GROUP 1

Case
Related to
Capacity
(AlAhliyyah)

FIN 6650
REGULATORY FRAMEWORK
OF ISLAMIC FINANCIAL
CONTROL

MUHAMMAD FARID
BIN BAHRUDIN
G1411827
GULED MOHAMED
OSMAN G1419467

DR. MARHANUM CHE

MOHD SALLEH

Definition

Section 11 of The Contract Act of

Malaysia A person is deemed able
to contract if he is an adult as
provided by the law in force and if
he is sound mind and has the
capacity to enter into contract as
provided by that law

Ahliyyah alwujub naqisah

(Embryo/janin))

Ahliyyah al-ada
kamilah

(After puberty
(baligh))

Ahliyyah alwujub kamilah

(Born until
mumayyiz)

Ahliyyah aladanaqisah

(Mumayyiz until
puberty (baligh)

Intelligent Awareness
Person can make decision for own
benefit
- Example : Financial aspect

3 CASES RELATED
TO CAPACITY
(Al-Ahliyyah)

Nash v Inman
[1908] 2 KB 1
Nash
(tailor)

Entered into contract to

supply 11 fancy waistcoats

Inman
(Cambridge
undergraduat
e student)

Inman was a minor who was already

adequately supplied with clothes by his father.
When Nash claimed the cost of these clothes
Inman sought to rely on lack of capacity and
succeeded at first instance.

However, infants
an infant may contract for the supply at a
have a limited
reasonable price of articles reasonably
capacity to
necessary for his support in his station in
contract. To
life if he has not already a sufficient
succeed, the
supply. To render an infant's contract for
plaintiff had to
necessaries an enforceable contract two
prove the
conditions must be satisfied, namely, (1.)
contract within
the contract must be for goods
this limited
reasonably necessary for his support
capacity, which
in his station in life, and
his Honour
(2.) he must not have already a
defined as
sufficient supply of these
follows:
necessaries.
For Islamic point of view. To enter Islamic transaction must in stage
Ahliyyah al Ada Kamilah or achieve Intelligent Awareness.
Which person can make decision for own benefit in term of financial
aspect.
But in this case, contract is invalid because infant cannot
make decision for own benefit.
Buying another 11 fancy waistcoats even though
adequately provided
Not able to think in term of financial aspect.

Hart v O'Connor
[1985] 1 AC 1000
Vendor

However

Sold trust property (a farm)

Hart
- 83 years old
- Unsound mind

Hart did not know this and was fair in

his negotiations with Vendors solicitors.
Hart occupied and improved the land. When
one of the Vendors brothers (OConnor) took
over as trustee of the estate he sought to set
aside the contract.

The Vendor clearly lacked contractual capacity. They accepted

the principle that a contract made by a party of unsound mind
but who appears to be of sound mind with another party
(having no knowledge of the unsoundness) is valid. There is
no unfairness that can be imputed to the party having no
knowledge of the others incapacity.
in the opinion of their Lordships, the validity of a contract entered
into by a lunatic who is ostensibly sane is to be judged by the same
standards as a contract by a person of sound mind, and is not voidable
by the lunatic or his representatives by reason of "unfairness" unless
such unfairness amounts to equitable fraud which would have enabled
the complaining party to avoid the contract even if he had been sane.

For Islamic point of view. To enter Islamic transaction both

parties must be sound mind.
Even thought Hart already reach the stages of capacity in Islam.
However Islam hinder Insane people to have full capacity.
Therefore contract between Hart and Vendor clearly void,
because one of them in insane.
Natural Defects (Awarid Samawiyah)

Blomley v Ryan
(1956) 99 CLR 362
Bomly

entered into a contract to

purchase a farm

Ryan
- 78 years old
- suffering the
effects of
prolonged
and excessive
consumption
of alcohol

When Ryan sought to resile from the sale

Blomley sought specific performance one issue
(this case will also crop up later in the unit) was
whether Ryan had the requisite capacity to contract.

 In cases like this where intoxication is the main disadvantage

relied upon, the adequacy (or otherwise) of consideration is
particularly important.
In this case the sale price was significantly below market
price the only explanation for this was that Ryan was old
and impaired by habitual drinking to excess and who
contracted during about of heavy drinking rendering him
utterly incapable of forming a rational judgment about the
terms of any business transaction.
This was apparent to Blomley (through his agent) who took
unfair advantage of that condition. Specific performance and
damages were, therefore, denied.

To enter Islamic transaction must in stage Ahliyyah al Ada

Kamilah or achieve Intelligent Awareness. Which person can
make decision for own benefit in term of financial aspect.
However due to intoxication Islam hinder Insane people to
have full capacity. Therefore Ryan cant think the benefit
receives.
Therefore contract between Hart and Vendor clearly void,
because one of them in intoxication and unfairness happen.
Acquired Defects (Awarid Muktasabah)

References
Dr. Marhanum

Che Mohd Salleh

Nash v Inman http://
www.australiancontractlaw.com/cas
es/nash.html
Blomley v Ryan http://
www.australiancontractlaw.com/cases/bl
omley.html
Hart v O'Connor http://
www.australiancontractlaw.com/cas
es/hart.html