ISLAMIC LAW OF TRANSACTION

1. ISLAMIC LAW OF TRANSACTION QUESTION 2 CONCEPT OF MISTAKE AND ITS CATEGORIES

2. GROUP MEMBERS

3. IMPEDIMENTS TO CONSENT IN ISLAMIC CONTRACT

4. 4 Grounds of the impediments

5. Definition of Mistake (Ghalat)

7. Concept of mistake in islamic contract • Islamic law conceives of mistake as a substantive or intrinsic element which capable of occurring only during the formation of contractual agreement. • Mistake could arise from an assumption as to the existence, quality or quantity of the contractual object or to the nature or existence of the contract itself.

8. The provisions concerning mistake are scattered and usually are to be found in the books of fiqh among the discussion in option of description, defect or sight. • The Islamic concept of mistake is inextricably bound to the notion of consent in contract. • The law lacks in formulated theory because the provision of mistake are in actuality, mostly preclusions or safeguards designed to prevent its very incidence.

9. Categories of Mistake

10. MISTAKE AS TO OBJECT

11. Mistake as to Object of the contract

12. MISTAKE AS TO MEANING (GHALAT AL-MAA'NA)

13. Mistake as to meaning(Ghalat al-Maa’na) • According to classical jurists, a mistake with regard to the substance (Jins) of the object will constitutes the contract void abnitio. • It considered as substantive mistake. • Based on Art. 208 of Al-Majella: “If the object is declared in kind (Jins) and the object proves to be another kind, the sale is invalid (batil)”.

14. Examples

15. In this case, the mistake as to meaning is also actionable under the option of description. • This shows that the Islamic doctrine of mistake takes on noticeably wider ambit that mistake in common law.

16. Mistake as to desired quality (insubstantial) of the object • Insubtantial quality (Wasf) of a contract refer to the object being in the same substance as contracted for, but different in its quality. • It is regarded as valid but not binding - the remedy is sought under Islamic law is not under mistake (ghalat) but either under the option of defect or description.

17. Example of insubstantial mistake

18. MISTAKE WITH STIPULATION OF INTENTION 1) Manifest expression of intent 2) Deduction of intent from circumstances of the case 3) Deduction of intent from the nature of the things

19. Manifest Expression of Intent • What is about ? Expression of intents formula are al- Tasmiya (nominator) and al- Inshara (indication) • Explanation? Nomination represents the real will of the contracting party Indication represents the apparent will A • Example? sales by catalogue

20. Deduction of Intent from Circumstances of the Case • Explanation? • Not necessary for manifestation of a contracting party’s will to be express. • The other party may reasonably assume to have tacitly understood or deduced his co-contractor’s will from his accompanying circumstances or origin and be expected to recognised a mistake • Example? selling stone in a market for a precious jewel may reasonably be assumed to be that category of value.

21. Deduction of Intent from the Nature of the Things • What is about? The option of defect • Explanation? • Established option with an implied condition for there is an implied condition of guarantees concerning the soundness of the object. • Unless, contractor expressly inserts a condition of waivers against defects in the contracts. • Example? • Anything which appreciably diminishes the value of an object of ordinary commerce is regarded as a defect giving rise to an option.

22. NON- DISCLOSURE OF THE WILL Khiyar al-Ru’ya

23. What is about? • General Rule in Islamic jurisprudence: If a contractor agrees to buy an object without having seen it, he is allowed an Option of Inspection, which gives him a right to ratify or rescind the contract. • In this doctrine: A contract formed by the will of two parties cannot be valid when the will of one of those parties has been breach by mistake as to the intended object.

24. MISTAKE AS TO PERSON

25. Mistake As To Person • Not explicitly formulated by the classical jurist. • Resolution may be adopted to form general outline of a doctrine. • Not affect the contract unless the persona of the contractor, or a substantive quality thereof, which give rise to a mistake, is a legal cause to the contract.

26. Mistake As To Person • Specific contract in which a mistake as to person of the co-contractor has become importance. • Party who suffers is given the right to annul the contract following the French Civil Law concept. • Contrasted with English Common Law where Mistake as to Person falls into the category of Mistake which negate consent

27. Mistake As To Person 1) Marriage Contract. • The person of the spouse is generally of prime consideration in the contract. • Sanhuri, a modern author, distinguish between qualities generally, and essential qualities of the person. • Mistake as to essential qualities of the person in Sanhuri’s opinion will invalidates the marriage contract.

28. Mistake As To Person 2) Unilateral Contract of Gift. • The donee constitute a substantive aspect of the contract. • A mistake as to his person will give the donor the right to withdraw or demand the return of his gift.

29. Mistake As To Person 3) Unilateral Contract of Bequest • The legatee is regarded as a cause of the contract. • Al-Kasani states that among the important condition of a contract is a consent (Rida) of the testator because it is connected with the property. • Therefore, a bequest made in jest or by compulsion or mistake is invalid.

30. Mistake As To Person • 4) Contract of Pre-emption and Agency. • In the contract of agency, Mistake pertains not so much to the identity of the person as to his substantive qualities. • For example, a minor purporting to be an agent lacks capacity so to act. • If the third party dealing with the agent believes the latter has proper capacity to contract, this is a mistake in the substantial quality of the agent, that is his capacity to the contracts.

31. Mistake As To Person • Thus the third party who deals unwittingly with such an agent may avoid the contract on the ground of Mistake. • Abu Yusuf states that if the buyer is aware of the status of the agent minor, he is not allowed to avoid, whereas if he is mistaken wittingly, he may be given the option to annul or perform.

