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Islamic Financial Contracts
Islam encourages business and financial transactions as a way of securing the basic needs for
all human beings, but these need to be conducted in accordance with the principles contained
in the Qur’ān and Sunnah. However, these legal concepts are not classified subject-wise,
and the verses on commercial law, like all other topics, are scattered throughout the Qur’ān,
making it difficult for readers to gain a full understanding of the topic. This, therefore, is the
first comprehensive book to demystify Islamic contract law and specifically Islamic financial
contracts, and to examine its roots and history.
The book is written in a clear style to allow for a greater understanding of the more
challenging and misunderstood areas pertaining to Islamic business and financial contracts.
It also contributes a series of chapters which address the market niche and need, concerning
Shariah compliance for Islamic financial products and services. The book is divided into 16
chapters in order to provide a holistic and thorough overview of Islamic law of contract. It
covers the objections and misconceptions surrounding Islamic business and financial contracts.
It also includes the key features and guiding principles of Islamic law of contract and offers
technical know-how, illustrating the concept of formation of a contract, as well as the essential
elements of a valid contract. The authors also offer a discussion on the system of options under
Islamic business and financial contracts and potential solutions to breach of contracts.
The book will serve as a handy reference for scholars and students of Islamic business and
finance and Islamic commercial law and will also be beneficial for practitioners as well as legal
and judicial officers. It will open new doors for further research in the field of Islamic financial
contracts.
Hussain Mohi-ud-Din Qadri, PhD, is a Deputy Chairman of the Board of Governors of Minhaj
University Lahore and an Associate Professor at the School of Economics and Finance at MUL.
He is also the President of Minhaj-ul-Quran International; Chairman of the Minhaj Education
Society (running 650 schools and colleges all over Pakistan); Chairman of Aghosh Orphan Care
Homes; Chairman of Al-Mawakhat Microfinance; and Chairman of Minhaj Halal Certification.
He has also been affiliated with the University of Melbourne Australia as Senior Fellow for
many years. Dr. Qadri is an author of thirty books, writer of over 50 research articles and a
reputed international speaker.
Nasir Iqbal is a senior Advocate High Court. He is Legal Advisor of Minhaj University, Lahore,
Minhaj Halal Certification and Al-Mawakhat Microfinance. He is also managing partner in law
firms “ABNAQ & Co. Advocates/Solicitors/I. P Attorneys” and “Nadeem Saeed & Co.” dealing
in civil law and commercial law. He is also a visiting lecturer for commercial and business law
in Minhaj University. He has more than 20 years’ experience in the field of law and is an expert
in the area of business and financial contracts/commercial law and intellectual property laws,
particularly in trademark and copyright laws.
Islamic Business and Finance Series
Series Editor: Ishaq Bhatti
There is an increasing need for western politicians, financiers, bankers, and indeed
the western business community in general to have access to high quality and
authoritative texts on Islamic financial and business practices. Drawing on exper-
tise from across the Islamic world, this new series will provide carefully chosen
and focused monographs and collections, each authored/edited by an expert in
their respective field all over the world.
The series will be pitched at a level to appeal to middle and senior manage-
ment in both the western and the Islamic business communities. For the manager
with a western background the series will provide detailed and up-to-date brief-
ings on important topics; for the academics, postgraduates, business communities,
manager with western and an Islamic background the series will provide a guide
to best practice in business in Islamic communities around the world, including
Muslim minorities in the west and majorities in the rest of the world.
Islamic Fintech
Edited by Sara Sánchez Fernández
Introduction xii
Bibliography 243
Index 251
Introduction
Writing on the subject of law in general and Islamic law in particular is a technical
and difficult project. We took the initiative to write a comprehensive masterpiece
entitled Islamic Financial Contracts: A Research Companion and this book is in
your hands by our joint efforts.
A number of classical and modern works and scattered literature in Arabic in
the field of Islamic law of contract are available written by great Islamic jurists.
Among them are Dr. Wahabah al-Zuhaili, Dr. Abdul Razaq al-Sanhuri, Dr.
Husain Hamid Hasan, Mustafa Ahmad al-Zarqa, Imam Muhammad Abu Zahra,
Abd al-Salam Madkur, Dr. Abd al-Karim Zaydan, Dr. Yusuf Musa and many
other scholars.
A very few works were also developed in English by some orientalists. But
unfortunately, they have tried to degrade Islamic concepts of contract law in
their literature in “sugar-coated style.” They have tried to bracket the pure legal,
financial, commercial, social, economic and political works of Islam within the
religious aspect only. Among them are Anderson, N.J. Coulson, Joseph Schacht,
Baillie, Dr. E.S. Rayner etc. There are also some contributions made by a few
Islamic scholars in this field in English, namely, Prof. Dr. Abdur Rahman I. Doi,
Dr. Liaqat Ali Khan Niazi, S. Sitti Salwani, Dr. Masum Billah, Dr. Muhammad
Tahir Mansuri, Dr. Ala’ eddin Kharofa and so on. Muhammad Masum Billah has
also mentioned some of these names in the preface of his book.
Students often face conceptual difficulties in learning and understanding the
complex concepts of contracts and other areas of commercial and business law.
This handbook of Islamic business and financial contracts is written with the aim
of setting out, in a manner that can be easily understood and explaining in greater
depth the more challenging and misunderstood areas particularly of the Islamic
law of contract. An attempt has been made to produce a write-up that could serve
as a reference book for students and all others who have a desire to understand
the principles and different concepts of Islamic business and financial contracts.
However, this book is not intended to be the last word.
In preparation of this book, we benefited basically from the Holy Qur’ān and
Sunnah and from traditional classical works of jurists on Islamic jurisprudence
and the academic literature available on Islamic contract law and business trans-
actions. References have also been made from classical contract texts and articles
Introduction xiii
written by different modern authors relevant to each area of the Islamic law of
contract. The works of orientalists have also been consulted.
It is hoped that this book will be a useful contribution to the Islamic legal
literature and more importantly to the Islamic law of contract in Pakistan. It is
our hope that this book will be beneficial for practitioners, legal and judicial
officers along with those in academia. It may be taken as a text book for students
studying Islamic law of contract in their BS programme in Islamic Banking and
Finance and as a handy reference on the basic principles of the Islamic law of
contract.
All praise be to Allah u whose help and guidance has sustained us to bring this
1st edition of the book. We pray to the Almighty Allah for His acceptance of this
humble effort, related to Islamic concepts and knowledge of the Shariah in busi-
ness and commercial dealings and to make this work a useful addition in Islamic
contract law.
