Options to Reconsider (Cooling-Off Options, Either-Or Options, and Options to Revoke Due to Non-Payment) - Appendix B (The Shariah Basis for the Standard)

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1. Shari ’ah Standard No. (52): Options to Reconsider (Cooling-Off Options, Either-Or Options, and Options to Revoke Due to Non-Payment) Appendix (B) The Shari’ah Basis for the Standard Cooling-Off Option ■ The basis for cooling-off option is the Hadith narrated by Habban Bin Munqidh, attributed to the Prophet (peace be upon him), saying: “If you are concluding a deal say: ‘There shall be no Khalabah (misleading marketing or showcasing of products), then you shall have a 3-day option’” option’”.(2) ■ The basis for consideration of all expressions that imply the cooling-off option is the opinion of the Four Schools of Fiqh (Madhahib).(3) Imam AlNawawi said: “This expression (as mentioned in the Hadith related by Ibn Hibban: “There shall be no Khalabah...” is neither considered to be a kind of literal worship, nor a Shari’ah ruling that a religiously accountable person shall be aware of it”.(4) ■ The basis for the stipulation of timing for cooling-off conditions is that an untimed option results in Jahalah (obscurity or ambiguity) which may lead to dispute. This is the opinion of the majority of Fuqaha. ■ The basis for the stipulation of attaching the option to the contract is that detachment contradicts the prerequisites of the contract, which entails that it takes effect immediately.(5) ■ The basis for the stipulation of attaching the option to a binding contract is that its usability comes into existence only when attached to such a contract. The basis for invalidity of the stipulation of such an option in contracts that entail taking possession (Qabd) is that it contravenes Qabd stipulated in Sarf and in Salam. (2) It has been related by Ibn Hibban. It is a Hadith with acceptable authenticity. (3) “Al-Fatawa Al-Hindiyyah” [3: 39]; “Al-Mughni” [3: 529]; and others. (4) “Al-Majmu’” [9: 210]. (5) “Al-Mughni” [3: 502]; “Bada`i’ Al-Sana`i’” [5: 300]; and “Al-Majmu’” by Al-Nawawi, [9: 191]. 1228
2. Shari ’ah Standard No. (52): Options to Reconsider (Cooling-Off Options, Either-Or Options, and Options to Revoke Due to Non-Payment) ■ The basis for permissibility (but not the obligability) of delivery of the two countervalues is that delivery serves both selection and reconsideration, which are literally the purpose of the option. ■ The basis for the situation where the option does not abate upon offering it for sale is that such a practice is meant to probe the fairness of the price. However, it does abate in case of actual sale because this serves as a testimony to acceptance, as the disposal of the object underlying the option is considered to be as the disposal by owners. ■ The basis for effecting ownership upon sale is that the price does not change if the two parties opted for continuity of ownership, and this conforms to the Hanafi School, as opposed to Hanbalis. If the option is rested with one party, then the position of this standard is based on a variety of perspectives. [see applications in the Shari’ah Standard No. (8) on Murabahah] Option to Revoke Due to Non-Payment ■ The basis for permissibility is Qiyas (analogical deduction) to the cooling-off option and reports dating back to the time of the companions. It was taken up by Hanafis, Malikis and Hanbalis. The wisdom behind its permissibility is the need for the buyer to reconsider/re-evaluate his knowledge about prices and for the seller to ensure that the proper price is quoted in order to avoid procrastination by the buyer. ■ The basis for impermissibility in contracts in which taking possession (Qabd) is a stipulation –such as Sarf and Salam- is that it is inconsistent with the stipulations of their validity. ■ The basis for abating of the option upon the death of its owner is that it constitutes a readiness and willingness to act, and therefore is not transferable to heirs. Either-Or Option ■ The basis for permissibility of the either-or option is Qiyas (analogical deduction) to the cooling-off option; since it conforms to Shari’ah injunctions- i.e., the cooling-off option- so it was permissible based on it, and due to the need of the buyer to employ it in case of hesitancy as to selection of the most needful from amongst a number of objects. The majority of Fuqaha adopted it though with different views on definition and scope. 1229
3. Shari ’ah Standard No. (52): Options to Reconsider (Cooling-Off Options, Either-Or Options, and Options to Revoke Due to Non-Payment) ■ The basis for all issues pertaining to ownership is the application of the rules relating to Daman (liability) and destruction (of objects of sales) and to treat both parties according to rules of equity in relation to the price that needs to be paid if the subject-matter of the option is destroyed. ■ The basis for the transferability of the option to heirs is that a testator has an established ownership in the objects subject matter of the option, and as such heirs shall need to identify their selection. ■ The basis for impermissibility of sale and tradability of either-or options is that such options are construed to be mere readiness and willingness (to contract), which cannot be transferred or traded. ■ The basis for combination of two options or more is that such combination does not contradict their prerequisites -i.e., the effectuating of sale on an immediate basis. 1230