Islamic Contract Law: Differences Between

Wa‘d,Muwa‘adah and

‘Aqd

Although

wa‘d, muwa‘adah and ‘aqd may appear similar, they are different in terms of when they take effect, the number of parties involved, and whether an actual contractual exchange has taken place.

1.

Wa‘d

— Unilateral Promise

Wa‘d means a promise made by one person to perform something in the future.

Main Characteristics

• It involves one promisor.
• It concerns a future action.
• It does not require acceptance in order to exist as a promise.
• No actual exchange of counter-values takes place at the time of the promise.
• The actual contract may be concluded later.

Example

Ahmad says to Ali:

“I promise to sell you my car next month.”

At this point:

• Ahmad has made a promise.
• Ali has not yet bought the car.
• Ownership has not transferred.
• No sale contract has been concluded.

Therefore:

Wa‘d = one party promises to do something in the future.

2.

Muwa‘adah

— Mutual Promise

Muwa‘adah means two parties make separate promises to each other concerning something they intend to do in the future.

Main Characteristics

• It involves two parties.
• Both parties make promises.
• The promises relate to a future transaction or action.
• The two promises are conceptually separate.
• There is no actual exchange of the subject matter or counter-value yet.
• The actual contract may be concluded later.

Example

Ahmad says:

“I promise to sell you my car next month.”

Ali says:

“I promise to buy your car next month.”

This is muwa‘adah.

At this stage:

• Ahmad promises to sell.
• Ali promises to buy.
• The car has not yet been transferred.
• The purchase price has not yet been exchanged.
• The actual sale contract has not yet been concluded.

Therefore:

Muwa‘adah = both parties promise now to perform something in the future.

3.

‘Aqd

— Contract

‘Aqd refers to an actual agreement between the contracting parties, normally formed through ijab (offer) and qabul (acceptance).

Unlike wa‘d and muwa‘adah, an ‘aqd creates the contractual relationship itself.

Main Characteristics

• It normally involves two contracting parties.
• There is a mutual agreement.
• The contract takes legal effect when it is validly concluded, subject to its agreed terms.
• It creates rights and obligations between the parties.
• In an exchange contract, each party gives something and receives something in return.

Example

Ahmad says:

“I sell you my car for RM40,000.”

Ali says:

“I accept.”

Now there is an actual ‘aqd al-bay‘, or sale contract.

The legal consequences begin:

• Ahmad must transfer the car.
• Ali must pay RM40,000.
• Rights and obligations arise between them.

Therefore:

‘Aqd = the actual contractual agreement, not merely a promise to contract later.

Difference in Time of Effect

Wa‘d

A declaration concerning something that will be performed in the future.

“I promise I will sell it next month.”

Muwa‘adah

Two parties make promises concerning something they will perform in the future.

“I promise to sell.”

“I promise to buy.”

‘Aqd

The parties make the actual agreement, which takes contractual effect when validly concluded.

“I sell.”

“I accept.”

So:

Wa‘d → future promise by one

Muwa‘adah → future promises by both

‘Aqd → actual agreement

Difference in the Number of Parties Making the Commitment

Wa‘d

Only one party makes the promise.

Muwa‘adah

Two parties make promises to each other.

‘Aqd

Two or more contracting parties agree and become connected through the contract.

Difference in Counter-Value or Exchange

Wa‘d

There is no actual exchange at the time of the promise.

Example:

Ahmad promises to sell his car later.

No car or money has yet been exchanged.

Muwa‘adah

There is also no actual contractual exchange yet.

Example:

Ahmad promises to sell and Ali promises to buy next month.

The car and money have not yet been exchanged under the actual sale contract.

‘Aqd

In an exchange contract, the parties exchange counter-values.

For example, in a sale:

Car ↔ RM40,000

In ijarah:

Manfa‘ah or service ↔ rent/payment

This creates reciprocal rights and obligations.

However, not every ‘aqd requires payment—for example, hibah is also a contract but is voluntary and does not require counter-value.

One Example Showing All Three

Suppose Ahmad owns a car.

Stage 1:

Wa‘d

Ahmad tells Ali:

“I promise to sell you my car next month.”

Only Ahmad has promised.

This is wa‘d.

Stage 2:

Muwa‘adah

Ali replies:

“I also promise to buy your car next month.”

Now both parties have made promises.

This is muwa‘adah.

Stage 3:

‘Aqd

Next month Ahmad says:

“I sell you this car for RM40,000.”

Ali says:

“I accept.”

The actual sale contract has now been concluded.

This is ‘aqd.

Stage 4: Legal Obligations

After the valid contract:

• Ahmad must deliver the car.
• Ali must pay RM40,000.

The parties now have enforceable contractual rights and obligations.

Simple Summary

Wa‘d

• One party
• Promise
• Future action
• No actual contract yet

Muwa‘adah

• Two parties
• Mutual promises
• Future action
• No actual contract yet

‘Aqd

• Two or more contracting parties
• Actual mutual agreement
• Creates contractual rights and obligations
• In exchange contracts, counter-values are exchanged

Easy Way to Remember

Wa‘d = “I promise.”

Muwa‘adah = “We both promise.”

‘Aqd = “We contract and agree now.”

Islamic Contract Law:

Wa‘d

(Promise)

Meaning of

Wa‘d

The Arabic term wa‘d literally means a promise.

Technically, wa‘d refers to a declaration made by one person that he intends to perform a particular act in the future.

Wa‘d = a unilateral promise to do something in the future.

Main Characteristics of

Wa‘d

1. It Is Made by One Party

A wa‘d is generally a unilateral promise, meaning that only one person makes the commitment.

The person making the promise is the promisor, while the person to whom the promise is made is the promisee.

Example

Ahmad tells Ali:

“I promise to sell you my car next month.”

Ahmad is the promisor, while Ali is the promisee.

This is a wa‘d because the promise comes only from Ahmad.

2. Acceptance Is Not Required

Unlike an ‘aqd (contract), wa‘d does not require acceptance from the other party in order to exist as a promise.

It may look similar to an offer, but there is an important difference:

• In a contract, there must normally be ijab (offer) and qabul (acceptance).
• In wa‘d, the promisor simply makes a promise about a future action.

