Understanding Islamic Finance - Doha Academy of Tertiary Studies

Islamic Law of Contracts and Business Transactions 115However, modern Muslim jurists do not at all consider themselves bound by their predecessors,and most Islamic banks consider the promise to purchase as binding. Further, they require collateralagainst the possibility of the promise being dishonoured. This reasoned departure from medievalFiqh demonstrates that important developments are occurring in the way Islamic judgements areconstructed. These developments are creating a degree of conflict among Islamic legal scholars,and objections have been raised against the Murabaha transaction as it is currently practised.”In the opinion of this author, it does not involve any conflict. It seems that Ray hasnot thoroughly read the position and importance of promise in Islamic Sharī´ah. Manytraditional jurists, particularly the Malikis, Hanbalis and some Hanafi and Shafi‘e, and almostall contemporary jurists have accepted the legal effectiveness of promise if understandingbetween the promisor and the promisee takes place in commercial dealings with mutualconsent. According to them, fulfilling a promise is mandatory and a promisor is under moralas well as legal obligation to fulfil his promise. In this regard, Shaikh Taqi Usmani says:“This view is ascribed to Samurah b. Jundub, the well-known companion of the holy Prophet‘Umar B. Abdul Aziz, Hasan al-Basri, Sa‘id b. al-Ashwa’, Ishaq b. Rahwaih and Imam Bukhari.The same is the view of some Maliki jurists, and it is preferred by Ibn-al-Arabi and Ibn-al-Shat,and endorsed by al-Ghazzali, the famous Shafi‘e jurist, who says the promise is binding if it ismade in absolute terms. The same is the view of Ibn Shubruma”. 25 The third view is presented bysome Maliki jurists. They say that in normal conditions, promise is not binding, but if the promisorhas caused the promise to incur some expenses or undertake some labour or liability on the basisof promise, it is mandatory on him to fulfil his promise for which he may be compelled by thecourts. 26Further, this does not contradict any Nass (text) of the Qur’ān or Sunnah and thereforecan be accepted on the principle of Ibāhatul Asliyah.The Islamic Fiqh Academy of the OIC has made the promise in commercial dealingsbinding with the following conditions:1. The promise should be unilateral or one-sided.2. The promisor must have caused the promisee to incur some liabilities or expenses.3. If the promise is to purchase something, the actual sale must take place at the appointedtime by the exchange of offer and acceptance. Mere promise itself should not be takenas the actual sale.4. If the promisor backs out of his promise, the court may force him either to purchasethe commodity or pay actual damages to the seller. The actual damages will include theactual monetary loss suffered by him, but will not include the opportunity cost. 27According to the majority of scholars, Muwa‘adah or Mu‘ahidah (bilateral promise) isnot allowed in situations where ‘Aqd is not allowed (e.g. forward currency contracts), andthus not enforceable by law. However, some scholars of the subcontinent consider bilateralpromise as enforceable by law except for the bilateral promises in transactions like shortsellingof currencies or shares of joint stock companies. Notwithstanding the binding natureof promise, the difference between a contract (‘Aqd) and a bilateral promise is that theownership in bilateral promise is not transferred at the time of signing the promise, while in25 Al Muhallah, 8: 28; Bukhari, al-Sahih, al Shahadat; Ghazali, 3: 133, cf. Usmani, 2000a, p. 122.26 For detail see Usmani, 2000a, pp. 120–126.27 OIC Fiqh Academy, 5th Conference, Resolution Nos. 2 and 3.