Understanding Islamic Finance - Doha Academy of Tertiary Studies

Trading in Islamic Commercial Law 143you wish, provided that the exchange is hand to hand”. 55 Exchange rules need to be seen inthe light of this saying, as discussed in Chapter 4.The sale and purchase of currencies and foreign exchange dealings are included in thenormal activities of banks and financial institutions. It is imperative, therefore, that when asale transaction is taking place among currencies, the exchange has to take place instantlyand not on a deferred basis. In this regard, a normal time required for payment/settlementis allowed by the Sharī´ah scholars provided that it does not become a condition of theexchange. The OIC Islamic Fiqh Academy and the Sharī´ah advisory committee of Al BarakaBank allow the use of an otherwise Sharī´ah-compliant credit card for the purchase of goldand silver, as an unintentional delay of up to 72 hours does not create a problem in respectof payment. 566.7 GHARAR – A CAUSE OF PROHIBITION OF SALESGharar is one of the main factors that make a transaction un-Islamic. This subject has beendiscussed in detail in Chapter 3. Here we shall indicate the overall theme of Gharar and thekinds of sale that have been prohibited on its account.“Gharar” means hazard, chance, stake or risk. In the legal terminology of jurists, “Gharar”is the sale of a thing which is not present at hand or whose consequence is not known or asale involving hazard in which one does not know whether it will come to be or not, as in thesale of a fish in water or a bird in the air. From this the jurists derive the general principlethat a sale must not be doubtful or uncertain as far as the rights and obligations of the partiesare concerned, otherwise it would be tantamount to deceiving the other party. The object ofthe contract must be precisely determined, and price and terms must be clear and known.The general principles with regard to avoiding Gharar in sale transactions that have beenderived by jurists are: the contracts must be free from absolute uncertainty about the subjectmatter and its counter value in exchanges. The uncertainty leads to risk but all risks are notGharar, because business risk is not only a part of life but also a valid requirement for takinga return in exchanges. The requirement is that the commodity must be defined, determinedand deliverable and clearly known to the contracting parties; quality and quantity must bestipulated; the contract must not be doubtful or uncertain so far as the rights and obligations ofthe contracting parties are concerned and the parties should know the actual state of the goods.This implies that ignorance (Jahl) is also a part of Gharar that has to be avoided. Thepurchaser should know about the existence and condition of the goods and the vendor shouldbe able to deliver them on the agreed terms and at the agreed time. In other words, one shouldnot undertake anything or any act blindly without sufficient knowledge, or risk oneself inadventure without knowing the outcome or the consequences.The holy Prophet (pbuh) prohibited all those transactions that involved Gharar (and Jahl).These included, Bai‘ al-Ma‘dum, Bai‘ al-Mulamasah, Bai‘ al-Munabadhah, Bai‘ al Hasat,and similar other contracts involving uncertainty. 57 Imam Malik defines Mulamasah andMunabadhah thus: “Mulamasah is when a man touches or feels a garment, but does notunfold it nor ascertain (its character). Munabadhah is when a man throws to another a55 Tirmidhi, 1988, No. 1263–1994, also in Bukhari, Muslim, ’Ibn Mājah.56 Al Baraka Resolutions, 1995, No. 12/6, p. 193.57 Tirmidhi, 1988, Nos. 1252, 1253 (p. 8), 1332 (p. 31), also see Bukhari, Sahih, Kitab al Buyoo.