Example

Ahmad says:

“I promise to give you RM500 next month.”

Even if Ali does not say, “I accept,” Ahmad has still made a wa‘d.

Therefore:

Wa‘d = promise without the need for acceptance.

3. It Relates to a Future Action

A wa‘d concerns something that the promisor intends to do later, rather than something completed immediately.

Examples

• “I promise to sell you my car next month.”
• “I promise to donate RM1,000 next week.”
• “I promise to purchase the equipment from you next year.”

All of these involve a future action.

Difference Between

Wa‘d

and

‘Aqd

A wa‘d is not the same as an actual contract.

Wa‘d

One party promises to do something later.

Example:

“I promise to sell you my car next month.”

At this stage, the sale itself has not yet been concluded.

‘Aqd

The parties actually conclude the contract through offer and acceptance.

Example:

Ahmad says:

“I sell you this car for RM40,000.”

Ali says:

“I accept.”

Now there is an ‘aqd.

So:

Wa‘d = promise to enter into or perform something in the future.

‘Aqd = the actual contractual agreement.

Simple Example Showing the Difference

Stage 1 —

Wa‘d

Ahmad says:

“I promise to sell you my house next month for RM300,000.”

There is only a promise.

Ownership of the house does not transfer merely because of the promise.

Stage 2 —

‘Aqd

Next month Ahmad says:

“I sell you my house for RM300,000.”

Ali says:

“I accept.”

Now the sale contract is concluded.

Therefore:

Promise first = wa‘d

Actual agreement later = ‘aqd

Simple Summary

Wa‘d means a promise made by one party concerning an action to be performed in the future.

Its main features are:

• It is normally made by one party.
• It does not require acceptance from the promisee.
• It relates to a future action.
• It is different from an ‘aqd, which requires an actual contractual agreement.

Easy Way to Remember

Wa‘d = “I promise I will do it later.”

‘Aqd = “We agree to the contract now.”

Islamic Contract Law: Shariah Terms Related to

‘Aqd

Several Shariah terms are closely related to ‘aqd (contract). They may appear similar because they all involve legal or moral relationships between parties, but they are not the same.

The main related terms are:

• Tasarruf — action or legal disposition
• Wa‘d — promise
• Muwa‘adah — mutual promise
• Iltizam — obligation

1.

Tasarruf

— Action or Legal Disposition

Tasarruf refers to an act or conduct that produces a legal effect under Shariah.

It is broader than a contract because a legal effect may arise even without an agreement between two parties.

Examples

• Selling property
• Giving a gift
• Making a waqf
• Making a wasiyyah
• Releasing someone from a debt

Some forms of tasarruf involve a contract, while others may be carried out by one person alone.

Example

Ahmad declares that a piece of land is permanently dedicated as waqf.

This is a legal action that creates consequences, even though it is not necessarily based on an exchange of offer and acceptance like a normal sale contract.

Tasarruf = a broad legal act that may create legal consequences.

2.

Wa‘d

— Promise

Wa‘d means a promise made by one person to another person to do something in the future.

It is normally unilateral, meaning only one party makes the promise.

Example

Ahmad tells Ali:

“I promise that I will sell you my car next month for RM40,000.”

At this stage:

• Ahmad has made a promise.
• Ali has not yet purchased the car.
• Ownership has not yet transferred.

Therefore:

Wa‘d is not the same as the actual sale contract.

The future sale would require the proper formation of the contract when the parties proceed with the transaction.

Easy Meaning

Wa‘d = one-sided promise about a future action.

3.

Muwa‘adah

— Mutual Promise

Muwa‘adah means two parties promise each other that they will enter into a transaction or perform something in the future.

Unlike wa‘d, the promise comes from both parties.

Example

Ahmad says:

“I promise to sell you my car next month.”

Ali replies:

“And I promise to buy it from you next month.”

This is a muwa‘adah because both parties have made promises.

However, the mutual promise is conceptually different from the actual sale contract.

At this stage:

• Ahmad has promised to sell.
• Ali has promised to buy.
• The final sale contract may still need to be concluded later.

Muwa‘adah = two-sided or mutual promise.

Difference Between

Wa‘d

and

Muwa‘adah

The easiest way to distinguish them is:

Wa‘d = one party promises.

Muwa‘adah = both parties promise.

Example

Ahmad alone promises to sell his house to Ali next month.

Wa‘d

Ahmad promises to sell, and Ali promises to buy.

Muwa‘adah

4.

Iltizam

— Obligation

Iltizam means an obligation or responsibility that a person is required to fulfil.

The obligation may arise from:

• A contract
• A promise in certain circumstances
• Shariah rules
• Liability for damage
• Another recognised legal reason

Example from a Sale Contract

Ahmad sells a laptop to Ali for RM2,000.

Once the valid sale is concluded:

• Ahmad has an obligation to deliver the laptop.
• Ali has an obligation to pay RM2,000.

These obligations are forms of iltizam.

Iltizam = a duty or responsibility that must be fulfilled.

Example from Debt

Ali borrows RM1,000 from Ahmad.

Ali has an obligation to repay RM1,000.

That repayment duty is:

Iltizam

How These Terms Relate to

‘Aqd

‘Aqd is a contract formed through the agreement of the contracting parties.

The related concepts are broader or different:

Tasarruf

A legal act that creates a legal effect.

Wa‘d

A one-sided promise to do something in the future.

Muwa‘adah

A mutual promise by two parties regarding a future transaction.

Iltizam

The obligation or duty that a person must fulfil.

‘Aqd

The contract itself, usually formed through offer and acceptance.

One Example Connecting All the Terms

Suppose Ahmad wants to sell a car to Ali.

Stage 1 —

Wa‘d

Ahmad says:

“I promise to sell you my car next month.”

This is a wa‘d because only Ahmad promises.

Stage 2 —

Muwa‘adah

Ali replies:

“I also promise that I will buy it next month.”

Now both parties have made promises.

This is muwa‘adah.

Stage 3 —

‘Aqd

Next month Ahmad says:

“I sell you this car for RM40,000.”