1.2 Shariah
Literally, the term Shariah means “the way”, or “the clear path”, which Muslims
should follow to be guided rightly.4 Shariah is an Arabic word meaning the path
to be followed. Literally it means “the way to a watering place.” It is the path not
only leading to Allah, the Most High, but the path believed by all Muslims to be
the path shown by Allah, the Creator Himself through His Messenger, Prophet
Muhammad a.5 “Shariat,” says Sir Abdur Rahim, “which may be translated as
the Islamic Code, means matters which would not have been known but for the
communication made to us by the law-giver.”6 The Shariah itself is a vast network
of injunctions and regulations which relate the world of multiplicity inwardly to
a single centre which conversely is reflected in the multiplicity of the circumfer-
ence.7 In the theological discussion, the word Shariah is referred to as divine
revelation in toto. It provides all humanity, of all nations, a multidimensional
body (compendium) of faith and belief, and laws and regulations. So, in this way,
2 Some basic legal terminologies
it is viewed; Shariah as the embodiment of the “Divine Will”, and God is seen as
the “supreme legislator” whose laws sanctify human life.8 In Islam, Allah alone
is the sovereign, and it is He who has the right to ordain a path for the guidance
of mankind.9
1.4 Fiqh
The dictionary meaning of the term fiqh is understanding or knowledge. The
word fiqh has been typically defined as “knowledge of practical revealed rul-
ings extracted from detailed evidence” (al-ilmu bi al-ahkam al-shariah
Some basic legal terminologies 3
al-amaliyyah min adillatiha al-tafsiliyyah).19 Thus, fiqh is related only to “prac-
tical” (amaliyyah) and not to the tents of faith, i.e. theological (itiqadiyyah)
issues. Hence, fiqh is the knowledge of the Shariah ahkam (legal rules) pertain-
ing to conduct, that has been derived from their specific evidence. The author of
“Touzih” defines fiqh as
Fiqh means a true understanding of what is intended. Jurists generally define fiqh
as the outcome of human “understanding” (fahm)20, “perception” (tasawwur),21
and “cognition” (idrak)22 in the form of derivations from defined sources of law,
i.e. Qur’ān and Sunnah. Technically, however, fiqh refers to the science of deduc-
ing Islamic laws from evidence found in the sources of Islamic law. By extension,
it also means the body of Islamic laws so deduced. Hence fiqh refers to the result
of the human activity of exploration, interpretation, analysis and presentation of
the textual sources of Shariah (detailed evidence).
In cases where there is no clear injunction or directives in the Qur’ān and
Sunnah, jurists are allowed to legislate and use their faculties of juristic knowledge
(ijtihad) to frame laws.23 The fiqh is the further extension of Shariah (revealed in
primary and secondary sources) which consists of legal research of jurists and the
Islamic schools of law’s wealth of heritage. The vast collection of laws in books
of fiqh is based on juridical reasoning that was given by scholars and jurists from
various schools of thought for their own environments and times in regard to the
application of Shariah to real-life situations, issues and cases. The jurists derived
the laws from the primary (Qur’ān and Sunnah) and other authentic (ijma, qias,
etc.) sources of Islamic laws by adopting rigorous methods of derivations in the
light of the principles given in Qur’ān and Sunnah for the derivation and legisla-
tion of laws.
َ َو َما َكانَ ۡٱل ُم ۡؤمِ نُونَ ِليَنف ُِرواْ َكآفَّ ٗۚة فَلَ ۡو َل نَف ََر مِ ن ُك ِّل ف ِۡرقَ ٖة ِ ّم ۡن ُه ۡم
ِ َّة ِلّيَتَفَقَّ ُهواْ فِي ٱلدٞ طآئِف
ِين َو ِليُنذ ُِرواْ قَ ۡو َم ُه ۡم
َإِذَا َر َجعُ ٓواْ إِلَ ۡي ِه ۡم لَعَلَّ ُه ۡم يَ ۡحذَ ُرون
“And it is not possible for all the Muslims to set out (together). So, why should
a party from within every group (or tribe) not go forth in order that they may
acquire deeper knowledge (i.e., thorough understanding and insight) of the
Din (Religion), and warn their people when they return to them so that they
may guard themselves (against a life of sins and disobedience)?”24
4 Some basic legal terminologies
Qur’ān further says:
َ َو َما َكانَ ۡٱل ُم ۡؤمِ نُونَ ِليَنف ُِرواْ َكآفَّ ٗۚة فَلَ ۡو َل نَف ََر مِ ن ُك ِّل ف ِۡرقَ ٖة ِ ّم ۡن ُه ۡم
ِ َّة ِلّيَتَفَقَّ ُهواْ فِي ٱلدٞ طا ٓ ِئف
ِين َو ِليُنذ ُِرواْ قَ ۡو َم ُه ۡم
َِإذَا َر َجعُ ٓواْ ِإلَ ۡي ِه ۡم لَعَلَّ ُه ۡم يَ ۡحذَ ُرون
“Say: ‘(In fact,) all comes from Allah.’ So, what has gone wrong with these
people that they do not feel inclined to understand anything?”25
علَ ٰى قُلُو ِب ِه ۡم أ َ ِكنَّةً أَن يَ ۡفقَ ُهوهُ َوف ِٓي َءاذَانِ ِه ۡم َو ۡق ٗر ۚا َو ِإن يَ َر ۡواْ ُك َّل َءايَ ٖة َّل َ َومِ ۡن ُهم َّمن يَسۡ تَمِ ُع ِإلَ ۡي ۖكَ َو َجعَ ۡلنَا
َير ۡ َٱل َّولِين
ُ َ ِط سٰ َ أ لَّ ٓ إ
ِ ٓ اَ ذ ه
َ ٰ ۡ
ن إ ْ
ِ ُٓا و َر ف َ
ك ذ
َِين َّ ٱل ُ
ل وُ قَ ي ََك ن وُ ل ي ُۡؤمِ نُواْ ِب َه ۖا َحت َّ ٰ ٓى ِإذَا َجا ٓ ُءوكَ يُ ٰ َج ِد
“And amongst them are (also) some who keep their ears towards you, and (in
view of their evil intentions). We have wrapped their hearts in veils. (So, it is
not possible for them now) that they may understand it (the Qur’an) and (We
have) plugged their ears.”26
ِ ُن َّل ي ُۡبٞ وب َّل يَ ۡفقَ ُهونَ ِب َها َولَ ُه ۡم أ َ ۡعي
َص ُرون ٞ ُقُل
“They have hearts wherewith they understand not.”27
ٱختِ ٰلَ ٗفا َكث ِٗيرا ۚ أَفَ َل يَتَدَب َُّرونَ ۡٱلقُ ۡر َء
ۡ انَ َولَ ۡو َكانَ مِ ۡن عِن ِد غ َۡي ِر ِ َّٱلل لَ َو َجدُواْ فِي ِه
“Do they not ponder over the Qur’an? Had this (Qur’an) come from anyone
other than Allah, these people would have found in it many contradictions.”28
ِ َِي خ َۡي ٗرا َكث ِٗير ۗا َو َما يَذَّ َّك ُر ِإ َّٓل أ ُ ْولُواْ ۡ َٱل ۡل ٰب
ب ُ ۡ َ َي ُۡؤتِي ۡٱلحِ ۡك َمةَ َمن ي
َ شا ٓ ۚ ُء َو َمن ي ُۡؤتَ ٱلحِ ۡك َمةَ فَقَ ۡد أوت
“He blesses with wisdom whom He wills. Moreover, he who is granted
wisdom (and reason) receives tremendous good. And only those who are
endowed with wisdom and insight receive direction and guidance.”29
An example of this usage can be found in the Ahadith also. The Holy Prophet
Muhammad a said: “To whomsoever Allah wishes good, He gives the Fiqh (true
understanding) of the religion.”30
The Holy Prophet (PBUH) while praying for His cousin Abdullah ibn Abbas;
said اللھم فقہ فی الدینO Allah! Bless him with the understanding of religion.31
“Fiqh, according to traditional authorities, is knowledge of the practical regula-
