Transcript KHIYARAT (OPTIONS) - LAW 737 Islamic Law of Transaction

Presenters:
Mahyuddin Daud
Hairul Hafiz Hasbullah
Norlaili Mat Isa
Nuur Azza Leenda Chamingan
KHIYARAT (OPTIONS)
The options / rights for
contracting parties to confirm or
exclude themselves from
performing the contract
INTRODUCTION
What is Khiyar?(in general)
is a right given to both parties or to either one of them to
confirm, cancel or back down from the contract.
Khiyar based on economic glossary:
A term used to express an option within a certain period
after the conclusion of a bargain during which either of
the parties may cancel it
DEFINITION
According to Al-Tayin:
“One of the parties therefore reserves the option to choose, designate
from among several objects, the true object of that contract during
prefixed term”
The 2 Possible Decision:
(i) To ratify by choosing from among the alternative
objects; or
(ii) To cancel the contract entirely
OTHERS DEFINITION
Wahbah al-Zuhaili
“Khiyar is an option to continue or discontinue the contract
due to certain circumstances.”
Sheikh Mohsin
“Both party were given the option to choose to continue the
sales or to discontinue (fasakh) according to the rules or
certain circumstances.”
TYPES OF KHIYAR
Khiyar divided to 5:(i) Khiyar Majlis- the condition of withdrawing from the contract as long as the meetings of the parties continue
(ii) Khiyar Syarat (Al-Shart) -optional condition, where one of the parties stipulates for a period of three days or less
(iii) Khiyar Aib (Al-‘Ayb)-option from defect, the option of dissolving the contract on discovery of defect
(iv) Khiyar Ta’yin-option of determination, where a person having purchased two or three things of the same kind,
stipulates a period to make his selection
(v) Khiyar Rukyah- option of inspection, option of rejecting the thing purchased after sight
KHIYAR AL-MAJLIS
(OPTION OF MEETING)
Presenter:
Hairul Hafiz Hasbullah
KHIYAR MAJLIS
Definition:
“Option during the meeting” means each one the parties has
the right to confirm or cancel the contract in the negotiation
stage of the contracy, as long as the two parties still there
and have not left.
KHIYAR MAJLIS
• Literal: based on the
doctrine of Khiyar AlMajlis:
• (a) gives each of the
parties to a contract of
sale the
option of
withdrawing from the
contract so long as they
have not physically
separated; and
• (b) There is no time limit
to the Majlis (meeting)
which only ends when
one party leaves the
meeting place.
According to NG
Coulson :-
“ This principle only
applies to contracts
made in a face to
face meeting and its
purpose is to ensure
that the parties are
as sure about the
transaction.”
Continue…..
(ii) Technical
• According to Al-Jaziri, there are 2 parts,
whereby:
1st Part
• “so long as the parties do not leave the place of
contract, any of them (seller or purchaser) can
cancel the deal.”
2nd Part
• “however, if it is stipulated that the contract
has been finalized even if the parties do not
separate, Khiyar Majlis will not be available”.
Different
Khiyar al-Majlis is different from Majlis Aqad in the application
because Majlis aqad is a gathering place or the place for such agreement
or place of business. As for Khiyar Al-Majlis the purpose is to give a
right and choice to the related party either to proceed or cancel the
agreement aslong the Majlis not be dissolved.
According to Mazhab’s Shafie’ and Hambali:
Pursuant to surah Al-Maidah;
“the parties which are binding to a contract and other party no right
to revoke the contract”
LEGALITY
(i) Al-Sunnah
(ii) Al-Hadis
(iii) Ijmak
(iv) Qias
LEGALITY
(i) Al-Sunnah
Ibn Umar reports that Prophet (PBUH) said :
“if two men conduct a sale, each one of them has the right of choice until they part or until one of them
gives the choice to the other and they conclude the sale, the sale is then confirmed”.
(This hadith is narrated by al-Bukhari and Muslim)
Hakeem Ibn Hizam reports that the
Prophet(PBUH) said :
“ the two sale parties have the choice until they are truthful and clear, their sale will be blessed ,if they
tell lies(deceive ) and hide secrets, the blessing of their sale will be annihilated
(Riwayat Bukhari & Muslim)
LEGALITY
Amr ibn Sho’aib reports from his father’s report
of his grandfather that the Prophet (PBUH)
said:
“Both parties have the choice until they part”
(hadith sahih by Hassan.)
