Arab Law Quarterly - Dissolution of Contract in Islamic Law

Dissolution of Contract in Islamic LawAuthor(s): Muhammad Wohidul IslamSource: Arab Law Quarterly, Vol. 13, No. 4 (1998), pp. 336-368Published by: BRILLStable URL: http://www.jstor.org/stable/3382091 .Accessed: 04/07/2011 04:20

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DISSOLUTION OF CONTRACT IN ISLAMIC LAW

Muhammad Wohidul Islam*

INTRODUCTION

In the Islamic legal system, like other legal systems of the world, certain formalities and substantive elements are essential for juristic acts to become legally binding on the parties. Classical Muslim jurists developed a clear concept of juristic acts which produced a legal effect. Contractual transactions, whether written or unwritten, constitute the vast majority of juristic acts. That being so, Muslim jurists of various classical schools stipulated a clearly defined idea of the conditions and requirements of validity and binding force in juristic transactions concluded between parties. These essential conditions and requirements of substantive and procedural law now provide the criteria for void, valid, binding and enforceable elements of contractual transactions. Muslim jurists laid down a set of criteria for distinguishing between essential conditions on which the valid conclusion of the contract depended, and those which were regarded as less fundamental and which might affect its binding force on only one of the parties. Islamic law, taking into account the nature of the legal requirements which have not been complied with, laid down a distinction between absolute (mutlaq) and relative (nisbf) nullity and between contracts which were void ab initio, and contracts which were merely voidable. Muslim jurists went further and spoke of non-existence of the contract as a radical form of nullity under which the contract was considered as if it had never taken place. They also recognised, in contrast to the above category, contracts the effects of which were merely suspended (mawquf'ala al-ijazat), depending on the choice of the party whose intention was not validly expressed, and for whose protection the nullity was prescribed.'

I shall attempt to outline the principles and rules relating to dissolution of contract under Islamic law on various possible grounds. A contracting party might sometimes not receive the performance which was due to him because of the failure of the other contracting party to honour his side of the bargain. Thus, contractual liability arises, generally speaking, when one of the contracting parties fails to perform his contractual obligation. On the other hand, the fulfilment of a contractual undertaking may be disturbed or permanently frustrated as a result of

* LLB (Hons); Master of Comparative Law (MCL), International Islamic University Malaysia. Saba Habachy, "The System of Nullities in Muslim Law", The American Journal of Comparative

Law, Vol. 13, 1964, p. 61, at pp. 62-63.

Arab Law Quarterly, [1998] 336-368

336

DISSOLUTION OF CONTRACT IN ISLAMIC LAW 337

events or occurrences for which none of the contracting parties is responsible. In any case, the obligation arising out of a contract is, like all other obligations, co- relative of individual right which in fact does not claim permanence, but rather is time-bound and may, at any time, cease to exist due to determinate causes. Whatever the causes might be, the situation makes the performance of the contract either impossible or totally different from that which was initially contemplated by the parties. Sometimes the impact of such events may appear so considerable that the performance of the contract is completely hindered and the parties are therefore discharged from their obligations. Sometimes there may be a case where the contract only needs readjustment to enable reasonable performance of the parties' obligations. The readjustment may be contractual and an out of court settlement, if the parties agree, or judicial, if the parties are in dispute. In my study of the subject, reference will be made to the traditional Islamic law as well as relevant modem statutory provisions and judicial precedents in some selected Arab countries as though they are not totally reflective of but highly influenced by the traditional Islamic law.

GROUNDS FOR DISSOLUTION

The Shari'a attempts to ensure the elimination of all sorts of risk or uncertainty (gharar) in contractual transactions. This noble attempt of the Shari'a led Muslim jurists to discover all possible causes that might result in uncertainty and thus may form bases for the dissolution of a contract. All causes of dissolution, therefore, contain as a general rule in most of the cases, elements of gharar which in turn plays a pivotal role in breaking up the contractual ties between the parties. Experts in the Islamic law of contract have categorised the causes into various classes. Coulson opines that only two modes of dissolution are known to Islamic law, which are unique in their application from a comparative standpoint and which have a vital significance in contemporary commercial transactions in the Gulf States. The first is the right of a party to rescind the contract unilaterally, and "without fault or legal cause". The second is termination on the legal ground of frustration.2 His categorisation seems to be defective and biased as he ignores some of the modes of dissolution familiar in Islamic law, such as "mutual agreement (iqalah)" of the parties which is a well recognised remedy in Islamic law. Niazi contends that a contract is discharged:

(1) By performance; (2) By express agreement; (3) By operation of the doctrine of frustration; and (4) By breach.

2 Coulson, Noel J., Commercial Law in the Gulf States: The Islamic Legal Tradition (London, Graham & Trotman, 1984), p. 75.

338 ARAB LAW QUARTERLY

As regards termination by agreement (1) and (2), he again states that the law is as follows:

(1) Dissolution simpliciter: an abrogation of the rights and duty under the contract;

(2) Novation: by agreement, substituting different duties for the old one which is called hawalah;

(3) Partial dissolution; (4) Accord and satisfaction: by doing a specified act not originally required

under the contract; one party discharges his obligations under the existing contract.3

Sanhuri holds that by cessation (zawal) of contract is meant dissolution (inhilal) of a contract after its formation as valid (sahih) and enforceable (nafidh); and before the completion of its execution, and therefore he excludes two things from the discussion, namely: cessation by execution (tanfidh) or extinction (inqida'); and annulment (ibtal) of the contract. These will be looked at in turn.

Cessation by execution (tanfidh) or extinction (inqida') This is due to the fact that a contract usually ends upon the fulfilment of obligations arising out of it. A contract of sale, for example, ends by the transfer of the subject matter from the vendor to the purchaser and payment of the price from the purchaser to the vendor. All obligations should be fulfilled immediately before the expiry of the time for their fulfilment. A time-bound contract may end with the extinction of a fixed period of time, because the period of time in such a contract may extinguish with the extinction of the period, because the period of time in such a contract is a vital element. Therefore, a contract of lease, for example, will cease with the expiry of the fixed period.

Annulment (ibtal) of the contract

This type is also excluded because annulment arises in cases of invalid (ghayr sahih) or unenforceable (ghayr nafidh) contracts, whereas the purported dissolution involves a contract that is valid and enforceable.4

It is evident from the above discussion that Sanhuri excludes the discussion of cessation by extinction (inqida') and annulment (ibtal); and concentrates on the discussion of cessation by dissolution (inhilal). He also strikes a distinction between the two former and the latter. He states that the distinction between dissolution (inhilal) and extinction (inqida') is that dissolution takes place before the execution of the contract or, in other words, before the execution of a contract

3 Niazi, Dr. Liaquat Ali Khan, Islamic Law of Contract (Lahore, Research Cell, Dyal Sing Trust Library, n.d.), p. 301.

4 Sanhuri, 'Abd al-Razzaq, Masadir al-Haqq fi al-Fiqh al-Islami (Cairo, Dar al-Nahdah al- 'Arabiyyah, n.d.), Vol. 6, p. 201f.


is completed; and extinction arises only after the completion of execution. The distinction between dissolution and annulment (ibtal) is that dissolution arises in the case of a contract which came into being as valid and enforceable, however, subsequently dissolved either with retrospective or non-retrospective effect; annulment, on the other hand, arises in the case of a contract which came into being as invalid or unenforceable and subsequently annulled in all circumstances with retrospective effects.5 Sanhuri, thus, confined the causes of dissolution into three categories:

(1) Dissolution due to non-binding (ghayr lazim) contract; (2) Dissolution for termination (faskh); and (3) Dissolution by mutual agreement (iqalah).6

Mahmassani maintains that for the cessation of a contractual obligation, there are several special causes which should ensue from the dissolution of a contract before or during the continuance of its execution or on account of the expiry of its period. He categorises these causes into three classes,' namely:

(1) Rescission or dissolution by mutual agreement (iqalah) in binding contracts; (2) Termination revocation (faskh) in non-binding contracts due to their nature

or on account of any of the options; (3) Nullity (butlan) or defect (fasad) in invalid contracts.

Without prejudice to the above categorisations of the causes by prominent Muslim scholars, the following categorisation would, it is submitted, pragmatically combine all the above and serve to facilitate the discussion in a comprehensive manner. Thus, in my assumption, the causes of dissolution would be categorised as:

(1) Dissolution by mutual agreement (iqalah); (2) Automatic dissolution by death, destruction of subject matter, expiry of

period, achievement of purpose and stipulated repudiation, etc; (3) Dissolution by revocation and termination (Al-Faskh):

(a) unilateral termination in permissible contracts ('Uqud Ja'izah)/contracts of licence,

(b) termination for nullity and illegality, (c) termination for options (Khiyarat), (d) termination by non-approval to suspend contracts, (e) termination for breach or fault;

(4) Dissolution for impossibility (istihalah) of contractual performance - doctrine of changed circumstances, doctrine of frustration, doctrine of intervening contingencies, doctrine of force majeure and act of God, etc.

5 Ibid., p. 202. 6 Ibid., p. 204.

Mahmassani, Sobhi Rajab, Al-Nazariyyah al-'Ammah Li'l-Mujibat wa'l-'Uqud (Beirut, Dar al- 'Ilm Li'l-Malayin, 1983), p. 485.


AUTHORITIES AND LEGAL VALIDITIES FOR DISSOLUTION

There is an unfounded allegation that the traditional Islamic law was not familiar with such principles as dissolution of contract as a form of remedy for breach or frustration. In fact, jurists have located the authority for the principle of dissolution in various sources which tend to refute the allegation and assert that the concept of dissolution of contract is deeply rooted in Islamic law.

Qur'anic principle of justice and equity

There are verses in the Qur'an which show how flexible the Law-Giver (Shari') can be as a matter of justice and equity in cases of difficulty. A few verses are cited below which demonstrate this:

(1) Allah intends every facility for you: He does not want to put you to difficulties;8

(2) Allah has imposed no difficulties on you;9 (3) On no soul does Allah place a burden greater than it can bear;'0 (4) Allah commands justice and equity."