Ali replies:

“I accept.”

The sale contract is now concluded.

This is the ‘aqd.

Stage 4 —

Iltizam

After the contract:

• Ahmad must deliver the car.
• Ali must pay RM40,000.

These duties are their iltizam.

The whole transaction and its legal consequences may also fall within the broader idea of tasarruf.

Simple Summary

Tasarruf = legal action or disposition

Wa‘d = one-sided promise

Muwa‘adah = mutual promise

Iltizam = obligation or duty

‘Aqd = actual contract formed between the parties

Easy Way to Remember

Promise by one → Wa‘d

Promise by both → Muwa‘adah

Actual agreement → ‘Aqd

Duty created → Iltizam

Broader legal act → Tasarruf

1. Tasarruf — Action or Legal Disposition Tasarruf refers to an act or conduct that produces a legal effect under Shariah. It is broader than a contract because a legal effect may arise even without an agreement between two parties. Examples  Selling property Giving a gift Making a waqf Making a wasiyyah Releasing someone from a debt  Some forms of tasarruf involve a contract, while others may be carried out by one person alone. Example Ahmad declares that a piece of land is permanently dedicated as waqf. This is a legal action that creates consequences, even though it is not necessarily based on an exchange of offer and acceptance like a normal sale contract. Tasarruf = a broad legal act that may create legal consequences.

2. Wa‘d — Promise Wa‘d means a promise made by one person to another person to do something in the future. It is normally unilateral, meaning only one party makes the promise. Example Ahmad tells Ali: “I promise that I will sell you my car next month for RM40,000.” At this stage:  Ahmad has made a promise. Ali has not yet purchased the car. Ownership has not yet transferred.  Therefore: Wa‘d is not the same as the actual sale contract. The future sale would require the proper formation of the contract when the parties proceed with the transaction. Easy Meaning Wa‘d = one-sided promise about a future action.

3. Muwa‘adah — Mutual Promise Muwa‘adah means two parties promise each other that they will enter into a transaction or perform something in the future. Unlike wa‘d, the promise comes from both parties. Example Ahmad says: “I promise to sell you my car next month.” Ali replies: “And I promise to buy it from you next month.” This is a muwa‘adah because both parties have made promises. However, the mutual promise is conceptually different from the actual sale contract. At this stage:  Ahmad has promised to sell. Ali has promised to buy. The final sale contract may still need to be concluded later.  Muwa‘adah = two-sided or mutual promise.

Difference Between Wa‘d and Muwa‘adah The easiest way to distinguish them is: Wa‘d = one party promises.

Muwa‘adah = both parties promise. Example Ahmad alone promises to sell his house to Ali next month. Wa‘d Ahmad promises to sell, and Ali promises to buy. Muwa‘adah

4. Iltizam — Obligation Iltizam means an obligation or responsibility that a person is required to fulfil. The obligation may arise from:  A contract A promise in certain circumstances Shariah rules Liability for damage Another recognised legal reason  Example from a Sale Contract Ahmad sells a laptop to Ali for RM2,000. Once the valid sale is concluded:  Ahmad has an obligation to deliver the laptop. Ali has an obligation to pay RM2,000.  These obligations are forms of iltizam. Iltizam = a duty or responsibility that must be fulfilled.

Example from Debt Ali borrows RM1,000 from Ahmad. Ali has an obligation to repay RM1,000. That repayment duty is: Iltizam

How These Terms Relate to ‘Aqd ‘Aqd is a contract formed through the agreement of the contracting parties. The related concepts are broader or different: Tasarruf A legal act that creates a legal effect. Wa‘d A one-sided promise to do something in the future. Muwa‘adah A mutual promise by two parties regarding a future transaction. Iltizam The obligation or duty that a person must fulfil. ‘Aqd The contract itself, usually formed through offer and acceptance.

One Example Connecting All the Terms Suppose Ahmad wants to sell a car to Ali. Stage 1 — Wa‘d Ahmad says: “I promise to sell you my car next month.” This is a wa‘d because only Ahmad promises. Stage 2 — Muwa‘adah Ali replies: “I also promise that I will buy it next month.” Now both parties have made promises. This is muwa‘adah. Stage 3 — ‘Aqd Next month Ahmad says: “I sell you this car for RM40,000.” Ali replies: “I accept.” The sale contract is now concluded. This is the ‘aqd. Stage 4 — Iltizam After the contract:  Ahmad must deliver the car. Ali must pay RM40,000.  These duties are their iltizam. The whole transaction and its legal consequences may also fall within the broader idea of tasarruf.

Simple Summary Tasarruf = legal action or disposition

Wa‘d = one-sided promise

Muwa‘adah = mutual promise

Iltizam = obligation or duty

‘Aqd = actual contract formed between the parties Easy Way to Remember Promise by one → Wa‘d

Promise by both → Muwa‘adah

Actual agreement → ‘Aqd

Duty created → Iltizam

Broader legal act → Tasarruf

Islamic Contract Law: Definition of Contract (Aqd)

Literal Meaning of

‘Aqd

The Arabic word ‘aqd literally means to tie, bind, or tighten something together.

It is the opposite of loosening or freeing.

This literal meaning reflects the idea that a contract binds the parties together through mutual obligations.

‘Aqd = tying or binding two parties through an agreement.

Technical Meaning of

‘Aqd

In Islamic contract law, ‘aqd refers to an agreement formed through an offer and an acceptance between the contracting parties.

The parties agree to bind themselves to a particular matter and undertake certain rights and obligations.

In simple terms:

A contract exists when one party makes an offer and the other party accepts it, creating a binding agreement between them.

Main Elements in the Definition

The technical definition of ‘aqd contains several important ideas.

1. There Must Be Contracting Parties

A contract involves at least two parties who enter into an agreement.

Example

Ahmad wants to sell his laptop to Ali.

• Ahmad = seller
• Ali = buyer

Both are contracting parties.

2. There Must Be an Offer (

Ijab

)

Ijab means the offer or proposal made by one of the parties.

Example

Ahmad says:

“I sell this laptop to you for RM2,000.”

This is the ijab.