tions and rules of the Shariah acquired by reference to and detailed study of the
sources.” “The detailed practical rules derived by reasoning from the corpus of
Shariah are known as Fiqh.”32
Fiqh is distinct from Shariah. “Shariah is the wider circle; it embraces in its
orbit all human actions. Fiqh is the narrow one and deals with what is commonly
understood as legal aspects.”33
Some basic legal terminologies 5
1.6 Islamic jurisprudence
It is defined as “ فھو العلم باالحکام الشرعیۃ من ادلتھا التفصیلیہIt is knowledge of the laws of
Shariah, relating to men’s acts and derived from specific sources.”34 According to
Maliki jurists, “it is the science of the commands (laws) of the Shariah in particular
matters deduced by the application of a process of reasoning.”35
Islamic jurisprudence is a broader term that is applied to mean all that is cov-
ered by Islamic law. It is sometimes applied to mean the study of usul al-fiqh
or legal theory. This restricted application of the term emphasises the impor-
tance of the discipline of usul al-fiqh because usul al-fiqh is indispensable for
the study, practice, and teaching of Islamic law and is also a prerequisite to
the study of tafsir and hadith. If it is to be confined to issues covered by usul
al-fiqh, it may be titled as ‘Islamic Legal Theory.’ The term includes both
usul and fiqh, i.e. legal theory, legal concepts, and substantive and procedural
law.36
The term usul al-fiqh is broken up into its two components—usul and fiqh—and
by understanding their meaning, we understand the meaning of Islamic jurispru-
dence. The term fiqh we have already explained. Now we explain the term usul.
The term usul is the plural of “asl”. The literal meaning of the “asl” is “some-
thing from which another one originates”. Thus, the origin of a thing is its asl.
Technically, the term usul here means principles. These may also be referred to as
qawa‘id. There are several types of principles, but here it means principles used
for the interpretation of the texts of the Qur’ān and the Sunnah. Thus, the term
usul al-fiqh means the principles of interpretation used to derive the knowledge
of the legal rules of conduct from the specific evidence. Muslim jurists define the
term as follows:
They are the principles by the use of which the mujtahid arrives, through the
specific evidence, at the legal rules of conduct.
This definition states that the usul al-fiqh is a body of principles of interpretation
by the help of which the mujtahid can derive the law from the detailed evidence
in the Qur’ān, the Sunnah, ijma‘ and qiyas.37
It is also worth noting here that Muslims were the pioneers in the known world
in the field of science of law. In the West, jurisprudence was seriously treated as
science only in the 18th century. In Islam, it had acquired that status by the end of
the second century Hijra viz. about 1,200 years ago.38
According to Anwar A. Qadri “The science of Islamic jurisprudence is con-
sidered as an evergreen system, vigorous and vital in nature and features. It has
a methodology out of which solutions for new problems of law in the light of
changes in people’s habits and modes of living can be drawn”.39
The Muslim scholars worked very hard for jurisprudence. Especially
Imam Abu Hanifah, along with his disciples compiled judicial works that are
6 Some basic legal terminologies
unparalleled in the world. Even the British jurists could not compete with
this school. That is why Imam Abu Hanifah is regarded as one of the great-
est jurists. He possessed a remarkable power of reasoning and deduction. The
other three Imams, viz Malik, Shafi and Ahmad bin Hanbal were also endowed
with talents of an exceptional nature. They enjoyed an excellent reputation
as jurists. Due to the combined efforts of the above-noted Imams, it can be
safely said that Islamic jurisprudence has become more scientific than British
jurisprudence.40
The term “Hukm” does not signify the words and the letters literally contained in
the commandments of Allah, communicated in the form of Qur’ān. It is the rule or
legal value established by the communications of Allah. The “Hukm”, in its exact
technical sense, is “what is established by communication, not the communication
itself (words of communication)”.44
The same is expressed by Mahalli in Shahrah Jam il Jawame by Qazi Azd-ud-
Din in Sharh-ul-Mukhtasar, by Asnawi in Sharh-ul-Minhaj, by Amidi in Sharh-
ul-Haj, by Amidi in Al-Ihkam, by Fazil Qarabaghi, Allama Bihari, Qanuji and
many other authorities on Islamic jurisprudence.
It is pertinent to mention here that what is the established from the commu-
nication from God does not mean only explicit text of Qur’ān, but all legal rules
and juristic values based upon Prophet’s Sunnah and definite Ijma and other
authentic sources of Islamic law are also included. Hence the standard definition
of “law” in Islamic legal science is that “Any rule, established, directly or indi-
rectly from the communication of Allah, which pertains to human acts, whether
it be to demand a choice between alternative or a simple declaration is known as
Hukm or ‘law’.”45
It is worth noting here that a law or a legal system is a system of commu-
nication that is also recognised in the modern age though the Emitter or the
Communicator may be different.46 In the case of the Islamic legal system, the
Emitter or Communicator is “Allah”, and in the case of its counterpart, the Emitter
may be King or any other sovereign or body so authorised.
Some basic legal terminologies 7
Therefore, the “law” in Islamic concept is a body of rules regarding human
conduct, established:
From Qur’ān (because it is an explicit and manifest version of Allah’s
communication);
From “Prophetic Sunnah” (because it is an implicit version, practical denota-
tion and physical demonstration of Allah’s communications); and
From “Definite Ijma”, (because it is an authoritative device of knowing and
inferring what has been divinely communicated to humanity). This also included
other authentic sources of Islamic law.
In Islamic legal science, the concept of “law” is unanimous among all the
jurists and the schools of law right from early periods till today. No dichotomy
or conflict of opinion upon this issue exists in Islam. Therefore, in Islamic juris-
prudence, the term “law” possesses a permanent and universal character, which is
not subject to any alteration,47 as opposed to its counterpart, where there exists no
single definition of the word “law”.