Prophetic sanction

Dissolution is designed to avoid hardship in performing the contract and also harm to the contracting parties and the following Hadith demonstrates this: "There shall be no unfair loss nor the causing of such loss (La darar wa la dirar)".'2

Al-Zarqa, referring to the above cited verses and Prophetic tradition, maintains that the principle of dissolution can easily be deduced from the Islamic law ideals of justice and equity.13 This proposition has been further supported by assimilating the remedy of termination for breach to the classical Islamic law concept of payment option (khiyar al-naqd). This legal concept is to the effect that a seller and a buyer can agree on a certain period of time for payment, failing which the seller has the right to terminate the contract.'4 This rule was included in Majallat al-Ahkam al-'Adliyah.'5 Article 313 reads: "If the buyer and seller agree that the price shall be paid at such a time, and that if it is not paid, there is not to be any sale between them, this is a valid agreement. This is called 'money option' (khiyar al-naqd)".

Al-Qur'an, Surah al-Baqarah (2): 185. 9 Surah al-Hajj (22): 78. 1o Surah al-Baqarah (2): 286; see also Surah al-Baqarah (2: 233); Surah al-An'am (6): 152; Surah al-

A'araf (7): 42; Surah al-Mumimun (23): 62; Surah al-Talaq (65): 7. 11 Surah al-Nahl:90. 12 Quoted from Coulson, see n.2, supra. 13 Adnan Amkhan, "Termination for Breach in Arab Contract Law" [1995] ALQ 17. 14 Ibid. 15 Ottoman Civil Code, well known as the Mejelle, trans. (Eng.) by Tyser, C.R. (Lahore, Law

Publishing Company, 1967).


Legal maxims and the principle of necessity

The primary purpose of religion or divine legislation is to preserve five vital and necessary elements; belief, life, intellect, posterity and property. Any occurrence which hinders the enjoyment of any of these elements must, if at all possible, be avoided. In addition, the application of divine law should not result in injury or harm to either individuals or the public at large.'6 Hence, the following legal maxims signifying equitable and common sense rules of necessity relating to the human transactions set out in the preliminary chapter of the Mejelle could be referred to as authority for the theory of dissolution:

(1) Necessity (darurat) allows actions which would otherwise be prohibited (Art. 21);

(2) Hardship is solved by tolerance (Arts. 17 and 18); (3) There shall be neither retaliatory damage nor causing of damage (Art. 19); (4) Necessity is judged according to its merits (Art. 22); (5) A damage must be brought to an end (Art. 20); (6) A major damage may be replaced by a lesser one (Art. 27).

Theory of interdependence of obligations

Adnan Amkhan contends that the most widely held theory as an authority for dissolution of contract is that of the interdependence of obligations. This theory implies that contractual obligations are dependent on each other, and so the disappearance of one obligation should lead to cancellation of the counter obligation as well. Linked with this, another theory has evolved which involves the notion of an implied resolutive condition. In other words, every reciprocal contract has an implied terminating clause, which becomes operative when one of the contracting parties fails to perform his contractual obligation. This theory of "implied resolutive condition" has been severely criticised by legal writers, since it suggests that whenever a contract is breached it will be automatically terminated, which is not the case. The aggrieved party must, in the absence of any agreement to the contrary, seek termination through a court order, and the court has the discretionary power to grant or refuse the request.'7

Theory of equilibrium

Islamic law emphasises the idea of balance of countervalues in a contract and provides a binding force only for contracts satisfying this requirement, because Islamic law always respects the real intent of society.'" Therefore, contracts are

16 Adnan Amkhan, "The Effect of Change in Circumstances in Arab Contract Law" [1994] ALQ 258, at 259.

17 See Amkhan, n. 13, supra, pp. 18-19; Bel-'Uyur, Abdul Karim, Nazariyyat Faskh al-'Aqdfi al- Qanun al-Madani al-Jaza'iri al-Muqaran, n.p., 1986, pp. 85-113.

'8s Hideyuki Shimizu, "Philosophy of the Islamic Law of Contract, A Comparative Study of Contractual Justice" (IMES Working Papers Series No. 15, I.U.J., March 1989), p. 75.


never legally binding until the real equilibrium is ascertained or both parties are satisfied. Thus, the attitude of Islamic law is not always formal but is very substantial,19 unlike Western law which emphasises the mutual consent of the parties irrespective of their equality of bargaining power. Although a mutual agreement is a cause of contract, Islamic law regards a cause not based on the real and ultimate reason as meaningless. In other words, a mutual agreement which never brings mutual satisfaction is not respected. Accordingly, it is judged by fully considering the total context of a contract in a society where the principle of equilibrium has priority over the rule of a binding contract,20 that is to say, although the Islamic legal system creates a valid contract by mutual agreement, the contract does not have a binding force until the parties can ascertain that their proper expectation can be substantially realised. Thus, Islamic law provides binding force to the contract where a just and apparent agreement at the beginning of a contract is not realised, but after ascertaining the satisfaction of the parties real agreement is realised. It is at the time of ascertaining the equilibrium of countervalues that the contract becomes legally binding in Islamic law,21 and as a result, in the absence of such equilibrium of countervalues or, in other words, where there is difficulty in the realisation of a substantial mutual agreement, the contract is susceptible to dissolution.

IQALAH: DISSOLUTION OF CONTRACT BY MUTUAL AGREEMENT

After the formation of a valid, enforceable and binding contract, the parties are under an obligation to perform it. If one of the parties regrets his actions and wants to revoke his part of the undertaking in the contract, he is not permitted to do so except with the consent and approval of the other party. This principle can be justified in the sense that a contract is formed by mutual consent and, therefore, cannot be dissolved except by the same mutual consent.22 Al-Zaila'yi states, "None of the parties has the right to unilaterally dissolve the contract as none of them can unilaterally form it, because the contract is a shared right".23 The Shari'a considers it permissible, however, if one or both of the contracting parties regret their actions for them to dissolve the contract with mutual satisfaction, and this procedure of dissolution is called "iqalah".24

'9 Ibid., p. 74. 20

Ibid., pp. 84-85. 21

Ibid., p. 88. 22 See n. 7, supra, p. 486. 23 A1-Zaila'yi, Uthman ibn Ali, Tabyin al-Haqa'iq Sharh Kanz al-Daqa'iq, Vol. 4 (Boulac, 1313-

15h), p. 198. See n. 7, supra, p. 486.


Definition of iqalah

Al-Zuhaili defines iqalah as "termination of contract by mutual consent of the parties in case one of them is regretful and wants to turn away from the contract".25 According to Ibn Najim, "iqalah is withdrawal of contract and its cancellation by the agreement of the parties in case of binding contracts".26 This is also called the agreement in contrast to the contents of contract which is termed in Roman law "Contrarius Consensus".27

Authority for iqalah

The authority for iqalah is attributed to a famous Hadith of the Prophet (PBUH) who is reported to have said, "whoever discharges a regretful person of his undertaking, Allah (SWT) will remove his obstacles in the hereafter (Man aqala nadiman bai'atahu aqala Allahu 'athratahu yawma al-Qiyamah)".28

Formation of iqalah

The element (rukn) of iqalah in Islamic law is the offer from one of the contracting parties and the acceptance of the other party.29 Therefore, the offer and the acceptance expressed in word(s) constitute the element of iqalah. There is no dispute as to the issue that iqalah can be constituted by two words both signifying the past tense. According to Imam Abu Hanifa and Abu Yusuf, iqalah could also be constituted by two words (ijab) and (qabul), one signifying the past tense and the other the future tense as prevalent in the marriage contract but not in the contract of sale, in which case this may not apply in the initial contract but may apply at the subsequent iqalah contract. This view is, however, opposed by Imam Muhammad who is of the opinion that iqalah constitutes two words both signifying the past tense as in the case of an initial contract of sale.30 Al-Kasani holds that the element of iqalah is offer and acceptance as in the case of a contract of sale. However, in his view, the element of a sale contract takes the form of two words both signifying the past tense, and the same applies in the case of iqalah. Nevertheless, there is a difference between both the words according to the contexts of iqalah and the sale contract in the sense that the use of the future tense for bargain is real (haqiqah) and the bargain in the sale contract is period bound and, therefore, the word can be converted to its real form. Consequently, it does not stand as acceptance. This is in

25 Al-Zuhaili, Wahbah, Dr., Al-Fiqh al-Islami wa Adillatuhu, Vol. 4 (Damascus, Dar al-Fikr, 1984), p. 277.

26 Ibn Najim, Zainul 'Abidin, Al-Bahr al-Ra'iq Sharh Kanz al-Daqa'iq, Vol. 4 (Egypt, 1334h), p. 277.

27 See n. 7, supra, p. 486. 28 Narrated by al-Baihaqi on the authority of Abu Huraira, quoted from Al-Zuhaili, see n. 25, supra,

p. 277. 29 Mejelle, Art. 191. 30 Sanhuri, see n. 4, supra, p. 269.


contrast to the situation in iqalah whereby the word cannot be converted to its real sense (haqiqah) because the bargain in iqalah is not period bound and therefore this can stand as acceptance. This is in line with the marriage contract where such word is considered as acceptance.31

Conditions for the validity of iqalah

Sanhuri stipulates five conditions for the validity of iqalah:32

(1) Satisfaction (rida') of the parties to iqalah, i.e., the consent should be free from duress (ikrah) because duress invalidates contract;

(2) Meeting (Majlis), i.e., iqalah should be concluded in a meeting because the substance of contract is present in iqalah and therefore the condition of majlis should apply in iqalah in the same way as it applies in contract;33

(3) Reciprocal possession of equivalent reimbursed money in the process of dissolution of a money exchange contract, i.e., the iqalah should be effected by reciprocal delivery and possession;

(4) In the case of a contract of sale the thing sold should be in existence in the hands of the buyer at the time of iqalah. Therefore, if the thing has been completely destroyed, the iqalah is not valid.34 However, if there is only a partial destruction of the object, with regard to the rest, the iqalah is valid with its equivalent portion of the fixed price.35 As far as the price is concerned, its destruction does not prevent the validity of iqalah;36

(5) The thing sold should be susceptible of being terminated for all causes of termination, such as revocation for the options of stipulation (shart), sight (ru'yah) and defect ('ayb). If it is not so, that is if there is something additional which prevents the right to revocation ensuing from those causes, the iqalah is not valid according to Abu Hanifa and Zufar. However, Abu Yusuf does not consider it as a condition.