View from the 4 Mazhabs
Mazhab Shafie and Hambali
The Ulama’s have a different view pertaining to this Khiyar. According to Mazhab
Shafie and Hambali, Both of them agreed with the Khiyar Majlis and stated that this
contract is not binding and undecided as long the parties still in the place to execute the
contract. Both parties still have the rights either to accept or cancel . However, when one
of the party or both parties apart which each other or get out from the designated place
automatically the contract is concluded and parties are bound to it.
In addition, according to Mazhab Shafie it is an obligation to the party that accept that
offer to accept immediately once the offer is out to give a chance to the parties to re-think
about the offer and enough time to apply Khiyar Al-Majlis.
Mazhab Hanafi and Maliki
(1) However according to Mazhab Hanafi and Maliki, once the contract is concluded
with a positive offer “proposal” and acceptance, it is ultimate and binding and neither
one the parties has the choice of backing down from it. They provide as evidence the
Quranic commandment to the believers to keep their contract referring to Surah AlMaidah ayat 1
Meaning :
“O mankind, satisfied and concluded the agreements.
The above surah stated that Muslim is binding with their contract and according to
this 2 Mazhab the application of this Khiyar is contradict with the stated surah.
(2) Mazhab maliki also rejected this Khiyar Majlis because Madinah people did not
practiced Khiyar al-Majlis during our Prophet time.
whatever the case maybe, the reason for the disagreement amongst scholars on he
option of the meeting is their way of understanding the hadiths relating to it. Those
who confirm the option have understood the hadiths as they were and have not
offered any interpretation. Those who reject the option interpreted the hadiths in the
manner
mentioned above. This exposition of the jurisprudential opinions on the option of the
meeting and the rulings pertaining to it should be seen as a great achievement of
Islamic jurisprudence as it has been unique is doing it.
ILLUSTRATIONS
illustration (I)
When Dr Azam has made a purchase and was not aware, at
the time of sale or previously, of a defect in the article
brought, Dr Azam has an option either be content with it at
the agreed price or reject it.
illustration (II)
If Ijam has sold an asset as being possessed of some specific
quality and that asset turns out to be without quality, Dr
Azam has an option to annul contract.
KHIYAR AL-SYARAT
(OPTION OF CONDITION)
Presenter:
Nuur Azza Leenda Chamingan
Khiyar Al-Syarat
• It is a right given to the parties or another person to
confirm or cancel the contract during an agreed
period of time.
• Contradict with Prophetic tradition but accepted on
2 reasons:
1. Prophet accepted and sanctioned it
2. Some people may not be clever about trading and
need expert opinion
• Applicable to binding, necessary and committing
contract which are cancellable even it was
committing to one party e.g. sae,rent partnership,
warranty
Issues
1. Who has the option of condition
• Both or either one of the parties
• Abu Hanifah, Malik, Ahmad Ibn Hanbal, the
Zaidis and Al-Shafie – one of the parties may
delegate it to the stranger
• Parties may not be knowledgeable and need expert
opinion
• Al-Shafie and Zufar – not permissible to delegate
to another person. Option was meant originally to
be used by contracting parties. The practice of
delegating it to another person means transferring
the power over the contract to a stranger
2.Period of Option of Condition
Abu Hanifa, Zufar and Al-Shafie
-does not exceed 3 days
-this period is given to the parties to determine
Abu Yusuf, Muhammad and Ahmad ibn Hanbal
-can exceed 3 days and may be longer provided that the time is
determined and defined
-to give ample time to decide, so should not limit
Imam Malik
-originally 3 days but can be extended to sufficient time
-in case where the subject matter of contract was in a place
which is very far and could not be reached within 3 days
Zaidis
-period should be set and made known provided it is within 3
days
Parties claim different agreed period-shorter one would be
considered
Parties keep silent and do not specify the period – 3 days
3.Cancellation of contract in the option of
condition (verbal / action)
Abu Hanifa & Muhammad
-other party has to be informed of the cancellation
-this is to safeguard the interest of the other
parties
Hanbalis, Abu Yusuf and Hanafi
-the party who has the option can cancel the
contract in the absent of the other party without
his consent
Zaidi
-The other party has to be informed of the
cancellation
4. Ownership of subject matter during the period of option
Abu Hanifa
-the ownership does not transfer to the buyer during the period of
option, price also should not paid by the buyer to the seller during
this period.
