THIS ASSIGNMENT IS A PARTIAL FULFILLMENT

FOR SH1002
CERTIFIED ISLAMIC FINANCE PROFESSIONAL (CIFP)
INCEIF
Student Name: FASHOLA OLAYINKA NURUDEEN
Student ID: 1100275
Question:
Discuss the main Shari`ah requirements in the contracting parties in order to have a valid
contract.
1.0 Introduction.
The philosophy o la! on Islam diers rom the !estern philosophy o la! quite
signiicantly. The Islamic philosophy says this !orld !as created "y only one #od $no!n as
%&llah' and all materials on earth and in the universe !ere created "y (im and (e alone
managed this creation. There !ere angels to help him "ut !ithout the help o angels (e !as
)ust as capa"le o accomplishing this monumental tas$ !ithout any pro"lem in !hatever !ay
(e !ished and planned.
&llah has created this earth and all things therein. &mong the creatures on earth* the "est
creation o &llah is the human "eing +$no!n as ashraful makhlukat in the &ra"ic terms,
!hich is mentioned in the religious "oo$ o -uslim $no!n as the %.ur'an'. The Islamic
Scholars accept this philosophical concept o creation o the human "eing !ithout a dou"t
and the Islamic philosophers +$no!n as Ulama, say that &llah has provided all the "asic
principles o la! in the perormance o a social conduct in the .ur'an !hich must "e applied
in the society to act in a civili/ed manner at all times. The legal principles !hich have not
"een provided in the .uran or hadis +the sayings and deeds o the 0rophet -uhammad,* are
let to the human "eing to interpret and act upon them accordingly "ased on the precept o a
civili/ed society. The government through the 0arliament can ma$e the necessary la!s or the
society "ut these man1made la!s !ill not "e contradictory !ith the "asic legal principles
provided in the .uran and the hadis. This is the "asic concept o the Islamic legal philosophy.
The Islamic religion emphasi/es on the importance o the la! o contract. The Islamic la! o
contract has detailed provisions to ensure via"le "usiness transactions "et!een the
companies. Islam only prohi"its earnings through usury or interest in "usiness as clearly
mentioned in the &l1.uran. &llah +#od, says in the holy .uran: Taking interest on loan is
prohibited for you but doing business is permitted for you'+The .uran* Surah +Chapter, 2*
3erse 245., This verse
o the holy .uran is e6horting the "usiness community not to lend money !ith a i6ed rate o
interest. &s a matter o act* it encourages the rich people to give interest1ree loans +qard al1
hasan, to the poor and the needy people to help them solve their daily needs or survival. 7n
the other hand* this verse encourages the rich people to also invest their money in "usiness
"ecause the proit they gain rom "usiness is halal +permitted, as "usiness creates
employment opportunity or the people as !ell as contri"utes to the #D0 gro!th o the
country. 7n the same line o reasoning* the Islamic "an$s are operating some interest1ree
inancial transactions "ased on the proit1loss sharing mechanism. The Islamic "an$ing
transactions are also conducted "y using the Islamic contract la! principles.
This !rite1up is meant to e6amine the Islamic contract !ith particular emphases on the
requirements that ma$es a contract to "e valid !ith regards to the contracting parties. The
irst section discuss "riely a"out the concept o contract in Islam* ollo!ed "y the elements
that constitute a valid contract. It !ent urther to discuss !ho the contracting parties are and
the qualities that must "e possessed "y the contracting people "eore the contract can "e
ad)udged as "een valid.
2.0 Contract in Islam.
&n %aqd in Islamic la! is deined as the 8o"ligation !hich is the result o an oer given "y
one party and the acceptance given "y the other party* in a !ay !here its legal eect is
e6pressed on the thing contracted upon9. The !ord %aqd literally means %to tie'* %to asten'*
%to lin$ together'. It is said* or e6ample 8to tie the rope9 +%aqd al1ha"l,* to "ind t!o ends o
something* and there"y orm a strong connection.
Some -uslim )urist reerred to contract in a more general term* to cover covenant dra!n "y a
man* and they called %aqd !hat is ormed under the !ill such as testamentary disposition +al1
!asiyyah,* endo!ment +!aqa, and oath +al1yamin, as !ell as !hat is ormed under t!o
!ills.