3. There Must Be Acceptance (

Qabul

)

Qabul means the acceptance of the offer by the other party.

Example

Ali replies:

“I accept.”

This is the qabul.

When the offer and acceptance correspond with each other, the agreement may become binding if the other Shariah requirements are also satisfied.

Combination of Offer and Acceptance

A contract is formed through the connection between:

Ijab + Qabul

Example

Ahmad:

“I sell you my phone for RM1,500.”

Ali:

“I accept.”

The offer and acceptance come together and create the contractual relationship.

Therefore:

Offer + Acceptance = Contract (‘Aqd)

Binding Effect of a Contract

Classical jurists describe a contract as something by which the parties bind themselves and undertake to perform something regarding a particular matter.

This means that once a valid contract is formed, it may create:

• Rights
• Duties
• Obligations
• Legal consequences

Example: Sale

Ahmad sells a car to Ali for RM50,000.

After a valid contract:

• Ahmad has the obligation to transfer the car.
• Ali has the obligation to pay the agreed price.
• Ali becomes entitled to receive the car.
• Ahmad becomes entitled to receive the payment.

So the contract binds both parties to what they agreed upon.

Example:

Ijarah

Suppose Fatimah rents a house to Aisha for RM1,500 per month.

Fatimah offers:

“I rent this house to you for one year at RM1,500 per month.”

Aisha accepts.

The agreement creates obligations:

• Fatimah must allow Aisha to use the house.
• Aisha must pay the agreed rent.

Therefore, an ijarah contract is also formed through offer and acceptance.

Why the Word “Binding” Is Important

The literal meaning of ‘aqd helps explain the legal meaning.

Just as a knot ties two things together, a contract ties the parties together through their agreed obligations.

For example:

Before the contract:

• Ahmad is free to keep his car.
• Ali is free not to buy it.

After a valid sale contract:

• Ahmad becomes obligated to transfer the car.
• Ali becomes obligated to pay the price.

So:

‘Aqd creates a legal bond between the contracting parties.

Simple Summary

‘Aqd literally means:

To tie, bind, or tighten.

Technically, it means:

An agreement created through offer (ijab) and acceptance (qabul) by which the contracting parties bind themselves regarding a particular matter.

Easy Way to Remember

Ijab = offer

Qabul = acceptance

Ijab + Qabul = ‘Aqd

And:

‘Aqd = a legal bond created by mutual agreement.

Islamic Contract Law: Examples of Nominated and Non-Nominated Contracts

1. Nominated Contracts

Nominated contracts are contracts that are already recognised in classical Islamic jurisprudence and have established names, rules, and legal effects.

Examples include:

• Bay‘ — sale contract
• Example: Ahmad sells a laptop to Ali for RM2,000.
• Ijarah — lease or hiring contract
• Example: Fatimah rents a house for RM1,500 per month.
• Hibah — gift contract
• Example: A father gives his daughter a car without asking for payment.
• Qard — loan
• Example: Ahmad lends Ali RM1,000, and Ali must return RM1,000.
• Wakalah — agency
• Example: Ahmad appoints Ali to sell his car on his behalf.
• Musharakah — partnership
• Example: Two people contribute capital to start a business and share profit according to agreement.

Nominated contract = a recognised contract with an established name and established Shariah rules.

2. Non-Nominated Contracts

Non-nominated contracts are agreements that do not fall exactly under one traditional named contract.

They may be newly created or modern arrangements designed to meet contemporary commercial needs.

They are not automatically prohibited simply because classical jurists did not give them a specific name.

They may be valid if they do not violate Shariah principles.

Example 1: Modern Service Subscription

Suppose a company offers:

“Pay RM50 per month and receive access to our online business software, cloud storage, and customer support.”

This exact modern arrangement may not have existed as a classical named contract in the same form.

However, it can be structured using general Shariah principles relating to services and benefits.

Example 2: Combined Maintenance Agreement

A company sells machinery to a customer and separately agrees to provide:

• Regular inspection
• Repair services
• Technical support

for a fixed annual fee.

The whole commercial arrangement may not correspond to one classical nominated contract by itself.

Instead, it may combine recognised contractual elements in a modern structure.

Example 3: Modern Membership Arrangement

A business offers annual membership for RM300.

Members receive:

• Access to certain facilities
• Discounts
• Priority booking
• Other agreed benefits

The agreement may not have a single classical contract name, but it may still be permissible if:

• The benefits are clear
• The payment is clear
• There is no prohibited uncertainty
• The arrangement does not involve riba or unlawful activities

Main Difference

Nominated Contract

Has a recognised classical name and established legal rules.

Example:

Buy a car for RM50,000 = bay‘

Non-Nominated Contract

A newer or customised arrangement that does not fit exactly into one classical named contract.

Example:

Annual membership giving access to several services and benefits

The key question is not merely whether the contract has a classical name.

The important question is:

Does the agreement comply with Shariah principles?

Easy Way to Remember

Nominated = already named and recognised in classical fiqh

Non-nominated = newly designed or customised agreement that must still comply with Shariah

Islamic Contract Law: Introduction to Contract (

‘Aqd

) in

Fiqh Muamalat

Meaning and Importance of Contract

A contract (‘aqd) is one of the main topics in fiqh muamalat, which deals with Islamic rules governing financial and commercial transactions.

Contracts are especially important because they form the basis of many Islamic banking and finance products.

Therefore, it is important to understand:

• When a contract is valid (sahih)
• When a contract is invalid or void (batil)
• What conditions must be satisfied for a contract to be recognised by Shariah

‘Aqd = a contract or legally recognised agreement under Shariah.

Valid and Invalid Contracts

Sahih

— Valid Contract

A sahih contract is a contract that fulfils the requirements of Shariah.

When a contract is valid:

• It is legally recognised.
• The parties are generally bound by its effects.
• Rights and obligations may arise from it.

Example

Ahmad sells a car to Ali for RM30,000.

If:

• Both parties agree freely,
• The car and price are known,
• The subject matter is lawful,
• Other Shariah requirements are satisfied,

then the sale may be considered a sahih contract.

Batil

— Void Contract

A batil contract is one that is not recognised as valid because an essential Shariah requirement is missing or violated.

