Shariah provides a pathway to be followed in all

The five categories are:

1) Beliefs (Aqaid)
2) Acts of Worship (Ibadaat)
3) Dealing with others (Muamlaat)
4) Manners (Ikhlaqiat)
5) Economics (Maishat)
The nature of Shariah rulings are as follows
 Halaal
 Haraam
 Faraiz - All those actions that are declared mandatory by either Quran or Sunnah e
Mutawaatirah or Ijma.
 Wajibaat - All those actions that are declared mandatory on Muslims by the narrations
which are not as strong in terms of narrators as Sunnah Mutawaatirah.
 Sunnah - All those actions that are recommended to be performed by Muslims, based upon
the association of those actions with Holy Prophet
 Nawafil (All those actions that are made optional and reward able on Muslims by Shariah).

Sources of Shariah
The rules and regulations laid down by Islamic Shariah are derived from
the following sources:
1) Quran is the word of Allah Ta’ala revealed over Prophet Muhammad . The Holy Quran is the
primary source of knowledge and Shariah rulings for Muslims.
2) Hadiths (Sunnah) is defined as a word spoken or act done or rectified by the Holy Prophet
3) Ijma means consensus of scholars of Ummah on a particular issue. "My Ummah shall
never be combined on an error."
4) Qiyas means to apply a recognized rule of Shariah expressly mentioned in the Holy
Quran and Sunnah, to a similar thing or situation by way of analogy.
5) Ijtihad litrary means “Utmost Effort” and technically it means to exert utmost effort to
discover the ruling of Shariah regarding a particular situation.

Definition of Riba (Interest)

The word "Riba" means excess, increase or addition. According to Shariah terminology, it
implies any excess compensation without due consideration (consideration does not
include time value of money).
Classification of Riba
There are two types of Riba, identified to date by the scholars namely 'Riba An Nasiyah'
and 'Riba Al Fadl'.
Riba An Nasiyah is defined as excess, which results from predetermined interest (sood)
which a lender receives over and above the principal (Ras ul Maal) in any loan transaction.
This is the real and primary form of Riba. Since the verses of the Holy Quran has directly
rendered this type of Riba as haram, it is also called ‘‘Riba Al Quran.’’ Similarly, since only
this type was considered as Riba in the dark ages, so it has earned the name of “Riba Al
Jahiliyyah” as well.

Riba Al Fadl The second classification of Riba is Riba Al Fadl. Since the prohibition of this
Riba has been established on the basis of Sunnah, it is also called “Riba Al Hadees.”
Riba Al Fadl actually means that excess which is taken in exchange of specific homogenous
commodities and encountered in their hand-to-hand purchase & sale as explained in the
famous hadith:
Amwaal-e-Ribawiyyah This hadith enumerates in the six (06) different commodities
namely:
1) Gold
2) Silver
3) Dates
4) Wheat
5) Salt
6) Barley
These six commodities can only be bought and sold in equal quantities and on spot. An
unequal sale or a deferred sale of these commodities with similar commodities will
constitute Riba. These six commodities in fiqh terminology are called "Amwaale-
Ribawiyyah".

Commercial Interest and Usury

In the 17th century, two new technical terms of interest emerged after the establishment
of banking system, namely:
1. Tijarti Sood (Commercial Interest): Interest paid on loan taken for productive and
profitable purposes.
2. Sarfi Sood (Usury): Interest paid on loan taken for personal need and expenses.
What is Mokhabara
Mokhabara is a division of crop by agreement between the landlord and cultivator in
which the landlord gives his land to the cultivator for cultivation purposes in order to get
his preagreed amounts of the crop irrespective whether the production is low or high.

ISLAMIC CONTRACT
Three terminologies of the Islamic Jurisprudence
1) Unilateral Promise (Wa'da)
2) Bilateral Promise (Muwa'adah or Muahaidah)
3) Contract (Aqd)