Modes of iqalah

Mahmassani maintains that, as the iqalah can be validly constituted by express (sarih) or implied (dimni) consent, similarly iqalah itself can be express or by way of indication.37 Iqalah by way of mutual delivery to one another is also valid, the delivery standing in the place of an offer and acceptance.38 As it is evident that iqalah is notionally as well as practically analogous to a fresh contract, all the

31 Al-Kasani, 'Alauddin, Bada'i~i al-Sana'i'ifi Tartib al-Shari'i (Egypt, 1327-28 h), Vol. 5, p. 306. 32 See Sanhuri, n. 4, supra; for a detailed discussion on the conditions of iqalah see also al-Kasani,

n. 31, supra, pp. 308-310. 33 Mejelle, Art. 193. 34 Ibid., Art. 194. 3s Ibid., Art. 195. 3

Ibid., Art. 196. 37 Mahmassani, see n. 7, supra, p. 487. 38 Mejelle, Art. 192.


modes of contract may apply in iqalah. Having established this, what is now necessary in the formation of a contract is the mutual assent of the parties. What is important is that, irrespective of the modes, the consent which is an intangible mental fact has to be manifested before its existence can be known. Thus the emphasis is on the objective manifestation of assent, and not on assent as a subjective mental fact.39 There should be no dispute as to the validity of ways by which an assent may adequately be manifested and communicated. The Malikis were prepared to accept as sufficient manifestation of assent, anything that is customarily regarded as indicative of consent. Similarly, Hanbalis hold the view that a contract can be concluded by whatever is customarily regarded as indicative of mutual assent. In tune with this view, the Hanafis hold that consent can be inferred even from mutual delivery (mu'atah) without a word being uttered in a customary sale contract.4 The same rule is applicable in iqalah for the shared similarity of nature and form between contract and iqalah.

Iqalah and the common law doctrine of recession compared

There is a similarity between iqalah in Islamic law and recession in English common law in the sense that both require a new offer and acceptance for their formation and thus none of the contracting parties can independently annul the existing contract. However there are some differences between the two systems. The recession in English common law does not bear retrospective effect by itself unless the parties agree. The Islamic law doctrine of iqalah, on the other hand, is regarded as revocation at one time and a new contract at another time. If it is regarded as revocation then it removes the effect of the original contract with retrospective effect and renders it as if there was no such contract at all. If it is regarded as a new contract, the original contract still exists, and subsequently the subject matter of the contract is re-exchanged by the fresh contract with the effect of iqalah; and thus, iqalah does not bear retrospective effect. As a result, if iqalah is regarded as revocation with retrospective effect, it would not be restricted to the contracting parties but would extend to a third party; and if it is a fresh contract with no retrospective effect, its effect would not be restricted to a third party only but also in relation to the contracting parties.41

AUTOMATIC DISSOLUTION OF CONTRACT

There are certain causes which give rise to the automatic dissolution of a contract. I will now discuss them.

39 Hamid, Mohmed Al-Fatih, "Mutual Assent in the Formation of Contracts in Islamic Law", Journal of Islamic and Comparative Law, Vol. 7, 1977, p. 41.

40 Ibid., pp. 42-43. 41 Sanhuri, see n. 4, supra, pp. 275-276.


Death

A contracting party is naturally exempted by his death from the liability arising out of the contract. However, contracts are not dissolved in general by the death of either of the contracting parties, unless the subject matter of the contract is of a personal nature, such as, for instance, as in the case of a lease, where if either the landlord, or the farmer dies, the contract is dissolved on the occurrence of that event. Similarly, in the case of partnerships, the surviving partners are not bound to continue in business with the heirs of the deceased partner, and vice versa.42 Not all types of contract are susceptible of automatic dissolution by death. Al-Zuhaili has determined certain types of contract which may be dissolved by the death of one of the contracting parties as follows.43

Contract of lease (ijarah)

According to the Hanafi School, the lease contract, despite being legally binding from both sides, is automatically dissolved by the death of one of the contracting parties."44 However, according to non-Hanafi jurists, the lease contract does not dissolve upon the death of one of the parties.4 This difference of view is due to the different perception with regard to the formation of a lease contract. Hanafis perceive that ijarah takes place in benefits (manafi') according to its gradual accrual, i.e., the lessee owns benefit gradually with the passage of time. Therefore the benefit accrued after the death of the lessee can not be owned by him. Thus the contract does not validly exist after death. The non-Hanafis, on the other hand, hold that the benefit is considered to be present during the formation of the contract and the lessee owns it at once and that it is a legally enforceable ownership. Therefore, it can be inherited like other purchased things. Thus, the lease contract like other sale contracts does not dissolve upon the death of one of the contracting parties.46

Mortgage (rahn) and surety (kafalah)

They are binding contracts only on the part of the obligor (da'in), that is the mortgagee or the one for whom the surety is created (makful lahu). So, if the mortgagor dies, the mortgage may be sold out by his will and his debt may be settled in this way if his heirs are minors. However, if the heirs are adults, they have to inherit the property and they are under an obligation to release the lease by settlement of the debt.47 As regards the surety (kafalah), if it is by debt, it does not

42 Niazi, n. 3, supra, p. 74; Standish Grover Grandy, Manual of the Mohammadan Law of Inheritance and Contract (London, Allen & Co., 1869), p. 168.

43 AI-Zuhaili, n. 25, supra, pp. 277f. " Al-Zaila'yi, n. 23, supra, Vol. 5, p. 144; Al-Kasani, n. 31, supra, Vol. 4, p. 201. 45 Al-Shirazi, Abu Ishaq, Al-Muhadhdhab (Egypt, Matba'ah Halabi, 1343h), Vol. 1, p. 406; Ibn

Rushd, Al-Hafid, Bidayat al-Mujrahid (Egypt, Matba'ah Sabih, 1347-52h), Vol. 2, p. 227. 46 Al-Zuhaili, n. 25, supra, p. 278. 47 Ibid.


dissolve upon the death of the original debtor; rather it dissolves in two ways: by rendering back the debt to the creditor, or by exemption from the debt. If the guarantor (kafil) dies, the debt would be settled from his bequest. However, if the kafalah involves the kafil himself as opposed to debt, it would be dissolved by the death of the original debtor who was guaranteed by himself (makful bi nafsihi); and by the death of the kafil because of the inability to bring the original creditor in whose favour the surety was created (makful 'anhu).48

Partnership (sharikah) and agency (wakalah)

Both are non-binding contracts on the part of both parties. They are dissolved by death. Partnership is dissolved by the death of one of the partners regardless of whether the other partners know about the death or not.49 Similarly, wakalah is dissolved by the death of the agent or principal irrespective of the knowledge of the other about the death.50

Contracts of muzara'ah and musaqat51

They are non-binding contracts from both sides. Hanbali jurists recognise both the contracts. According to them, the contract would be dissolved by the death of either the landowner or the peasant regardless of whether he dies after or before his work on the land or plantation and regardless also of whether or not harvest has taken place.52 However, if the landowner dies before the crops or fruits are ripe, the land should be left in the custody of the peasant until harvest for the sake of preserving the interest of both the parties. If the peasant dies, his heirs should continue work until the harvest.53

Expiry of the period of contract and achievement of purpose

The contract would automatically be dissolved if the limited period of its effect expires or the purported object of the contract is achieved. This is like the expiry period in the case of a time-bound lease contract and the settlement of debt in the case of mortgage and surety contracts and execution of the agent of the tasks for which he was made agent in the case of a contract of agency.54

48 Ibid.; Al-Kasani, n. 31, supra, Vol. 6, p. 11. 49 Al-Sarakhsi, Shams al-Din, Al-Mabsut Sharh al-Kafi (Egypt, Matba'ah al-Sa'adah, 1331h),

Vol. 11, p. 212; AI-Kasani, ibid., p. 78. 50 Al-Sarakhsi, ibid., Vol. 19, p. 13; Al-Kasani, ibid., p. 38; Al-Zuhaili, n. 25, supra, p. 278. 51 Muzara'ah is a temporary sharecropping contract; Musaqat is a sharecropping contract over the

lease of a plantation, limited to one crop period. 52 Al-Kasani, n. 31, supra, Vol. 6, p. 185. 53 Al-Zuhaili, n. 25, supra, p. 279. 54 Ibid., p. 277.


Non-performance within stipulated time

If a contract stipulates that non-performance of a party within a fixed period would entitle the other party to repudiate the contract, such repudiation gives rise to automatic dissolution of the contract. It can be illustrated by reference to a rent contract, where if there is a condition for the immediate payment of rent and the hirer refuses to pay when the lessor demands the rent in ready money, the lessor has the right to repudiate the contract5s which would lead to the automatic dissolution of the contract. Similarly, if there is a stipulation that the price shall be paid at such a time (khiyar al-naqd) in a contract of sale and the purchaser fails to pay the price at such a time, the contract is dissolved.56

Destruction of the subject matter

If the thing sold is destroyed while in the hands of the vendor, before receipt by the purchaser, the loss does not affect the purchaser, it falls on the vendor,57 and according to Abu Hanifa and Shafi'i the contract is dissolved by such destruction of the subject matter. However, Malik and Ibn Hanbal are of the view that such destruction does not give rise to dissolution of the contract, rather the purchaser may oblige the vendor to deliver an equivalent similar thing or an equivalent price. Ibn Hanbal further observes that the purchaser may revoke the contract and claim restitution of the price he has paid.58 If the thing sold is destroyed by a stranger before its receipt by the purchaser, then the purchaser may, in the opinion of the majority, dissolve the contract and claim restitution of the price paid.59

AL-FASKH: DISSOLUTION OF CONTRACT BY REVOCATION

AND TERMINATION

There are certain types of contract that may be dissolved by revocation of one of the parties or termination by operation of law. In Islamic law al-Faskh is the common term which adequately accommodates these two grounds of dissolution of contract. I will attempt to discuss in brief the contracts which may be unilaterally revoked by one of the contracting parties. Then I will discuss in greater length the causes which may lead to termination of contract by operation of law.