وع ۡ َ ٱلَّذ٣ِ فَ ۡليَعۡ بُدُواْ َربَّ ٰ َهذَا ۡٱلبَ ۡيت٢ ِص ۡيف
ٖ ِي أطعَ َم ُهم ِ ّمن ُج
ٓ ّ ِ ِۦإ ٰلَ ِف ِه ۡم ِر ۡحلَةَ ٱل١ِ ِلي ٰلَفِ قُ َر ۡي ٍش
َّ شتَآءِ َوٱل
٤ َِۢو َءا َمنَ ُهم ِ ّم ۡن خ َۡوف
“To awake drive amongst the Quraysh, they were acclimatized to the summer
and the winter (commercial) trips. So they should worship the Lord of this
(Sacred) House (Ka’ba, to give Him thanks), who has fed them in hunger (i.e,
provided them sustenance in starving conditions) and secured them from fear
(of foes i.e, blessed them with secure and peaceful life)”.48
The Allah Almighty also says عآئ ِٗل فَأ َ ۡغن َٰى
َ ََو َو َجدَك
“And He found you seeking (closeness with your Lord), and (then blessed
you with the pleasure of His sight and) freed you of every need (forever). Or
And He found you compassionate and benevolent, then (through you) made
the destitute non-liable.”
8 Some basic legal terminologies
The following verse is also an excellent example of choosing to trade as a career.
Another verse urges the Muslims to seek Allah’s grace—that is, trade and business.
َض ِل ِ َّٱلل َو ۡٱذ ُك ُرواْ ََّٱلل َكث ِٗيرا لَّعَلَّ ُك ۡم ت ُ ۡف ِلحُون ِ صلَ ٰوة ُ فَٱنتَش ُِرواْ فِي ۡ َٱل ۡر
ۡ َض َو ۡٱبتَغُواْ مِ ن ف َّ ت ٱل ِ ُفَإِذَا ق
ِ َضي
“Then after the prayer is offered, disperse in the land and (then) look for
Allah’s bounty (i.e., sustenance). And remember Allah much so that you may
attain prosperity.”50
Even after performing pilgrimage (hajj), it is allowed that Muslims may engage
in sale, purchase and trade to fulfil the necessities of life. On deriving material
benefit from the hajj activity, Allah says in the Qur’ān:
Dhu al-Majaz and ‘Ukaz were the markets of the people in the time of
ignorance. When Islam came, people did not really like to trade in them
until it was revealed: And it is no sin on you if you (also) seek your Lord’s
bounty (through trade during the hajj days) [Qur’ān 2:198] in the hajj
festival.52
It is worth mentioning here that seeing the optimum economic, strategic and dip-
lomatic potential in the hajj season, Muslim governments should organise and
manage this activity as a large-scale project. Not only does the hajj stimulate vari-
ous economic sectors in Muslim lands, but the centrality of the Ka’ba contributes
to anchoring the Muslim community in a world of increasing globalisation and
cross-border financial transactions. Moreover, the economics of the hajj may play
a decisive role in strengthening relations and fostering brotherhood among the
Muslim countries.
It has been observed that when the hajj is celebrated, through its impact on
investors’ sentiments, it boosts the stock market as well.
Some basic legal terminologies 9
Prophetic traditions also place emphasis on the significance of trade and mer-
chants; some of these are:
Rafi’ b. Khadij (R.A) narrated that Allah’s Messenger a was asked, “What type
of earning is best?” He replied: “A man’s work with his hand and every business
transaction that is approved.”53
According to Jabir b. ‘Abd Allah (R.A), Allah’s Messenger a said:
“May Allah show mercy to a man who is lenient when he sells, lenient when
he buys and lenient when he asks for payment!”54
Once Allah’s Messenger a saw the people doing business, so he said: “People of
the trade!” and they replied to him, turning their necks and their gazes towards
him, and he said:
“The importer is blessed with the provision and the hoarder is cursed.”57
Ibn ‘Abbas (R.A) reported that Allah’s Messenger a said there are 20 ways of
making a livelihood. Nineteen of them are inclusively for traders, and only one
way is open to industrialists.58
َ َ عذ
ِ َّاب ٱلن
ار َ سن َٗة َوفِي ۡ ٓٱلخِ َر ِة َح
َ سن َٗة َو ِقنَا َ َومِ ۡن ُهم َّمن يَقُو ُل َربَّنَا ٓ َءا ِتنَا فِي ٱلد ُّۡنيَا َح
“And there are others of them who submit: ‘O our Lord, grant us excellence
in this world, and excellence in the Hereafter (as well), and save us from the
torment of Hell.’”60
A renowned author named A.E. Libber states: “Islam is perhaps the one great reli-
gion which affords the merchant a highly honoured place in society.”61 Another
author commented that
there are religions whose sacred texts discourage economic activity in gen-
eral, counselling their followers to rely on God to provide them with their
daily bread, or more particularly, looking askance at any striving for profit.
This is certainly not the case with the Koran, which looks with favour upon
commercial activity.62
People are encouraged to earn a living through lawful means to cater for both
their mundane wellbeing and their livelihood. Islam encourages business trans-
actions to secure the basic needs for all human beings, and these should be
within the general ambit of permissibility transactions in order to effectively
manage the resources that God has bestowed upon the world.63 Similarly,
regardless of a person’s gender, Islam gives an unfettered right to the acquisi-
tion of property to all, subject to the general rules of the Shariah. As the pro-
pensity to earn or acquire property is an innate character of humans generally,
Islam regulates this right for the benefit of all. The regulations placed on lawful
earnings in Islam are not meant to retain the legitimate acquisition of property
but are there to guide people in the proper manner to do so to avoid rancour and
chaos in society.64
The right to earn legitimate earnings through wages or doing business transac-
tions is embedded in the higher objectives of the Shariah. This right was conferred
on everyone—male and female—more than 1,400 years ago through the divine
legislation in the Qur’ān and Sunnah. Men and women are considered equal in
matters of this kind; both have the right to enter into lawful transactions through
contracts that are in accordance with the general principle of the Shariah.65 The
Qur’ān says:
ۖ َ يب ِمما ۡٱكت
يب ِ ّم َّما
ٞ َص َ ّسبُواْ َولِل ِن
ِ سآءِ ن َ َّ ّ ٞ َص ّ ِ ّض ل
ِ ِلر َجا ِل ن ۚ ٖ ۡعلَ ٰى بَع
َ ض ُك ۡم
َ ۡٱللُ بِ ِهۦ بَع َّ ََو َل تَت َ َمنَّ ۡواْ َما ف
َّ ض َل
عل ِٗيما ۡ َس ۡب ۚنَ َوسَۡٔلُواْ ََّٱلل مِ ن ف
َ ٍض ِل ۚ ِ ٓۦه إِ َّن ََّٱلل َكانَ بِ ُك ِّل ش َۡيء َ َ ۡٱكت
“And do not long for the thing in which Allah has made some of you superior
to others. Men will have a share of what they earn, and women will have a
share of what they earn, and keep begging Allah for His bounty. Surely, Allah
knows best everything.”66
Some basic legal terminologies 11
This verse clearly explains that people have the right to earn legitimate means of
livelihood. The next verse reveals how Allah Almighty rewards those who are
vigilant about the affairs of both worlds.