Example

If a contract involves a subject matter that Shariah does not permit to be traded, the contract may be void.

Sahih = valid and recognised

Batil = void and not legally effective in the required manner

Scope of

Fiqh Muamalat

Fiqh muamalat has a broad scope.

It is not limited only to agreements that would traditionally be classified as contracts under English or Western legal systems.

Islamic law may recognise certain legal dispositions, arrangements, and transactions that are treated differently in other legal systems.

Therefore:

The Islamic concept of contractual and financial dealings can be broader than the conventional concept of contract.

General Contract Theory in Shariah

Shariah provides a general theory of contracts.

This means Islamic law is not limited only to a fixed list of traditional contracts.

Classical Islamic law recognises many well-known contracts, such as:

• Bay‘ — sale
• Ijarah — lease or hiring
• Hibah — gift
• Qard — loan
• Wakalah — agency

However, parties may also create arrangements that do not fit perfectly into one traditional named contract, provided that the arrangement does not violate Shariah principles.

Named and Unnamed Contracts

Named Contracts

These are established contracts that are already recognised and discussed in Islamic jurisprudence.

Examples include:

• Sale
• Lease
• Partnership
• Loan
• Gift

These may be called nominated contracts because they have recognised names and established rules.

Unnamed or New Contractual Arrangements

A modern agreement does not automatically become prohibited merely because classical scholars did not give it a specific traditional name.

A new arrangement may be acceptable if it:

• Has lawful subject matter
• Does not contain prohibited riba
• Avoids unacceptable gharar or excessive uncertainty
• Does not involve fraud or injustice
• Does not contradict other principles of Shariah

Example

Modern commercial arrangements may combine several contractual mechanisms to create a financial product.

The important question is not only:

“Did this exact contract exist historically?”

The more important question is:

“Does the arrangement comply with Shariah principles?”

Conditions Attached to Contracts

Parties may sometimes include additional conditions in their contracts in order to meet their particular needs.

These conditions may expand or clarify how the agreement operates.

However, contractual conditions must themselves be consistent with Shariah.

Example

Ahmad rents a shop to Ali.

They may agree that:

• The lease lasts for two years.
• Ali must use the shop only for lawful business.
• Rent must be paid on a particular date.

These agreed conditions help define the rights and obligations of the parties.

Islamic Contracts and Western Contracts

Islamic contract law shares some similarities with conventional or Western contract law.

For example, both legal approaches generally recognise the importance of:

• Agreement between parties
• Legal capacity
• Clear contractual terms
• Valid subject matter
• Rights and obligations arising from agreements

However, Islamic contracts also operate within Shariah ethical principles.

Ethical Dimension of Islamic Contracts

Islamic contract law is not concerned only with whether a technical agreement exists.

It also considers:

• Justice
• Fairness
• Honesty
• Avoidance of exploitation
• Protection of parties from harm
• Compliance with halal and haram principles

Therefore, a transaction may need to satisfy both:

Legal requirements + Shariah ethical requirements

Example

Two parties may freely agree to a financial arrangement, but if the arrangement contains prohibited riba, their agreement alone does not make it acceptable under Shariah.

Importance in Islamic Banking

Contracts are fundamental to Islamic banking because Islamic financial products must be structured using Shariah-compliant contractual relationships.

Examples include:

• Murabahah — sale with disclosed cost and profit
• Ijarah — leasing
• Mudarabah — profit-sharing partnership
• Musharakah — partnership
• Salam — forward purchase under specific conditions

Therefore, understanding the general principles of contract law is necessary before studying individual Islamic banking products.

Simple Summary

A contract (‘aqd) is a central concept in fiqh muamalat and Islamic finance.

The main ideas are:

• Contracts form the basis of Islamic commercial transactions.
• A contract may be sahih, meaning valid, or batil, meaning void.
• Fiqh muamalat has a broad understanding of contractual transactions.
• Shariah recognises both traditional named contracts and potentially new arrangements.
• New arrangements are not automatically prohibited simply because they are not classical named contracts.
• Contractual conditions may be added as long as they comply with Shariah.
• Islamic contract law includes not only legal requirements but also ethical principles such as justice and fairness.

Easy Way to Remember

‘Aqd = contract

Sahih = valid

Batil = void

Islamic contract = legal agreement + Shariah compliance + ethical conduct

Islamic Contract Law: Meaning and Classification of Ownership (

Milkiyyah

)

Meaning of

Milkiyyah

Milkiyyah means ownership.

In Islamic law, ownership refers to a lawful relationship between a person and a property that is recognised by Shariah.

This relationship gives the owner:

• Exclusive control over the property
• The right to use it
• The right to benefit from it
• The right to sell, rent, gift, or transfer it
• The right to prevent others from using it without permission

However, the owner’s rights are not unlimited.

The property must be used in a way that does not violate Shariah.

Example

Ahmad owns a house.

He may:

• Live in it
• Rent it
• Sell it
• Give it as a gift

But he cannot lawfully use the house for an activity prohibited by Shariah.

Therefore:

Ownership = lawful control + right of use and disposal + compliance with Shariah

Absolute Ownership Belongs to Allah

According to Shariah:

Allah s.w.t. is the absolute and ultimate owner of all property and wealth.

Human beings may own property in this world, but their ownership is not absolute.

Instead, people are regarded as trustees of the wealth given to them by Allah.

This means that a person may:

• Own property
• Use it
• Enjoy its benefits
• Transfer it

But the property must be managed according to the principles of Shariah.

Example

Fatimah owns a business and earns profit from it.

She may use the profit for herself and her family, but she should also:

• Avoid prohibited transactions
• Pay zakat when required
• Fulfil her obligations
• Avoid misuse or waste

Therefore:

Allah = absolute owner

Human being = trustee and lawful worldly owner

Classification of Ownership

Ownership can be classified from two main perspectives:

1. According to the substance or extent of ownership
2. According to the nature of the owner

1. Ownership According to Its Substance

This classification looks at:

How much of the property right does the person own?

