5) Discuss Shariah requirements in Islamic business transaction.Themeaning of Islamic business transaction is “an expression of the matchingbetween a positive proposal made by one of the contractors and the acceptanceof the other contractor in a way which has an impact on the subject of thecontract”. Shariah business law in Islamic term of legal is known as fiqhmuammalat. It creates an essential branch of law dealing with issue ofcontract.
By this law, a contract can be valid, void, or avoidable. For a validcontract in Shariah law, certain conditions are required. A valid contract has severalrequirements which are offeror and offeree (contracting parties), offer andacceptance (ijab and qabul), the subject matter and the consideration. Offerorand offeree (contracting parties) is the first requirement for making a validcontact in Shariah law. The contracting parties are who practice the sighah ofijab and qabul. In order to make a valid contract, they must be legallycompetent.
The competence to transact in Islamic law is dignified hugely by twofactors, namely prudence and puberty. These are revealed in surah al-Nisa’verse 6 “Observe the orphans through testing their abilities until theyreach the age of marriage; then if you find them capable of sound judgment,hand over to them their property”. Possessing capacity is the main part of eachcontracting parties. It has been noted with capacity (ahliyyah) according toShariah. Ahliyyah or legal capacity has been stated by Muslim jurists as the”eligibility of a person to establish right for and obligation upon himself”.This can be broken down into two categories which are Ahliyyat al-wujub that isthe eligibility of a person to have rights for and upon him and second categoryis Ahliyyat al-ada’ which is the eligibility of a person to execute ordischarge his right and duties in a manner stated by the law. There are two factorsthat may hinder one’s legal capacity.
It can be categorized into twocategories, namely involuntary impediments and voluntary impediments. Involuntaryimpediments or known as Awaridh Samawiyyah is the factors beyond one’s control.The factors may exist without the affected person’s choice. For example,unsound mind, imbecility (‘atah), coma, sleeping, death illness. Due to thelack of legal capacity makes these people cannot enter to a valid contract.Second category is voluntary impediments or also known as Awaridh Muktasabah whichfactors within one’s control.
They exist caused by that person’s own act andchoice. For example, drunkenness, insolvency. Since these are people’s owndesire, their ‘aqd is valid although it may be suspended in certain situations.
Thesecond Shariah’s requirement to enter valid contract is offer (‘ijab) andacceptance (qabul). Offer is made with specific action that requires willingnessor consent of the maker. It is supposedly from the word first expressed by oneof the contracting parties.
Offer may be expressed verbally or in writing.According to Shariah law, qabul (acceptance) is used to signify a statement representingagreement to the ‘ijab (offer). Muslim Jurist classified into two different methodologiesin understanding of qabul. The majority point of view of qabul is by the buyerregardless as to whether this comes first or later.
However, the Hanafi schoolholds a more flexible method when qabul is stated as the word expressed later conformingto the terms, which it may be expressed by either the seller or the buyer. Thisis likely same to the common law. Offer and acceptance also may be determinedby ways of modern communication channels such as the telephone, telex, fax,e-mail and letter.Thethird requirement for making an enforceable Islamic contract is subject matter(mahal al-‘aqd).
Definition of Mahal al-‘aqd is mal (property or wealth).Muslim jurists indicated four conditions for the subject matter which are itmust be in existence at the time of the contract made, it can be delivered, itcan be ascertained, it must be suitable for transactions according to Islamiccommercial law. Mal is indicated as something which can be guaranteed for useat the time of need. The term mal here is generally translated as property. Theproperty is valid only to objects which have a traceable existence which meansthings sold is fixed and individually traceable as designated at the sale. Forexample, the sale of the animal fetus yet to be born while it is still inmother’s womb is invalid if the mother is not included in a part of sale.However, there is an exception to bay al-salam (sale by advance payment for thefuture delivery), bay al-istisna (contract of manufacture), ijarah (contract ofhire), and musaqat (contract of irrigation) based on necessity and customs.
Thesecond condition is where the subject matter can be delivered. Shariah requiresit must be able to be delivered to other contracting party. If not, an ‘aqd isinvalid. On top of that, the delivery must be possible without any damagecaused to the subject matter, otherwise the contract may be voidable.
If thecontracting party can consider with damage, then the contract is valid. Forexample, to sell a bird on sky, fish in the sea is void. Third condition is thesubject matter must ascertainable and known to other contracting party. Enoughinformation about the subject matter is necessary to any future problems fromoccurring. In a situation where the subject matter is of different kinds orarticles, necessary to determine one by one but if it is of similar articles,then enough to have knowledge about one of the articles. Fourth condition isthe subject matter must be legal and has commercial value, if not an ‘aqd isinvalid. For example, the sale of the wine, blood, pork is void.
The sale ofitems that can be owned without purchase such as fish in the sea, bird in theair. Once one person owned, then it can become the subject matter for contract.Asfor price consideration, Islamic law does not limit it to a monetary price andthis means it can be in the form of another commodity. The Islamic lawprohibits uncertainty. Therefore, it requires the price to exist, can be measuredat the time of the contract and cannot be fixed at a later date with referenceto the market price, nor can it be left subject to determination by a thirdparty.