55 The Mejelle (trans. in English by Tyser, C.R., Lahore, Law Publishing Co., 1967), Article 648. 56 Mejelle, Arts. 313 and 314. 57 Mejelle, Art. 293. 58 Mahmassani, n. 7, supra, p. 501. 59 Al-Ghazali, Al- Wajiz (Egypt, Matba'ah al-Muwabbad wa'l-Adab, 1317h), Vol. 1, p. 145; Al-

Rafi'i, Fath al-'Aziz Sharh al Wajiz (Taba' Badhil, Kitab al-Majmu' Li'l-Nawawi), Vol. 8, pp. 399- 400.


Unilateral revocation of contract

A group of contracts susceptible of being dissolved by unilateral revocation is known as 'uqud ja'izah. Coulson criticises its common translation as "lawful contracts". He maintains, ja'izah is the plural adjectival form of the noun jawaz, which is best rendered, in technical legal terminology, as "licence". A licence has the characteristic of being revocable at will; and it is this same feature of revocability which is the real significance of the 'uqud ja'izah under Islamic law and it distinguishes them from binding (lazim) contracts. These contracts, therefore, may appropriately be called "contracts of licence".6 0 Mahmassani categorises them as non-binding contracts either from both sides or only one side.61 They may be terminated by the revocation of the party for whom they are licensed. If such contracts are non-binding for both the parties, each of them is allowed to revoke the contract without the consent of the other. For instance, a partnership is dissolved by the revocation of one of the partners, but it is a condition that the other should know of its dissolution. If one has revoked his partnership, the dissolution of the partnership is not effected until the other knows of it.62 Similarly, in the case of agency (wakalah), the principal can dismiss his agent (wakil). However, he cannot dismiss him if there is a right of another related to the agency.63 Likewise, the agent too has the right to resign from the agency. But, as stated above, if the right of another is dependent upon him, he cannot resign, and he is compelled to perform his agency.64 Another instance in which both the parties have the right to revoke the contract is in the case of deposit (wadi'ah), where each person who deposits his property for safe-keeping with a person who promises to keep it safe, has a right to dissolve the contract of wadi'ah at any time.65

There are certain contracts which are regarded as binding for one party and non- binding or, in other words, permissible/licence (ja'izah) for the other. They can be terminated by the agreement of both parties; or the party for whom it is licensed may dissolve by revocation. For instance, in the case of a mortgage (rahn), the mortgagor and the mortgagee can by agreement dissolve the contract of mortgage.66 The mortgagee can also of his own accord dissolve the contract of mortgage.67 However, the mortgagor cannot revoke the contract until the assent of the mortgagee has been given.68

60 Coulson, n. 2, supra, p. 76. 61 Mahmassani, n. 7, supra, p. 487. 62 Tyser, n. 15, supra, Art. 1353. 63 Ibid., Art. 1521. 64 Ibid., Art. 1522. 65 Ibid., Art. 774. 66 Ibid., Art. 718. 67 Ibid., Art. 716. 68 Ibid., Art. 717.


In all the circumstances above, the dissolution does not depend on a court order,69 and does not have retrospective effect. For example, when the principal has dismissed his agent, until notice of his dismissal is received by the agent, he continues as agent, and his disposition of property as an agent up to that time is valid.70

Termination for nullity and illegality

Nullity and illegality of form and substance may be one of the grounds of dissolution in Islamic law. Rayner shares the view that, despite some striking similarities, the system of nullity in Islamic law is incomparable and peculiar to other legal systems. The number of contracts which are absolutely null and void due to religious sanctions affirm the distinctive personality of Islamic law, and the system of options to be found within the Islamic doctrine of nullity is indeed peculiar to that particular system.71 The system of nullity in Islam takes its starting point from the Qur'an, which provides the basic principles, morals and fundamentals of Islamic public order for the guidance of the Muslim community. The Qur'anic precepts take the effect of mandatory rules of good morals and public order. In principle, therefore, any attempt by the contracting parties to exercise their freedom of contract to circumvent the Qur'anic restrictions should prove ineffective: the contract is batil (null and void) as contrary to the Shari'a.72 The neo-Hanbali jurist Ibn Taymiyyah and his eminent disciple Ibn Qayyim al- Jawziah have contributed greatly to the understanding of the general rules governing the validity of contracts in Islamic law.73 It was Ibn Taymiyyah who before the eighteenth century had made an attempt at a general systematisation of the theory of nullity, who covered most of the salient features of nullity in his chapter on contracts in the luminous book Fatawa.74 One of the general rules concerning nullity, as perceived by Ibn Taymiyyah according to the Shari'a is that absolute nullity must be based on either a pillar (rukn) or cause (sabab) of the contract, and this, as often as not, concerns either the offer and acceptance, or the object of the contract, or both.75 Saba Habachy has categorised these nullities into the following broad categories.76

69 Ibn Rajab, Abu al-Fath 'Abd al-Rahman, Al-Qawa'idfi'l-Fiqh al-Islami (Egypt, Matba'ah al-Sidq al-Khairiyyah, 1933), rule 63.

70 Mejelle, Art. 1523. 71 Rayner, S.R., Dr., The Theory of Contracts in Islamic Law (London, Graham & Trotman, 1st edn,

1991), p. 147. 72 Ibid., p. 152. 73 Habachy, n. 1, supra, p. 61 at 63. 74 Ibn Taymiyyah, Sheikh al-Islam Taqi al-Din Ahmad, Fatawa (Mabhath al-'Uqud), (Cairo, 1326-

29h), Vol. 3, 387ff. Al-Jaziri, 'Abd al-Rahman, Kitab al-Fiqh 'ala al-Madhahib al-Arba'ah, Vol. 3 (Beirut, 7th

printing, n.d.), pp. 224-25. 76 Habachy, n. 1, supra, 63ff.


Unlawful contracts

As mentioned earlier, the Shari'a, like every system of law, has a set of mandatory rules of public order and good morals. These rules, which are meant to protect the interest of the community, cannot be contravened by private contracts. Where they are, such infringement of the law carries the sanction of the absolute nullity of the offending contracts. The Shari'a requires conformity to these rules in determinate terms. Private contracts involving acts which are contrary to the Shari'a are null and void.77 For instance, a contract to commit a crime or to perform any other unlawful or immoral act would be invalid under Islamic law. The yardstick according to which the unlawful or immoral character of an act is to be measured is the revealed law of Allah (SWT), and not, unlike other systems, looked at from a purely human angle. The Islamic law of obligations and contracts takes into consideration, as a religio-legal system, the prohibition on religious grounds of certain transactions among Muslims. Therefore, the list of unlawful contracts under the Shari'a is to be longer and more detailed.78 Rayner has classified the list of unlawful contracts into the following three classes:79

Firstly, when the Shari'a requirements of legality concerning the object of contract are not realised at the time of contract, then the contract is void (batil).80 For instance, existence of the object at the time of the contract is a requirement of legality; and if the object does not exist a contract of sale of it is invalid (batil), for example, to sell fruit which has not yet appeared on the tree.81 Another requirement of legality of the object is that it should be mal mutaqawwim, and therefore, to sell a thing which cannot be accounted as property (mal)82 among men is invalid (batil), for example to sell an unclean carcasse or a man is invalid,83 for they are not regarded as property. Similarly, a sale of property (mal) which is not mutaqawwim is invalid (batil).84

Secondly, the sale of any article which cannot be separated without harm, and is not deliverable is invalid. Thus a beam in the roof of a house would not be the lawful object of a contract as that beam could not be separated from the rest of the house without causing harm to the whole structure.85 Likewise, the sale of an

77 Ibid., pp. 64-65. 78 Ibid. 79 Rayner, n. 71, supra, pp. 153-154. 80 Sanhuri, n. 4, supra, Vol. 4, p. 135; for a detailed discussion of the requirements of legality, see also

Rayner, ibid., 131ff. 81 Mejelle, Art. 205; see also Art. 363; this requirement is dispensed within the case of salam

contracts, certain agricultural contracts and contracts for services or acts. 82 For the definition of Mal Mutaqawwim, see Art. 127 of the Mejelle. 83 Ibid., Art. 210. 84 Ibid., Arts. 211 and 363. 85 Rayner; n. 71, supra, p. 154.


object the delivery of which is impossible is invalid, e.g., the sale of an escaped animal.86

Thirdly, things which are deemed or declared unlawful by the Shari'a, or which offer no benefit, or which have restricted disposal rights, or which are ritually impure, or things without market value, are unlawful objects of contract. For example, Islam prohibits the consumption of carcass, blood, pork and wine.87 Consequently, any transaction between Muslims which involves these things for its object is stricken with absolute nullity. Islam also categorically prohibits contracts based on usury (riba).88 Therefore, any contract involving usury is null and void under the Shari'a. Islamic law never recognises any contract which has an apparently illegal purpose such as the commission of an anti-social act like killing. Muslim jurists also developed the theory of gharar (risk/uncertainty) on the Qur'anic interdiction of gambling (maysir)89 and extended the sanction of absolute nullity to all contracts where a risk was to be taken in a spirit of speculation, or where the extent of the obligations undertaken by one of the parties and of the advantages which would rebound to the other party were not clearly defined at the time the contract was entered into.