-but, if the option belongs to the seller alone, ownership not transfer
but the price should go out of the ownership of the buyer
-to avoid having both price and sold object in the possession of the
seller
Abu Yusuf and Muhammad
-Price = ownership of the seller
-but if option be on the buyer, price does not go out of his possession
but the sold object goes out the possession of the seller without
entering the possession of the buyer
Abu Hanifah, Abu Yusuf, Muhammad and Malikis
-the sold object does not go out of the ownership of the seller during
the period of the option
Shafie and Hanbalis
-the ownership should be transferred during the period of option
5.Responsibility of the maintenance expenses of the
subject matter and right to the increase
-Hanafi and Maliki
Responsibility of the seller
-Other scholars
-responsibility of the buyer
6.Option nullified with death
-Hanafi and Hanbalis
-option is dropped and not transfer to the heirs
-consider it as personal right
-Malikis and Shafies
-option is transferred to the heirs as it is a financial
right not personal right
-the option of condition is lost by the death of the
parties who has it
7.Delegating the option of condition to others
-cannot withdraw except with the death of the
third person
-agent can’t delegate the option to another person
except with the approval of the appointer
If the agent dies, the right goes back to the original
party
8. Differences in the option of condition
-burder of proof – one who denies on the
condition and he has to deliver solemn oath in
the absence of the conclusive proof
KHIYAR AL-RU’YAH
(OPTION OF VIEWING)
Presenter:
Norlaili Mat Isa
General rule
• In order to conclude a valid binding contract the
subject matter must exist at the time of the contract
in order to avoid gharar or uncertainty.
• But, this strict rule will caused hardship to the
contracting parties
• Thus the Muslim jurist had allow exceptions to the
strict rule of existence.
• As for example, bay’ al-salam (sale by advance
payment for the future delivery), bay’ al-istisna’
(contract of manufacture), Ijarah (contract of hire)
and musaqat (contract of irrigation).
• But still all this kind of transaction still has its own
stage of uncertainty (gharar) because the party still
has not seen the subject matter yet.
• Thus, to avoid uncertainty the purchaser given
power to opt whether to continue or rescind the
contract concluded between them after seeing and
inspect the subject matter.
• This option known as option of viewing or option of
sight (khiyar al-ru’yah). This option also known as
option of inspection because not only see but
Purposes of khiyar al-ru’yah
1. To avoid injustice that may lead to ignorance
and dispute among parties.
2. To protect the interest (istihsan) of Muslim
and to prevent any disputes among them.
3. To avoid unfairness when they have no
experience or ability to market place to buy
things they have not seen.
Legality of khiyar al-ru’yah
Hanafis, Malikis, and Hanbalis
They admitted the legality of this
option based on the authority of
hadiths reported by Ibn Abbas and
Abu Hurairah:
“He who buy something which he has
not yet seeing has the option upon
seeing it either to accept or refuse it.”
Hanafis, Malikis and Zaidis give the
right of the option of viewing only to
the buyer
Hanbalis and Zahiris give the right to
exercise this option to the seller and
the buyer
Shafi’is
Refused and remains with the strict
rule of transaction.
Any transaction will be consider void
and invalid if the subject matter is not
existing and cannot be seeing.
Following is the authority of hadith:
“Prophet Muhammad S.A.W. forbid
cheating in selling”
(Reported by Abu Muslim from
Hurairah)
Second, Shafi’is does not accept the
hadiths mentioned by Hanafi, Maliki,
and Hanbali as authority which he
describes as weak or incorrect hadiths
(hadiths da’if).
Conditions of the Option of Viewing
1. The subject matter of transaction must define as to
its kind, genus, value to prevent any imbalance
between the parties obligation.
2. The party should not have seen the subject matter
before. If the party has seen the subject matter
before, the option will not applicable anymore.
The viewing can be in other form such as touch,
smell, or taste.
3. The party can only exercised the option after the
purchaser have seen the subject matter.
The Period to have the Option and
its Duration
General Rule
duration of option is depend on the subject matter itself.
Subject matter
Perishable - option will
applicable for long period
Imperishable - must make his
decision as soon as possible
For example, if the contract is related to foods stuff such as fruits or
vegetables which are cannot last long, then the party should make his
option clear so if the buyer insists to terminate the contract the seller still
have the opportunity to sell the things to other party who interested.
Muslim jurists differ in term of determining the period in order to
avoid existence of uncertainty (gharar) in the contract. Gharar here
refer to the decision whether the parties still want to continue or
terminate the contract.
