CHAPTER 4

SUBJECT MATTER OF A CONTRACT

 III. Subject Matter of the Contract

In Islamic law of contract , the term

subject matter is applied to anything that
is exchanged in the contract. It includes
both the commodity and the
consideration.
The subject matter of a contract differs
from transaction to transaction.
 In a sale contract the subject matter
refers to the sold item.
 Cont’d

In a lease (ijarah) contract it refers to the

usufruct.
In a transfer of debt (hawalah) it is the
debt that is transferred.
In an agency (wakalah) it is a service.
In a partnership it includes the capital
contributed by the partners while in
mudarabah contract it includes the
capital and the labour or expertise.
 Conditions of the subject matter
• Muslim jurists have attached great
significance to the subject matter of a
contract. They have laid down various
conditions in order to ensure that the
property, usufruct, or the service on which a
contract is concluded is permissible, free
from ambiguity and uncertainty (gharar), in
existence, deliverable and properly defined.
1. The legality of the subject matter : The property
on which a certain contract is concluded should
be valuable (mutaqawwim). A valuable property
is a property which is permissible in Islamic law
(Shari’ah) and could be secured and
possessed. A contract which involves a non
valuable property or a property, which is not
secured , or possessed, is void .
For example, contracts involving fish in the sea or
birds in the sky are void as they are not
considered valuable property as they are not
possessed and secured.
• Similarly, contracts involving prohibited (haram)
items such as wine, intoxicants, pigs, blood ,
idols, crosses and statues are not valid as
Muslims are prohibited to do business in
forbidden things.
• Purpose for which a certain transaction is
concluded should be lawful. It must not go, for
example, against public interest, public order or
morality.
• Contracts with immoral aims or those ,
which are harmful to the public morality, are
void.
• For example, when a rented house is
used as a gambling casino or rented
machinery is used to produce alcoholic
beverages. In both cases the house and
the machinery are valuable properties but
the purpose for which they are used is
prohibited.
2. Existence of the subject matter: the
property on which certain contract is
concluded should be in existence while the
contract is concluded. The wisdom behind
this prohibition is the possibility of
uncertainty (gharar) which may arise when a
contract is concluded on non existence
properties.
An exception is in Salam (forward contract), or the
future provision of a certain commodity which is
specifically permitted by the Prophed ( S.W.A).
Muslim jurists have also argued on the grounds of
necessity and Istihsan for the contract of Istisna’ (contract
of manufacture).
Istisna’ involves future products, manufactured or
provided for by a prior order. However, the subject matter
must be specifically defined and precisely determined as
to its quantity, quality and the time of is delivery.
Similarly, the price also must be agreed upon and
ascertained in advance.
3. Certainty of Delivery: the delivery of the
subject matter must be certain. The party to a
contract must have complete ownership over
the property and possess it. He must be
capable to deliver the goods or the services.
For example, the sale of debt and the sale of
a bird in the air , or a fish in the sea are
prohibited on these grounds.
• Similarly, a contract to perform a service,
which is not certainly possible, is
prohibited. The significance of this
principle is to avoid conflict that may arise
out of a contract where the delivery of the
subject matter or a certain service is not
possible.
4. Precise Determination of the Subject Matter : if
the subject matter is present at the session of the
contract, the knowledge of the subject matter is
attained if it is seen. If the subject matter is not
present at the session of the contract, it should be
precisely determined. It should be clearly defined
and sufficiently described in a way that would
dispel all elements of ignorance (Jahalah). The
genus, species, quality and quantity should be
clearly described.
• The definition given must be sufficient to render
the subject matter of the contract distinguishable
from other goods.
• Similarly, when the object of a contract is an
obligation or performance, or a service, its nature
and value must be precisely determined. This
condition is designed to prevent ambiguity and
the resulting conflicts between the parties.
 The purpose and effect of a Contract
• In Islamic law of transaction each contract
has a certain purpose and effect.
• The purpose of a contract refers to the
main purpose for which people use that
contract.
• The effect of a contract refers to its
consequences or results, and the rights
and liabilities of the parties.
• For example, the purpose behind a
contract of sale is to enable the parties to
exchange their counter values with mutual
consent while its effect is the transfer of
ownership from the seller to the buyer in
return for a consideration or
compensation.
• The purpose of a lease contract is to allow
the tenant to use the leased asset while its
effect is to transfer the ownership over
usufruct to the tenant with consideration.
• The purpose of Kafalah contract is to provide
a guarantee to the creditor while its effect is
to enable creditor to claim his debt either
from the principle debtor or the guarantor.
• The purpose of lending things (al-’iarah) is to give
the borrower the permission to use the borrowed
item while its effect is to transfer the usufruct
without consideration.
• The purpose of transfer of debt (hawalah) contract
is to help a creditor to recover his debt while its
effect is to transfer a debt from the principal
debtor to a third person or the transferee.
• The parties are at liberty whether or
not to enter into a certain permissible
contract .
• However ,once they have concluded
the contract they are automatically
entitled to its purpose and effect.
• Islamic law has so jealously guarded the
purpose and effect of each individual
contract that it has prohibited any condition
that would change the purpose and the
effect of a contract.
• Thus, the parties who enter into a certain
contract achieve its predetermined purpose
and are entitled to its predetermined effect.
 EXPRESSION (IRADAH ZAHIRIYYAH) AND
HIDDEN INTENTION (IRADAH BATINIYYAH)