Defects of formality

Islamic law is generally free from the fetters of external formalism as it places importance upon intention and mutual consent. Article 3 of the Mejelle states that in contracts effect is given to the intention and meaning and not to the words and phrases. Saba Habachy contends that this informalism emanated from the saying attributed to the Prophet (PBUH) which puts the emphasis in human behaviour on intention rather than form. According to the saying, acts shall be judged and appraised in the light of the intention which inspires them; and each man shall be judged according to what he intended by his actions.90 Sanhury explains that the absence of formalities derives from the religious character of Islamic law.91 Nabil Saleh, however, maintains that the Islamic informality in the technique of contracting is the Qur'an's concern to protect the Islamic community from any undue hardship;92 that concern being a distinctive feature of the teaching of Islam.93 This being the case, in general, a few contracts, however, do remain

86 Mejelle, Art. 209; see also Art. 363. 87 Al-Qur'an, Surah al-Ma'idah (5): 3 and 90. 88 Surah al-Baqarah (2): 275; Surah Al'Imran (3): 130. 89 Surah al-Ma'idah (5): 90.

9o Habachy, n. 1, supra, pp. 66-67. 91 Sanhuri, n. 4, supra, p. 37. 92 Qur'an, xxii, 78. 93 Saleh, Nabil A., "Financial Transactions and the Islamic Theory of Obligations and Contracts",

Islamic Law and Finance (ed. C. Mallat, London, 1988), p. 4.


subject to conditions, which, although not all are recognised as strict conditions of form, if omitted, would render the contract devoid of effect such as:9

(1) The contract of pledge depends on the transfer of possession to the pledgee.95 In pledge and mortgage transactions, either physical or constructive possession of the pledge by title deed is required for the pledge to have valid effect. If possession of the pledge is not transferred the pledge is rendered incomplete and revocable;

(2) The contract of gift depends on the delivery of the object to the second party. Until delivery has been executed the contract remains revocable by the donor;96

(3) Islamic law looks on marriage as an ordinary contract subject to two conditions.97 The first, which is applicable to all four schools, is that a certain number of witnesses are required. The second condition is that the expressions employed must convey an unequivocal intention that the parties intend to become husband and wife;

(4) The contract of salam, being a contract involving future delivery requires immediate consideration to pass in order for it to be valid and not contrary to the rules of gharar;98

(5) The contract of barter, by its very essence, requires immediate consideration to pass;

(6) The contract of mufawada (unlimited mercantile partnership) is created either by intention of the term "mufawada" itself, or by mention of every single legal effect. Here effect is given only to formal declaration of the precise terms;"

(7) The contracts of 'ariyah (hire) and qard (loan) are dependent for their legal effect on the taking possession of the object of the contract,100 or delivery of the moneys to the borrower.

In all the situations above, defect with regard to formalities may make the contract invalid and thus susceptible of dissolution.

Termination for lack of constitutive elements and incidental conditions

Void and voidable contracts

The constitutive elements or the intrinsic conditions are the foundation (arkan), without which a contract could not be validly concluded and if one of them was

94 Habachy, n. 1, supra, 67ff.; Rayner, n. 71, supra, 164ff. 95 Mejelle, Art. 706. 96 Ibid., Art. 837. 97 Mahmassani, n. 7, supra, Vol. 2, pp. 31-32. 98 Al-Jaziri, n. 75, supra, Vol. 2, 397ff. 99 Schacht, Joseph, Introduction to Islamic Law (Oxford, 1964, reprinted 1966, 1979), p. 116. 00oo Ibn 'Abidin, Muhammad Amin, Radd al-Muhrar 'ala al-Durr al-Mukhtar (Dar al-Sa'adah,

1324h), Vol. 4, 531ff.


lacking, there could only be the external form or similitude of a contract, but that contract would be non-existent in law. Such an act would be absolutely null and void. But, on the other hand, despite the presence of all the basic constitutive elements of a contract, one of them may be imperfect or vitiated by an initial weakness. That contract would then be only voidable, the defect of which may either be subsequently remedied, in which case the cause of relative nullity would

disappear, or the person with whom rests the action to challenge the validity of the contract may choose to expose the defect, in which case the contract would be voided.101 It should be noted that Muslim jurists have classified contracts into three categories of valid (sahih), void (batil) and voidable (fasid). That division is demonstrated in Articles 106-109 of the Mejelle in the Chapter on sales. However, the rules which apply to sale also apply mutatis mutandis, to other commutative contracts. 102

Thus, Article 108 of the Mejelle defines a valid sale as a contract which is lawful, both "in itself' (dhatan, in se, or in its essence) and "as regards matters incidental thereto" (wasfan, in its qualifications).

In view of Article 107, a "non-concluded sale" is regarded "as a sale which is void", and it makes "non-existent" and "void" contracts, interchangeable terms which equally stand for absolute nullity. In between the two categories of valid and void contracts stands the third category of voidable contracts. Article 109 of the

Mejelle states: "A voidable sale is a sale which, while valid in itself, is invalid as

regards certain external particulars". The constitutive elements without which a contract would be an absolute nullity

and thus dissolved are the following:103

(1) The agreement of the parties which consists in a meeting of minds as

expressed in an offer by one side and an acceptance of that offer by the other

side; (2) The capacity of the parties. The contract of a child who has not yet reached

the age of reason, or the contract of a person who is completely insane, is non-existent, or absolutely null and void;'"

(3) The object of the contract must be in existence, and must be capable of

being the lawful object of a transaction according to the Shari'a. We have seen above that wine and pork are not merchantable according to the

teaching of the Shari'a, and consequently they cannot be objects of a lawful contract among Muslims;

(4) The purpose or cause of the contract must be valid. To be valid under Islamic law, a contract must not have for its object the commission of an unlawful or an immoral act.

101 Habachy, n. 1, supra, p. 69.

102 Ibid.

'03 Ibid., pp. 69-70. 104 Mejelle, Arts. 361 and 362.


The causes which do not bring about the absolute nullity of a contract, but merely vitiate one of its elements and make it voidable follow.105

Lack of legal capacity. In the case of contracts where it is not certain whether they will be to the benefit of a minor of perfect understanding or to his disadvantage, such contracts are concluded subject to the permission of his tutor.106 A person interdicted for prodigality is also treated like a minor of perfect understanding.'07

Defective acceptance vitiated by constraint, error or fraud. Article 1006 of the Mejelle states that contracts entered into as a result of constraint are invalid. Error as to a desirable quality of the object of the contract makes the contract voidable. This is called in Islamic law "option for misdescription".'l0 Article 72 provides to the effect that: "No validity is attached to conjecture which is obviously tainted by error". Fraud is another cause vitiating the will of one of the parties to a commutative contract and making such contract voidable at the choice of the defrauded party. Article 164 of the Mejelle defines fraud as cheating and Article 357 provides that: "If one of the two parties to the sale deceives the other, and flagrant misrepresentation is also proved to be present in the sale, the person so deceived can cancel the sale".

Termination by options

The system of options (khiyarat pl. of khiyar) aimed at removing as much risk as possible and realising the fundamental aspiration of Islamic law - the highest possible degree of certainty in the rights and obligations arising from a contract, that is to say, that a contract will not be legally binding without ascertaining the equality of countervalues. It often happens that an apparently lawful and voluntary contract involves a latent flaw or defect unknown to the parties at the time of formation.'" It is not acceptable, in the Islamic legal system, to enforce such a defective agreement. Unless the defect is removed, the agreement cannot be binding. Ibn Taymyyah observes: "If proper fulfilment of obligations and due respect for covenants are prescribed by the Law-giver, it follows that the general rule is that contracts are valid. It would have been meaningless to give effect to contracts and recognize the legality of their objectives, unless these contracts were themselves valid".110 In order to lawfully terminate such a defective and invalid agreement after its conclusion, the system of options exists. The right of options is accorded by the Shari'a as a unilateral "choice" to cancel (faskh) or to ratify

105 Habachy, n. 1, supra, 70ff. 1'6 Mejelle, Art. 967. 107 Ibid., Art. 990. 108 Habachy, n. 1, supra, p. 71. 109 Saleh, n. 93, supra, 57ff; Hideyuki Shimizu, n. 18, supra, p. 69. 110 Ibn Taymiyyah, Shaikh al-Islam Taqi al-Din Ahmad, Fatawa (Mabhath al-'Uqud), Vol. 3;

quoted in Habachy, op. cit., and Hideyuki Shimizu, loc. cit.


(imda') a contract."' If the option is to cancel, the effect is to render the situation as if the contract had never existed, although these acts are not void ab initio as in the case of contracts tainted with nullity. The jurists simply categorised them as valid legal acts subject to ratification. Until ratification or revocation, therefore, the acts are non-binding (ghyr lazim) or suspended (mawquf).112

Islamic law recognises a wide number of options which may be divided into two broad categories:

(1) Those which are created by the mutual consent of the contracting parties affecting the formation of the contract, such as the option of acceptance or rejection within the contractual session (khiyar al-majlis), the option of distinction (khiyar al-ta 'yin) and the option to defer payment within a specified time limit (khiyar al-naqd);

(2) Those which are created by operation of law affecting the binding force of the contract, such as the option of fraud (khiyar al-tadlis), the option of inspection (khiyar al-ru'yah) and the option of defect (khiyar al-'ayb).113

Even though the system of options in Islamic law is, to a certain extent, similar to the corresponding system in modem law, the former is more extensive than the latter. For instance, the option of the session (khiyar al-majlis) is an option not so easily accepted by modem law. The existence of this option in Islamic law shows that the equity of a contract is more essential than the mutual agreement. Accordingly, the act of inspection or investigation, such as wearing clothes or riding a vehicle, is recommended in order to ascertain the equality of countervalues.1" This Islamic system is remarkably in favour of the purchaser. Goods and services must fulfil the proper expectation of the purchaser or he has the right to terminate the contract. It is noteworthy that the Islamic law of contract has assumed a consumer protectionist character since more than ten centuries ago.15 Thus, this idea of protecting the weak against exploitation by the strong led to the elaboration of a rule of general application, commanding that transactions should be devoid of uncertainty and speculation, and this could only be secured by the parties' having a perfect knowledge of the countervalues intended to be exchanged as a result of their transaction, otherwise the purchaser can use a proper option for a respective reason116 to terminate the contract.