Hanafis
Malikis
• option can last until it is become
extinguish either by annulment or
eventual lapsed
• The period are depend on the party to
decide whether to make the period last
long or make the option of sight only
applicable for short period
• option last to limited time after the
party had seen the subject matter
• If the person has the opportunity to
terminate the contract after viewing
taken place but he did not do so, thus
the option of viewing will not
applicable upon him to be exercised
and the contract considered as binding
upon him
The party made his declaration of
option after he saw the subject
matter either by disposition or
expression.
The party had seen part of the object
which can represent the whole of the
subject matter.
The subject matter destroyed
whiles the subject matter in the
hand of the purchaser after it has
been delivered.
Termination
of the Option
of Viewing
The buyer paid for the price of the
subject matter after he saw the
subject matter.
Deaths of the party also
extinguish the option of
inspection.
If the buyer gives the subject
matter as a mortgage,
automatically the option of
inspection will be terminated.
The Effects of Option of Viewing
Contracting party who did not see the subject
matter has the option either to continue or
rescind the contract after viewing take place.
The right to rescind or accept the contract is
on the part of the party who exercised the
option of viewing unless he looses his right by
saying, “I accepted the contract” or, “I am
satisfied with the contract”.
Thus the contract will be binding if he does
something that can be considered as he had
accepted the subject matter. If he opts to
annul it then the contract considered has
never been existed.
KHIYAR AL-AYB
(OPTION OF DEFECT)
Presenter:
Mahyuddin Daud
Meaning of khiyar al-ayb
• It is an option given to a party to rescind the
contract when he discovers in the subject, defect
that reduces its value or that makes it fall short of its
requirements or specifications.
• The Malikis termed this option as “khiyar alNaqisah” or the option of reduction.
• It is a general rule that there should be no deceit or
fraud in sale transactions among Muslims. As such,
this necessitates the security of sale i.e. the right of
option
• This type of option arises only if the contract has
been concluded.
• If the contract is still in the state of negotiation
or still under discussion, the affected party
cannot exercise this option.
• If anything appears in the subject of the contract
which does not match its original use or
decreases its conventional market value, or
makes it unfit to meet requirements expected of
it, then the buyer have the right to exercise
option of defect, as freedom from defects is the
right of the buyer given in any commercial
transactions.
Purpose of the Option
• If the defect reduces the value of the object, so it
is only fair to give the party a choice as when the
subject matter has defect, the consent or
satisfaction of parties involved are one-sided.
Surah An-Nisa Verse 29
• Allah S.W.T prohibits taking money of others
illegally and command that trading should be
conducted with mutual consent as stated in anNisa’:29.
• “O ye who believe! Eat not up your property
among yourselves in vanities: but let be there
amongst you traffic and trade by mutual good
will: nor kill or destroy yourselves: for verily
God any hath been to you Most Merciful!”
Hadiths:
The Prophet s.a.w says:
“A Muslim is a brother to another Muslim. It is
illegal for a Muslim to sell his brother a
deficient thing unless he makes it clear to him”
“It is illegal for someone to sell something
without showing its real qualities; and it is
illegal for someone who knows about it not to
show it.”
“It is reported that the Prophet s.a.w passed by
someone selling foodstuff. He (the Prophet) put
his hand in it and found it wet, then he said, He
who cheats us is not one of us”
The Mejelle, Article 336:
“Any buyer in Islamic law has an automatic
implied warranty against latent defects in the
goods purchased”.
Conditions for Option of Defect to
Become Applicable
1. The defect have existed in the subject matter prior to
the time of sale or it occurs before the delivery and
while it is still in the hands of the seller.
2. The defect which existed in the subject matter
decreases its value or renders it unfit for the purpose to
which it is intended
3. The buyer must be unaware of the defect at the time of
contracting and taking the subject matter into his
possession. If the seller indicates that the defect is so
manifestly obvious so as not to escape defection and
the buyer accepted it without protest, he is considered
to have waived his right.
4. The absence of stipulation for waiving or releasing the
seller from liability for the defect in the subject matter
What if express provisions were
stipulated on acquittal from liability
if defects found?
• the Option is not lost if both parties agree to
acquit each other of all defects.
• Abu Hanifah and Abu Yusuf consider a sale
which contains a provision of acquitting of
defects as valid, even if the defects were not
mentioned in detail.
• It is of no consequence whether the defect
existed before the contract or after it BUT before
the buyer receives the sold object.
What if express provisions were
stipulated on acquittal from liability
if defects found?
Imam Malik, Al-Shafie
and Muhammad ibn AlHasan
The provision of acquittal
covers only the defects which
exist at the time of the
conclusion of the contract; it
does not cover defects
occuring after that and
before the buyer receives the
sold object
Zaidis
If the two parties agree to
acquit of all defects,
apparent or hidden, the
option is dropped
Conditions under which right of
Option of Defect cannot be exercised
1. When the buyer, after he has known the defect in
the subject matter, insists or continues on buying
the thing.
