Islamic Law of Options

 ISLAMIC LAW LAW OF OPTIONS  (KHIYARAT)

Introduction

Muslim jurists have suggested many devices to safeguard contracting parties against hasty undertaking. These devices are called khayarat , i.e., options in Islamic law. These devices give a  party an option to revoke the contract. contract. The purpose of these devies is to !"i#t"i# $"%"#e i# tr"#s"tio#s "#d to protet " &e"'er  p"rt fro! $ei# h"r!ed .

Introduction

Muslim jurists have suggested many devices to safeguard contracting parties against hasty undertaking. These devices are called khayarat , i.e., options in Islamic law. These devices give a  party an option to revoke the contract. contract. The purpose of these devies is to !"i#t"i# $"%"#e i# tr"#s"tio#s "#d to protet " &e"'er  p"rt fro! $ei# h"r!ed .

The meaning of 'hi"r  is  is that a contractor has right to ratify the contract or to annul within the period of option.

Kinds of Options   Khi"r

"%*Sh"r"t (option of condition)

  Khi"r

"%*T"i# (option of determination)

  Khi"r

"%*A$ (option of defect)



'hi"r "%*Ru"h(opion of inspection)

  Khi"r

"%*&"sf (option of description)

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Optio# of defet and Optio# of i#spetio# has  been granted by Shariah. Optio# of stipu%"tio# + Optio# of deter!i#"tio# and Optio# of desriptio# are established by agreement.

1-Khiyar al-Shart (Option of condition) Definition

It is that option through which o#e p"rt or $oth of them stipulate for the!se%ves or for so!eo#e e%se the right to revo'e the contract &ithi# " deter!i#ed period .

Example   the

purchaser says to the seller I purchased this thing from you but I have right to return it within three days!

The resu%t of this optio# is th"t o#tr"t &hih is $i#di# i#iti"%% $eo!es #o#*$i#di# &ith the stipu%"tio# of this optio#.

Legality  It

is reported that "oly #rophet$#.%.&."' granted this option to Hibban Ibn Manzir who complained that he was defrauded each time he made a purchase. "e was directed by "oly #rophet $#.%.&."' to say whenever he made a  purchase , No he"ti# "#d I reserve optio# for three d"s-.

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 (ccording to Imam Shafi and Imam Ahmad it should be stipulated at the time of the contract.

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)ther jurists allow it even after the contract has  been concluded, as long as the parties are in the same session.

  Khiyar

al-Shart  is permitted in those contracts which accept revocation like sale, hire etc..



It cannot be stipulated in those contracts which do not accept revocation such as divorce etc.

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The option can be stipulated by one of the parties for *

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"imself  or 

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+or a third party $the third party then becomes wakil of the party for purpose of exercising the option' but it does not prevent a party from exercising this right himself.

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There is agreement among the jurists that khayar al-Shart can be stipulated for a period of three days or less.

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The jurists disagree as regard any period over three days.

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Imam (bu "anifa and hafi do not allow it for more than three days.

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(ccording to Malikis the period varies from case to case.

Termination of the Option The option ceases to be applicable in the following cases*  Death

of one in hose fa!or the option as operating

The exercise of option is a personal right and cannot pass to the heirs. )ption becomes extinct and the contract is now binding on heirs. (ccording to Shafis and Malikis it is right which can be inherited and heirs can exercise the right of )ption within the stipulated period.

 Termination

of the period

)n termination of period contract becomes binding and irrevocable.  Destruction

of the su"#ect matter

In this case contract also becomes binding.

-/hiyar alTayin $)ption of determination'  Me"#i#

It is the right of buyer to choose, designate or determine within a prestated time one object out of two or more which are proposed to him. The $"si ru%e is th"t the su$/et !"tter !ust $e '#o&# "t the ti!e of o#tr"t.

 01"!p%e  )ne

buying a car out of three vehicles offered for fixed price, gets opportunity through this option to have cars examined by a specialist and choose one of them. The reservi# of the riht to "sert"i# the $ouht ite! %"ter is '#o&# "s the 'hi"r "%*t"i#.

Effects )f the )ption o

o

 hafis and the "anbalis do not permit the stipulation of the determination because their opinion is based on the general rule which is that the goods being purchased must be ascertained at the time of the contract . The "anafis and Mallikis allow this option on the basis of need because one may be in need of consulting other or purchaser is the agent of someone and wants to refer the matter to his  principal..etc.

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o, this option is allowed as an exception through Istihsan $0uristic  preference'.

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Its operation is very narrow permitted mainly in the contract of sale.