"' Schacht, n. 99, supra, p. 152. 112 Sanhuri, n. 4, supra, Vol. 4, p. 216; Rayner, n. 71, supra, p. 305. 113 Rayner, ibid.; Kourides, P. Nicholas, "The Influence of Islamic Law on Contemporary Middle

Eastern Legal Systems: The Formation and Binding Force of Contracts", Columbia Journal of Transnational Law, Vol. 9(2) (Fall, 1970), p. 407.

114 Hideyuki Shimizu, n. 18, supra, p. 70. 115 Coulson, n. 2, supra, p. 67. 116 Hideyuki Shimizu, n. 18, supra, p. 71.


Termination by non-approval to contingent contracts

Islamic law recognises certain non-binding contingent contracts whose effects are suspended (mawquf) until ratification by the party who has been granted the option to terminate the contract. It is pertinent to note that two things, authority over the object and authority of disposition, are a necessary prerequisite for the creation of a relationship between the contracting party and the object of the contract. In the absence of either of these two requirements, a contract may be validly concluded, however, it would not be effectively enforced, rather its effects would be suspended. The authority of a contracting party over the object of the contract may be realised by a proof of his right to ownership over it or of his capacity as representative of the owner. The right of a third party should not be attached to the object of the contract, and thus, the non-owner or, in other words, the unauthorised (fudulh) person has no authority over the object. Therefore, the contract concluded by an unauthorised person is valid for he has the capacity to conclude it, but it is contingent due to his lack of authority over the object, and consequently it would not be effectively enforced without the approval of the owner.117 In such a situation, if the owner approves the transaction, the contract turns enforceable and if he does not approve, it becomes terminated as if there was no such contract.118 Thus the mawquf contract also arises in cases of right to transfer ownership, such as where the unauthorised agent (fuduli) does not have full power to contract, such as in contracts of pledge or hire; and where capacity is affected and awaits ratification by a guardian. Because of their effects, the mawquf contracts are categorised as voidable (fasid). However, the Shafi'i jurists reject the categorisation of mawquf contracts as fasid and treat them as void (batil). They consider that the elements of right to transfer ownership and capacity are the essential elements of the contract itself and not elements of its enforceability. The Hanafi jurists, on the other hand, hold that the mawquf contracts are invalid (ghyru sahih) and this category is placed somewhere between the categories of batil and fasid.119 Sanhuri categorises the situations in which the contract may be suspended of effects into two categories: lack of capacity and lack of object. The first category covers contracts of rational (mumayyiz) minor, rational lunatic (m'atuh), stupid (safih), inadvertent (dhu ghaflah), servant and, in the opinion of Zufar, also the person under duress, etc. The second category covers the unauthorised agent (fuduli), the vendor who sells the commodity a second time without the approval of the purchaser, usurper (ghasib), representative (na'ib) and the agent of the representative when the representative transgresses the customary limits of representativeness, the owner of a mortgaged object or hired object, etc.120

117 Sanhuri, n. 4, supra, Vol. 4, p. 137. 11s Mahmassani, n. 7, supra, p. 489. 119 Sanhuri, n. 4, supra, 137ff. 120 Ibid., p. 194.


Termination for breach

The general principle is that all valid contracts must be performed specifically. The contracting parties should oblige each other to perform the contractual obligation by force through judicial order (qada'). Thus, under the traditional Islamic law, it is contended, specific performance and/or the equivalent in monetary compensation (damages), were the only two remedies available for failure to perform a valid contract. Therefore, the general principle of termination as a consequence of breach, as recognised today, was not offered by the Islamic legal tradition. The Federal Court of the United Arab Emirates (UAE) observed that, "the fundamental principle of classical Islamic law is that contracts are to be performed specifically; and the Court must enforce their terms. Islamic law did not allow termination for breach. The aggrieved party had no option but to request for specific performance.12' However, while performance of a valid contract is the general rule and while the essence (asi) of agreed upon obligations is the substance of such performance, there remain exceptional circumstances in which the performance is excused and alternative recourse is resorted to in compliance with the legal maxim, "when the general rule is cancelled, recourse should be made to an alternative rule (idha batala al-asl yusaru ila' al-badl)". Furthermore, it is a corollary right of a contracting party to abstain from performance of his part of the obligation in abstention of the other party from performance of his part.'22 Thus, if one party breaches his contractual promise, the aggrieved party is entitled to terminate the dishonoured contract. The termination of a contract in this context is regarded as one form of remedy for failure to perform ('adam al-tanfidh).'2 This has been emphasised by the Arab courts. The Egyptian Court of Cassation, for example, referring to Article 147 of the Egyptian Civil Code, indicated that "this Article provides for the principle of termination as a remedy for breach of a synallagmatic contract, a principle which this Court upholds. The right to effect discharge - and hence termination - is something inherent in every contract which creates reciprocal obligations, even in the absence of an agreed term to that effect".'24 The Arab courts have used the terms "fault", "breach" and "non- performance" ('adam al-tanfidh) interchangeably. Moreover, it emerges that the terms "breach" and "non-performance" are used more often than "fault".'25 Adnan Amkhan observes that contractual fault is the failure of one of the contracting parties to perform his contractual obligation, whatever the reason for such failure; and contractual liability cannot be negated by disproving fault. Thus, non-performance of a contractual obligation and contractual fault is synon- ymous.'26

121 Adnan Amkhan, n. 13, supra, 17, at 17-18. 122 Mahmassani, n. 7, supra, p. 492. 123 Adnan Amkhan, n. 13, supra, p. 18ff. 124 See Case No. 1919, 22/12/1980, reproduced in Mahkamat al-Naqd (1980), Vol. 2, p. 2082 at

p. 2087. 125 Adnan Amkhan, "The Concept of Fault in the Arab Law of Contract" [1994] ALQ 171, at 177. 126 Ibid., p. 175.


While the right to terminate the contract arises when one of the contracting parties fails to perform his contractual obligation, the nature and scope of non- performance or breach depends largely upon the type of contractual obligations involved. These fall into two different categories127 which will now be looked at.

1. Obligations requiring the achievement of a specific result or goal

In this kind of contractual obligation, an aim prescribed in the contract must be fulfilled. Failure to achieve the said goal in itself constitutes breach. For example, a seller's obligation is to transfer the sold goods to the buyer. This obligation will not be fulfilled unless the goods have been delivered.'12 The defendant cannot negate his breach by claiming that he has done his utmost to fulfil his obligation or that he has committed no fault.

2. Obligations requiring adoption of a particular standard of care

In this category of contract, if the obligor manages to exercise the standard of care which is required of him as a reasonable man, he will have fulfilled his obligation irrespective of whether the ultimate aim of the contract has been achieved. The general rule of obligation to employ a standard of reasonable care has been mentioned expressly in Arab civil codes. For example, Articles 211, 214, 212, 290, 358, 351, 172 and 107 of the Egyptian, Libyan, Syrian, Kuwaiti, Jordanian, UAE, Yemeni, Algerian and Qatari Civil Codes respectively provide for this principle and they read as follows: "an obligor who is required to preserve a thing, or to manage it, or to act with prudence in performance of his obligation, fulfils his obligation if he brings to the performance thereof the care of a normal person, even if the intended object is not achieved. This will apply in the absence of agreement or law to the contrary".

Thus, breach of a contract can take two different forms: either an objective or a subjective one. In the former, a breach will occur if the aim behind the contract has not been achieved; in the latter, it will occur if the obligor has not taken the care required of a normal reasonable person, irrespective of whether the subject matter of the contract has been fulfilled.129

Before the right to the remedy of termination for breach can be invoked by a contracting party, the following prerequisites must be present.130

The contract must be of a synallagmatic nature. The remedy of termination for breach is only applicable to synallagmatic contracts, in other words, to contracts which give rise to reciprocal and interdependent obligations, such as contracts of

127 Ibid., 177ff. 128 See The Syrian Court of Cassation Judgment: Case No. 231/964, 4/3/1964, reproduced in

Ma 'allat al-Qanun, Vols. 3-5, p. 428. 19a Adnan Amkhan, n. 125, supra, at p. 178.

130 See Sanhuri, n. 4, supra, Vol. 6, pp. 260-261; Adnan Amkhan, n. 13, supra, 20ff.


sale, partnership, hire and lease.131 The reason for limiting the application of the remedy of termination to synallagmatic contracts is that it is only in the context of such contracts that termination will serve one of its main purposes: that is, releasing the aggrieved party from his obligation following the other party's breach. In unilateral contracts, on the contrary, the obligee will not gain any benefit from demanding termination for the obligor's failure to perform; rather it would normally be in his interest to insist on the contract being duly performed.132

There must be a real breach. The most important requirement of all for the availability of the remedy is that a breach of contract must have occurred. Neither of the contracting parties can claim termination unless the other party has failed to carry out his obligations. The degree of non-performance - whether complete, or partial or defective, or in the form of delay - would not affect the aggrieved party's initial right to invoke termination.'33 The breach should be, however, brought to the notice of the party in default. The Syrian Court of Cassation held to the effect that "the failure to perform will not be regarded as a breach unless such failure has been brought to the attention of the defendant, otherwise the plaintiff will be considered as having tolerated such a failure and having sustained no loss".'34 Notification is, however, not always necessary. For instance, if one contracting party had already expressed his unwillingness to perform or to continue performing his obligation, notifying him would not be necessary.135

The party seeking termination must not himself be in default. A contracting party who invokes termination for the failure of the other party to perform should not himself be in breach of his obligation. The Egyptian Court of Cassation ruled that: "to rule on termination it is not enough that the contract is reciprocal in nature and the non-performance is attributed to one of the contracting parties; it is important as well, that the party demanding termination is ready to perform his side of the obligation. Thus, if the claimant is himself in breach, he should not be granted termination for the other party's failure to perform".'36

Ability to restore the status quo ante. Some writers and courts have added that the party invoking termination should be able to restore the status quo ante.137

131 Sanhuri, Al-Wasitfi Sharh al-Qanun al-Madani, n.d., n.p., Vol. 1, pp. 698-699. 132 Adnan Amkhan, n. 13, supra, p. 21. 133 Zaki, Mahmud Jamal al-Din, Al-Wajiz fi al-Nazariyyat al-'Ammah li'l-Iltizamar, n.p., 1978,

pp. 404-405. 'm See Case No. 197, 20/3/1980, reproduced in Majallat al-Qanun, Nos. 1-4, 1980, pp. 10-11. 135 See Case No. 392, 31/5/1956 of the Egyptian Court of Cassation Judgment, reproduced in

Mawsu'ah al-Thahablyyah fi Qada'Mahkamat al-Naqd, Vol. 7, p. 810. 136 Case No. 148, 8/4/1969, ibid., p. 823. 137 Kuwaiti High Court (Commercial Division) Judgment; Case No. 47/1975, reproduced in al-

Muhamun, 1982, No. 6, p. 702 at 703.


