Three Chapter 3: Transactions

Lesson 32: The Types of Transactions

A- The Types of Transactions

In Islamic jurisprudence, the laws of buying and selling and business are divided into five categories: obligatory, unlawful, disapproved, recommended, and permissible.

One: Obligatory Transactions

If a person has no wealth but must pay certain expenses, such as family expenses, he must do some business (Issue 2178).

Two: Recommended Transactions

Business is recommended for acts such as providing a better living for families and helping the poor (Fuqarāʾ) (Issue 2178).

Tree: Disapproved Transactions

The following types of business are disapproved or disliked (Makrūh) in Islam:

1. Selling real estate;
2. To be a butcher;
3. Selling shrouds (Kafans);
4. Transactions with unknown individuals whose properties are uncertain;
5. The transactions between Adhān of the morning prayer (Ṣubḥ) and sunrise;
6. Establishing a business for buying and selling wheat and barley;
7. Interfering with another person’s transactions (Issue 2179).

Four: Unlawful and Void Transactions

In the following cases, transactions are unlawful and void:

1. The sale and purchase of impure things (original najasat) such as intoxicating drinks, urine, feces, carrion, and pork.
2. Sale and purchase of usurped (Ghaṣbī) property without the owner’s consent.
3. The sale and purchase of things that people do not own, such as insects;
4. The sale and purchase of things that are usually used for unlawful purposes, such as gambling tools;
5. A transaction that involves usury;
6. The sale of something mixed with something unknown (Issue 2180).

B- Conditions of Seller and Buyer

The following six conditions must be met by both the sellers and the buyers for the transaction to be valid:

1. They must be adults (Bāligh);
2. They must be sane (ʿĀqil);
3. They must not be foolish (Safīh)[1];
4. They must have the intention to buy and sell a commodity;
5. They must have free will (must not be compelled by anyone);
6. They must be the owner of the commodity or with the owner’s permission.

C- Conditions of Commodity and Its Substitute

The commodity which is sold and the thing which is gained as payment in exchange must fulfill the following conditions:

1. Its quantity must be known in terms of weight, volume, measure, number, or other similar method;
2. The person must be able to deliver it;
3. The particulars of the commodity and the payment in exchange must be known;
4. A commodity or item gained in exchange must be the owner’s pure property; another person must not have any rights to it.
5. The commodity must be sold, not its usufruct (Issue 2215).

D. Types of Transactions by the Time of Delivery Commodity and Its Substitute

The Types of Transactions based on the time of delivery commodity and its substitute are as follows:

1. Cash (Naqd) Transaction: It is a transaction where commodity and price are exchanged at the time of contract. Buyer and seller can demand the item or money from each other.
2. Credit (Nasīʾah) Transaction: The commodity is transferred at the time of the contract, but the price is paid later. The period must be specified.
3. Forward (Salaf) transaction: A buyer pays the price of a commodity and receives it later.
4. Debt: Both the commodity and its price are paid after the contract

Exercises:

1. What are three unlawful transactions?
2. What are the conditions of the buyer and the seller?
3. What are the two conditions of commodity and exchange?
4. What is the difference between prepayment transactions (Salaf) and credit (Nasīʾah)?

Lesson 33: The Right of Rescission (Khīyār) and Usury Transactions

In Islamic jurisprudence, the right to cancel a transaction is known as Khīyār (option) or the right of rescission. The buyer and the seller have the right to cancel in some circumstances.

A- Types of Khīyār in Transactions

A buyer or a seller can cancel a transaction in one of the following eleven cases:

