WEEK 4:

Instructor: Puan Syahidawati binti Shahwan 0193379185 syahidawati@usim.edu.my

Lecture Outlines
Sale Contract

Definition

Classification/Types

Pillars/Constituents Conditions

Effects

Options

Dissolution

DEFINITION
Literal Meaning
From an Arabic word ba a means to buy

Technical Meaning
1. Exchanging one form of money for another, in which the parties exchange their ownerships accordingly/ 2. Subject Matters of sales can be in form of: 1. Money vs money = Bay al-Sarf 2. Money vs property = Bay al-Mutlaq 3. Money/Property vs usufruct = Al-Ijarah 4. Property vs Property = Bay al-Muqayadah (Barter)

PILLARS OF CONTRACT
Pillars of Contract/Constituents of Sales Contract
Contracting Parties Subject Matter and Consideration Format

Al-Ijab

Offeror

Offeree

Al-Qabul

Al-Jumhur Al-Hanafiyyah

PILLARS OF CONTRACT (contd)

1. ISSUES RELATED TO CONTRACTING PARTIES Eligibility: Full capacity ? / Without capacity ? Deficient capacity: discerning child, foolish () Ownership: Agency Issue
ISSUES RELATED TO SUBJECT MATTER AND CONSIDERATION Legally recognized and acceptable Specified and defined in a way to prevent ambiguity Existent / Non-existent subject matter? Or deliverable? ISSUES RELATED TO FORMAT Gestures , signals? Written? Place of Contract (Majlis?)

2.

3.

CONDITIONS OF CONTRACT
(According to al-Hanafiyyah)
Conclusion

Validity

Execution

Bindingness

Null / Void

/
1. General Condition 2. Specific Condition

Invalid

Suspended

Dissoluble / Nonbinding

1. The contract 2. Contractors 3. Object of Contract 4. Place of Contract

1. Ownership of the object

1. Existence of Option (Khiyar)

CONDITIONS OF CONTRACT
(According to al-Jumhur)
Conclusion

Validity

Execution

Bindingness

Null/Void

1. 2. 3. 4.

Invalid

Suspended

Dissoluble

The contract Contractors Object of Contract Place of Contract

1. Ownership of the object

1. Availability of Option (Khiyar)

EFFECTS OF CONTRACT
Specific
The purpose of a particular contract e.g. transfer of ownership in sale, ownership of usufruct in leasing and so forth.

General
Effective rights obligations Binding rights obligations and and

DISSOLUTION OF CONTRACT
(How to dissolve a contract?)
1. 2. 3. 4. 5. 6. Having elements that could render the contract null and void. The practice of options and choices Revocation by mutual consent ( ) Expiration: The period of contract or the contract is fully executed and performed Death: Al-Ijarah (al-Hanafiyyah), Al-Rahn, Al-Kafalah, AlShirkah, Al-Wakalah, Al-Muzaracah, Al-Musaqah. The suspended ( )contract is not approved/endorsed by its owner

CLASSIFICATION OF CONTRACT
TYPES OF SALES CONTRACT FORBIDDEN SALES CONTRACT
INELIGIBILITY OF CONTRACTING PARTIES
LANGUAGE OF CONTRACT
UNILATERAL CONTRACT

VALID SALES CONTRACT

BILATERAL CONTRACT

Gift (Hadiah/Hibah

Contract of Exchange Bay al-Amanah

Contract of Partnership
Capital Partnership (alInan/al-Mufawadhah)
Credit Partnership (alWujuh) Labour Partnership (Al-A;mal/al-abdan) Silent Partnership (Mudharabah)

OBJECTS OF SALES

Off set of the debt (Ibra

DESCRIPTION, CONDITION OR LEGAL PROHIBITION

Will (Wasiyyah)

Bay al-Salam

Endowment (Waqf

Bay al-Istisna

Loan (Qard

Bay Al-Ijarah

Bay al-Sarf

Bay al-Jizaf Contract of Security

FORBIDDEN DUE TO THE INELIGIBILITY OF CONTRACTING PARTIES

(Valid - sane, legal age, own free will, not restricted to deal for himself-not indebted)

Sale of Insane Sale of non-discerning young child Sale of blind person Sale of Coerced person Sale of uncommissioned agent Sale of a person under legal supervision Sale of a person who needs to sell property due to transgression