DISSOLUTION FOR IMPOSSIBILITY OF CONTRACTUAL PERFORMANCE

The central idea of impossibility of contractual performance

Muslim jurists have categorised the circumstances which generally affect the legal capacity of a person, or interfere with the proper legal effect of a man's actions in particular cases, into two classes:

(1) Samawi or circumstances which are the work of Providence, that is, those which are beyond the control of man; and

(2) Maksubah, that is, those which are created by man.138

At this juncture, we are concerned only with the first category, i.e., the work of Providence, which is used in different terms by different jurists, and in different legal systems. This category of situation leads to a fundamental change of circumstance, which in turn renders the performance of a contract totally impossible, for although the equilibrium of performance was maintained at the time of entering into it, it was completely destroyed later on by such changed circumstances. Generally gharar (risk or uncertainty which gives rise to dissolution of contract) is considered to be built at the inception stage of the contract. In the notion of changed circumstances, however, gharar arises after the formation of the contract. The notion of "change in circumstances" which renders the performance of a contract impossible, is defined in Islamic law "as a right to dissolve a contract when unforeseen changes of circumstance made the contractual obligation more burdensome and difficult than expected at the time of the formation of a contract". 139

There is a similar concept to the doctrine of "frustration" in the common law system "which is used to indicate a situation in which a contracting party, through the arising of novel and unanticipated circumstances outside his control, finds the performance of his contractual obligations either to be impossible or to entail an unforeseen burden in the way of extra work or expenditure".140 Coulson contends that there is not to be found in the authoritative texts of traditional Shari'a law any exposition of a general doctrine of frustration.'41 This contention is unrealistic as the Islamic notion of impossibility of performance (istihalah al-tanfidh) due to changed circumstances is as wide as the common law doctrine of frustration is subsumed in it simply as a single rule. Adnan Amkhan maintains, "it is worth noting that traditional Islamic law recognised a rule which is very much akin to the common law concept of frustration of purpose".142 Thus, Article 443 of the

138 'Abdur Rahim, Sir, The Principles of Muhammadan Jurisprudence (Lahore, All Pakistan Legal Decision, 1977), 219.

139 Shimizu, n. 18, supra, pp. 77-78. 140 Coulson, n. 2, supra, p. 82. 141 Ibid., p. 83. 142 Adnan Amkhan, "Force Majeure and Impossibility of Performance in Arab Contract Law"

[1991] ALQ 297, at 299.


Mejelle provides that: "if any events occurred whereby the underlying reason for the conclusion of the contract disappears so that the contract cannot be performed, such contract is rescinded". Similarly, Article 478 reads: "if the benefit to be obtained from the thing hired is entirely lost no rent is payable". Hideyuki Shimizu shares the view that the Islamic law concept is much more extensive than that of the modem common law, that is, a contract can be rescinded in Islamic law even because of a change in personal circumstances." 43This is best illustrated with reference to a specific case in Hedaya: If a person let to hire a house or shop, and afterwards became poor and involved in debt to a degree which he is unable to discharge but by the price of the house or shop, the Kazee (judge) must dissolve the contract of hire, and sell the place for payment of the debt; because in the endurance of the contract the lessor sustains a superinduced injury not incurred by the contract, ... which superinduced injury, in this instance, is that the Kazee will otherwise seize and imprison him on account of the debt.144

This notion of Islamic law is never embraced by the theory of frustration in the modem common law, and it is clearly outside the realm of the modem concept.'45

Mahmassani uses the term "Misfortune from Heaven" ('afat samawiyah) for the causes rendering the performance of contractual obligations impossible. He maintains that, when an agreement for the sale of a fruit crop has been reached, delivery may subsequently be rendered impossible by "misfortune" which destroys the crop, such as rain, cold, drought or wind. Such a "misfortune" is generally restricted to natural phenomena which are not the result of any human activity, although some jurists included in the definition civil disorders, trespass, theft and suchlike.14 The "Misfortune from Heaven" is also called in the common law "Act of God" which has been defined by Lord Westbury LC as: "Circumstances which no human foresight can provide against and which human prudence is not bound to recognise the possibility"."14

Sanhuri picks up the broad term "foreign cause" (sabab ajnabi) under which he brings all the categories of events which allow a defendant to claim to be exonerated from liability on the ground that the failure to perform is not attributed to him but rather to some external factors.'48 "Foreign cause" denotes a circumstance or an occurrence which breaks the causal link between breach and loss and it has been defined as an event which is not within the power of the contracting parties to control.149 Under this broad title he brings the discussion of "quwah qahirah" and "'afat samawiyah". The term quwah qahirah or quwah al- qanun is also used by Rayner who maintains that the Islamic law concept of quwah

143 Shimizu, n. 18, supra, p. 89. 144 Hamilton, Charles, The Hedaya (Lahore, Premier Book House, 1982), p. 511. 145 Shimizu, n. 18, supra, pp. 89-90. 146 Mahmassani, n. 7, supra, pp. 498-499; ibid., pp. 83-84. 147 See Tennet v. Earl of Glasgow (1864) 2M. (H.1.) 22. 148 Sanhuri, n. 4, supra, p. 191. 149 Hamzah, Mahmud Jalal, "Hal Y'ani Thubut al-Sabab al-Ajnabi In'idam al-Khata' fi Janb al-

Mudda' 'alaihi", Al-Muhamun (1985), No. 5, p. 606 at 611.


qahirah corresponds to the term force majeure and it is somewhat wider than the Western concept of frustration.150 In fact the term force majeure is a well-rooted doctrine in the civil law system. Rayner contends that the Shari'a recognises basically any "Act of God", or unforeseen condition as coming under the ambit of force majeure (quwah qahirah), and this includes any unforeseen changes in circumstances which are outside the control of the obligor, and which through no fault of the obligor, may constitute unfair loss or harm to the affected party. Thus, a "Misfortune from Heaven" such as rain or cold or drought which destroys a crop and therefore renders delivery of it impossible is regarded as force majeure.151 Thus, for example, a contractor in a Muslim jurisdiction hired under a contract of service to dig a well may rescind the contract should he strike rock after the first few feet of digging. Similarly, the lessor may terminate a lease to his property at any time should there occur any change in his financial position which requires him to sell the property; or any change to his circumstances, for instance, if he needs to migrate.152 In Islamic law, the force majeure caused by the intervening impossibility renders the contract invalid for, however, only as long as that impossibility exists. When the force majeure ceases, the contract redeems its validity and may be enforced.153

There is yet another doctrine prevailing in modem Arab contract law called "nazariyyah al-hawadith al-tari'ah" or "nazariyyat al-zuruf al-istithna'iyyah" (hereinafter referred to as the doctrine of intervening contingencies), which signifies occurrences which radically disturb the equilibrium of a contractual obligation, making the performance excessively onerous for one of the contracting parties.'54 However, major differences do exist between force majeure and the principle of intervening contingencies, although they share certain common features. The following distinctions between the two principles can be drawn:55s

(1) For an event to qualify as an intervening contingency it should affect (at least in the context of private law contracts) a number of people (i.e., it must be general in character), whereas force majeure can be particular in nature, in other words, it can affect a single contracting party;

(2) Force majeure makes the performance of the contractual obligation impossible, whereas intervening contingencies lead only to severe hardship if performance is allowed to continue in its original form;

(3) Force majeure, if proven, will terminate or suspend the contract, whereas intervening contingencies will basically make it possible for the court to modify the onerous contractual obligation (although suspension is not ruled out);

150 Rayner, n. 71, supra, p. 259. 151 Ibid., 259-260; Mahmassani, n. 7, supra, pp. 498-499; Coulson, n. 2, supra, pp. 83-84; El-Hassan,

'Abd El-Wahab Ahmed, "Freedom of Contract, The Doctrine of Frustration, and Sanctity of Contracts in Sudan Law and Islamic Law" (1985) 1 ALQ, p. 51, at 58.

152 Id., p. 260; Coulson, ibid., pp. 85-86, 91; Sloane, "The Status of Islamic Law in the Commercial World", International Lawyer (Fall, 1988) 22(3), p. 747.

153 Amin, Islamic Law in the Contemporary World (Glasgow, 1985), p. 51. 154 Adnan Amkhan, n. 16, supra, p. 258. 155 Adnan Amkhan, n. 142, supra, 308.


(4) Force majeure does not fall within the domain of public order as does the principle of intervening contingencies.

From the above discussion it is evident that even though there are differences between force majeure and the principle of intervening contingencies, nevertheless, both are covered under the umbrella of "impossibility of performance". It is also pertinent to note that notwithstanding adherence to different doctrines with little or no variation in different legal systems such as the doctrines of changed circumstances, frustration, Act of God, Misfortune from Heaven, foreign cause, force majeure and intervening contingencies; they all share, to a certain extent, the same effect of premature termination of the contract and thus are all subsumed under the broader legal doctrine of "impossibility of performance".

Specific causes of impossibility

Some modem legal writers classify the specific causes of impossibility of performing a contract generally under the Islamic law theory of al-darurah al- shar'iyyah (legal necessity). However, the theory of necessity applies principally in the field of ritual religious obligations; therefore, it is pragmatically expected to deal with the specific causes, instead of inferring a general rule; more specifically with their practical application in the circumstances that may affect the performance of contracts. Samir A. Saleh gives an account of three such specific causes156 which will be looked at below.