The concept o contract in Islamic )urisprudence is a very undamental one. It is "ased on the
moral and religious principles as sho!n and e6plained in the dierent quranic verses and
hadith. The .uran orders the o"ligation and contracts "e ulilled and that de"ts due on a
i6ed term "e put in !riting unless they concern present goods. It laid do!n general
principles "y !hich dealings in all maters should "e made. The !ords o the .uranic verses
in general apply to all contract and covenants concluded "et!een man and man and
&:::&(* as can "e seen rom the ollo!ing verse:
8O ye who believe! Fulfill all obligations9 ; Surah &l1-a'idah* verse <
8Fulfill the covenant of ALLAH whom you have entered into it, and break not your oath
after you have confirmed them: indeed you have made ALLAH your surety; for
ALLAH knows all that you do9 ; Surat an1Nahl verse =<
8And take not your oaths, to practice deception between yourselves with the result that
someone`s foot may slip after it was firmly planted and you may have to taste the evil
consequences of having hindered (men) from the Path of ALLAH and a might wrath
descend on you9 ; Surah &l1Nahl <>:=?
It can "e concluded rom the verse a"ove that:
To every contract !hich is made* or oath !hich is ta$en * &::&( is the !itness and
thereore* it must "e ully o"served
Contract is a solemn act entered into and "inding "et!een parties* and must "e carried
out !ith all sincerity and honesty
The consequences o ma$ing alse contract are severe
3.0 Elements of a valid contract.
& contract is an agreement !hich is enorcea"le "y la! and only legal agreements are
contracts !hereas illegal agreements are not contracts. To drat a valid contract there must "e
some "asic legally enorcea"le elements !hich are "asically similar and applica"le either in
the Islamic la! o contract or the English la!. The elements involved in a contract are stated
"elo!:
&n oer +I)a",
&n acceptance +qa"ul,
& ree consent
& consideration
&n intention to create a legally "inding relationship
The o")ective and consideration o the contract should "e legal
& certainty o legitimate perormance
& capacity +ahliyah,
& ormality.
3.1 Offer (Ijab)
@hen someone !ants to ma$e a contract* he has to ma$e a proposal to the other person to
o"tain his consent to the act or a"stinence. This is $no!n as an oer.
For e6ample* i & !ants to sell something to A* it is required that & has irst to ma$e an oer
to A that & !ants to sell a particular thing or a certain price* !hether A is !illing to "uy or
not. Thus* ma$ing an oer to another party is an element o a contract in the Islamic la!.
There are three $inds o oer in the Islamic la! o contract. They are:
i. 3er"al oer +kalam,
ii. 7er "y conduct +%amal,
iii. 7er in !riting +kitabah,
3.1.1 Verbal offer (kalam)
&n oer can "e ver"al in !hich it is e6pressed in !ords to sell something to someone else
and is not !ritten do!n. & ver"al oer is accepta"le in Islam rom !hich an acceptance is
good or an immediate sale. (o!ever* !hen the sale !ill ta$e place in a uture time* it is
recommended that the terms o the oer and the acceptance should "e !ritten do!n concisely
so that no disagreement can arise later due to am"iguity.
& classical Islamic )urist said that the ver"al !ords or an oer should "e in the past or the
present tense "ut not in the uture tense* "ecause the oer should have an immediate eect to
the oeree.24 I someone says: 8I !ill oer to sell my car in uture or B- <C CCC9 then the
oeree says 8I !ill accept it to "uy it in uture9. Do the e6pressions here ma$e good oer and
acceptanceD In act no oer has "een made yet so there cannot "e an acceptance at the present
time.
3.1.2 Offer by conduct (amal)
&n oer can "e made "y conduct* that is* !ithout any ver"al !ords or gestures "eing
e6changed or e6pressed.
For e6ample* seller E is selling rice rom a pile o rice. The price per $ilogram is !ritten on
top o the pile at FG per $ilogram. Auyer H gives F> to the seller and the seller gives the "uyer
2 $ilograms o rice. (ere no ver"al communication is made "et!een the oerer and the
oeree. The oer and acceptance has "een concluded "y conduct. 7er and acceptance "y
conduct is recogni/ed in the Islamic la! o contract.
3.1.3 Offer in wirting (kitabah)
&n oer can "e made in !riting to potential customers. It is the "est !ay o ma$ing a
contract as the terms o oer and acceptance are in !riting and signed "y the parties in !hich
case i any dispute arises later* it can "e resolved "y reerring to the !ritten terms o the
agreement.