32. MISTAKE AS TO LAW

33. Mistake As To Law • General principle of the civil law that Mistake as to Law, like a mistake as to fact, may vitiate the consent of the contracting party. • Bellafonds states that the Shariah, as formulated by the classical jurist, rarely distinguishes between the concept of Mistake as to Law and that of ignorance of the law.

34. Mistake As To Law • Modern exposes of the principle of contract, there is a distinction made between Mistake and ignorance of the law. • The general maxim that “ignorance of the law is no excuse” with regard to Mistake is not always applicable is Islamic law.

35. Mistake As To Law • Compendiums on Usul al-Fiqh, the principle is that ignorance of the law is a valid excuse as long as it is not accompanied by negligence (Taqsir). • Whoever is ignorant of the law and is negligent, is held answerable to this ignorance and will not be considered a Mistake in Law. • Whoever is ignorance of the law and is not negligent in that ignorance is excused his ignorance and it may be regarded as a Mistake as to Law.

36. Mistake As To Law • The primary assumption of Islamic Fiqh is that Mistake as to law is not excusable except if the special surrounding condition can be established to rebut the charge of the assumed negligence regarding the ignorance as to the law. • The Hanafi author, al-Kasani states, in the sale of moveable property, if a neighbour asks for a right of pre-emption to that property, and the buyer, thinking that his neighbour may legally have per-emption over it, submits that right of pre-emption to him, when later one of the two want to revoke the contract without the other’s consent, he will not able to because when the submission is made, it became a contract between them.

37. Mistake As To Law • Here, the buyer mistakenly thinks that pre-emption may be allowed on moveable objects, which is mistake in law in Hanafischool. • This ignorance cannot be considered excusable because it encompasses negligence on the buyer’s behalf. • Therefore, he is not allowed to revoke the sale due to ignorance, and the contract is binding upon him.

38. MISTAKE AS TO VALUE (GHABN AL-FAHISH)

39. MISTAKE AS TO VALUE (GHABN AL-FAHISH) • Definition • The Islamic Law only recognizes mistake to value as one of the impediment to contract if it is regarded as Ghabn al-fahish (Flagrant misrepresentation). • The Majelle in its glossary has defined Ghabn al-fahish as “Excessive deception in the value of goods”

40. The Articles of the Majelle further elaborate to what extent shall a deception be considered excessive and enable a contract to be vitiated. • Article 165 states that excessive deception means:- • not less than 1/20 of the total price in respect of goods, • not less than 1/10of the total price in respect of animals; • not less than 1/5 of the total price in respect of real estate unless it is accompanied by verbal deception (Taghrir) or fraud (Tadlis)

41. Article 356 states that “ If there is an excessive deception without fraud in a sale, the person deceived cannot annul the sale”. • Article 357 states that when one party has defrauded the other and it has been ascertained that there has been excessive deception the person who is so deceived can annul the sale.

42. The rationale is that in the case of contract that is flawed due to excessive deception there is lack of equivalence in the contract which would result injustice to one of the parties.

43. CONDITIONS ATTACHED (OPINION OF THE JURISTS) • According to Hanafi, Shafi’i and Hanbali school: Ghabn must be accompanied by fraud or verbal deceit. • The Shafi’i school further added that Ghabn must be accompanied by flagrant misrepresentation. A mistake accompanied by Ghabn alone does not give rise to rescission unless accompanied by taghrir.

44. According to Hanafi, Shafi’i and Hanbali school: Ghabn must be accompanied by fraud or verbal deceit. • The Shafi’i school further added that Ghabn must be accompanied by flagrant misrepresentation. A mistake accompanied by Ghabn alone does not give rise to rescission unless accompanied by taghrir.

45. However the the I’badi school was of the opinion that a contract maybe cancelled for any diminution in value of the object whether or not that diminution is a veritable defect. • Therefore it is clear that in order for a mistake as to value have effect on the validity of the contract it is very pertinent that it must be accompanied with the element of fraud and verbal deception.

46. Exception to condition • The only exception to the rule that mistake must be accompanied by fraud and verbal deception is applicable in the case of contract which involves the property of a minor, a waqf donor or treasury.

47. The effect of Mistake as to value • Ibn Al-Hamam in his book al-Bahr al-raiq states that a contract for the sale of property (Qunya) if the Buyer is deceived in the exorbitant manner by the seller has the right to return the property to the buyer under the principle of Ghabn. has the right to return the property to the seller.

48. According to Ibn A’bidin there are 3 different stances taken by Islamic fiqh towards Ghabn unaccompanied by tgahrir:- • 1. the sale is valid but maybe rescinded absolutely; • 2. rescission is not absolute • 3. if deceit has also occurred rescission is absolute.

49. According to the Shafi’i school: Ghabn accompanied by taghrir maybe rescinded at the option of the buyer • According to Hanbali school which allow option to rescind on 3 grounds and must be accompanied by taghrir as follows:- • the sale to receive passenger; • al-Najsh; • the contract of dispatch when the carrier is unaware of the value of the commodity and does not consider it to be a condition of the contract. If he asks the contractor for indemnity and is deceived then the carrier is given the option of Ghabn since there is verbal deceit.

50. Maliki school was of the opinion that rescission is permissible on 3 conditions as follows:- • where the Ghabn al fahish occurs in a sale other than at public auction and the Ghabn al-fahish exceed 1/3 of the price or is underpriced by a 1/3 or more in a purchase; • where it occurs in a sale whereby it maybe determined that any reasonable person might have so been deceived , in which case consideration must be had to the price at the time of contracting. The prejudiced party must have had no knowledge about the value prior to the contract; • the claim must proceed within a year of the action which give rise to the deceit so that longer lapses of time leading to breaches of agreement may not disrupt the ordinary continuance of trading relations.