There are two types:

A. Complete Ownership —

Al-Milk al-Tamm

Complete ownership exists when a person owns both:

• The physical property itself — ‘ayn
• The benefit or usufruct — manfa‘ah

Example

Ahmad owns a house and lives in it.

He owns:

• The house itself
• The right to use and enjoy it

Therefore:

‘Ayn + Manfa‘ah = Complete ownership

The owner may generally use, sell, rent, gift, or transfer the property, subject to Shariah.

B. Deficient Ownership —

Al-Milk al-Naqis

Deficient ownership exists when a person has rights over only part of the ownership relationship.

The person may have:

• The physical asset but not its present benefit, or
• The benefit without owning the physical asset

Example

Ahmad owns a house and rents it to Ali.

• Ahmad owns the house itself.
• Ali receives the right to live in and use it for the rental period.

Ali owns or controls only the manfa‘ah, not the house itself.

Therefore:

Partial right over the property = deficient ownership

2. Ownership According to the Nature of the Owner

This classification looks at:

Who owns the property?

There are two main types:

A. Private Ownership

Private ownership refers to property owned by a specific person or group of persons.

The owner has the right to use and dispose of the property, subject to Shariah.

Private ownership may be:

• Individual ownership — one person owns the property
• Joint ownership — two or more people own the property together

Example

Fatimah owns a car by herself.

Individual private ownership

Ahmad and Ali jointly own a shop.

Joint private ownership

B. Public Ownership

Public ownership refers to property or resources intended for the benefit of the public or society as a whole.

Examples include:

• Public roads
• Certain public facilities
• Certain natural resources
• Property managed by the public treasury

A single individual generally cannot claim exclusive ownership over such property where it has been designated for public use.

Example

A government-built public road is intended for society to use.

Public road = public ownership

Simple Summary

Milkiyyah means lawful ownership recognised by Shariah.

The owner has:

• Control
• Use
• Benefit
• Right of disposal

but must remain within Shariah limits.

Islam also teaches that:

Allah is the absolute owner of all wealth, while humans are trustees.

Ownership can then be classified in two ways:

According to Substance

• Al-Milk al-Tamm → complete ownership
• Al-Milk al-Naqis → deficient ownership

According to Nature of Owner

• Private ownership
• Public ownership

Easy Way to Remember

Substance = how much do you own?

Nature of owner = who owns it?

Islamic Contract Law: What Happens When the Right of

Shuf‘ah

Is Exercised, Refused, or Misused?

The main idea of shuf‘ah is that an eligible co-owner may have a priority right to acquire a share that is being sold to an outsider.

However, shuf‘ah does not mean that the co-owner can control the property of the other partner without limit.

Shuf‘ah gives a priority right to purchase — not a right to obtain the share for free or permanently prevent the owner from selling it.

1. Co-Owner Wants to Exercise

Shuf‘ah

and Can Pay

Suppose Ahmad and Ali jointly own a piece of land:

• Ahmad owns 50%.
• Ali owns 50%.
• Ali sells his share to Zaid for RM100,000.

Ahmad wants to exercise his shuf‘ah right.

If Ahmad satisfies the applicable requirements and pays the required purchase price, he may acquire Ali’s former share instead of Zaid retaining it.

Therefore:

Ahmad exercises shuf‘ah + pays the required price → Ahmad acquires the share.

2. Co-Owner Wants the Share but Cannot Pay

Suppose Ahmad wants Ali’s share but cannot pay the RM100,000 required.

Ahmad cannot simply tell Zaid:

“Give me the property because I am the existing co-owner.”

The right of shuf‘ah is a right to acquire the share by paying the required consideration, not a free transfer.

If Ahmad cannot satisfy the payment requirement, he generally cannot compel the new buyer to surrender the share without payment.

Therefore:

Wanting to exercise shuf‘ah without being able to pay does not normally entitle the co-owner to take the share.

Easy Rule

Shuf‘ah = priority to buy, not a free acquisition.

3. Co-Owner Refuses to Buy the Share

Suppose Ali wants to sell his 50% share.

Ahmad is given the opportunity to acquire it but says:

“I do not want to buy it.”

Ali may then proceed with the sale to another buyer, subject to the applicable rules.

If Ali sells the share to Zaid:

• Ahmad keeps his original 50%.
• Zaid becomes the owner of Ali’s former 50%.

Therefore:

The co-owner has a right to exercise shuf‘ah, but is not obligated to buy the share.

4. Co-Owner Refuses to Buy and Allows Another Person to Buy

Suppose Ahmad does not want Ali’s share and does not object to Zaid purchasing it.

Ali sells the share to Zaid.

The result is:

• Ahmad remains a co-owner.
• Zaid becomes the new co-owner.

If Ahmad validly gives up or waives his shuf‘ah right, he generally cannot later treat the right as though it had never been waived, subject to the rules of the applicable school of law.

Therefore:

Refusing the share and accepting the outsider’s purchase generally allows the sale to proceed.

5. Co-Owner Refuses to Buy but Also Refuses to Let Anyone Else Buy

This is an important situation.

Suppose:

• Ahmad and Ali jointly own land.
• Ali wants to sell his 50% share.
• Ahmad says, “I will not buy your share.”
• Ahmad also says, “I will not allow you to sell it to anybody else.”

Ahmad generally cannot use shuf‘ah simply to block Ali from selling his own share while refusing to purchase it himself.

The purpose of shuf‘ah is to give Ahmad a priority opportunity to acquire the share, not to imprison Ali’s ownership permanently.

Therefore, if Ahmad does not want to exercise the right:

Ali may generally proceed to sell the share to another person, provided the sale satisfies the applicable Shariah and legal requirements.

Ahmad cannot normally say:

“I refuse to buy it, but I also forbid everyone else from buying it.”

That would go beyond the normal purpose of shuf‘ah.

Simple Principle

Exercise the right and buy the share, or decline the right and allow the owner to deal with his share according to the law.

There may, however, be separate contractual restrictions, court orders, or other legal rights affecting a particular property. Those would be different from shuf‘ah itself.

6. Co-Owner Refuses to Buy but Wants a Particular Person to Buy

Suppose Ahmad does not want the share but tells Ali:

“I do not want it, but you must sell it to Hassan instead of Zaid.”

