such as fruits orvegetables which are cannot last long, then the party should make his

option clear so if the buyer insists to terminate the contract the seller stillhave the opportunity to sell the things to other party who interested.

Subject matter

Perishable - option willapplicable for long period

Imperishable - must make hisdecision as soon as possible

General Rule

duration of option is depend on the subject matter itself.


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Muslim jurists differ in term of determining the period in order to avoid existence

of uncertainty (gharar) in the contract. Gharar here refer to the decision whether

the parties still want to continue or terminate the contract.

option can last until it is become extinguisheither by annulment or eventual lapsed

The period are depend on the party todecide whether to make the period last long

or make the option of sight only applicablefor short period

Hanafis

option last to limited time after the party had

seen the subject matter If the person has the opportunity toterminate the contract after viewing takenplace but he did not do so, thus the optionof viewing will not applicable upon him to beexercised and the contract considered asbinding upon him

Malikis


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Termination

of the Optionof Viewing

The party made his declaration ofoption after he saw the subjectmatter either by disposition or

expression.

The party had seen part of the objectwhich can represent the whole of the

subject matter.

The subject matter destroyedwhiles the subject matter in thehand of the purchaser after it

has been delivered.

If the buyer gives the subjectmatter as a mortgage,

automatically the option ofinspection will be terminated.

The buyer paid for the price of thesubject matter after he saw the

subject matter.

Deaths of the party alsoextinguish the option of

inspection.


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The Effects of Option of Viewing

Contracting party who did not see the subjectmatter has the option either to continue orrescind the contract after viewing take place.

The right to rescind or accept the contract ison the part of the party who exercised theoption of viewing unless he looses his right bysaying, I accepted the contract or, I amsatisfied with the contract.

Thus the contract will be binding if he doessomething that can be considered as he hadaccepted the subject matter. If he opts toannul it then the contract considered hasnever been existed.


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KHIYAR AL-AYB

(OPTION OF DEFECT)


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Meaning of khiyar al-ayb

It is an option given to a party to rescind the contract

when he discovers in the subject, defect that reduces its

value or that makes it fall short of its requirements or

specifications.

The Malikis termed this option as khiyar al-Naqisah or

the option of reduction.

It is a general rule that there should be no deceit or fraud

in sale transactions among Muslims. As such, this

necessitates the security of sale i.e. the right of option


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This type of option arises only if the contract has been

concluded. If the contract is still in the state of negotiation or still

under discussion, the affected party cannot exercise this

option.

If anything appears in the subject of the contract whichdoes not match its original use or decreases its

conventional market value, or makes it unfit to meet

requirements expected of it, then the buyer have the

right to exercise option of defect, as freedom from

defects is the right of the buyer given in any commercialtransactions.


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Purpose of the Option

If the defect reduces the value of the object, so it is only

fair to give the party a choice as when the subject matter

has defect, the consent or satisfaction of parties involved

are one-sided.


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Surah An-Nisa Verse 29

Allah S.W.T prohibits taking money of others illegally and

command that trading should be conducted with mutual

consent as stated in an-Nisa:29.

O ye who believe! Eat not up your property among

yourselves in vanities: but let be there amongst you

traffic and trade by mutual good will: nor kill or destroy

yourselves: for verily God any hath been to you Most

Merciful!


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Hadiths:

The Prophet s.a.w says:

A Muslim is a brother to another Muslim. It is illegal for a

Muslim to sell his brother a deficient thing unless he

makes it clear to him

It is illegal for someone to sell something without showing

its real qualities; and it is illegal for someone who knows

about it not to show it.


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It is reported that the Prophet s.a.w passed by someone

selling foodstuff. He (the Prophet) put his hand in it and

found it wet, then he said, He who cheats us is not one of

us

The Mejelle, Article 336:

Any buyer in Islamic law has an automatic implied

warranty against latent defects in the goods purchased.


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Conditions for Option of Defect to Become

Applicable

1. The defect have existed in the subject matter prior to thetime of sale or it occurs before the delivery and while it isstill in the hands of the seller.

2. The defect which existed in the subject matter decreases itsvalue or renders it unfit for the purpose to which it isintended

3. The buyer must be unaware of the defect at the time ofcontracting and taking the subject matter into hispossession. If the seller indicates that the defect is somanifestly obvious so as not to escape defection and the

buyer accepted it without protest, he is considered to havewaived his right.

4. The absence of stipulation for waiving or releasing theseller from liability for the defect in the subject matter


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What if express provisions were stipulated

on acquittal from liability if defects found? the Option is not lost if both parties agree to acquit each

other of all defects.