FORBIDDEN DUE TO LANGUAGE OF CONTRACT

(Valid mutual agreement, off+acc correspond in terms of price, object, etc, single session

Physical Exchange Sales Sales by correspondence or messenger Sale of mute persons by means of an understood Sale with a party who is absent from the contract session Sales where the offer and acceptance do not correspond Non-consummated sales

signal/writing

FORBIDDEN / PROHIBITED SALES

(Some examples)

FORBIDDEN DUE TO THE OBJECTS OF SALES

(Valid properties are owned, valued, existent, known, not sharing right, not legally prohibited)

Sale of Non-Existence objects Sale of Undeliverable Goods Differed Sale of debts Excessive Gharar Sales Sale of Impure/ tainted Objects Sale of water Sale of unknown objects Sale of absent/unseen objects Sale of un-received items Sale of fruits and vegetables Down payment sales Same item resale Sale with riba elements Sale with a forbidden price Sale by a city dweller Meeting caravans outside the city Price hiking Auctions Sale during the call of Jumaat prayer Sale of grapes to wine maker Sale of mother without the child Replacing the sale of another A sale with conditions Combining a sale with one of these contracts in one agreement.

FORBIDDEN DUE TO DESCRIPTION, CONDITION OR LEGAL PROHIBITION

(Valid Satisfy all cornerstones and conditions and no additional conditions that may effect the contract)

Al-Murabahah

Bay al-Amanah
Bay al-Musawamah
Bay al-Salam

Al-Tawliyyah Al-Wadiah

VALID CONTRACT

Bay al-Istisna

Bay Al-Ijarah
Bay al-Sarf Bay al-Jizaf Bay al-Mulamasah Bay al-Munabazah INVALID CONTRACT Bay al-Hasat Bay al-Gharar

Contract of Exchange
(Some examples)

Bayatani fi Bayah Wahidah

Bay al-Inah Bay al-Dayn
CONTROVERSIAL CONTRACT

Bay al-Taqsit Bay al-Istijrar Bay al-Urbun

BAY AL-AMANAH (TRUST SALES)

Al-Murabahah
The object is sold at the price at which it was obtained plus a stated profit margin
Conditions of Murabahah Sale 1. Knowledge of the Initial Price 2.Knowledge of the Profit Margin 3.Fungible (measured) original price can be sold by the agent; Non-fungible original price only the owner can sell the object 4.Riba is not effected in relation to the original price when trading in ribawi goods. 5.The initial contract must be valid.
RM 10 RM 10+5 RM 10 RM 10-5

Al-Tawliyyah
The object is sold to the buyer for the same price at which the seller obtain it

Al-Wadiah
The object is sold to the buyer for the known discounted price at which the seller obtain it.

Al-Ishraq: At price but seller only sells part of the object

RM 10 RM 10

Manufacturer

Retailer

Customer

Manufacturer

Retailer

Customer

Some of the conditions may also applied to Al-Tawliyyah and Al-Wadiah Sales

Manufacturer

Retailer

Customer

BAY AL-SALAM (FORWARD SALES)

The sale of a deferred item in exchange for an immediate price
GOOD-FUTURE

BAY AL-ISTISNA (COMMISION TO MANUFACTURE)

A contract commissioning a worker to manufacture an item

ORDER GOOD-FUTURE RECEIPT

Retailer

RM 10,000 Customer CASH

FUTURE Customer PAYMENT Manufacturer

What are the differences between Forward Sales to Commission to Manufacture Sales?

BAY AL-IJARAH
A contract over desirable, known, permissible, and accessible usufruct, in exchange for a known compensation

BAY AL-MUSAWAMAH
A normal type of sale in which the parties agreed upon price without disclosure of the original price of an object

OWNERSHIP OF USUFRUCT

Lessee

KNOWN COMPENSATION Lessor

RM Buyer

Seller

BAY AL-SARF
The exchange of one monetary form for another in the same or different genera; (i.e Gold for gold, silver for silver, gold for silver, silver for gold, etc according to the hadith)
CURRENCY EXCHANGE

BAY AL-JIZAF
Gross Sale or purchasing a large quantity of goods. In which the amount is unknown in detail

GROSS QUANTITY OBJECT

UNKNOWN AMOUNT

Seller

Buyer

Seller

Buyer

BAY AL-MULAMASAH
Sale by touch. A person purchased an object by touching it without opening it or seeing it or examining it. (Contains element of Gharar)

BAY AL-MUNABAZAH
Sale by object of sale-throwing at commodity of sale. (Contains element of Gharar)

Eg: One man throws the cloth he sell towards another person and the sale is confirmed, even though the person may not have touched it or seen it.
Mr. B is a buyer for the briefcase since he is the one who catches it.