Conflict between the purpose of a

contract and intention of the parties:
It is possible that the parties may
conclude a contract for a purpose
other than for which it is intended. In
this case the purpose or motive of the
contracting parties differs from the
purpose of the contract.
• In this case the purpose or motive of the
contracting parties differs from the purpose of the
contract. They may have an unlawful purpose or
motive when they conclude a lawful contract.
• For instance, a sale contract is normally used to
meet the mutual needs of the parties for the sold
item and the price.
• However, a person may sell his properties to
his close relatives or others in order to avoid
creditors who have obtained a bankruptcy
order against him. The parties have concluded
a sale contract not because they are in mutual
need of the counter values but for the purpose
of avoiding the creditors to recover their debts.
• Such a sale contract may have fulfilled all the
pillars and conditions related to the expression,
the parties and subject matter.
• However, the purpose for which it is concluded is
not a valid purpose.
• Similarly, the parties may enter into a repurchase
agreement (bay al-inah) whereby one of them
sells a certain asset for deferred payment and
repurchases the same asset for lower cash price.
• The purpose for which the two sales are
concluded is not to purchase the item or
commodity as it reverts to the initial seller but to
provide cash to one of the parties who would
later have to pay a higher deferred price.
• Similarly, a gift is given for a purpose to show
appreciation and strengthen relationships.
However, it could be used as camouflage for a
bribe.
• A person may also use the gift contract to
transfer all his wealth to his wife and
children at end of certain period to avoid
zakat.
• It is also possible that a person may make
a gift in favour of one or some of his heirs
to deprive other heirs from inheritance.
• In all these examples the purpose of the
contracting parties and the purpose of the
contract itself are not in agreement.
• However, when a contract of such a nature is
concluded all its pillars and conditions
concerning the offer and acceptance, the
contracting parties and the subject matter are
fulfilled. The unlawful purpose itself is never
referred to in the agreement.
 Questions that may arise
1) Is it sufficient for the validity of a contract to
fulfill its pillar and conditions?
2) should contract be concluded for a purpose
for which it is intended by the Shari‘ah?
3) Should we also take into account the hidden
intention and purpose of the contracting
parties while determining the validity of a
contract?
4) Does the existence of invalid intention make
a contract void?
 Views of Muslim Jurists

 Muslim jurists are of two opinions on the

issue of hidden intention or purpose.
1) The Shafi‘is and Hanafis look at the
agreement itself and the purpose of the
parties as expressed in the agreement.
They don't look beyond the agreement at
the hidden intention or motive of the
contracting parties.
 Cont’d

 They argue that the Shari‘ah requires that

the parties should enter into a certain
permissible contract by mutual consent and
fulfill all its pillars and conditions.
 According to them once the parties enter
into a properly concluded contract the
question of bad or good or hidden intention
or motive is irrelevant to the validity of the
contract.
 Cont’d

According to them, bay al-‘inah, the sale

of grapes to a person who would make
wine, the sale of arm during the civil war,
and ziwaj al muhallil are contractually
valid (sahih) although they are makruh
tahrim to the Hanafis and haram to the
Shafiis if the parties intend to use them to
obtain an unlawful purpose.
 Cont’d

2) The Malikis, Hanbalis, and the

Shi‘ah Fiqh Schools, on the other
hand, look at the hidden
intention/motive or purpose of
the parties while deciding on the
validity of a contract.
 Cont’d

• According to them, if the motive or

purpose of the parties is unlawful,
the contract is also void. For example:
 They view a gift to the people in
authority as a bribe.
The profit in a repurchase sale (bay‘
al-‘inah) is similar to lending charges
or interest added to a loan.
Fictitious (false, fictional or assumed to be
true) Contract (al-‘Aqd al-Suri)

A- fictitious contract is a contract

where there exists offer and
acceptance (iradah zahiriyyah) by
the parties but the intention
(iradah batiniyyah) to conclude
the contract is absent.
 Cont’d
contracts made by mistake, coercion, and
contracts made for an unlawful purpose are
considered fictitious.
Acts and contracts made in jest are not valid
unless they relate to marriage, divorce and
ruj‘ah .
A contract made for an unlawful purpose such
as giving gift to people in authority or
repurchase sale (bay‘ al-‘inah) are also
considered fictitious.
WASSALAM