ۚ يب ِمما َك ٓ
ب َ ِس ِري ُع ۡٱلح
ِ سا َ سبُواْ َو َُّٱلل ِ أ ُ ْو ٰلَئِكَ لَ ُه ۡم ن
َ َّ ّ ٞ َص
“It is they for whom there is a share of their (virtuous) earning, and Allah is
Swift at reckoning.”67
It is the Divine intention that humans should look for means of sustenance on
land and sea. The Sustainer subjected canals, seas, rivers and oceans to them. The
treasures of the deep waters, as well as the marine creatures, are there for human
benefit. Furthermore, we may get numerous other benefits from the great body of
water that covers a large portion of the earth. Regarding the beneficial nature of
natural streams of water, Allah says:
The following hadith highlights the significance of earning one’s keep. The
Prophet (PBUH) said if someone enters the morning tired as a result of working
(diligently) with his hands, his sins are pardoned.69 This also has been explained
by the Prophet (PBUH). Rafi’ ibn khadij narrated:
“It was said: ‘O Messenger of Allāh a what kind of earning is best?’ He said:
‘For a man to work with his hands and every honest transaction’.” In another nar-
ration, Al-Miqdām (R.A) reported that Allah’s Messenger a said:
علَ ْي ِه الس ََّلم َكانَ يَأ ْ ُك ُل مِ ْن َ ط َخي ًْرا مِ ْن أ َ ْن يَأ ْ ُك َل مِ ْن
َّ ع َم ِل يَ ِد ِه َو ِإ َّن نَ ِب
َّ ي
َ َللاِ دَ ُاود ُّ َطعَا ًما ق
َ ٌَما أ َ َك َل أ َ َحد
ع َم ِل يَ ِد ِه
َ
“No one eats any better food than someone who eats from what he earns by
the work of his own hands. Allah’s Prophet, Dāwūd (peace be upon him),
used to eat from what he earned by the work of his own hands.”70
Notes
1 Muhammad Abdul Khaliq Omar, Reasoning in Islamic law, 3rd ed. (Cairo: M. Omar,
1999).
2 Dr. Abu Ameenah Bilal Philips, The Evolution of Fiqh, p. 1.
3 Ahmad bin Mohamed Ibrahim, Sources and development of Muslim law, p. 1 (1965).
4 Muhammad Hashim Kamali, Shariah law: An introduction, 2008, p. 14.
5 Abdur Rahman I. Doi, Shariah: The Islamic law, p. 2.
12 Some basic legal terminologies
6 Sir Abdur Rahim, The principles of Muhammadan jurisprudence, p. 50.
7 Seyyed Hossein Nasr, Sufi essays 43 (1999).
8 Muhammad Hashim Kamali, Shariah law: An introduction, 2008, p. 14.
9 Sayyid Qutb, Hadha al-Din (this religion of Islam), USA, I.I.F.S.O. Publication,
undated, p. 19.
10 Qur’ān, 5:48 (English translation from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr.
Muhammad Tahir-ul-Qadri).
11 Qur’ān, 42:13 (English translation from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr.
Muhammad Tahir-ul-Qadri).
12 Qur’ān, 45:18 (English translation from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr.
Muhammad Tahir-ul-Qadri).
13 M. Kabir Hassan, Rasem N. Kayed & Umar A. Oseni, Introduction to Islamic banking
and finance, principles and practice, p. 4.
14 Muhammad Shalabee, al-Madkhal fee at-Ta‘reef bil-Fiqh al-Islaamee, p. 28.
15 Syed Habibul Haq Nadvi, Islamic legal philosophy and the Qur’ānic origins of the
Islamic law, p. 26.
16 Khurshid Ahmad, Ed. The Islamic law, p. 19.
17 Bernard Weiss, Interpretation in Islamic law: The theory of Ijtihad, (1978) The
American Journal of comparative law, 203.
18 Syed Habibul Haq Nadvi, Islamic legal philosophy and the Qur’ānic origins of the
Islamic law, p. 189.
19 Muhammad Abu Zahra, ‘Usul al-Fiqh (Cairo: Dar al-Fikr al-Arabi, 1958), p. 5.
20 Ibn Taymiyah, Kutub wa Rasa’il wa Fatwa (Books, Letters and Legal Opinions),
vol. 13, p. 113.
21 Al-Subki, Al-Ibhai fi Sharh al-Minhaj, vol. 1, p. 39.
22 Al-Haj, Al-Taqrir, vol. 1 p. 26.
23 Syed Habibul Haq Nadvi, Islamic legal philosophy and the Qur’ānic origins of the
Islamic law, p. 189.
24 Qur’ān 9:122 (English translation from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr.
Muhammad Tahir-ul-Qadri).
25 Qur’ān 4:78 (English translation from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr.
Muhammad Tahir-ul-Qadri).
26 Qur’ān 6:25 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr. Muhammad
Tahir-ul-Qadri).
27 Qur’ān 7:179 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr. Muhammad
Tahir-ul-Qadri).
28 Qur’ān, 4:82 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr. Muhammad
Tahir-ul-Qadri).
29 Qur’ān, 2:269 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr. Muhammad
Tahir-ul-Qadri).
30 Sahih al-Bukhari Arabic-English, vol. 4, pp. 223–224, No.346), Muslim, Abdul Hamid
Siddiqi, Sahih Muslim (English trans.), (Beirut: Dar al-Arabia, n.d.), vol. 3, p. 1061,
No.4720).
31 Ibn Saad, Tabqat ul Kubra II, p. 363.
32 Syed Hossein Nasr, The Heart of Islam, Enduring values for humanity, p. 123 (2002);
Eric Winkel, Islam and the living law: The Ibn al-Arabi approach 15 (1997).
33 Asaf A.A. Fyzee, Outlines of Muhammadan law, p. 21.
34 Abu Zahra, Usul-ul-Fiqh, p. 1.
35 Abdul Rahim, Mohammedan Jurisprudence, p. 50.
36 Imran Ahsan Khan Nyazee, Outlines of Islamic jurisprudence, p. 29.
37 Imran Ahsan Khan Nyazee, Outlines of Islamic jurisprudence, p. 29.
38 Justice Aftab Hussain, “Sources of Islamic law-classicism and contemporary prob-
lems” published in 3rd Pakistan France Colloquium Islamabad, 1982, p. 42.