2. When the buyer knew the defect in the subject
matter but transfers or gives it to other persons as
a gift or as a selling thing. He loses his right of
option of defect.
3. When the seller sells a thing with a condition that
he shall not be made liable for any defect in the
subject matter and the buyer agreed upon that
condition. The buyer loss his right of option of
defect.
Conditions under which right of
Option of Defect cannot be exercised
4. If the defect is slight and if it does not reduce the
value of the object, and if it is conventional to
overlook it, then the party cannot use it as a
pretext to return the sold object
5. If the new defect occurs in the subject matter while
it is in the possession of the buyer and he discovers
that the object had an old defect while it was in the
possession of the seller, then the buyer can claim
the reduction of the value but he cannot return the
object.
What if the buyer keeps silent of the
defect in the subject matter?
• The right of khiyar will not be available if the
defect is the one which could be apparent with
usual examination and the buyer knows of it.
• However, if the defect does not appear at the
usual examination, the option is never dropped.
Is the Option Transferable to Heirs?
• The option of defect is one of the options that are
transferable to the inheritors as it is attached to
the subject of the contract.
• The option holder’s death does not cause the
option to be lost because the object itself is
transmitted to inheritors, and thus so is the
option.
• This is because inheritors should inherit a sound
and not a defective object.
Applicability of the right of Option
•
•
•
•
•
contract of sale
contract of Ijarah (hire)
contract of exchange of currency
Mahr payment,
Sulh (reconciliation) involving agreement or setting
blood money, that is all contracts whose purpose is
the exchange of counter values.
• However, in contracts whose primary aim is not
mutual exchange of counter-values there is no
dispute that defects have no effects in them
whatsoever.
KHIYAR AL-TA’YIN
(OPTION OF DETERMINATION)
Presenter:
Mahyuddin Daud
• The parties have the option to choose the object of sale
out of multiple varieties of a given article.
• The purpose of this Khiyar is to give wide choice to the
buyer to choose and the seller to stipulate the subject
matter of the contract.
• For example the parties may purchase one out of three
varieties of commodities of different qualities (excellent,
average and poor) without specifying which particular
varieties would be purchased on the condition that those
the subject matter from the same class but different
qualities and different price.
• For example the object were car and have three
types, Audi, Perdana V6, and Dutson also have
different qualities and different price. In this
situation, the seller have the option to determine
the object, price and the qualities of the subject
matter of the contract itself.
• This option only applicable to the parties of the
contract only in a stipulated time.
• This option cannot be stipulated by the third parties.
However, some scholar in the opinion that this
option only applicable to the buyer only.
• Duration of this option according to the nature of
the transaction. Imam Abu Hanifa maintain that the
period of this khiyar At-Ta’yin same as khiyar al
syakk which is 3 days. However duration of option
must be precisely defined by contracting parties.
• Syafie and Hanbalis do not recognize this option.
They are in the opinion that if the subject matter of
the contract is not determined sufficiently then it is
not confirming the basic principle of Islamic
Transaction. They also argued that there is no
authority on Hadith about Khiyar At-Ta’yin.
• Hanafi and Maliki approved Khiyar at-Ta’yin on
the basis of Istihsan and affirmed that the option
has been introduce to prevent any damages
CONDITIONS OF KHIYAR AL TA’YIN
1.
2.
3.
4.
5.
6.
This option is applicable in commutative contract (unchanged of
quantities) for valuable consideration and in which property is
transferred. It is therefore restricted to the contract of sale, barter, give
and trust.
Choice of determination may only be exercised between a maximum of 3
object which have three qualities, good, medium and bad
If the object were less or more than 3, the contract will be voidable on the
ground of ‘Gharar’( uncertainty)
This option only applicable to the parties of the contract only and not to
the third party it is for the purpose to avoid in justice among the parties
of the contract
Option of determination must expressly stipulate in the contract which
means that both of them knew that they have the option to choose the
subject matter of the contract. If not, the seller must inform the buyer.
Hanafis require that the object which the choice is made must be all the
same class but must different quality or kind for the option to be of any
consequences.
Conclusion
• The Options are another alternative which could
assist in ensuring the fairness in trade.
• It also ensures the contracting parties to have
transactions which are in line with the Shariah
• The right of Options has also been adopted in
the modern financial transactions