3.1.4 Invitation to treat (Al-Muasah)
In the Islamic la! o contract* an invitation to treat is $no!n as al-muasah. &n invitation to
treat is not an oer. It is merely an invitation to ma$e an oer to "uy something.
There are dierent types o invitation to treat in the English common la! !hich are
recogni/ed in the Islamic contract la! as al-muasah.2= Dierent types o invitation to treat
are as ollo!s:
Displaying o goods in shop*
&dvertisement*
Beply to inquiry*
&uction sale
Tender
3.2 Acceptance (qabul)
In the Islamic la! o contract* acceptance is $no!n as qabul. @hen an oer is accepted "y
the oeree* it is said that an acceptance has "een made. @hen there is an eective
acceptance* an agreement is made "et!een the parties !hich "ecome legally "inding or
them. &n acceptance can "e ver"al* "y conduct or in !riting. Inder the Islamic la!* in order
to eect a contract the oer must "e accepted "y the oeree and the acceptance must "e in
the same meeting +majlis, not later. The Islamic la! o contract emphasi/es on an immediate
acceptance o an oer to ma$e a valid contract. (o!ever* it seems that such requirement o
an immediate acceptance o an oer in the same meeting "et!een the oerer and oeree may
not "e plausi"le in the modern "usiness !orld as "usinessmen need time to thin$ a"out the
possi"ility and via"ility o ma$ing a contract and to inally decide positively.
Inder the Islamic la! o contract there must "e a consideration in a contract. I there is no
consideration* the agreement !ill not "e valid as it is not enorcea"le "y la!. & consideration
needs not "e adequate as an inadequate consideration is enough to validate a contract as long
as the parties give consent reely to the agreement upon !hich they are satisied.GG I a
contract is not caused "y a misrepresentation* raud* coercion* undue inluence and other
attendant legal am"iguities then the contract is valid even though its consideration is not
adequate. For e6ample* & sells his car to A or B- 5*CCC !hile the mar$et value o the car is
B- <C*CCC. I & sells the car !ith a ree consent and he is not orced "y someone to sell the
car or he is not unduly inluenced to sell the car and i he is satisied !ith the price* !e can
say that the contract !ill not "e invalid due to a merely inadequate consideration.
3.2.1 Communication of acceptance
&n acceptance must "e communicated to the oeree to orm an eective acceptance. The
communication o acceptance is complete the moment it comes to the $no!ledge o the
oeree. I the acceptance does not come to the $no!ledge o the oeree* it !ould not "e an
eective acceptance and no contract !ill "e ormed.
This is the ma)ority vie! o the classical -uslim )urists !ho are also o the opinion that !hen
an oer is made to a person !ho is not present near the oeror* the majlis +meeting,n!ill
continue until the oeree receives the oer. For e6ample* i the oer is sent "y a letter
through the post oice* the majlis !ill continue until the oeree receives the letter and he !ill
"e given some time to accept the oer* "ut not or long
3.3 Free consent
For a contract to "e valid* the agreement must "e made "y a ree consent o the parties in the
contract. & ree consent o parties is also $no!n as consensus o parties !ithout any orm o
coercion* either directly or indirectly. I the contract is caused "y a coercion or a raud or
undue inluence* it !ould "e a voida"le contract. (ence* the contract must "e "ased on ree
consent rom "oth parties. & ree consent o parties is very important in the discharge and
e6ecution o the Islamic contract la!.
In a hadith the 0rophet +p"uh, said: 8Verily trade is based on a mutual consent9. +&s1
Shar"ini. <==?. Mughni Al-Muhtaj* 2: G25,. Begarding a ree consent &llah S@T says in the
.uran: 8O ye who believe, squander not your wealth among yourselves in worthless
dealings, but let there be trade by mutual consentJ9+.uran* ?:<=.,. In this verse &llah
+the Creator, emphasi/es on the importance o e6ecuting a trade contract "y a mutual
consent. Thus* it is a undamental principle in the Islamic la! o contract that "oth parties
must demonstrate a ree consent !hile conducting a transaction. The proo o a ree consent
"et!een the oeror and the oeree is very signiicant and highly required as the essence o
the Islamic contract la! aqd.
