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KHIYARAT (OPTIONS)

Presenters: Mahyuddin Daud Hairul Hafiz Hasbullah Norlaili Mat Isa Nuur Azza Leenda Chamingan. KHIYARAT (OPTIONS). The options / rights for contracting parties to confirm or exclude themselves from performing the contract. INTRODUCTION. What is Khiyar?(in general)

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KHIYARAT (OPTIONS)

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  1. Presenters: Mahyuddin Daud Hairul Hafiz Hasbullah Norlaili Mat Isa Nuur Azza Leenda Chamingan KHIYARAT (OPTIONS) The options / rights for contracting parties to confirm or exclude themselves from performing the contract

  2. INTRODUCTION What is Khiyar?(in general) is a right given to both parties or to either one of them to confirm, cancel or back down from the contract. Khiyar based on economic glossary: A term used to express an option within a certain period after the conclusion of a bargain during which either of the parties may cancel it

  3. DEFINITION • The 2 Possible Decision: • To ratify by choosing from among the alternative objects; or • (ii) To cancel the contract entirely According to Al-Tayin: “One of the parties therefore reserves the option to choose, designate from among several objects, the true object of that contract during prefixed term”

  4. OTHERS DEFINITION

  5. TYPES OF KHIYAR

  6. KHIYAR AL-MAJLIS(OPTION OF MEETING) Presenter: Hairul Hafiz Hasbullah

  7. KHIYAR MAJLIS Definition: “Option during the meeting” means each one the parties has the right to confirm or cancel the contract in the negotiation stage of the contracy, as long as the two parties still there and have not left.

  8. KHIYAR MAJLIS

  9. Continue…..

  10. Different Khiyar al-Majlis is different from MajlisAqad in the application because Majlisaqad is a gathering place or the place for such agreement or place of business. As for Khiyar Al-Majlis the purpose is to give a right and choice to the related party either to proceed or cancel the agreement aslong the Majlis not be dissolved. According to Mazhab’sShafie’ and Hambali: Pursuant to surah Al-Maidah; “the parties which are binding to a contract and other party no right to revoke the contract”

  11. LEGALITY

  12. LEGALITY

  13. LEGALITY

  14. View from the 4 Mazhabs MazhabShafie and Hambali The Ulama’s have a different view pertaining to this Khiyar. According to MazhabShafie and Hambali, Both of them agreed with the KhiyarMajlis and stated that this contract is not binding and undecided as long the parties still in the place to execute the contract. Both parties still have the rights either to accept or cancel . However, when one of the party or both parties apart which each other or get out from the designated place automatically the contract is concluded and parties are bound to it. In addition, according to MazhabShafie it is an obligation to the party that accept that offer to accept immediately once the offer is out to give a chance to the parties to re-think about the offer and enough time to apply Khiyar Al-Majlis.

  15. MazhabHanafi and Maliki (1) However according to MazhabHanafi and Maliki, once the contract is concluded with a positive offer “proposal” and acceptance, it is ultimate and binding and neither one the parties has the choice of backing down from it. They provide as evidence the Quranic commandment to the believers to keep their contract referring to Surah Al-Maidahayat 1 Meaning : “O mankind, satisfied and concluded the agreements.

  16. The above surah stated that Muslim is binding with their contract and according to this 2 Mazhab the application of this Khiyar is contradict with the stated surah. (2) Mazhab maliki also rejected this Khiyar Majlis because Madinah people did not practiced Khiyar al-Majlis during our Prophet time.

  17. whatever the case maybe, the reason for the disagreement amongst scholars on he option of the meeting is their way of understanding the hadiths relating to it. Those who confirm the option have understood the hadiths as they were and have not offered any interpretation. Those who reject the option interpreted the hadiths in the manner mentioned above. This exposition of the jurisprudential opinions on the option of the meeting and the rulings pertaining to it should be seen as a great achievement of Islamic jurisprudence as it has been unique is doing it.

  18. ILLUSTRATIONS illustration (I) When Dr Azamhas made a purchase and was not aware, at the time of sale or previously, of a defect in the article brought, Dr Azam has an option either be content with it at the agreed price or reject it. illustration (II) If Ijam has sold an asset as being possessed of some specific quality and that asset turns out to be without quality, DrAzam has an option to annul contract.