Some basic legal terminologies 13
39 Anwar A. Qadri, Islamic jurisprudence in the modern world, p. 214.
40 Dr. M. Rashid Ahmad Khan, Islamic jurisprudence, 19–20.
41 Encyclopedia of Islam, II, p. 723.
42 Dr. Sobhi Mahmassani, Falsafa shariat-e-Islam, p. 8.
43 Sadr-ush-Shariah, At-Tauzih, pp. 36 as quoted by Prof. Dr. Muhammad Tahir-ul-Qadri,
Islamic concept of law, p. 1.
44 Sadr-ush-Shariah, At-Tauzih, pp. 40; Taftazani, At-Walweeh, p. 50.
45 Prof. Dr. Muhammad Tahir-ul-Qadri, Islamic concept of law, p. 1.
46 Antony Allott, The limits of law, p. 5 (1980 Ed).
47 Prof. Dr. Muhammad Tahir-ul-Qadri, Islamic concept of law, p. 1.
48 Qur’ān, 106:1–4 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr.
Muhammad Tahir-ul-Qadri).
49 Qur’ān, 4:29 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr. Muhammad
Tahir-ul-Qadri).
50 Qur’ān, 62:10 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr. Muhammad
Tahir-ul-Qadri).
51 Qur’ān: 2:198 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr. Muhammad
Tahir-ul-Qadri).
52 Narrated by al-Bukhari in al-Sahih, 2:628 #1681.
53 Narrated by Ahmad b. Hanbal in al-Musnad, 4:141 #17265; al-Hindi in Kanz al-
‘Ummal, 4:124 #9861.
54 Narrated by Ibn Majah in al-Sunan, 2:742 #2203.
55 Narrated by Ibn Majah in al-Sunan, 2:752 #2236.
56 Narrated by al-Tirmidhi in al-Sunan, 3:515 #1210; ‘Abd b. Humayd in al-Musnad,
1:299 #966; and al-Mundhiri in al-Targhibwa al-Tarhib, 2:365 #2745.
57 Narrated by Ibn Majah in al-Sunan, 2:728 #2153; al-Darimi in al-Sunan, 2:324 #2544;
and al-Bayhaqi in al-Sunan al Kubra, 6:30 #10934.
58 Narrated by al-Hindi in Kanz al-‘Ummal, 4:16 #9874.
59 Qur’ān 2:275 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr. Muhammad
Tahir-ul-Qadri).
60 Qur’ān, 2:201 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr. Muhammad
Tahir-ul-Qadri).
61 Libber, A.E. Eastern, Business practices and medieval European commerce, p. 21,
Economic history review, p. 230.
62 Rodinson M, (1987) ‘Islam and capitalism’ in Ghai LS (ed), The political economy of
law: A third world reader, Oxford University Press, pp. 70-71.
63 M. Kabir Hassan, Rasem N. Kayed & Umar A. Oseni, Introduction to Islamic banking
and finance, principles and practice, p. 43.
64 M. Kabir Hassan, Rasem N. Kayed & Umar A. Oseni, Introduction to Islamic banking
and finance, principles and practice, p. 44.
65 M. Kabir Hassan, Rasem N. Kayed & Umar A. Oseni, Introduction to Islamic banking
and finance, principles and practice, p. 44.
66 Qur’ān 4:32 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr. Muhammad
Tahir-ul-Qadri).
67 Qur’ān, 2:202 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr. Muhammad
Tahir-ul-Qadri).
68 Qur’ān, 14:32 (Eng. trans. from ‘Glorious Qur’ān’ by Shaykh-ul-Islam Dr. Muhammad
Tahir-ul-Qadri).
69 Narrated by al-Tabarani in al-Mu’jam al-aswat, 7:289 #7520.
70 Narrated by al-Bukh¥rÏ in al-ßa^Ï^, 2:730 #1966; al->abar¥nÏ in al-Mu¢jam al-KabÏr,
20:267 #631; and al-BayhaqÏ in al-Sunan al-Kubr¥, 6:127 #11471.
2 Historical evolution of contracts and
codification of Islamic law of contract
2.2 Pre-Islamic era
Before Islam, Quraish used to be involved in trade and Macca was the commer-
ّ ِ إِۦ ٰلَ ِف ِه ۡم ِر ۡحلَةَ ٱل١ِ ِلي ٰلَفِ قُ َر ۡي ٍش
cial city.2 It is, however, indicated in the Holy Qur’ān: ِشتَآء
٢ ِص ۡيف
َّ َوٱل
“To awake drive amongst the Quraysh. They were acclimatized to the sum-
mer and winter (commercial) trips.”3
A renowned exegete wrote: “Macca it’s relation with the important trade route
to India from Babylonia, from the ports of Persian Gulf as well as from Yemen,
flowed rich products of the Middle East; from Syria, those of Mediterranean
world.”4
Many Arabs had obtained their livings from the camels, horses, cattle and
sheep while the rest of them engaged in commerce and their caravans set out at
regular intervals to the east and west.5
The idea and practice of contract have been popular in Arab society since the
pre-Islamic era. Surveys on the commercial background of the pre-Islamic era
were done in the sixth and seventh century in Arabia.6
Makkah and Madinah were trading centres and market transactions were gov-
erned by the customary law of property, contract and obligations.7
The cities of Macca and Madinah were well-known commercial cities during
the pre-Islamic period, and these two cities had fostered a strong relationship with
Contracts and codification 15
the Nimads in the area of trade and commerce.8 Trans-regional trade was preva-
lent in the then Arabian Peninsula, which involved trade caravans from Macca to
Syria and vice versa. Macca was the centre of interregional trade in the Arabian
Peninsula.9
Macca was one of the richest cities among the Arab states, which estab-
lished transactions in trade and commerce between the Indian Ocean and the
Mediterranean.10 According to Tabarani, once Hashim bin Abd Manaf (the great
grandfather of Holy Prophet (PBUH) travelled to Palestine, bought some flour
and brought it to Macca. This had made him the first merchant to make two trad-
ing journeys in two seasons, i.e. to the Sham in the summer and to Al-Yemen in
the winter.11 Gradually, the Quraish in the later generation of Hashim bin Abd
Manaf established the nature and practices of international trade with different
countries. There were mainly two types of commercial transactions during the
pre-Islamic period: partnership agreement (musharakah) and receiving goods on
the basis of a partnership.12 These two types of commercial transactions extended
an unlimited development of the trade in the society at that time. The prevail-
ing modes of transactions during this era included shirkah (partnership), whether
mudarabah (trust financing) or musharakah (joint venture partnership), both of
which were practised as profit and loss sharing (P.L.S.) transactions. In addition,
interregional trade within the Arabian Peninsula involved caravan trades where
agents were employed to represent their principals in the business, mostly to carry
out specific transactions under the authority of the latter. Agents were sent to
Syria and its Mediterranean ports to trade in goods. The agents were compensated
either through financial payments or proprietary benefits as agreed by the parties.