3.4 Intention to create legal relation
Inder the lslamic la! o contract* an intention to create a legal relationship is signiicant. I
there is a lac$ o intention to create a legal relationship* the agreement may not* in all
pro"a"ilities* "e enorcea"le "y la!. (o!ever* the party that claims that there is a lac$ o
intention to create the legal relationship has to prove "eyond a shado! o dou"t o its tangi"le
e6istence. Isually* the agreement !hich has a consideration is regarded as having an
intention to create a legal relationship "et!een the parties. Ausiness contracts are usually
considered as having the intention to create a legal relationship in one !ay or another. Some
social agreements may lac$ the intention to create a legal relationship and it depends on the
case "y case "asis and circumstances o the agreement. For e6ample* & is a riend o A and &
promises to give qard al1hasan +interest1ree loan, to A or an amount o F2*CCC* "ut later
reuses to conclude the deal.
(ere* the contract may not "e enorcea"le due to a lac$ o consideration. This is an e6ample
o a social contract !here there is a lac$ o intention to create a legal relationship "et!een the
parties.
3.5 The objective and consideration should be legal
It is important under the Islamic la! o contract that the o")ective o a contract should "e
la!ul and legally "inding other!ise the contract !ill "e invalid and not enorcea"le "y la!.
I the o")ective o a contract is to perorm some orm o illegal act or immoral acts* then the
contract !ill "e invalid. Similarly* the consideration or a su")ect matter o the contract should
"e legal* legitimate and la!ul "ecause i any o these elements is a"sent* the contract !ill "e
invalid. For e6ample* i the su")ect matter o a contract is haram +prohi"ited, in Islam* then
the contract !ill "e illegal and not enorcea"le "y la! due to the nature o the spirit o the
contract !hich may "e against the grain o )udicial prudence and )ustice. (ence* a contract to
sell pig meat or dangerous drugs* such as* heroin or dierent types o !ine etc.* is legally
considered as invalid "ecause to rom a valid contract under the Islamic la! o contract* the
o")ective and consideration must "e la!ul and must all !ithin the am"it o legal
enorcea"ility.
3.6 Certainty
Inder the Islamic la! o contract* the terms o an agreement must "e deinite* clearly deined
and unam"iguous. The terms must "e e6pressed or clearly and precisely !ritten do!n so that
no element o uncertainty can "e presumed in the contract. I the terms or su")ect matter is
uncertain and am"iguous* the contract !ill "ecome void. & term in the contract is considered
uncertain i it is not very clear to "e understood. For e6ample* company E has agreed to "uy
<CC tons o rice rom company H or an agreed price. This agreement may "ecome void due
to an uncertainty as it does not mention !hat type o rice to "e delivered* the time rame
!ithin !hich the goods must "e delivered as !ell as the quantity o rice i it is "e delivered
on a partial "asis and the terms o payment involved thereupon. This e6ample can "e
considered as quite crucial as there are dierent types o rice !ith the same name in !hich
case the sample o the rice should "e clearly spelled out to "e made availa"le "eore delivery
and other pertinent matters to "e clearly itemi/ed and speciied in order to avoid elements o
uncertainty in the contract.
It is the requirement in the Islamic contract la! that the su")ect matter o a contract must
e6ist at the time !hen the contract is made and it should "e possi"le to "e delivered at the
agreed time o delivery. I the su")ect matter does not e6ist !hen the contract is made the
element o gharar (uncertainty) may occur and can invalidate the contract. The Islamic la!
o contract usually discourages the ma$ing o a sale contract on non1e6istent or uture goods
as they cannot "e seen !hen the contract is made as the type and quality o the goods is not
$no!n and !hether it !ould "e availa"le at all or delivery on the time i6ed in the contract.
(o!ever* non1e6istent goods or invisi"le commodities can "e a su")ect matter o a contract i
the nature o the su")ect matter and its quality are properly descri"ed* !ell deined and is
predominantly availa"le or delivery on the appointed time.
3.7 Capacity (ahliah)
Inder the Shariah (Islamic) contract la!* capacity is $no!n as ahliyyah. Capacity is the
a"ility to ma$e a contract under a ully sane physical condition !ith a healthy mental
a!areness. Not every person can ma$e a legal contract* such as* a minor* an insane person
and any person incapa"le o ma$ing a decision due to physical and mental deect* etc.
3.8 Formality
Formality means the !riting and signature requirement o a contract and the contract might
"e required to "e !itnessed "y others. The Islamic la! o contract emphasi/es on !riting
do!n the terms o a contract !hich is to avoid a dispute "et!een the parties as one or more
parties may* ater long period o time* orget !hat they had actually decided or agreed upon.