Abu Hani fah and Abu Yusu f consider a sale which

contains a provision of acquitting of defects as valid, even

if the defects were not mentioned in detail.

It is of no consequence whether the defect existed before

the contract or after it BUT before the buyer receives the

sold object.


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What if express provisions were stipulated

on acquittal from liability if defects found?

Imam Malik, A l-Shafie and

Muhammad ibn Al-Hasan

Zaidis

The provision of acquittal

covers only the defectswhich exist at the time of the

conclusion of the contract; it

does not cover defects

occuring after that andbefore the buyer receives

the sold object

If the two parties agree to

acquit of all defects,apparent or hidden, the

option is dropped


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Conditions under which right of Option of

Defect cannot be exercised

1. When the buyer, after he has known the defect in the

subject matter, insists or continues on buying the thing.

2. When the buyer knew the defect in the subject matter

but transfers or gives it to other persons as a gift or as

a selling thing. He loses his right of option of defect.

3. When the seller sells a thing with a condition that he

shall not be made liable for any defect in the subject

matter and the buyer agreed upon that condition. The

buyer loss his right of option of defect.


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Conditions under which right of Option

of Defect cannot be exercised4. If the defect is slight and if it does not reduce the value

of the object, and if it is conventional to overlook it,

then the party cannot use it as a pretext to return the

sold object

5. If the new defect occurs in the subject matter while it is

in the possession of the buyer and he discovers that

the object had an old defect while it was in the

possession of the seller, then the buyer can claim thereduction of the value but he cannot return the object.


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What if the buyer keeps silent of the defect in

the subject matter?

The right of khiyar will not be available if the defect is the

one which could be apparent with usual examination and

the buyer knows of it.

However, if the defect does not appear at the usual

examination, the option is never dropped.


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Is the Option Transferable to Heirs?

The option of defect is one of the options that are

transferable to the inheritors as it is attached to the

subject of the contract.

The option holders death does not cause the option to be

lost because the object itself is transmitted to inheritors,and thus so is the option.

This is because inheritors should inherit a sound and not

a defective object.


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Applicability of the right of Option

contract of sale

contract of Ijarah (hire)

contract of exchange of currency

Mahr payment, Sulh (reconciliation) involving agreement or setting blood

money, that is all contracts whose purpose is the

exchange of counter values.

However, in contracts whose primary aim is not mutualexchange of counter-values there is no dispute that

defects have no effects in them whatsoever.


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KHIYAR AL-TAYIN

(OPTION OF DETERMINATION)


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The parties have the option to choose the object of saleout of multiple varieties of a given article.

The purpose of this Khiyar is to give wide choice to the

buyer to choose and the seller to stipulate the subjectmatter of the contract.

For example the parties may purchase one out of threevarieties of commodities of different qualities (excellent,average and poor) without specifying which particularvarieties would be purchased on the condition that thosethe subject matter from the same class but differentqualities and different price.


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For example the object were car and have three types,

Audi, Perdana V6, and Dutson also have different

qualities and different price. In this situation, the seller

have the option to determine the object, price and the

qualities of the subject matter of the contract itself.


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This option only applicable to the parties of the contract

only in a stipulated time.

This option cannot be stipulated by the third parties.

However, some scholar in the opinion that this option

only applicable to the buyer only.

Duration of this option according to the nature of the

transaction. Imam Abu Hanifa maintain that the period of

this khiyar At-Tayinsame as khiyar al syakk which is 3

days. However duration of option must be precisely

defined by contracting parties.


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Syafie and Hanbalis do not recognize this option. They

are in the opinion that if the subject matter of the

contract is not determined sufficiently then it is not

confirming the basic principle of Islamic Transaction.

They also argued that there is no authority on Hadithabout Khiyar At-Tayin.

Hanafi and Maliki approved Khiyar at-Tayinon the

basis of Istihsan and affirmed that the option has beenintroduce to prevent any damages


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CONDITIONS OF KHIYAR AL TAYIN

1. This option is applicable in commutative contract (unchanged ofquantities) for valuable consideration and in which property istransferred. It is therefore restricted to the contract of sale, barter,give and trust.

2. Choice of determination may only be exercised between a maximumof 3 object which have three qualities, good, medium and bad

3. If the object were less or more than 3, the contract will be voidableon the ground of Gharar( uncertainty)

4. This option only applicable to the parties of the contract only and notto the third party it is for the purpose to avoid in justice among theparties of the contract

5. Option of determination must expressly stipulate in the contractwhich means that both of them knew that they have the option tochoose the subject matter of the contract. If not, the seller mustinform the buyer.

6. Hanafis require that the object which the choice is made must be allthe same class but must different quality or kind for the option to beof any consequences.

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