  19. KHIYAR AL-SYARAT(OPTION OF CONDITION) Presenter: Nuur Azza Leenda Chamingan

  20. Khiyar Al-Syarat • It is a right given to the parties or another person to confirm or cancel the contract during an agreed period of time. • Contradict with Prophetic tradition but accepted on 2 reasons: • Prophet accepted and sanctioned it • Some people may not be clever about trading and need expert opinion • Applicable to binding, necessary and committing contract which are cancellable even it was committing to one party e.g. sae,rent partnership, warranty

  21. Issues • Who has the option of condition • Both or either one of the parties • Abu Hanifah, Malik, Ahmad IbnHanbal, the Zaidis and Al-Shafie – one of the parties may delegate it to the stranger • Parties may not be knowledgeable and need expert opinion • Al-Shafie and Zufar – not permissible to delegate to another person. Option was meant originally to be used by contracting parties. The practice of delegating it to another person means transferring the power over the contract to a stranger

  22. 2.Period of Option of Condition Abu Hanifa, Zufar and Al-Shafie -does not exceed 3 days -this period is given to the parties to determine Abu Yusuf, Muhammad and Ahmad ibnHanbal -can exceed 3 days and may be longer provided that the time is determined and defined -to give ample time to decide, so should not limit Imam Malik -originally 3 days but can be extended to sufficient time -in case where the subject matter of contract was in a place which is very far and could not be reached within 3 days Zaidis -period should be set and made known provided it is within 3 days Parties claim different agreed period-shorter one would be considered Parties keep silent and do not specify the period – 3 days

  23. 3.Cancellation of contract in the option of condition (verbal / action) Abu Hanifa & Muhammad -other party has to be informed of the cancellation -this is to safeguard the interest of the other parties Hanbalis, Abu Yusuf and Hanafi -the party who has the option can cancel the contract in the absent of the other party without his consent Zaidi -The other party has to be informed of the cancellation

  24. 4. Ownership of subject matter during the period of option Abu Hanifa -the ownership does not transfer to the buyer during the period of option, price also should not paid by the buyer to the seller during this period. -but, if the option belongs to the seller alone, ownership not transfer but the price should go out of the ownership of the buyer -to avoid having both price and sold object in the possession of the seller Abu Yusuf and Muhammad -Price = ownership of the seller -but if option be on the buyer, price does not go out of his possession but the sold object goes out the possession of the seller without entering the possession of the buyer Abu Hanifah, Abu Yusuf, Muhammad and Malikis -the sold object does not go out of the ownership of the seller during the period of the option Shafie and Hanbalis -the ownership should be transferred during the period of option

  25. 5.Responsibility of the maintenance expenses of the subject matter and right to the increase -Hanafi and Maliki Responsibility of the seller -Other scholars -responsibility of the buyer 6.Option nullified with death -Hanafi and Hanbalis -option is dropped and not transfer to the heirs -consider it as personal right -Malikis and Shafies -option is transferred to the heirs as it is a financial right not personal right -the option of condition is lost by the death of the parties who has it

  26. 7.Delegating the option of condition to others -cannot withdraw except with the death of the third person -agent can’t delegate the option to another person except with the approval of the appointer If the agent dies, the right goes back to the original party 8. Differences in the option of condition -burder of proof – one who denies on the condition and he has to deliver solemn oath in the absence of the conclusive proof

  27. KHIYAR AL-RU’YAH(OPTION OF VIEWING) Presenter: Norlaili Mat Isa

  28. General rule • In order to conclude a valid binding contract the subject matter must exist at the time of the contract in order to avoid gharar or uncertainty. • But, this strict rule will caused hardship to the contracting parties • Thus the Muslim jurist had allow exceptions to the strict rule of existence. • As for example, bay’ al-salam (sale by advance payment for the future delivery), bay’ al-istisna’ (contract of manufacture), Ijarah (contract of hire) and musaqat (contract of irrigation).

  29. But still all this kind of transaction still has its own stage of uncertainty (gharar) because the party still has not seen the subject matter yet. • Thus, to avoid uncertainty the purchaser given power to opt whether to continue or rescind the contract concluded between them after seeing and inspect the subject matter. • This option known as option of viewing or option of sight (khiyar al-ru’yah). This option also known as option of inspectionbecause not only see but

  30. Purposes of khiyar al-ru’yah • To avoid injustice that may lead to ignorance and dispute among parties. • To protect the interest (istihsan) of Muslim and to prevent any disputes among them. • To avoid unfairness when they have no experience or ability to market place to buy things they have not seen.

  31. Legality of khiyar al-ru’yah

  32. Conditions of the Option of Viewing • The subject matter of transaction must define as to its kind, genus, value to prevent any imbalance between the parties obligation. • The party should not have seen the subject matter before. If the party has seen the subject matter before, the option will not applicable anymore. The viewing can be in other form such as touch, smell, or taste. • The party can only exercised the option after the purchaser have seen the subject matter.