(o!ever* under the Islamic la! o contract* an oral contract is valid i it can "e proven "y
relia"le and capa"le !itnesses. In a conventional la!* an oral contract is also valid "ut the
conventional la! encourages people to !rite do!n the terms o the contract in all contracts i
possi"le. Nonetheless* some contracts should "e in !riting "ecause o the nature o contract.
-arriage contract* transer o real property* etc.* must "e in !riting and signed "y the parties
involved. There are parliamentary la!s in many countries that stipulate to !rite do!n some
contracts and the la! provides that i the parties do not !rite do!n the contract and duly sign
it* the contract !ould "e considered as invalid. &s mentioned a"ove* the .uran requires
people to !rite do!n a loan contract in Surah +Chapter, 2* 3erse 2K2. This verse also requires
!itnesses to testiy the contract !hen any dispute arises out o this contract.
!.0 "he Contractin# $arties.
#enerally contract involves more than one partyL ho!ever* there could "e e6ception to this
rule* !here"y you have a unilateral contract. & unilateral contract is a contractual o"ligation
on the part o only one party. It includes:
Contract o promise o re!ard !here a person ma$es a promise to another to give him
re!ard or a certain )o" to "e done
Contract o !aqa !here a person ma$es a promise to donate his property or !aqa
purpose
Contract o discharge !here an o"ligor discharges his o"lige voluntarily o a ight due
to him and the right shall "e e6tinguished
Aequest and contract o surety !here a guarantor underta$e to settle the de"t to the
creditor on "ehal o the de"tor.
Since contract involves t!o or more persons* there are rules that must "e met "eore the
contract can "e valid !ithin the Islamic )urisprudence. The contracting persons are those that
are involved in the contract* it can "e t!o or more persons* these particularly individuals must
possess the ollo!ing attri"utes "eore they can "e involved in the discussion or negotiation
o any contract. These attri"utes are discussed "elo!:
4.1 Puberty
Aoth contracting parties must have attained the age o pu"erty. -uslims )urist are in
agreement that pu"erty is esta"lished !hen proper evidence o se6ual maturity is
orthcoming. The 0rophet +S&@, !as reported to have said to the eect that the action o
three category o persons are not accounted or vi/ a sleeper until he !a$es up* a minor until
he attains se6ual maturity and an insane person until he regains sanity+&l Aayhaqi* Sunan al1
Mu"ra,.
For the (anai* -ali$i and Shai'I schools* the main natural signs constituting pu"erty are
voluntary or involuntary +nocturnal, emission o seminal luid or "oys and menstruation or
pregnancy or girls. &dditional signs such as the appearance o coarse hair in some part o the
"ody* are also ta$en into consideration. It is reported "y &liyyah al1.ura/i !ho said:
~I was amongst the captives of Quraizah. They looked for those who have grown coarse
hair and killed them and those who have not yet grown coarse hair were not killed. I
was one of those who have not grown coarse hair (Al Bayhaqi, Sunan al-Kubra, Vol VI,
p57).
I these signs do not appear earlier* the age o pu"erty is determined "y reaching certain age
limits. Imam &"u (aniah i6ed the age o pu"erty or males at <K years and emale at <>
years "ase on the vie! o I"n &""as !ho interpreted the verse o .uran to the eect:
~And come not nigh to the orphan`s property, except to improve it, until he attains the
age of full strength (Surah al-An`am, 6:152).
&ccording to Shai's and (ana"alis school* the age o pu"erty is <5 years or "oth "oys and
girls. They "ased their opinion on the hadith reported "y Au$hari rom &"dullah I"n %Imar to
the eect:
~I offered my service to the prophet (SAW) when I was fourteen years old but he
refused me permission to engage in the battle. I next presented myself to the prophet
(SAW) when I was fifteen and he allowed me to join the ranks (in the battle of
Khandaq) (Ibn Hajar, Fath al-Bari Vol 5 p.276).
Thereore according to the Shai'I* (ana"ali and -ali$i schools* there is a conclusive
presumption o la! that a male or emale !ho has reached the age o iteen is physically
mature and thereore the age o iteen is the minimum age o legal capacity to engage in
contract.