1. The right of rescission in the seating of the transaction (Khīyār al-Majlis): Each buyer or seller who has not left the contract meeting can cancel it;
2. The right of rescission due to cheating (Khīyār al-ghabn): If either the seller or the buyer is cheated in the case of a sal.
3. Stipulation of the right of rescission (Khīyār al-Sharṭ): The contract stipulates that either party or both parties can cancel the transaction.
4. The right of rescission due to deceit (Khīyār al-tadlīs): When one of the parties in the transaction displays his property in a way that appears better than it actually is.
5. The right of rescission due to the breach of condition (Khīyār takhalluf al-Sharṭ): If the other party of the transaction breaches a condition of the contract, another may be able to cancel the contract.
6. The right of rescission due to a defect (Khīyār al-ʿayb): If one of the two commodities is defective, it was not known before.
7. The right of rescission due to a partnership (Khīyār al-shirkah): If it becomes known that a portion of the sold commodity belongs to a third person, in this case, if the owner of that portion is not willing to sell it, the buyer can cancel the transaction.
8. The right of rescission due to seeing the commodity (Khīyār al-Ruʾyah): When a seller describes the item’s details to another party and then discovers that the thing lacks those qualities, the buyer can cancel the transaction.
9. The right of rescission due to delay (Khīyār al-Taʾkhīr): If the buyer does not pay the price of the commodity in the specified time and the seller has not delivered the item, the seller can cancel the transaction.
10. The right of rescission in the animal transaction (Khīyār al-ḥayawān): When an animal is being sold, the buyer may terminate the transaction within three days.
11. The right of rescission due to an inability to hand over (Khīyār Taʿadhdhur al-Taslīm): If the seller is unable to deliver the commodity, the buyer can cancel the transaction (Issue 2249).

B- Important Cases of the Rescission Right

One: Stipulation of the Right of Rescission

For example, the seller of a house worth 100,000 sells it to the buyer for 50,000, and they agree that if the seller returns the money on time, the transaction will be canceled. However, the transaction is valid if the buyer and seller intend to buy and sell (Issue 2251).

Tow: The Right of Rescission Due to a Defect

The affected person has the right of rescission if the commodity has a defect he is unaware of it (Issue 2249).

Three: Conditions for the Right of Rescission Due to a Defect

A buyer cannot annul the transaction or take a price difference due to a defect in the property in the following four cases:

1. At the time of the transaction, he was aware of the defect in the commodity;
2. If the person is satisfied with the property’s defect;
3. During the transaction, the seller states that he will sell the property with any defects.
4. In the transaction, the buyer says: If the property has a defect, I will not return it or take the price difference (Issue 2259).

C- Usury (Riba) Transactions

Transactions and buying and selling that are usury are unlawful and invalid and considered a major sin.

One: Kinds of Usury (Riba)

There are two types of usury:

1. Usury in loan: It will be explained in the next lesson;
2. Transaction usury occurs during the buying and selling process, such as selling a quantity of a commodity based on its weight or volume at a higher rate than the same type of commodity, like selling one kg of wheat for one and a half kg (Issue 2204).

Two: Conditions for Realizing Usury

1. Traded commodities must be of the same type.
2. The traded commodity must be bought and sold by weighing or measuring.

Three: Cases of Permissible Usury (Riba)

Some cases of usury are not unlawful:

1. Usury between father and child;
2. Usury between husband and wife;
3. Usury between a Muslim and an unbeliever if the recipient becomes a Muslim (Issue 2205).

Question:

As transactions are mostly done by phone and other modern communication means, how long does the right of rescission in the seating of the transaction (Khīyār al-majlis) last, and when does it end?

Answer:

After the transaction was finalized, communication between the parties was terminated by phone and other means.

Exercises:

1. What are the types of the right of rescission?
2. What is this right of rescission based on deceit (Khīyār al-Tadlīs)?
3. What is a condition sale?
4. What are the cases in which usury is not forbidden?

 Lesson 34: Banking Transactions, Rent, and…

A- Banking Transactions

People put money in banks for short-term and long-term deposits; if they stipulate a profit, it is a usury (riba) transaction. It is possible, however, for the owner of the money or the bank to benefit from the funds in various legitimate ways.

One: Lawful Ways for Owners of the Money

1. Agreement for power of attorney (Wakālat contract): When the owner of the money gives the bank a power of attorney to make him a partner in this money’s transactions, then the bank gives an amount of money as a compromise to the owner. This benefit is Lawful.
2. Free possession: the owner puts the money in the bank freely, but the bank gives the owner a portion of the profits it has earned. That amount is Ḥalāl.
3. A new transaction as a loan: The owner puts money in the bank as a loan and sells his property to the bank, whose price is, for example, ten thousand for twenty thousand; the bank gives 10,000 interest to the owner of the money. There is no problem with this transaction.
4. A new transaction as a loan: The bank sells a property to the lender, for example, twenty thousand for ten thousand; in this case, the lender earns 10,000 Ḥalāl profit (Issue 3065).

