Islamic Commercial Law
Wiley Finance Series

Filling a gap in the current literature, Islamic Commercial Law is the only book available that combines the theory and practice of Islamic commercial law in an English-language text. From the experts at the International Islamic University Malaysia, the book examines the source materials in the Qur'an and Hadith, and highlights the views and positions of leading schools of Islamic law, without burying the reader in juristic minutia. It combines theory with practice to address the needs of students while providing a pragmatic treatment of Islamic contracts. It provides diagrams for individual contracts to reveal the type and nature of the contractual relationships between parties and discusses all types of fundamental transactions, including sales, loans, debt transfers, partnerships, and more.

• Written by experts from the International Islamic University Malaysia, the leading organisation in research in Islamic finance
• Closes a vital gap in the English-language literature on Islamic commercial law
• Features end-of-chapter questions to enable self-testing and provoke critical thinking

An ideal guide for current students, researchers, and practitioners, Islamic Commercial Law offers a concise yet comprehensive coverage of the subject.

Preface xi

List of Abbreviations xiii

Acknowledgments xv

Introduction: An Overview of Prohibited Elements 1

Usury (Riba) 2

Ambiguities in a Contract (Gharar) 3

Gambling (Maysir) 4

Prohibited (Haram) Properties 5

1 The Contract of Sale (Bay’) 7

Introduction 8

The Pillars of a Sale Contract 9

Prohibited Sales and Practices 14

Contentious Sales 19

Chapter Questions 29

Notes 30

2 Types and Classifications of Sales 33

Introduction 34

Trust Sales (Buyu’ al-amanah) 35

Deferred Payment Sale (Bay’ Bi-thaman Aajil) 36

Islamic Banks and a Sale Contract 37

Future Commodity Sale (Bay’ al-Salam) 39

Manufacturing Sale (Bay’al-Istisna’) 43

Currency Exchange (Bay’ al-Sarf) 47

Chapter Questions 49

Notes 50

3 The Contracts of Employment and Lease (Ijarah),

Borrowing (I’arah), and Reward (Ja’alah) 51

Introduction 52

The Pillars of the Ijarah Contract 53

The Contract of Borrowing Things (al-I’arah) 60

The Contract of Reward for Service (al-Ja’alah) 61

Chapter Questions 64

Notes 65

4 The Contract of Agency (Wakalah) 67

Introduction 68

The Pillars of an Agency (Wakalah) Contract 69

The Types of Agency 70

Agency in Sale 71

Agency in Purchase 73

The Effects and the Rights and Liabilities of the Contracting Parties 74

An Agent Appointing Another Agent 75

Unauthorised Agency (al-Fadhalah) 76

Termination of an Agency 76

Chapter Questions 77

Notes 78

5 The Contract of Loan (al-Qard) 79

Introduction 80

Loan (Qard), Debt (Dayn), and Borrowing Things (I’arah) 81

A Loan That Provides Conditional Benefi t to the Lender 82

Waiting or Giving Time to a Borrower Is a Commendable Act 84

Chapter Questions 84

Notes 86

6 The Contract of Safekeeping (al-Wadi’ah) 87

Introduction 88

The Pillars of Wadi’ah Contracts 89

Relationship Between the Parties 89

When Is the Depository Held Liable? 90

Using Deposited Money for Investment 91

Wadi’ah and Islamic Banks 92

Termination of Wadi’ah 92

The Differences Between the Contracts of Wadi’ah and Qard 93

Chapter Questions 93

Notes 94

7 Partnership (al-Sharikat) 95

Introduction 96

Division of al-Sharikat 96

Capital Partnerships (Sharikat al-Amwal) 98

Management of Partnership (Sharikat al-’Inan) 101

Partnership of Services (Sharikat al-a’mal) 101

Partnership of Reputation or Creditworthiness (Sharikat al-Wujuh) 102

Partnership (Sharikat al-’Inan/Musharakah) and Islamic Banks 104

Dissolution of Partnership 106

Chapter Questions 107

Notes 109

8 Silent Partnership (Mudarabah/Qirad) 111

Introduction 112

Pillars of Mudarabah Contract 113

The Status of Sahib al-mal and Mudarib 114

Distribution of Profit and Treatment of Losses 114

Types of Mudarabah 115

Personal Expenses of the Mudarib 116

What the Mudarib Cannot Do 117

Void Mudarabah 117

Termination of Mudarabah 118

The Differences Between Musharakah and Mudarabah 119

Chapter Questions 119

Notes 121

9 Pledge, Mortgage, or Pawn (al-Rahn) 123

Introduction 124

The Pillars of Pledge (Rahn) 125

The Use of the Pledge by the Pledgee 126

Forfeiture of the Pledged Property 127

Chapter Questions 128

Notes 128

10 Guarantee (al-Kafalah) 129

Introduction 130

Pillars of Kafalah 131

The Effects of Kafalah 132

Immediate, Conditional, and Suspended Kafalah 132

Types of Kafalah 132

Charging a Fee for the Service of Guarantee 133

Letter of Guarantee 134

Termination of Kafalah 134

Chapter Questions 135

Notes 136

11 Transfer of Debt (al-Hawalah) 137

Introduction 138

Pillars of Hawalah 140

Types of Hawalah 140

Transfer of Right (Hawalat al-Haqq) 141

Bill of Exchange (Suftaja) 141

Termination of Hawalah 142

The Differences Between Hawalah and Kafalah 142

The Difference Between Hawalah and the Sale of Debt (Bay’ al-Dayn) 143

Chapter Questions 143

Notes 144

12 The Contracts of Absolution (al-Ibra) and Set-Off (al-Muqassah) 145

Introduction 146

The Subject-Matter of Ibra 146

The Pillars of Ibra 147

Types of Ibra 149

The Effect of an Ibra 149

The Differences Between Absolution (Ibra) and Gift (Hibah) 150

The Contract of Set-Off (al-Muqassah) 150

Classification of Muqassah 150

Chapter Questions 152

Notes 153

Answers to True/False Questions 155

Bibliography 161

About the Author 165

Index 167