There is an irreuta"le presumption o la! that a emale "elo! the age o nine and male
"elo! the age o t!elve has not reached physical pu"erty. I a male* !ho has completed
t!elve years* and a emale !ho has completed nine years* has not reached a state o pu"erty*
they are called %murahiq' and %murahiqah' until they reach a state o pu"erty. &ny claim that a
person "et!een these ages limits +i.e <21<5 or "oys and =1<2 or girls, has attained pu"erty
!ill succeed only i the proper evidence o se6ual maturity is produced. Iman &"u (aniah is
o the vie! that !hen a "oy or girl approaches the age o pu"erty and they have declare
themselves adult* their declaration must "e accepted "ecause the attainment o pu"erty is a
matter !hich can only "e ascertained "y their testimony and their notiication must "e
accepted in the same manner as the declaration o a !oman !ith respect to her courses.
The ma)ority vie! o -uslim )urist is that pu"erty alone is not suicientL it must "e
accompanied "y prudence. The vie! is "ased on the ollo!ing verse o the .uran !hich says
to "e eect:
~Make trial of orphans until they reach the age of marriage. If then you find sound
judgment in them, release their property to them but consume it not wastefully nor
haste against their growing up (Surah Al-Nisa, 4:6).
This verse clearly requires prudence to co1e6ist to ena"le a person to have a legal capacity to
transact.
From the a"ove discussion* it is clear that the Shariah does not correlate pu"erty !ith
reerence to the attainment o a certain age. Shariah concept o pu"erty and prudence relects
the requirements may create diiculties and dispute as it is apparently not easy to ascertain
!hether a person had attained pu"erty and prudence. &s a result* many contemporary -uslim
countries have adopted the attainment o a certain age to determine maturity. In the ield o
amily la!* Nordan* Tunisia* Iraq* -orocco* 0a$istan and some states in -alaysia have
provided that !ith regards to capacity to contract marriage* a male attains maturity at <K
years* !hereas !ith regards to emale* there are slight dierence rom one country to anotherL
<K years or Iraq* <4 years or Nordan* <> years or 0a$istan and -alaysia and <>5 years in
Tunisia and -orocco.
4.2 Maturity.
The parties involved in the contract must "e mature "eore the contract can "e valid.
&ccording to -uslim )urist maturity is : 8#ood and proper dealing !ith !ealth rom a
!orldly point o vie!9. I someone is a !rongdoer rom the religious vie! point* yet rom a
!orldly vie! point he is capa"le o dealing !ith money and !ealth properly !ithout !asting
or misusing it he is considered to "e mature.
In Islamic la!* -uslim )urist divided the minor into t!o categories* that is* minor !ho are not
o age o reason and minor !ho are o age o reason. &ll contracts and transactions "y minor
!ho are not o the age o reason are void even though the transaction is "eneicial to him. For
e6ample ta$ing a git* or detrimental to him* or e6ample* ma$ing a git* or something or
!hich the "eneit or detrimental to him cannot yet "e ascertained as a sale* lease* proit
sharing* partnership and other transactions. For the protection o the interest o the minor
Islamic la!s provide that in order to e6ecute a valid contract* the minor must "e presented "y
his guardian.
The %age o reason' is the end o inancy and the "eginning o %discerning ma)ority'. There is
no i6ed age !here an inant is deemed to have attained the age o reason. The test is
su")ective it has "een deined as the period !hen the intellectual gro!th o the minor allo!s
him to spea$ reasona"ly and to manage soundly his inancial interestL and !hen he is a"le to
distinguish "et!een a purchase and sales* or a proit and loss. This accord !ith the vie! o
(anai School. The other )urists are* ho!ever* o the vie! that normally the age o reason is
attained ater seventh year.
The eect o a contract entered into "y a minor !ho has reached the age o reason may "e
valid* void or voida"le. It depend on the "eneit and the detriment occasioned to the minor.
The minor !ho has reached the age o reason is authori/ed to conclude "eneicial contract
!ithout the authori/ation o his guardian or e6ample the acceptance o a "equest or git.
Such contracts are valid. (e his or"idden to conclude transactions or contracts !hich are
detrimental to him e.g ma$ing "equest or git or !hich are potentially harmul to him e.g
loans* guarantees !hich are or the "eneits o others. Such contracts are void even though
they are authori/ed "y his guardian. @hereas contracts !hich are neither potentially
"eneicial nor potentially harmul or e6ample +sale* hire, are voida"le. They are valid i
su"sequently ratiied "y the guardian and void i guardian re)ected it. This is the vie! o
(anai and -ali$i schools.