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It is permitted to the buyer  as the necessity .

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This option cannot be used by the seller according to the majority of the "anafis .

1uration of khiyar altayin

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Maximum period to exercise this khiyar is three days according to Imam (bu "anifah.

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(ccording to Imam 2usuf and Muhammand time period is unlimited.

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ome 0urists consider khiyar al-tayin , a kind of khiyar al-shart and grant the same period for it as stipulated for the khiyar alshart.

3onditions 

The number of unascertained items should not exceed three, out of which one has to be ascertained.

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There should be a difference in value between the three items and price of each must be known.

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The period of the option should be determined and not more than three days.

Effects of the /hiyar altayin 

( contract with this option is binding  for the seller and non-binding  for the buyer.

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It is possible for the buyer to revoke the purchase in all three items.

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(ccording to Hanafis on the termination of period the contract becomes binding it is now necessary for the buyer to select one of them.

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(ccording to Malikis on termination of the period, the sale is void in all items. o this option must be exercised within the period.

Termination +ollowing factors terminate this option* 4. Exercise of the option -. 1estruction of one of the items in possession

of buyer* The goods destroyed become ascertained and the buyer is liable for the price. 5. 1estruction of one of the items in possession of the seller* %uyer has a choice to accept what remains or to revoke the contract.

5. 1eath of one who possessed the option. The contract becomes binding for the heirs and the heirs must ascertain one item.

5/hiyar al6uyah $)ption of Examination' Definition

It is the right  given to a person7 buying or brings anything not yet present at the time of the signature of the contract, to confirm or revoke the said contract after inspecting the goods or commodity.

 /nowledge

of subject matter at the time of contract is an essential condition.

 uch

knowledge is possible through an examination of subject matter at the time of contract or by description in a manner which removes all kinds of ahalah.

Opinions Of Fu2"h" There are two opinions relating to the khiyar alruyah*

Opinion $ 1 

The hafis are of the view that the contract in which subject matter has not been examined is not valid.

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The re/et the v"%idit of this optio#.

They argue on the basis of this "adith*  Do not sell hat you do not ha!e! 

•

•

The Malikis agree with the hafis in general but they allow sale by minute description when* 8hen examination at time of contract becomes impossible or  It is likely to result in grave loss.

In such case the buyer may exercise option of examination and reject the good if it does not conform to description.

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The "anbalis agree with hafis and Malikis.

They re#ect %hiyar al-ruyah also.

Opinion $& The "anafis having difference of opinion with the other schools. (ccording to "anafis the contract in which the  buyer has not seen the goods is a valid and enforceable contract but it is non-"inding and the  buyer has the option to revoke it upon examination.

The buyer can reject the goods under this option even if the goods were described minutely and are found to conform to the description upon examination. 'anafiss rguments •

•

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They argue that the tradition 1o not sell what you do not have! applies to one who does not own the goods and has not capacity to deliver. It does not apply to the goods, which cannot  be seen at the time of contract. They 9uote in support a tradition to the effect that*

 "e who buys a thing which he has not seen has an option upon seeing it! •

They also base its legality on a judgment against "a:rat &sman $r.a.t.a' who has sold land to "a:rat Talhah. Either had not seen the land . 0ubayr ibn Mutam arbitrated the dispute and allowed Talhah right of option.

*onditions  The  The

buyer must not have seen the goods.

contract must be property, which is specified like houses, land, horses..etc.

+acts terminating the option  The

option ends with the examination of the subject matter. There is no fixed period for this.

 1estruction

of subject matter makes the contract irrevocable.

 The

death of the buyer makes the contract  binding for the heirs of the buyer.

 If

the buyer examines the property and transfers it to other person , the contract  becomes irrevocable.

;/hiyar al(yb  $)ption of defect' Definition

It is right given to purchaser  in a sale to cancel  the contract if he discovers that the good ac9uired has in it some defect diminishing its value! The optio# h"s $ee# i!posed $ %"& itse%f "#d the p"rties do #ot h"ve to stipu%"te it.

 The

goods are liable to be rejected if undeclared defects are discovered.

 If

the seller specifically states that he is not responsible for any defects then the buyer acts at his own risk and goods cannot be rejected.

Legality of this Option

This option is based on the traditions* 

 He &ho defr"uds "#other is #ot fro!

"!o#st us-  

,It is #ot per!itted for se%%er to se%% thi#s &hih "re defetive u#%ess he  poi#ts it out to hi!- 

*onditions for e,ercising option of defect 

The defect should be such which causes decrease in the value of property.

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1efect may be obvious