Revocation of Contracts by Exercise of a Cooling-Off Option - Appendix B (The Shariah Basis for the Standard)

Transcription

1. Shari ’ah Standard No. (54): Revocation of Contracts by Exercise of a Cooling-Off Option Appendix (B) The Shari’ah Basis for the Standard ■ Stipulation of cooling-off options apply only to binding contracts because nonbinding contracts are by their nature revocable by one or both parties. ■ The validity of revocation by any form of language, that indicates it, is based on the general Shari’ah maxim: “Contracts are interpreted according to intent and inherent meaning of the parties and not by the words or forms used” (Maxims of Al-Majallah Al-’Adliyyah) and the statement of some jurists that the use of the technical word “Revocation” is designated by jurists and what is important is its meaning.(2) ■ The existence of the cause triggering the option to revoke is required because revocation is contrary to the norm and rule that contracts are generally binding and that in principle consequences must flow necessarily from their causes, and that the cause must exist at the time of revocation.(3) ■ The requirement that the other party be notified of revocation is based on the opinion of Abu Hanifah and Muhammad Ibn Al-Hasan, contrary to the opinion of the majority of jurists, because notification averts harm from the other party who, unaware of the revocation, may conduct themselves to their detriment. ■ The four impediments to the exercise of cooling-off options are based variously on the following rationale: (I) Revocation would contradict the basic elements of the contract which have been validly established; or (II) revocation would contradict consent implied by conduct (implied terms have the same legal effect as express ones); or (III) revocation is impossible because the term of the contract has expired; or (IV) the subject matter of the option to revoke is deemed by law to have ceased to exist. (2) “Sharh Al-Minhaj Wa Hashiyat Al-Qalyubi” [2: 195] (3) “Al-Furuq” by Al-Qarafi [3: 269]; and “Al-Qalyubi” [2: 189] 1257
2. Shari ’ah Standard No. (54): Revocation of Contracts by Exercise of a Cooling-Off Option ■ The basis for the ruling on the effect of revocation and that revocation nullifies the contract immediately, is the prevailing viewpoint of the Shafi’i and Hanbali schools. Revocation invalidates ownership in sale contracts. This ruling holds true for the asset sold (subject-matter of the contract), whereas increments in the asset sold (separate growth) from time of contracting until revocation and before delivery to buyer, belong to the seller who becomes the owner at or just prior to time of revocation.(4) When the buyer takes possession of the asset sold, any separate growth belongs to him. ■ The basis for the rulings stated in item 9 regarding waiver of revocation right is the viewpoint which Al-Zarkashi has indicated in his book titled “Al-Manthur Fi Al-Qawa’id” Al-Qawa’id”.(5) ■ The basis for impermissibility of stipulating compensation in the contract as a condition for waiver of revocation right, is based on analogy to Iqalah, which is considered as one form of contract revocation and has to be performed without any increase or decrease in considerations. Similarly, Shari’ah prohibits waiver of some rights (such as pre-emption and demarcation rights) against compensation. ■ The basis for permissibility of stipulating, in the contract, compensation for waiver of the remaining periods of revocation right, in case of continuous contracts such as leasing, is the fact that the party who waives his right owns a benefit that makes him entitled to remuneration. ■ The basis for applications of conditional revocation is the rulings indicated in the Shari’ah standard that relates to each application, because rulings on these applications are derived from these preceding standards. (4) “Ibn Abidin” [4: 108] and “Nihayat Al-Muhtaj” [3: 434] (5) “Al-Manthur Fi Al-Qawa’id” [2: 151] 1258