1. Unilateral Promise (Wa’da)

It refers to a unilateral undertaking or promise extended by one person to another in
which he promises to execute a contract in future. E.g. to sell or buy something in future.
Since it is a unilateral promise, no question of future sale arises, as future sale is not
allowed in Islam.
2. Agreement (Muwa’adah or Mu'ahadah)
• It means bilateral undertaking (Mutual promise) or agreement.
• According to majority of the present day Scholars of Islamic Jurisprudence, Muwa’adah
is not allowed in situations where Aqd is not allowed (e.g. forward contracts), and thus is
not enforceable by law. This view is adapted by majority of Islamic Financial Institutions
of present day and even by AAOIFI.
3. Contract (Aqd')
An Aqd' or contract is a bilateral agreement that is executed between two or more parties.
Example:
Contract of Sale, Contract of Marriage etc.
Types of Aqd'
1) Uqood e Mu’awadah (Compensatory Contract)
2) Uqood e Ghaer Mu’awadah (Non Compensatory Contract)
Uqood e Mu’awadah (Compensatory Contract)
These are compensatory contract where one person sells something to someone else for
a price or compensation, for example, sale of a pen by ‘A’ to ‘B’ for Rs. 50/-.
Uqood e Ghaer Mu’awadah (Non Compensatory Contract)
These are non-compensatory contract where one person gives something to someone
else without any compensation for example a contract of loan gift.
Essentials of Aqd'
Four essential elements are required to constitute a valid Aqd.
1) Mutaa'qidain (Contractors)
2) Alfaz e Aqd (Wording of Contract)
3) Ma'qood Alaih (Subject Matter)
4) Ma'qood Bi'hi (Consideration)

Mutaa'qidain (Contractors)
The contractors must not be mahjoor i.e. restricted to make a contract. Islamic Shariah
identifies three types of people as mahjoor.
Alfaz e Aqd (Wording of Contract)
Alfaz e Aqd should be absolute and immediate and non-contingent to a future event as a
future contract is not allowed in [Link] the wordings should be unconditional. If the
wordings of the contract are conditional, the condition must adhere to the
following rules of Islamic jurisprudence.

Ma'qood Alaih (Subject Matter)

The subject matter should exist, should be valuable, usable under Shariah, capable of
ownership & title and delivery & possession. Also, it should be specified, quantified and
the seller must have its title and risk at the time of the sale. For example, a certain
mobile phone.
Ma'qood Bihi (Consideration)
It should be quantified, specified and ascertained at the time of executing the Contract.
For example, a price of Rs. 300/-. It should be noted that Ma'qood Bihi (consideration) is
not required for Uqood Ghair Mu’awadah.
Other Issues in Aqd
We will discuss two more issues in Aqd' here.
1) Safqatain fi Safqatin (Two contracts in one contract)
2) Tawkeel fil Aqd' (Agency contract)
Safqatain fi Safqatin (Two contracts in one contract)
It means accumulation or mixing up of two different contracts in such a manner that
execution of one becomes contingent on execution of another. This is not allowed by the
Holy Prophet in Hadith and it renders a contract void. This is the reason why
hire purchase contract in not allowed in Islam.
Tawkeel fil Aqd' (Agency or Wakalah contract)
It means the appointment of an agent (Wakil) on behalf of a contractor to carry out a
contract or trade on behalf of the principal.
Wakalah Isthithmar (Investment Agency)
It means the transaction in which one party appoints another party as its agent to carry
out a trade transaction on behalf of the principal. The difference between the Wakalah
Isthithmar Contract and Mudarabah Contract is that in Mudarabah Contract,
both the parties share in the profit arising out of the trade transaction whereas in
Wakalah Isthithmar contract, the Wakeel is only given a fee for his services by the
principal and does not share in the profit.
A valid sale has four essential elements
1. Contract or Transaction (Aqd)
1.1Offer & acceptance (Ijab-o-Qobool)
"I have sold" or "I have purchased" etc. There are two ways of doing it:
i) Oral/Verbal (Qauli)
ii) Implied (Isharaa)
1.2 Buyer & Seller (Muta'aqiain)
i) Sane:
ii) Mature:
1.3 Conditions of contract (Sharaet-e-Aqd)
1.3.1 Sale must be non-contingent.
(a) Unconditional contract
(b) Under reasonable conditions
(c) Under unreasonable condition but in market practice
(d) Sale must be immediate
2. Goods for Sale or subject matter (Mabee’)
2.1 Existence
2.2 Valuable
2.3 Usable
2.4 Capable of ownership/title
2.5 Capable of delivery/possession
2.6 Specific and quantified
2.7 Seller must have title and risk
3. Price (Thaman)
3.1 Quantified (Maloom)
3.2 Specified & certain (Muta'aiyan)
4. Delivery or possession (Qabza)
4.1 Physical (Haqiqi)
4.2 Constructive (Hukmi)
Sale (Bai) is commonly defined in Shari'ah as "the exchange of a thing of value by another
thing of value with mutual consent". For example "the sale of a commodity in exchange
for cash".