The (ana"alis are o the vie! that it is valid !ith the permission o the huradian and void i
transacted !ithout permission. The Shai'is are* ho!ever* o the opinion that the contract is
void i entered !ithout the permission o the guardian and that it cannot "e ratiied "y the
guardian.
It seems clear that there are t!o important criteria in evaluating legal capacity in Islam to
determine the validity or other!ise o a contracting parties in a contractL the age o pu"erty
and the age o prudence. 0u"erty !ithout prudence and vice versa ma$es the legal capacity
incomplete. & person might have attained the complete legal capacity* "ut pro"a"ly due to
some reasons the element o capacity particularly prudence might "e interrupted and caused
him legally to "e incapa"le.
4.3 Sanity.
Islamic la! considers a persons in a state o lunacy as incapa"le o administering his property
and not responsi"le or !hat he says. This is "ase on the hadith o 0rophet +S&@, to the
eect:
~The action of three categories of persons are not accounted for , that is, a sleeper until
he wakes up, a minor until he attains sexual maturity and an insane person until he
regain his sanity (Al-Bayhaqi, Sunan al-Kubra, vol VI,p57).
(is incapacity on account o lunacy or madness thereore "egins and ends !ith the presence
and a"sence o its causes. The lunatic is treated under the Islamic la! similar to that o an
inant "elo! the age o reason. The rule applica"le to such an inant also applies to a lunatic.
Thereore all contract and transaction entered into "y a lunatic are void !hether or not the
contract or transaction is "eneicial or detrimental to him or permitted "y his guardian.
& person !ho is continuously mad is in the same condition as an inant incapa"le o
transacting "usiness. (o!ever* the transaction o a person !hile he is in a state o soundness
o mind is li$e the disposition made "y a sane person.
& person that is into6icated do not have the legal competence or capacity to go into a
contract* "ecause o the prohi"ition o alcohol in (oly .uran and (adith o the prophet S&@.
The .uranic prohi"ition o alcohol clearly state to the eect:
~O you who believe! Intoxicant and gambling, (dedicated of) stones, and (divination by)
arrows, are an abomination of Satan`s handiwork. Eschew such (abominations) that you
may prosper. ;Surah al1-a'idah 5:=G
&"u (urairah narrated the 0rophet S&@ to have said to the eect:
~An adulterer, at the time he is committing illegal sexual intercourse is not a believer,
and a person, at the time of drinking an alcoholic drink is not a believer, and a thief, at
the time of stealing, is not a believer (Sahih al-Bukhari).
Iman &"u (aniah has deined the into6icated person or drun$ard as "eing una"le to
distinguish the earth rom the s$y* length and !idth o male or emale. &"u Husu held that an
into6icated person is one !ho "ehaves in a state o delirium. This accord to the verse o the
.uran to the eect that:
~O you who believe! Approach not prayer with a mind befogged (intoxicated) until you
can understand all that you say ; Surah al1Nisa ?:?G.
Thus a person !ho does not $no! !hat he utters is into6icated. &ll the other )urists su"scri"e
to this vie!. &ccording to predominate vie!s o all the school o la! !here a person ta$es
liquor "y accident to drin$s it as a medicine* his legal competence is aected and shall not "e*
lia"le or his action !hile into6icated. @here liquor !as ta$en voluntarily the schools dier
in their opinion. The (anai holds that the legal competence o the man is not aected "y
voluntary into6ication. Thereore* all transactions entered into "y him !hile into6icated are
valid in the same manner as !hen they are entered into !hilst he is so"er. The Shai'I and
(an"ali School are inclined to deny legal competence to the into6icated. The -ali$i School
gives an into6icated person the option o rescinding a legal act upon regaining his aculties.
In the middle east countries provisions are made in respect o contract entered into "y persons
o unsound mind. &rticle <CK o the Iraqi Civil Code dierentiate "et!een a person !ho is*
continuously mad and one !ho is occasionally o unsound mind and provides that a person
!ho is continuously mad is at la! li$e an inant "elo! the age o reason and a person not
continuously mad is at la! li$e a person o sound mind.
In Egypt* :i"ya* Mu!ait and Hemen the respective Civil Code deprives a person suering
rom mental illness rom legal competence to e6ecute contractual o"ligations. In Aahrain* a
person's capacity to enter into a contract is su")ect to the condition* inter alia* that he is o
sound mind. & person o sound mind or the purpose o ma$ing a contract is a person capa"le
o understanding a contract and all its o"ligation or its interest. In :e"anon* &rticle 2<> o
the code o o"ligation and contract* <=G? provides that acts o persons o unsound mind are
completely null and void.
