Islamic Law of Contracts and Gharar
Gharar is contractual uncertainty. An exchange contract that exhibit gharar is void. The meaning of gharar is, nevertheless, very intricate. In Shari’ah an exchange contract should spell out clearly the rights and obligations of the parties involved. If part of these rights or obligations is uncertain then gharar is present. For example if one sells, for $ 5, an item which will be decided by a “draw” of number from the hat of the seller, is purely a gharar contract. Clearly the obligation of the buyer is disposed off fully via the payment of the price. But there is uncertainty about the other parties obligations, is it going to be an automobile or just a pencil. Certainly this example is exotic and can be found only in games of chance. However, the possibilities of gharar is all exchange contracts is very significant. For example if 1 sell an item to a buyer and tell him the exact price will be revealed to you later, this is also considered a gharar contract, even if the buyer is willing to accept this uncertainty.
Source: An Introduction To Islamic Banking, Shaykh Dr Mohamed Ali Elgari. Republished with permission.
Search our Resources or Dictionary