Islamic Legal Maxims in Financial Transactions

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Legal maxims of Islamic jurisprudence, known as ‘al-Qawaid al-Fiqhiyyah’ are developed to facilitate a better understanding of Islamic jurisprudence.

These Islamic legal maxims are statements of principle that are extracted from the thorough reading of the rules of Islamic jurisprudence on multiple themes. These inclusive written descriptions empower the jurists to reduce them into theoretical statement of principles at a later stage of development.

The most comprehensive and universally based of all maxims are known as ‘al-qawaid al-fiqhiyyah al-asliyah’ (the normative legal maxims), and they apply to the entire range of Islamic jurisprudence without any specifications, whereas others might apply to a particular area of Islamic jurisprudence; such as religious matters, contracts, civil transactions, law suits and court proceedings.

الأمور بمقاصدها

The first maxim in ‘al-qawa’id al-fiqhiyyah al-asliyyah’, is “al-umur bi maqosidiha” (which means acts are judged by the intention behind them) is an all-inclusive maxim that has implications that scholars have discussed in various areas in commercial transactions. This maxim means everypractice, verbal or physical, brings different impact and judgment from shariah view, depending on one’s intention and objective.

One of its sub legal maxim is al-‘ibratu fi al-‘uqud li al-maqasid wa al-ma’ani la li al-alfaz wa al-mabani (contracts are to be understood in relation to their intention and substance, not by the words and phrases). To illustrate further, in the case of a bank proclaiming their policy of financing customers through interest-free financing, it would be necessary for the banks to do so, not by merely continuing the same practice or just restructure the financing products into Islamic products by simply changing relevant terms, such as by calling it ‘buy back’ or ‘mark-up’.

اليقين لا يزول بالشك

The second general legal maxim “al-yaqinu la yazulu bi al-shak” (means, certainty is not overruled by doubt). Explained, doubt cannot overrule certainty in judgment because the latter is established by clear evidence and proof. It is not tolerable if it can be invalidated by uncertainty or the proof, which the strength is lower than the latter, in order to annihilate harmful and hardship.

For example; a partner has no right to assume a minimum rate of profit earned by his business partner and claims his share in that profit as different from the amount stated to have been actually earned by the partner. The sub-rule provides that in case the working partner declares a certain amount of profit, no more will be presumed unless the contrary is verified to be a fact.

الضرر يزال

The third general maxim, namely, “al-dararu yuzal” (harm must be eliminated) provides a guideline to control the entire financial system in such a way that forbids imposition of harm and depresses reprisal. Other applications with regard to this maxim in fulfilling shariah objectives, is that one is not permitted to sell damaged goods to others because they cannot be used and may cause harm and damage to them after payment has been made.

المشقة تجلب التيسر

Another general Islamic legal maxim is “al-masyaqqah tajlibu al-taisir” (difficulty begets facility). This maxim may be applied in our daily lives either as general practice or for specific activities. It is a globally accepted view that Islam allows benevolent loan, borrowing of assets and property leasing in order to fulfill community needs (that comprise of the materially impoverished and those with insufficient funds). In this regard where provide them usage of other’s property in a form of cash money or tangible and intangible asset.

This accurately fulfils the requirement of members in society and affirms their well-being although in circumstances of inadequacy. In a smaller scope, minor uncertainty (gharar yasir) in trading is acceptable; such as in buying an orchard or pregnant livestock, and it is difficult for the buyer to know exactly each type and quantity of the trees in the orchard. Likewise with the pregnant livestock’s buyer, who may not determine the condition of the fetus indubitably. However, these types of sales are permissible for human’s benefit in fulfilling their necessities as reflection to this legal maxim.

In connection with the topic of gharar, major uncertainty (gharar fahish)may diminish the contract, if it is intended by the contractual parties for the reason of avoiding any disputable subject in the contract and encouraging unjust behavior in trading. However, in contrast to minor uncertainty that contributes to hardship in transaction and not purposely aimed by them, it won’t nullify the sale. Thus, majority scholars agreed the usage of this sub-maxim is such that the contract is invalid if it has major uncertainty, however it remains valid if the uncertainty is a minor one.

العادة محكمة

The legal maxim “al-‘adat muhakkamah” means (custom is arbitrary); is a judgment in determining the shariah view in common daily practices and transactions that are known among them, provided that it does not infringe with any shariah evidence and principle. If scholars are not unanimous in opposing and objecting the custom, hence the custom can be considered admissible in shariah jurisprudence and taken as shariah parameter in case of absence of other parameters obtained from shariah sources.

For instance, tenant should pay the rental payment early in the month where this has been practiced for many years. Furthermore, the custom is acceptable although the tenant realizes the custom makes him pay for unused usufruct, whether it is in the form of monthly payment or yearly. The objective of taking custom as a mechanism in ruling process is to bring fairness, and to make it accepted between the parties involved for them to mutually agree on the custom used in that specific transaction.

Summarized and edited from “The Role of Five Major Shari’ah Legal Maxims (Al-Qawaid Al-Kubra) in the Establishment of Maqasid Al-Shari’ah in Islamic Financial Products: A Discussion on Some Cases”.

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