Islamic Contract

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Any agreement between 2 or more then 2 parties more or less having the same condition as conventional contract just adding Shariah Clause makes it Islamic Contract.

An Islamic contract must have the following elements,

•      the form, i.e. offer and acceptance (Sighah);

•      the contracting parties (‘Aqidain);

•      the subject matter (Ma‘qud ‘alayh)

–     existing/existable, description, valuable, usable, capable of ownership/title,

–     capable of delivery/possession, specified and quantified and the seller must have its title and risk

Types Of Contracts

•     Uqood-e-Mu‘awadha

–     one party can get remuneration or compensation – like sale, purchase, lease

•       Uqood Ghair Mu‘awadha

–     one cannot get any return or compensation – like contracts of loan (Qard), gift (Tabarru/Hibah), guarantee (Kafalah)

1. Valid (Sahih) contracts
2.  Invalid (Batil) contracts

•     Valid when all elements of the contract offer and acceptance, the subject matter and the contracting parties are found to be in order 

Contracts in Islam

            CONDITIONAL CONTRACTS:

1.      A condition, which is not against the contract, is a valid condition.

            For example a condition of free delivery to buyer’s premises.

2.      A condition, which seems to be against the contract, but it is in the market practice, is not void, if its voidness is not proved with the clear injunctions of the Holy Quran and Sunnah.

For example a condition that the seller will provide five-year guarantee and one year free service. 

3.      A condition that is against the contract and not in market practice but is in favor of one of the contractors or subject matter, the condition is void.

For example if ‘A’ sells a car with a condition that will use it on a fixed date every month, this contract will be void he. 

4.      A condition, which is against the contract, not in the market practice and not in favor of any contractor that is not a void condition.

For example if both A and B decide to give to charity, a certain percentage of both subject matter and consideration, upon completion of sale.

            VOID CONDITIONS AND VOID CONTRACTS:

•      The contracts of compensation (Uqood Muawadha) like sale, purchase, lease agreements become void by putting void condition.

•      Non-compensatory (voluntary) agreements (Uqood Ghair Muawadha) like contract of loan (Qard-e-Hasanah), do not become void because of void condition.  The void condition, however, becomes itself ineffective.