  33. The Period to have the Option and its Duration

  34. Muslim jurists differ in term of determining the period in order to avoid existence of uncertainty (gharar) in the contract. Gharar here refer to the decision whether the parties still want to continue or terminate the contract.

  35. The Effects of Option of Viewing

  36. KHIYAR AL-AYB(OPTION OF DEFECT) Presenter: Mahyuddin Daud

  37. Meaning of khiyar al-ayb • It is an option given to a party to rescind the contract when he discovers in the subject, defect that reduces its value or that makes it fall short of its requirements or specifications. • The Malikis termed this option as “khiyar al-Naqisah” or the option of reduction. • It is a general rule that there should be no deceit or fraud in sale transactions among Muslims. As such, this necessitates the security of sale i.e. the right of option

  38. This type of option arises only if the contract has been concluded. • If the contract is still in the state of negotiation or still under discussion, the affected party cannot exercise this option. • If anything appears in the subject of the contract which does not match its original use or decreases its conventional market value, or makes it unfit to meet requirements expected of it, then the buyer have the right to exercise option of defect, as freedom from defects is the right of the buyer given in any commercial transactions.

  39. Purpose of the Option • If the defect reduces the value of the object, so it is only fair to give the party a choice as when the subject matter has defect, the consent or satisfaction of parties involved are one-sided.

  40. Surah An-Nisa Verse 29 • Allah S.W.T prohibits taking money of others illegally and command that trading should be conducted with mutual consent as stated in an-Nisa’:29. • “O ye who believe! Eat not up your property among yourselves in vanities: but let be there amongst you traffic and trade by mutual good will: nor kill or destroy yourselves: for verily God any hath been to you Most Merciful!”

  41. Hadiths: The Prophet s.a.w says: “A Muslim is a brother to another Muslim. It is illegal for a Muslim to sell his brother a deficient thing unless he makes it clear to him” “It is illegal for someone to sell something without showing its real qualities; and it is illegal for someone who knows about it not to show it.”

  42. “It is reported that the Prophet s.a.w passed by someone selling foodstuff. He (the Prophet) put his hand in it and found it wet, then he said, He who cheats us is not one of us” The Mejelle, Article 336: “Any buyer in Islamic law has an automatic implied warranty against latent defects in the goods purchased”.

  43. Conditions for Option of Defect to Become Applicable • The defect have existed in the subject matter prior to the time of sale or it occurs before the delivery and while it is still in the hands of the seller. • The defect which existed in the subject matter decreases its value or renders it unfit for the purpose to which it is intended • The buyer must be unaware of the defect at the time of contracting and taking the subject matter into his possession. If the seller indicates that the defect is so manifestly obvious so as not to escape defection and the buyer accepted it without protest, he is considered to have waived his right. • The absence of stipulation for waiving or releasing the seller from liability for the defect in the subject matter

  44. What if express provisions were stipulated on acquittal from liability if defects found? • the Option is not lost if both parties agree to acquit each other of all defects. • Abu Hanifah and Abu Yusuf consider a sale which contains a provision of acquitting of defects as valid, even if the defects were not mentioned in detail. • It is of no consequence whether the defect existed before the contract or after it BUT before the buyer receives the sold object.

  45. What if express provisions were stipulated on acquittal from liability if defects found?

  46. Conditions under which right of Option of Defect cannot be exercised • When the buyer, after he has known the defect in the subject matter, insists or continues on buying the thing. • When the buyer knew the defect in the subject matter but transfers or gives it to other persons as a gift or as a selling thing. He loses his right of option of defect. • When the seller sells a thing with a condition that he shall not be made liable for any defect in the subject matter and the buyer agreed upon that condition. The buyer loss his right of option of defect.

  47. Conditions under which right of Option of Defect cannot be exercised • If the defect is slight and if it does not reduce the value of the object, and if it is conventional to overlook it, then the party cannot use it as a pretext to return the sold object • If the new defect occurs in the subject matter while it is in the possession of the buyer and he discovers that the object had an old defect while it was in the possession of the seller, then the buyer can claim the reduction of the value but he cannot return the object.

  48. What if the buyer keeps silent of the defect in the subject matter? • The right of khiyar will not be available if the defect is the one which could be apparent with usual examination and the buyer knows of it. • However, if the defect does not appear at the usual examination, the option is never dropped.

  49. Is the Option Transferable to Heirs? • The option of defect is one of the options that are transferable to the inheritors as it is attached to the subject of the contract. • The option holder’s death does not cause the option to be lost because the object itself is transmitted to inheritors, and thus so is the option. • This is because inheritors should inherit a sound and not a defective object.

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