Mr. A is a buyer for the book since he is the one who touches it.

Mr. C also buyer for another briefcase for catching it.

BAY AL-HASAH
The contract concluded by the buyer throwing stone or pebbles towards the merchandise, the one hit by the pebble becoming the object sold. (Contains element of Gharar)

BAY AL-GHARAR
Any sale by deceiving the opposite party. A sale incorporating risk that affects one or more parties and may result loss of the property. It is then an uncertainty on the existence of the object. In selling, gharar may appear in: 1. unknown existence sale 2. unknown measure sale 3. undeliverable sale
GHARAR FAHISH (Excessive)

All Jurist: Invalid Hanafis, Malikis and Hanbalis: Valid Shafiis Outer Shell (AnNawawi et al Invalid / AlGhazali et. al Valid)

Mr. Globe is a buyer of the cow since his pebble hits it.

DISCUSSION GHARAR YASIR (Minor)

BAYATANI FI BAYAH WAHIDAH

A contract of sale in which: a seller offers to sell for a certain price on cash but for a higher price on credit. a seller sells merchandise for a certain price on cash with the condition that the buyer will sell it back to him at a higher price on credit.

I sold you for RM 100 cash or RM 150 in deferred I accept

I have sold you my house on the condition that you sell your car to me. I accept

ISSUE: Uncertain Price

ISSUE: May exist exploitation and uncertain situation of the 2nd sale

Hanafis: Defective (suspended) unless if the confusion is resolved Shafiis + Hanbalis: Invalid the existence of gharar Malik: Valid the sale contains options for the buyer

BAY AL-DAYN (Sale of Liabilities)

Liabilities: Price, compensation, wages, indemnity, etc. Contemporary practice in IF: The sale of payable right or receivable debt either to the debtor himself, or to any third party. This type of sale is usually for immediate payment or for deferred payment.

To the liable person / debtor

Majority: Valid, considered as gift Zahiri: Invalid due to gharar

To a third party
Hanafis & Zahiri : Not concluded Shafiis: Valid selling confirmed debt at maturity Hanbali: Invalid Malikis: Valid with 8 conditions

With deferred price

(Sale of debt for debt)

Immediate monetary compensation

All jurist: Valid sale

All jurist: Prohibited and invalid sale w/h to the debtor or 3rd party

BAY AL-INAH
Same item /object sale
SAME OBJECT RESALE Mr A sells an object for deferred price to Miss C

Seller

Buyer

Bank

Customer

Mr A buyback the object for cash price from Miss C Abu Hanifah Abu Yusof
Defective If no intermediary between the buyer and seller

Valid

Discussion
Shafiis, Dawud of Az-zahiri
Malikis and Hanbalis
Valid but Makruh

Invalid

BAY AL-URBUN
Down payment Sale: Advance payment of some portions of the price of sale to the seller. Agreement: If the sale is executed, the portion applies to the actual price, if the sale is not executed it is considered as a gift from the buyer.

Hanafis

Defective

Majority

Invalid & Forbidden

Discussion
Ahmad bin Hanbal
Majma Fiqh Islami

No harm in this sale

Valid and permissible since it guarantee the seller for his losses due to waiting and delays

BAY AL-TAQSIT (Installment Sales)

Selling an object for immediate delivery with a deferred price paid in installment with greater than its cash price.
Valid The contract is specified in the contract session and no ignorance in terms of object and price.

BAY AL-ISTIJRAR (Supply Sale)

A sales contract in which a person agrees to pay in lump sum in advance and receives the commodities gradually in instilment A contract whereby the supplier agrees to supply a particular product on an ongoing basis, e.g. monthly, at an agreed price and an agreed mode of payment.
Object: Gradual delivery

I sold you for RM 100 cash or RM 150 in installments I accept

Majority: The above contract is invalid Hanafis: Defective Existence of Gharar in terms of the price of the object

Seller

Buyer

Payment: Cash/Lump sum/Any mode

Wa ilalliqa Thank you for listening and attending the class. Wassalamualaikum Warahmatullah