Two: Lawful Ways for the Bank

1. Making the bank a partner in buying a house: The borrower takes 100 thousand from the bank to buy a home and then transfers half of the house to the bank account. The house is shared between the owner and the bank, and then the owner pays the bank rent for half of the house monthly or annually to buy the whole house.
2. A new transaction as a loan: The borrower sells the property to the bank for less than its value and stipulates that the bank will lend him one hundred thousand for one year. The bank has obtained a lawful benefit without usury.
3. A new transaction as a loan: A borrower buys a property from the bank for a double price and stipulates that the bank will lend him one hundred thousand as a loan. It is a lawful benefit.
4. Banks sell one hundred thousand Afghanis for one thousand dollars to owners of money for one year; its interest is not usury (Issue 3066).

B- The Laws of Lotteries

Tickets are sold for a certain amount and given a certain amount to the winner by lottery. They are not allowed and are invalid (Issue 2369).

C- Selling Gold and Silver to Gold and Silver

Buying and selling gold for gold and silver for silver is permitted under the following conditions:

1. Equality in weight;
2. 2. It must take delivery and hand over (Issue 2245).

D- Key Money Transactions

The key money (Goodwill) is the right of priority that a tenant gets on a property against the money he pays the landlord.

1. If the lessee rents a place for a period of time and makes a condition on the lessor that he must pay key money when he vacates the place, and the lessor accepts it, there is no problem (Issue 2360).
2. When a lessee takes key money from the owner or another lessee to vacate, it is unlawful.
3. After the lease period, the lessee can’t stay there without the owner’s permission, and his prayer there is invalid (Issue 2353).

E. Laws of Loan (Dain)

Giving a loan is a recommended act, which is emphasized dramatically in the Holy Qurān and the hadiths of the Infallibles (AS) as a good tradition.

One: Usurious Loan

1. When a lender stipulates that he will receive more than what he gave, for example, if he lends one kilogram of wheat and stipulates that he will receive two kilograms, this is usury (riba) and unlawful, even if the debtor will do something for him.
2. Whether the debtor returns more than what he borrowed without making a condition is not a problem but is recommended (Issue 2430).

Tow: Items That Are Exempted from Paying the Debt

If the debtor has nothing but the house he is sitting in, the furniture, and other things he needs, the creditor cannot demand payment immediately (Issue 2424).

H- The Laws of Lease (Ijārah) Contract

There are two types of hiring: hiring things (lease) and hiring people.

One: The Meaning of Hiring/ Renting

The lease contract is an agreement under which someone rents himself or his property to someone else. The lessee becomes the owner of the profits, and the lessor becomes the rent owner.

Two: The Elements of the Lease Contract

1. Lessor/landlord (muʾjir);
2. Tenant/ lessee (mustaʾjir);
3. The leased thing;
4. Rental/rent/wages.

Three: Conditions of Lessor and Lessee

A person who gives something (muʾjir) and a person who takes something (mustaʾjir) must meet the following conditions:

1. They must be adults (Bāligh);
2. They must be sane (ʿĀqil);
3. They must not be foolish (Safīh);
4. They must have the intention to rent;
5. They must have free will (Ikhtiyār); therefore, they must not be compelled by anyone;
6. They must be owners or with his permission.

Four: Conditions of the Leased Property

The property, which is rented, must meet the following conditions:

1. The property must be specific and known.
2. Lessees must see it, or owners must describe its features in detail.
3. That property must be deliverable.
4. It must remain after it has been used.
5. It must be able to be used for the purpose for which it has been leased;
6. The lessor must own or permit renting the property (Issue 2309).

Five: The Laws of Lease Contract

1. When the lessee rents a home, shop, or room, and the

owner stipulates he will only let the lessee use it; he cannot transfer that property to anyone else (Issue 2305).

2. The lessee must pay the rental, even if he does not take delivery or takes delivery but does not use the property until the end of the lease term (Issue 2321)
3. The lease contract is not void if the lessee or the lessor dies (Issue 2340).

Six: Paying The Hirer’s Wages

If someone is hired to perform a task on a specific day and shows up to perform that task, even if the lessor does not refer the work to him, he shall pay his wages on that day (Issue 2322).