4.4 Particular Cases of Interdiction.
& person may "e denied the competence to deal !ith all or some o his property or stand in a
position to sign a contract or engage in certain transactions. Such person or individual is said
to "e under interdiction* not to protect his o!n interests* as is the case !ith those !ho lac$
prudent )udgment* "ut to protect the interest o others. Te6tual authorities commonly cite
three main instances such as interdiction
4.4.1 Insolvency (Iflas)
I a person "ecomes insolvent +mulis, that is !hen his de"t e6ceed his or !hen he attempts
to place his assets "eyond the reach o his assets or even in some cases !hen he delays
payment* the court may upon the petition o creditors* +or even e61oicio in the Shai'I
School, issue an in)unction or"idding the insolvent person rom disposing his assets. The
insolvent's asset reer to the current assets e6isting at the date o the )udicial interdiction
according to (anai and -ali$i Schools !hilest the Shai'I and (an"ali Schools ma$e uture
asset also su")ect to )udicial interdiction. The insolvent is then not allo!ed to conclude
contracts purporting to reduce his assets.
4.4.2 Death Illness (Marad al-Maut)
In contrast to ordinary illness* death due illness deprives the individual the capacity to
contract under Islamic la!. Death due illness is an original concept o Shariah. It consist o
our elements:
& grave illness +such as tu"erculosis or cancer,
The patient's a!areness o his illness
The death o the patient !ithin one year o the onset o his illness
&n act detrimental to the patient's heirs or creditors.
The o")ect o this concept is to protect the interest o the patient's legal heirs and creditors.
Thereore death due illness may "e claimed "y the heirs creditors o the deceased to annul a
sale* git* a legacy or an ac$no!ledgment o de"t made to their detriment. (o!ever* the heirs
and creditors may* i they agree ratiy the same.
4.4.3 Prodigality after Puberty.
& person may reach the age o pu"erty accompanied !ith the state o prudence and continue
to "e prudent* "ut there a person may later suer prodigality or he may reach the age o
pu"erty in a state o prodigality.
The ma)ority o )urists holds that a prodigal has to "e interdicted !hich attains sound mind.
Aut &"u (aniah* holds that !hen a prodigal reaches the age o t!enty1ive years* he !ill not
"e interdicted* similarly !hen a person !ho reach the age o pu"erty !ith sound mind "ut
later suer prodigality. Interdiction o such a person is only in regards to dispositions
involving property such as sales* hire and pledge and it must "e made "y the order o the
court.
4.4.4 Pledgor
Inder Islamic la! the pledgor has no competence to deal !ith the property he has handed
over to the pledge* other!ise the right o the latter !ill "e nulliied.
5.0 Conclusion
The validity o a contract in Islam "ase on the Shariah provisions as it centers around the
contracting parties entails that the contracting parties must possess three qualities* that is*
pu"erty* maturity and sanity at all times.
(e the contracting party is considered to "e ully capa"le o contracting and ully negotiating
and concluding dierent types o contract independently. (o!ever i an individual is
pu"escent "ut insane* he is not allo!ed to go into a contract. :i$e!ise i an individual is sane
and pu"escent "ut not matured he is not allo!ed to conclude a contract independently. Bather
he has to do it !ith the consent o his guardian. I an individual !ho is not pu"escent reaches
the age o seven or a"ove and his a"le to distinguish "et!een good and "ad he !ill still not "e
allo!ed to conclude a contract independently unless accompany !ith a consent rom his
guardian.

%.0 &eferences.
&"dul Nalil -.D and -uhammad M.B* 2C<C. Islamic :a! o Contract is #etting -omentum.
International Nournal o Ausiness and Social Science 3ol. < No. 2L Novem"er 2C<.
&hcene :ahsasna* 2C<<. Shariah &spect o Ausiness and Finance. Enhanced edition o CIF0
module 2C<<* INCIEF.
Aa$ar* -ohd Daud. 2CCC. Contracts in Islamic Commercial Transactions and Their
&pplication in -odern Islamic Financial System.
Ba/ali N( Na!a!i* 2CC=. Islamic :a! on Commercial Transactions* CEBT pu"lication*
-alaysia.