This form of transaction is known as wakalah (agency contract).13
2.3 Post-Islamic era
Islam did not erase all pre-Islamic customs and practices. Instead, it removed
every facet of corruption and cancelled all customs which were harmful to the
society. Trade practices were reformed by making the basis of trade mutual con-
sent, and by disallowing all deceptive business transactions.14
At the dawn of Islam, business activities were also introduced through injunc-
tions in Qur’ān and Sunnah. Arabs continued their commercial and business
transactions in the post-Islamic era. During the post-Islamic period, the Arabs
organised trading caravans to make profits through commercial transactions.15
The Prophet and his companions engaged practically in commercial transactions
that involved financial dealings among parties of different nations and tribes.16 “It
is impossible to think of Macca in terms of other than trade. It was first established
as a local trading centre around a religious shrine.”17
Besides the above-mentioned prevailing modes of transactions during the pre-
Islamic era, during the post-Islamic era there were other transactions involved
such as contract of agency, contract of salam, contract of sale, contract of mort-
gage (juala) (imarah) and hire purchase agreement.18 Furthermore, qard (a benev-
olent loan) was also common during this era. The Prophet (PBUH) sometimes
16 Contracts and codification
borrowed money from Jews and facilitated some interest-free loans for his needy
companions. This form of transaction is a goodwill loan made without the inten-
tion of receiving interest or any benefit in making such a loan. The Prophet’s
approval of benevolent loans can be found in a passage where he was reported
to have said: “Whoever gives loans would have the reward (equivalent to the
reward) of one of them.”19 In a similar vein, one of the wives of the Prophet
(PBUH), Aishah, told that the Prophet (PBUH) bought some food on credit from
a Jew and gave him his chain mail as security for the debt.
Apart from the above modes of transaction, the Prophet (PBUH) also rec-
ognised and his companions practically engaged in salam (forward) contracts.
According to a tale, Ibn ‘Abbas, a companion of the Prophet (PBUH) said that
when the latter came to Madinah, they used to engage in salam contracts against
cash payment until the season.20 Other widespread permissible transactions during
this period include sarf (exchange of money that is gold for gold and silver for
silver at the same sitting) and ijarah (leasing).
In the post-Islamic period, the city of Macca was named as a Jama’a or a
republic.21 “Macca consisted of a collection of tribal camps, in which all came into
a confederation for the purpose of the development of the commercial transaction,
this confederation formed a general assembly wherein the commercial enterprise
of Makkan’s was planned.”22
The commodities that were involved in the trade were spices, skins (of ani-
mals), perfumes, precious stones and pearls, drugs, irons, hides and furs, timbers
and slaves, etc.23 International trade and business also played an essential role
between Arab, China Africa, Europe, Russia24 and many other countries.
The Holy Prophet (PBUH) himself was involved actively in trade and business
from Macca to Sham and other places even before the revelation from Allāh u.25 In
his business dealings, Prophet Muhammad a never engaged in unethical transac-
tions, and he did not hoard commercial goods for the purpose of selling at higher
prices when such commodities became scarce. Consequently, Khadija, a wealthy
and reputable merchant in Macca, engaged the services of the young and relia-
ble Muhammad a to assist in the management of her business. The Holy Prophet
(PBUH) was a member of the attested trading clan of Quraish.26 Even after he was
appointed by Allāh u as the Holy Prophet (PBUH) of the world, the Prophet (PBUH)
continues to encourage his companions to involve themselves in trade activities.27
Sayyidina Abu Bakr (R.A) also had a cloth business. Other companions of the
Holy Prophet (PBUH) were involved in many other trades at one time or another in
their lives.28 Many other companions of the Holy Prophet (PBUH) had also engaged
themselves in maritime and land trade throughout the whole world. The Prophets’
companions earned their living through different legitimate means. Leading compan-
ions of the Prophet (PBUH), such as Hazrat Abu Bakr, Hazrat Uthman ibn’ Affan
and Hazrat Abdul Rehman ibn ‘Awf engaged in lawful business and trade. Lawful
business and trade was the most common form of work and was considered to be
the best mode of earning during the era and was carried out in accordance with laid-
down principles governing the contract concluded by the parties then involved. Some
migrants and residents in Madinah were also engaged in agriculture, and some were
Contracts and codification 17
also reported to have owned farmland while others were involved in skilled crafts such
as smithery and carpentry. There were also professional jobs connected to the state,
such as teaching, the giving of compulsory alms (zakat), and adjudication of disputes.
Montgomery Watt wrote: “Macca, Mohammad’s home for half a century, was
entirely a commercial city, set amidst barren rocks. Geographical conditions were
also in its favour; it stood at the crossroads of routes from Yemen to Syria and
from Abyssinia to Iraq.”29
Hence, the Islamic law of contract, which forms the core of all trade and busi-
ness transactions, had gone through rapid development. This encouraging devel-
opment owes its existence not only to the Holy Qur’ān and Ahadith of the Holy
Prophet (PBUH), but also to the jurists through the other important sources of
Islamic law such as Ijma’, Qiyas, ‘Urf and Masalih al-Mursalah. It is also impor-
tant to note that the rapid development of the Islamic law of contract takes place
in two ways: Principally and practically.
Truly speaking the history of English law got its identity only after the
Norman Conquest. From the eleventh century onwards the common law
started taking its shape. We can say that common law began in this cen-
tury. Until the sixteenth century, common law played a very vital role in the
development of English law. For almost five centuries common law was at
its zenith. Then from the sixteenth century onwards, statutory law took the
upper hand on common law.30
The same is the case with English contract law. The history of English contract
law commences with the reign of Henry II.
It is pertinent to mention here that the “Western law of contract developed during
the 18th and 19th centuries and grew of the economic and legal theories.”32
It is interesting to note that in the above references that “Babylonian law of
contracts” is used rather than “Babylonian law of contract” (without “s”). It is
18 Contracts and codification
objected to and criticised in the case of the Islamic law that “Islamic law is the law
of contracts and not contract.”
Again, another quote is about the contracts which existed in the Roman Empire.
W.H. Buckler states in his book that the following are the list of contracts that
were prevalent in the regal period of the Roman Empire.33
·· Ivsivrandum.
·· Sponsio.
·· Nexum.
·· Dotis dictio.
