Islamic Contracts

In Islamic jurisprudence what is the ruling of putting a condition on a contract or agreement?

There are four basic rules for judging the validity of conditions in a contract:

1) A condition, which is not against the contract, is a valid condition.

2) A condition, which seems to be against the contract, but it is in the market practice, that type of condition is not void, if its voidness is not proven with the clear injunctions of the Holy Quran and Sunnah. For example ‘A’ buys an air conditioner on a condition that the seller will provide him five-year guarantee and one year free service. This type of condition does not invalidate the contract.

3) A condition that is against the contract and not in the practice of market but it is in favor of one of the contractors or subject matter, this type of condition is void. For example if ‘A’ says he sells a car with a condition that he will use it on a fixed date every month, this contract will be void.

4) A condition, which is against the contract, not in the market practices and not in favor of any contractor, is not a void condition.  

Now a question arises what is the ruling of void condition, whether it invalidates the contract or not?

The answer is that there is a detail about the impacts of void condition. Sometimes a void condition invalidates the contract and sometimes it does not invalidate the contract, however, the condition itself is annulled.

To elaborate this, Islamic jurists and scholars have written that the compensation (Uqood Muawadha) like sale, purchase, lease agreements become void by putting void condition. However, non-compensatory (voluntarily) agreements (Uqood Ghair Muawadha) like contract of loan (Qard-e-Hasanah), do not become void because of void condition. The void condition, however, becomes itself ineffective. For example if ‘A’ gives to ‘B’ a loan with a condition of premium at the time of repayment, this condition of interest is void. However, this condition does not invalidate the contract, therefore all transaction done by this borrowed money, will be valid. But the condition of interest itself is revoked; therefore ‘B’ is not liable for the payment of interest.

Rights, Responsibility and Obligation in a contract:

In Islamic Fiqh, some contracts are such that rights and obligations are also attached to the Agent doing the contract on behalf of the Contracting Party eg. Sales Contract, Ijara, Istisna, Salam etc. While in others Principal has all the responsibilities, rights & obligations eg. Nikah.

Source: Dr. Muhammad Imran Ashraf Usmani, Meezan Bank’s Guide to Islamic Banking.