The right of shuf‘ah normally gives Ahmad priority to acquire the share himself.

It does not normally give Ahmad the power to choose Ali’s buyer.

If Ali voluntarily agrees to sell to Hassan, that is possible.

But Ahmad generally cannot use shuf‘ah to force Ali to sell to Hassan rather than Zaid.

Therefore:

Shuf‘ah gives a right to purchase, not a general right to choose who the seller may sell to.

7. What If the Co-Owner Changes His Mind After Refusing?

Suppose Ahmad initially knows about the sale and clearly says:

“I do not want the share.”

Later, after the property’s value increases, Ahmad changes his mind and tries to exercise shuf‘ah.

If Ahmad has already validly waived the right, he may lose the ability to claim it later.

The exact rules differ among the schools regarding:

• When shuf‘ah must be claimed
• How quickly the claim must be made
• What conduct amounts to waiver
• Whether delay causes the right to lapse

So the precise legal result can depend on the applicable madhhab.

Simple Summary of the Main Scenarios

Scenario 1: Co-owner wants the share and can pay

He may exercise shuf‘ah and acquire it according to the applicable rules.

Scenario 2: Co-owner wants the share but cannot pay

He generally cannot force the transfer without paying the required price.

Scenario 3: Co-owner refuses to buy

The seller may generally sell the share to another person.

Scenario 4: Co-owner refuses and accepts another buyer

The outsider may become the new co-owner.

Scenario 5: Co-owner refuses to buy and refuses everyone else

He generally cannot use shuf‘ah merely to block the sale. If he does not exercise the right, the other owner may generally sell his share.

Scenario 6: Co-owner refuses to buy but wants to choose the buyer

Shuf‘ah generally does not give him the right to select another person’s buyer.

Easy Way to Remember

Shuf‘ah = right of priority to purchase.

It is not a right to obtain the share for free.

It is not an obligation to buy.

It is not normally a right to block every sale.

It is not normally a right to choose the seller’s buyer.

Islamic Contract Law: Removal of Ownership from an Islamic Perspective

Meaning of Removal of Ownership

Just as Shariah provides lawful ways to establish ownership (milkiyyah), it also recognises certain situations where a person’s ownership may be removed or transferred against their preference.

Ownership cannot simply be taken away without a valid Shariah reason. The removal must be based on a recognised legal justification.

There are three main situations:

1. Exercise of the right of pre-emption (al-shuf‘ah)
2. Debt settlement
3. Public interest

1. Right of Pre-emption (

Al-Shuf‘ah

)

Al-shuf‘ah is the right of a co-owner to claim priority in purchasing another co-owner’s share when that share is sold to an outsider.

Its purpose is to protect the interests of existing co-owners and prevent possible harm caused by bringing an unwanted outsider into jointly owned property.

Example

Ahmad and Ali jointly own a piece of land.

• Ahmad owns 50%.
• Ali owns 50%.

Ali decides to sell his share to Zaid, who is not one of the existing owners.

If the conditions of shuf‘ah are satisfied, Ahmad may exercise his right of pre-emption and take over the share that was sold to Zaid by paying the required purchase price.

As a result:

• Zaid’s newly acquired ownership may be removed.
• Ahmad becomes the owner of Ali’s former share.

Therefore:

Shuf‘ah can result in ownership being transferred from the new buyer to the person who has the recognised right of pre-emption.

Why Does

Shuf‘ah

Exist?

The purpose is to protect a co-owner from possible difficulties caused by having an unfamiliar third party enter into the jointly owned property.

Example

Ahmad and Ali jointly own a house.

If Ali sells his share to a stranger, Ahmad may suddenly have to share ownership and make decisions with someone he did not choose.

Shuf‘ah may give Ahmad priority to acquire Ali’s share instead.

Main idea: existing co-owner receives priority over an outsider in certain circumstances.

2. Removal of Ownership for Debt Settlement

A person’s property may also be taken and sold when they have a valid debt that has become due but they are unable to repay it.

In such a situation, the debtor’s property may be used to satisfy the rights of the creditors.

Example

Ahmad owes Ali RM50,000.

The debt is already due, but Ahmad cannot repay it.

Ahmad owns:

• A car
• Jewellery
• Other property

A competent authority may order that some of Ahmad’s assets be sold.

The money from the sale is then used to repay the creditor.

Therefore:

The debtor’s ownership of some property may be removed in order to fulfil an outstanding debt.

Why Is This Allowed?

Islam protects both:

• The debtor’s property rights, and
• The creditor’s right to receive repayment.

A debtor cannot simply keep valuable property while refusing or being unable to satisfy a legally enforceable debt when the law allows those assets to be used for repayment.

However, the process should be carried out through a lawful authority and proper procedure, rather than the creditor simply taking the debtor’s belongings.

Connection with Movable and Immovable Property

As discussed earlier, when property must be sold to settle a debt, movable property (manqul) is generally considered before immovable property (ghayr manqul).

Example

If Ahmad owns:

• A car
• Jewellery
• A house

The movable assets may be sold first.

The house or land may be considered later if the debt still cannot be fully settled.

This helps protect the debtor from unnecessarily losing important immovable property.

3. Removal of Ownership for Public Interest

The government or lawful authority may sometimes take private property when it is genuinely required for the public interest.

This may occur when land is needed for projects that benefit the wider community.

Examples

Land may be required for:

• A public road
• Highway
• Hospital
• School
• Public transport system
• Drainage or flood-control project
• Other essential public infrastructure

Example: Land Needed for a Public Road

Suppose Ahmad owns a piece of land.

The government plans to construct an important road that will connect several communities.

Part of Ahmad’s land lies directly along the necessary route.

If the legal and Shariah requirements are satisfied, the government may acquire that portion of land for the public project.

Therefore:

Ahmad’s private ownership may be removed because of an overriding public interest.

This does not mean that the government may take private property arbitrarily. There must be a genuine lawful public purpose, and the owner’s rights must be respected according to the applicable legal principles.

Private Ownership Is Protected but Not Absolute

These three situations demonstrate an important principle of Islamic ownership.