W.H. Buckler further explained about these contracts: “insivrandum is the con-
tract in which, promisor swore and had to call upon the gods and declare verbally
that he will behold his good faith, in case if he breaches the promise, he shall be
punished.” Sponso is the form of contract which deals with a sacrifice of wine in
three different stages.34
The nexum form of contract concerned sales and loans.
·· Lex Mancipi: This contract was like a covenant for the transfer of property.
·· Fiducia: This form was ancillary to Lex mancipi.
·· Uadimonium: This form was similar to the present-day law of guarantee.
Hence it is clear from above that in the ancient period the English law of the
contract was based on Roman law. The two renowned authorities on English law,
namely Ranulf de Glanvill, Chief Justiciar of England during the reign of King
Henry II, and Henry de Bracton, the famous author of books on English law, did
not deal with contract as a separate stream of law. Both of them in their works
gave little place to the law of contract. This seems to be the same story as that
explained previously in nominates contracts of Islamic law. However, it is evident
that Islamic law and Islamic law of contracts have their origin 1,400 years ago.
When orientalists discussed the same issue regarding Islamic law of contract,
they said that Islamic law is not the law of contract, but the law of contracts (nom-
inate contracts) and Islamic law has no general theory of contract law, etc. They
Contracts and codification 19
alleged it to be a “drawback” and a defect in the Islamic law of contract. However,
in the case of the English law of contract, they do not treat it in the same way as
in the case of Islamic law of contract.
It is pertinent to mention here that the Islamic contract law existed and started
taking its shape in the 7th century i.e. about ten centuries before its counterpart
(English law of contract).
In contrast to Islamic law, the Western common law of contract, which devel-
oped during the 18th and 19th centuries, grew out of the economic and legal
theories of the period in which it was formulated. In its nascency, it was
formulated by natural law theories and later by laissez-faire economic theory
both these theories have undergone considerable revision over time.37
Islamic contract law, by contrast, started taking shape in the 7th century. It is fair
to assume that at this time in human history, commerce was limited to market
overt (an open public market) and that goods consisted of surplus farm products or
handicrafts. The Islamic law of contracts reflects and addresses the transactional
reality of this period. The Anglo-Saxon common law of contracts was reshaped
in the wake of the industrial revolution of the 18th century. The Muslim world, in
general, did not experience the challenges of the industrial revolution. However,
in recent years the sudden oil-based prosperity of some Islamic lands has put the
Islamic law of contract into full gear. We find that through its history its responses
are reminiscent of the common law tradition. Hence its growth should also be
responsive to changing needs and times, as has been the case with common law.38
The detailed study or discussion of this topic is beyond the scope of this book.
2.9 Origin is different
One theological reason would be to emphasise its origin as a God-given law, i.e.
the origin of Islamic law is different from the origins of other laws of the world.
The Shariah explains how God wants a man to regulate his life, and this has been
expressed in the revelation of the fixed texts of the Qur’ān and Sunnah. When man
formulates systematic legal precepts out of this revelation, he necessarily uses his
intellect in this process, an intellect that is prone to error. Therefore, what man
decides may be right, or it may be wrong.45 Keeping this view in mind, the early
jurists never tried to codify Shariah laws in law code form.
Contracts and codification 21
2.10 Nature is different
Another historical reason for the lack of codification until now may regard the
nature of the authority of the lawgiver. In most countries in the world, the field of
law is tightly integrated with political rule. The governments or rulers make the
laws through a system of lawmaking. The legal system is an executive branch
of the state. Similarly, judges in the courts also form laws in the form of court
precedents. Contrary to this, Islamic laws were never made by a Muslim ruler or
government nor are the laws made by judges. Islamic laws and their legal system
are developed independently from any government but often against the will of
the ruler.
In the early Islamic period, the legal scholars (fuqaha’), in theory and in prac-
tice, were recruited, educated and functioned entirely autonomously from the
ruler. To develop the Islamic laws, the first step had to be taken by the jurists to
make a list of Qur’ānic laws and prepare an inventory of laws in Sunnah. The next
step was the discovery of the juristic principles of Ijma and Qiyas. Then hypo-
thetical problems, as well as problems of the day, were noted by them and, by use
of analogical reasoning, answers or solutions were found differently by various
jurists.46 These legal scholars (fuqaha’) and jurists of different localities devel-
oped the legal literature in different forms which eventually emerged in different
“schools of laws” which are practised now in different Islamic countries. The
fuqaha’ and jurists, again, never tried to codify the Islamic laws in law code form.
i. The fear of distorting the legal rules by the rulers by applying the codes as a
device to realise their interests.
ii. The Islamic legal rules have been implemented for more than 14 centuries
without official codes.
iii. The universal law system of several developed Western countries, e.g.
English Common Law, approves the fact that it is still acceptable to apply
laws without them being drafted in systematic codes.
iv. The opposition to the right of free Ijtihad granted to qualified scholars.49
Contracts and codification 23
The argument advanced in point number (ii) above is further elaborated by Dr.
Tanzil-ur-Rehman by saying that
For 1300 years at least more than half of the civilised world was being gov-
erned by the Islamic law. If you read the first few lines, of the introduction to
Anderson’s book on Islamic law in the modern world, you will find that for
1300 years Muslim law was governing the lives of millions of people without
any codified law. So the Shariah as a whole was being made applicable. The
qazis were enforcing the law as laid down in the Qur’ān, Sunnah and the
books of Fiqh. There was no state codification.50
2.14 Efforts of codifications
The first thing that must be kept in mind is that in the period of the Prophet
Muhammad a and during the republican era of the Khulafa-i-Rashidin (632–661
AD) the need for articulating of Ahkam (laws) and the question of codification
did not arise. With the passage of time, when a growing number of juristic schools
appeared, and the job of the courts was not as simple as before, it was difficult
to accept the harmony in scholars’ opinions and judges’ verdicts, as much as the
ruler themselves, began to feel the necessity of a codified law.51
The historians refer the very beginnings of codification in the Muslim world
to the well-documented event of Ibn al-Muqaffa’s dialogue (d.144AH/726CE),
with the Caliph Abu Ja‘far al-Mansur (95-158AH/713-775CE). Ibn al-Muqaffa, a
famous writer in Arabic literature, was the first to see the necessity of codification.
He put a proposal before Abu Ja‘far al-Mansur in a formal letter named “Risalat
al-Sahabah fi Ta‘at al-Sultan” (Message of Companions in the Obedience of the
Sultan) and because it was fruitless it was then called “al-Risalah al-Yatimah”
(The Orphan Message), stating:52
Codification of Islamic law is the process by which the various legal rul-
ings of the sharah (al-ahkam al-Sharah) of a specific subject matter (such as
property, torts, family law, etc.) that are collected and restated in a clear and
concise manner. It is to form a legal code that has a full effect within the range
of political jurisdictions.53
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