G- Reward (Juʿālah)

One: The Meaning of Juʿālah

1. Juʿālah is a contract wherein a person offers to give a specific amount in return for a task performed for him.
2. Those who offer a reward are called the rewarder /offeror (Jāʿil), whereas those who perform the task are called the workers/executors (Àmil).

Two: The Conditions of Offeror and Worker

The offeror (Jāʿil) and worker (ʿĀmil) must have the following conditions:

1. They must be adults (Bāligh);
2. They must be sane (ʿĀqil);
3. They must have the intention (Qaṣd) to make the Juʿālah;
4. They must have free will (Ikhtiyār);
5. The action of the worker (ʿĀmil) must not be unlawful, pointless, or an obligatory task;
6. The wage of the worker must be specified;
7. They must not be foolish (Safīh) (Issues 2344 & 2345).

Note: When the worker (ʿĀmil) has begun performing the task, the offeror (Jāʿil) may not cancel the Juʿālah unless the worker is satisfied (Issue 2350).

Exercises:

1. When does a bank deposit is usury?
2. In what cases is a key money permissible?
3. What is the usurious loan?
4. What are the conditions of the lessor and lessee?

Lesson 35: The Laws of Mortgage, Intercession, and…

A – Mortgage (Rahn) Contract

One: The Meaning of Mortgage (Rahn)

A mortgage is a contract in which a debtor deposits some property with a creditor as collateral so that, if the debtor cannot repay the debt, the creditor can recover the debt from the property.

Two: Conditions of the Mortgagor and Mortgagee

The mortgagor and the mortgagee must have the following conditions:

1. They must be adults (Bāligh);
2. They must be sane (ʿĀqil);
3. The mortgagor must be the owner of the property or with his permission;
4. The mortgagor must not be foolish (Safīh) and also have the right of disposal over their property legally (non-Mufallas);
5. They must have the intention (Qaṣd) in the mortgage;
6. They must have free will (Ikhtiyār) (Issues 2450).

Three: The Conditions of the Mortgaged Property

1. The mortgagor must be the legal owner of the property (Sharʿan).
2. The mortgaged property must be possible to purchase and sell.
3. Profits from the deposited item belong to the owner.

Note: if a mortgagor fails to pay his debt, the creditor has the right to sell the mortgaged property, such as a house, furniture, or household, and collect the debt.

B- Transference of Debt (Ḥawālah)

A transfer of debt is a contract in which a debtor refers his creditor to another, and the creditor accepts it, the third person becomes the debtor, and the first debtor is released from the debt (Issue 2437).

One: The Elements of Transference of Debt

1. The transferor;
2. The transferee;
3. The creditor;
4. The subject of transfer of debt.

Two: Conditions of Transference of Debt

1. The transferor must be a debtor (Issue 2440).
2. Debt type and amount must be known (Issue 2441).
3. The debt transfer contract cannot be annulled after it has been signed by the transferor and transferee

(Issue 2445).

4. The debt being transferred must be specific

(Issue 2442).

5. The creditor is not required to accept the transfer of debt (Issue 2443).

Three: Conditions of the Transferor, Transferee, and Creditor

The debtor, creditor, and the transferee must have the following conditions:

1. They must be adults (Bāligh);
2. They must be sane (ʿĀqil);
3. They must not be foolish (Safīh); also, the debtor and the creditor must not have been proclaimed bankrupt (Mufallas)[2];
4. They must have the intention (Qaṣd) to transfer;
5. They must have free will (Ikhtiyār) (Issue 2438).

C – Guarantee (Ḍamān)

One: The Meaning of Guarantee (Ḍamān)

In a guarantee, the guarantor (Ḍāmin) commits to pay the debtor’s debt, and the creditor accepts this commitment.

Two: The Elements of the Guarantee Contract

1. Guarantor (Ḍāmin);
2. Debtor (subjunctive);
3. Creditor;
4. Property or amount to be guaranteed (subject to)

Three: Conditions of the Guarantee

1. The debt must be specific (the person must be a debtor at that time).
2. The commodity given as a loan is to be specified;
3. The creditor and the debtor must be specified

(Issue 2462).

Four: Conditions of Guarantor and Creditor

The guarantor and the creditor must have the following conditions:

1. They must be adults (Bāligh);
2. They must be sane (ʿĀqil);
3. They must not be foolish (Safīh) and (Mufallas);
4. They must have free will (Ikhtiyār);
5. They must have the intention (Qaṣd) (Issue 2438).