Islam strongly protects private property, but private ownership is not completely absolute.

A person’s ownership may be restricted or removed where there is a recognised legal reason, such as:

• Protecting a co-owner’s right
• Satisfying a valid debt
• Protecting an important public interest

Therefore:

Ownership is protected by Shariah, but it remains subject to lawful rights and responsibilities.

Simple Summary

1.

Al-Shuf‘ah

— Right of Pre-emption

A qualified co-owner may have priority to purchase another co-owner’s share before or in place of an outsider, depending on the applicable rules.

Example:

Ali sells his share of jointly owned land to Zaid. Ahmad, the other co-owner, exercises shuf‘ah and acquires the share.

Ownership moves from the new buyer to the eligible co-owner.

2. Debt Settlement

If a person cannot pay a debt that has become due, some of their property may be sold to repay the creditor.

Example:

A debtor’s car is sold and the proceeds are used to settle the debt.

Property may be taken or sold to fulfil the creditor’s lawful right.

3. Public Interest

The government may acquire private property when genuinely necessary for an important public purpose.

Example:

Private land is required to construct a public road.

Private ownership may be removed for a legitimate public benefit.

Easy Way to Remember

Shuf‘ah → protect the co-owner

Debt settlement → protect the creditor

Public interest → protect the community

Islamic Contract Law: Ownership Through Succession

Meaning of Succession

Succession refers to the lawful transfer of ownership from one person to another, especially after the death of the former owner.

In Islamic law, a person may acquire ownership through succession when the requirements prescribed by Shariah are fulfilled.

There are two main forms:

1. Mirath — inheritance
2. Wasiyyah — will or bequest

1.

Mirath

— Inheritance

Mirath refers to the transfer of a deceased person’s property to his or her lawful heirs according to the shares determined by Shariah.

When a person dies, ownership of the estate passes to the entitled heirs after matters such as funeral expenses, debts, and valid bequests have been dealt with.

Possible Heirs

Depending on the family situation, heirs may include:

• Parents
• Husband or wife
• Sons and daughters
• Brothers and sisters
• Other eligible relatives

Not every relative automatically receives a share. Entitlement and the amount received depend on the rules of Islamic inheritance.

Example

Ahmad dies and leaves:

• A wife
• A son
• A daughter
• Property worth RM300,000

After the necessary expenses, debts, and valid wasiyyah are settled, the remaining estate is distributed among the lawful heirs according to the Islamic rules of inheritance.

The heirs become owners of their respective shares through mirath.

Mirath = compulsory transfer of the deceased’s estate to lawful heirs according to Shariah.

Important Characteristic of

Mirath

The deceased does not personally decide the inheritance shares.

The shares are determined by Shariah, based mainly on the Qur’an and Sunnah.

Therefore, a person cannot simply declare:

“I want one child to receive everything and the other heirs to receive nothing.”

If the excluded persons are lawful heirs, their inheritance rights cannot normally be cancelled by the deceased.

2.

Wasiyyah

— Will or Bequest

Wasiyyah refers to a person’s instruction that a certain property or benefit be given to another person after the person’s death.

Unlike mirath, which arises automatically under Shariah, wasiyyah is based on the deceased person’s voluntary decision.

Example

Fatimah states before her death:

“After I die, I want RM10,000 from my estate to be given to a charitable organisation.”

The transfer only takes effect after Fatimah’s death.

This is a wasiyyah.

Wasiyyah

Is Different from

Hibah

A wasiyyah should not be confused with hibah.

Hibah

A gift made during the person’s lifetime.

Example:

Ahmad gives his car to Ali today.

Ownership transfers during Ahmad’s lifetime.

Wasiyyah

A gift or bequest that takes effect only after death.

Example:

Ahmad says:

“After I die, my RM5,000 collection should be given to Ali.”

Ownership transfers only after Ahmad’s death.

So:

Hibah = transfer during lifetime

Wasiyyah = transfer after death

Limit on

Wasiyyah

As a general rule, a Muslim may make a wasiyyah of up to one-third of the net estate after relevant obligations are considered.

This protects the inheritance rights of the lawful heirs.

Example

Suppose Ahmad leaves a net estate of RM300,000.

Generally, he may make a wasiyyah of up to:

RM100,000

The remaining estate is then distributed among the lawful heirs according to mirath.

A bequest exceeding one-third normally requires the consent of the heirs.

Wasiyyah

to an Heir

As a general rule, a wasiyyah is not made in favour of a person who is already a lawful heir, unless the other heirs agree after the deceased’s death.

The reason is that the heir already receives a share through mirath.

Example

Ahmad’s son is already entitled to inheritance.

Ahmad cannot ordinarily use wasiyyah to give that son an additional portion at the expense of the other heirs without the required consent.

Main Difference Between

Mirath

and

Wasiyyah

Mirath

• Arises automatically after death.
• Beneficiaries are lawful heirs.
• Shares are determined by Shariah.
• The deceased cannot freely change the prescribed shares.

Wasiyyah

• Based on the deceased person’s voluntary instruction.
• Takes effect after death.
• Generally limited to one-third of the net estate.
• Commonly used to benefit non-heirs, charities, or other lawful purposes.

Order Before Distribution of Inheritance

When a Muslim dies, the estate is not immediately divided among the heirs.

Generally, the estate is dealt with in an orderly manner:

1. Necessary expenses connected with the deceased are settled.
2. Outstanding debts are paid.
3. Valid wasiyyah is carried out within the permitted limit.
4. The remaining estate is distributed to the heirs through mirath.

This ensures that existing obligations are fulfilled before the heirs receive their shares.

Simple Summary

Ownership through succession occurs mainly after death and may take two forms.

Mirath

The deceased’s property passes to the lawful heirs according to Shariah-prescribed shares.

Example: A son, daughter, spouse, or parent receives an inheritance share.

Wasiyyah

The deceased directs that part of the estate be given to someone or for a lawful purpose after death.

Example: RM20,000 is left to a charitable organisation.

Easy Way to Remember

Mirath = Shariah determines who receives the estate and their shares.

Wasiyyah = the deceased chooses a beneficiary, subject to Shariah limits.