Pledge/Mortgage/Pawn = Al-Rahn

Literally: a detained thing Technically: detention of a corporeal property on account of a claim such as a debt which may be satisfied out of that property. - Legality: - The Quran says: - If you are on a journey, and cannot find a scribe, a pledge with possession (may serve the purpose).And if one of you deposits a thing on trust with another, let the trustee (faithfully) discharges his trust, and let him fear his Lord. (2:283) - The Prophet (pbuh) in a bargain made with a Jew for grain, gave his coat of mail in pledge for the payment.

- Zahiris: pledge is allowed only: a) In journeys b) No possibility to get a written agreement c) No witnesses - Majority: anytime and in any situation - Pledge is convenient when: a) two parties cannot trust each other b) cannot get a written agreement c) No witnesses are available - Pledge creates a secure right for the lender who will be given priority over other lenders and other subsequent lenders with whom the same property is pledged (ex: one big house is pledged with several lenders but the first one is given priority).

The pillars of pledge/Rahn

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Two parties: pledgor (al-Rahin) and pledgee (al-Murtahin) The pledged property (al-Marhun) The debt (al-marhun bihi). Expression (offer and acceptance). Conditions: The pledged property should be known and well-defined. Existence of the pledged property at the time of contract (ex: pledge of an unborn animal is not valid; unripe fruits) Deliverability of the pledged property . It should be a valuable property (mutaqawwim) (ex: haram properties or properties that cannot be possessed is not valid).

5) Usufruct cannot be a pledge. - Hanafees: because it is not property - Majority: though it can be sometimes a property (gradually) but not in this situation. 6) Conjoined property with another property cannot be pledged separately (ex: crops and trees without the land) 7) The pledgor should have full ownership of the pledged property except in case a guardian or a father who may pledge the property of a minor for the debt of a minor or for his own debt. 8) The pledged property should be capable of coming into the possession of the pledgee. 9) The value of the pledged property should be equal or more than the amount of debt.

The Use of Pledge by the Pledgee The pledge is considered a trust in the hands of the pledgee. Pledgee is responsible for its safety otherwise he is liable for compensation. Pledge is given to secure the debt, therefore, it is not meant for investment and profitable use. Pledgee is not allowed to exploit or use the pledged property even with the permission of the pledgor except with compensation. Exploitation and profitable use of the pledge is considered usury. But if it is an animal that can be used for riding or milk, the pledgee may make use of it in return for its maintenance.

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6)

Rights and Responsibilities of the Pledgee The pledge is kept with the pledgee until the debt is paid. The pledgee may demand payment of his debt. The pledgee is not entitled to use the pledge, for he has the right to possess it, not to use it. He cannot let or hire the pledge to someone else. The pledge must be returned upon receiving the payment. In case if the pledgor refuses to spend on the pledge, the pledgee may do so with the permission of the court and reclaim that from the pledgor (ex: breeding pledged animal) The pledged property cannot sold without consent of the pledgor.

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5)

Rights and Responsibilities of the Pledgor The pledgor is not allowed, to retake his pledge before settlement of his debt. The pledgor cannot reclaim the pledge on the plea of selling it to discharge his debt. The pledgor cannot reclaim the pledge on the ground of partial settlement of the debt. The pledgor has to pay for the maintenance of the pledge. The produce and the benefit of the pledge belong to the pledgor.

Forfeiture of the Pledged Property The pledge can not be forfeited. The hadith states: The pledge is not forfeited, to the pledgor is returned his profit and he is held responsible for its loss. The pledgor has to settle the debt within the fixed time. If the pledgor refuses to pay and also does not allow to sell it, the court may force him either to settle the debt or to allow the sale of the pledge. Balance of the sold pledge belong to the pledgor. But if it is not enough the pledgor has to settle the balance. The pledged preperty is inherited by heirs of the pledgee If the pledgor dies the contract is dissolved automatically and the debt is payable immediately from the estate of the deceased pledgor.