Note: These conditions do not apply to a debtor.

Five: Laws of Guarantee

1. A guarantee contract is necessary; if a person acts as a guarantor, he becomes responsible for the debt and cannot revert from the role of guarantor.
2. When a guarantor guarantees the debtor’s debt with his permission, the guarantor can claim the guaranteed amount from the debtor. But he (the guarantor) cannot refer to the debtor if he guarantees to pay the debt without the debtor’s permission (Issues 2468 & 249).

D. Personal Surety (Kafālah)

One: The Meaning of Kafālah

Personal surety (kafālah) is a contract in which a person undertakes to present the debtor whenever the creditor wants him. The person who accepts such a responsibility is called a surety/guarantor (kafīl) (Issue 2470).

Two: The Elements of Kafālah

1. The surety/guarantor
2. The creditor;
3. The debtor.

Three: Conditions of the Surety (Kafīl)

1. The surety must be adult (Bāligh);
2. He must be sane (ʿĀqil);
3. The debtor accepts the guarantor’s guarantee;
4. He must be able to present the debtor for whom;
5. He must have free will (Ikhtiyār);
6. He must have the intention (Qaṣd) (Issue 2472).

Four: Liquidation of Surety (Kafālah)

The following cases will terminate the Kafālah contract:

1. The guarantor presents the debtor to the creditor;
2. The debt of the creditor is paid off;
3. The creditor himself forgives the debt;
4. The debtor dies.
5. The creditor releases the surety from the kafālah.
6. The surety dies.
7. The creditor transferred his right to another person (Issue 2473).

E- Agency (Wikālah)

One: The Meaning of Agency (Wikālah)

Agency means that a person who is religiously allowed to get involved in a specific act delegates it to someone else to do it on his behalf. The client is called (muwakkil), and the performer is called the agent (wakīl)

Two: Conditions of the Agent and Client

The client (muwakkil) and the agent (wakīl) must have the following conditions:

1. They must be adults (Bāligh);
2. They must be sane (ʿĀqil);
3. They must not be foolish (Safīh);
4. They must have the intention (Qaṣd);
5. They must have free will (Ikhtiyār) (Issue 2406).

Three: The Conditions of the Agency

The subject of the agency must be specific and known, and if the client appoints an agent for one of his works without specifying this work, the agency will not be valid (Issue 2408).

Four: Laws of Agency

1. If a person dismisses his agent, he cannot perform the task entrusted to him after he is informed of his dismissal, but if he performs it before the news reaches him, the task is valid. (Issue 2409).
2. Agents cannot appoint another agent for a task entrusted to them, but if the principal authorizes them, it is not a problem (Issue 2411).
3. The agency becomes invalid if the agent or principal dies or becomes insane or if the object of the agency disappears (Issue 2415).
4. If a property under the agency is lost, and the agent is not negligent in safeguarding it, he is not a guarantor. However, he is a guarantor if he fails to maintain or overdoes it (Issues 2418 & 2417).

F- Preemption (Shafea)

One: The Meaning of Preemption (Shafea)

When two people are partners in something immovable, and one sells his part to a third party, the other partner has the right to take it and pay what the third party determines. This right is known as the right of preemption (Shafea).

Two: Conditions of the Right of Preemption (Shafea)

1. A partner sells his share to a third person.
2. The right of Preemption applies when two people are partners, not more.
3. The right of preemption applies only to joint and common property.
4. A partner has the right of preemption only when he can pay the price of the sold commodity.
5. The person who wants to use the right of preemption against the buyer must also be a Muslim.
6. One who has the right of preemption must either accept or reject it all

(Majmaal-Al-Ahkam, issue 572-568).

Exercises:

1. What are the conditions of the mortgagor and mortgagee?
2. What are three cases of liquidation of Kafālah?
3. What are the three conditions for transferring a debt?

4. Is the agent a guarantor if the property is lost

[1]. The foolish man who cannot identify his benefit and loss in the financial affairs and spends his wealth in futile ways; therefore, he is prohibited from possessing financial resources.

[2]. Debtor who have been declared bankrupt (mufallas) by the Islamic ruler and is unable to legally dispose of their property;