Al-'udhr (excuse)

The traditional Islamic law doctrine of al-'udhr was mainly recognised by the Hanafi school and subsequently applied in the Mejelle exclusively to contracts of lease and services. Al-'udhr may be invoked in case of a contingency which renders the continuing performance of a contract harmful for one of the contracting parties. There are three types of 'udhr: the first arises on the part of the lessee, e.g., his bankruptcy or change of profession; the second is that which might affect the lessor, e.g., incurring debts forcing him to sell the leased property to free himself; the third is that which might affect the leased object.57 For example, Article 443 of the Mejelle provides that: "If any event happens whereby the reason for the conclusion of the contract disappears, so that the contract cannot be performed, such a contract is terminated". In addition to the above provision, the Mejelle provides the following examples: (i) when a cook is hired for a wedding party, if one of the spouse's dies, the contract of hire is terminated; and (ii) if a man suffering from toothache makes a contract with a dentist to remove his tooth for a certain fee, and afterwards the pain ceases, the contract of hire is terminated.

156 Saleh, Samir A., "Some Aspects of Frustrated Performance of Contracts Under Middle Eastern Law", International and Comparative Law Quarterly, 1984, Vol. 33, p. 1046 at 1047ff.

'57 A1-Zuhaili, n. 25, supra, p. 302.


The rationale behind the application of the principle of al'udhr has been explained thus: "if a contract, in the event of 'udhr, was still considered binding, unwarranted harm, which was not envisaged in the contract, would be inflicted on one of its parties".158 As far as the legal effect of al-'udhr is concerned, al-Kasani explains: "First and foremost, the potential effect of al-'udhr is first to be examined; if it leads to legal impossibility of performance (by rendering the continuation of performance unlawful) the lease is terminated ipso facto; however, if it only results in the infliction of harm which was not envisaged in the contract, a judicial ruling or agreement of the parties is needed in order to effect the termination". 59

Al-jawa'ih (natural disaster)

The Malikis and Hanbalis recognise the relevance of "natural disaster" or jawa'ih (pl. ofja'ihah) to contracts for the sale of crops and fruits on trees. The Hanafi and Shafi'i schools do not recognise such a doctrine since they do not recognise the validity of the sale of crops and fruits on trees. According to the Maliki school, al- jawa'ih is an irresistible occurrence, such as cold, drought, plant disease and locust swarms, which reduces or destroys the value of the sold crops or fruits before they are harvested.160 The Maliki jurists, however, differed with regard to whether human acts such as war might qualify as jawa'ih; and the prevalent view of the majority is that they could. Likewise, the Hanbalis defined al-jawa'ih as an epidemic beyond human control, e.g., high winds, drought and other Acts of God. Both schools accepted that if all crops were destroyed, the sale contract would be terminated.161

Currency fluctuation

Currency fluctuation is another specific cause of impossibility of performance to be found in contracts of sale, loan and lease. In none of the schools does a fluctuation in the value of gold and silver currency allow an adjustment to be made to the price. Where the value of a currency other than gold and silver stipulated in the contract has been changed, the Hanafi school does not allow any adjustment to be made. However, some recent Hanafi writers allow the value of the currency in relation to gold to be adjusted according to the value at the date of the conclusion of the contract. Where the currency falls into disuse, a contract of sale will be rescinded, but a contract of loan will remain valid without any possibility of adjustment. The Hanbali school, however, strikes a distinction between currency

158 Al-Kasani, n. 31, supra, Vol. 4, pp. 197-201; Adnan Amkhan, n. 16, supra, p. 260. 159 Ibid. 160 Al-Dardir, Abul Barakat Ahmad bin Muhammad bin Ahmad, Al-Sharh al-Saghir 'ala Aqrab al-

masalik 'ila Madhhab al-Imam Malik (1974 edn), Vol. 4, pp. 241-247. 161 Ibn Qudamah, Muwaffaq al-Din, Kitab al-Mughni (Egypt, Matba'ah al-Manar, 1972 edn), Vol.

4, p. 216.


devalued by the act of the ruler and currency whose value drops as a result of an economic condition. In the first case, the party at detriment can claim the value of the currency in gold calculated at the date of the conclusion of the contract; however, in the second case, where the drop in value is the result of economic circumstances regardless of the ruler's intervention, no adjustment can be made.162

Constituent elements of the doctrine of impossibility

The principle of supervening legal or factual impossibility cannot be applied unconditionally. The legal writers have worked out a number of constitutive elements which qualify an event as supervening to render performance of a contract impossible. These elements are also adopted by Arab civil codes and applied by the courts. The constituent elements will be discussed below.163

(i) The event must be exceptional. An event is held to be exceptional when its occurrence is infrequent, irregular or rare.'" The Arab civil codes give no example of an event which might fall into this category. This is because the question whether an event is of an exceptional nature can only be determined according to the circumstances of each case. The Explanatory Memorandum of the Egyptian Civil Code, however, mentions certain events which may be regarded as exceptional such as an earthquake, war, an unexpected strike, or a sharp rise in the price of certain commodities. Thus, for example, it was held that high winds, thunder and heavy rain in Damascus during the second half of the month of April, leading to the destruction of crops, qualified as an exceptional event.165

(ii) The event must be unforeseeable. The event must not have been anticipated or foreseen at the time the contract was made. An event is unforeseeable if at the time of the conclusion of a contract there are no immediate signs or particular circumstances which make it reasonably likely. Thus the Syrian Court of Cassation, for example, held that, in order to consider heavy rain as a supervening circumstance it must be established that the amount of rain in question was unforeseeable. 66To affirm this line of interpretation, the test which determines the element of absolute unforeseeability has been held to be that of a reasonable and diligent man. That is to say, the event must not have been foreseeable by the contracting parties, or by a reasonable and diligent person who might have been in the contracting parties' position.'67

162 Saleh, n. 156, supra, p. 1048. 163 See Adnan Amkhan, n. 142, supra, 301ff.; n. 16, supra, 263ff. 164 See Kuwaiti Court of Cassation Judgment: Case No. 1265/1970 (Commercial), 10/12/1970,

reproduced in Majallat al-Qada'wa'l-Qanun, 1970, No. 1, Year 3, p. 53. 165 See the Syrian Court of Cassation Judgment: Case No. 581, 9/4/1979, reproduced in Tu'mah al-

Taqnin al-Madani al-Surif (1990), Vol. 1, pp. 636-637. 6 See Case No. 116/1983, 4/6/1983, reproduced in al-Muhamun, (1983), No. 11, p. 1246.

167 Mamun, 'Abd al-Rashid, "'Ilaqat al-Sababiyyah fi al-Mas'uliyyah al-Madaniyyah", Majallat al- Qanun wa'l-Iqrisad (1979), Nos. 3-4, p. 581 at 675.


(iii) The event must be unavoidable. The unforeseeable event must also be unavoidable in the sense that it must not have been possible for a party claiming a supervening circumstance to have avoided or prevented the occurrence of the event or its consequences by taking all necessary steps to stop the event from occurring or to prevent its consequences. The Kuwaiti Appeal Court (Adminis- trative and Commercial Division) adjudicated in a case where goods belonging to the defendant were destroyed by fire while still in the possession of the customs department. The latter contended that it was not liable to damages because the fire in question was an event of force majeure. This claim was rejected, however, by the Court on the ground that the said fire could have been avoided by the customs department if appropriate precautions and preventive steps had been taken. The Court concluded that a cigarette stub left near the goods started the fire, and that this could have been avoided. Therefore, the said fire was not a supervening event of force majeure.168

(iv) The event must occur during performance. Article 198 of the Kuwaiti Civil Code explicitly provides that the supervening event should occur while the contract is still being performed. There is no such express provision in other Arab civil codes. However, the requirement is, according to legal writers and courts, an inherent logical factor in other Arab jurisdictions. For example, the Egyptian Court of Cassation stated that Article 147(2) of the Civil Code covers the whole range of contracts where a period of time exists between their conclusion and execution.'69

(v) The event must render performance impossible. An essential element of an event to be considered as supervening is that it must make the performance of the affected contract impossible. The Jordanian Court of Cassation ruled that, "the increase in commodity prices because of war and disturbances is not to be considered force majeure, unless such events make the performance of the contract impossible.170

(vi) The event must be general in character. The supervening event should also be general in character, that is to say, it should affect not only the contracting parties but also a wide spectrum of people. Thus, for example, the Kuwaiti Court of Cassation held that: "what is meant by general is that the exceptional event should not only affect one of the parties to a contract, but also a number of people, or a certain category of people such as farmers, or the producers of certain products or their traders".171

168 Case No. 188/1982, 22/3/1982, reproduced in Majallat Idarat al-Fatwa al-Tashri'i (1983), No. 3, p. 307 at 310.

169 Mausu'ah al-Thahabiyyah fi Qada' Mahkamah al-Naqd, Vol. 3, pp. 110-111. 170 Case No. 357/78, 28/11/1978, reproduced in Majallat al-Muhama (1979), No. 3, p. 411 at 419. 171 Case No. 1265/1970 (Commercial), 10/12/1970, reproduced in Majallat al-Qada' wa'l-Qanun

(1970), No. 1, p. 53.


Summary

Islamic law lays the utmost importance on the fulfilment of contractual obligations as a general rule in compliance with the principle of sanctity of contract which is deeply rooted in the revealed sources of Islamic law. Along with this general rule, Islamic law also simultaneously provides for various ways to remove contractual obligations in situations of inevitable difficulties and necessities. Thus, the concept of dissolution of contract due to the impossibility of its performance is not alien to Islamic law as sometimes alleged. The legal principles and rules recognising the impossibility doctrine in Islamic law vary, as have been seen according to the nature of the contract to which, and the circumstances in which, they are to apply. It has been made clear from the above examination of various circumstances leading to the impossibility of contractual performance under the Islamic law and from the comparable legal doctrines in common law that Muslim jurists have formulated according to the philosophy of their own great system of law a comprehensive doctrine which has its own special origins in the revealed sources of Islamic law. It is, therefore, my conclusion that the doctrine of impossibility of contractual performance in Islamic law effectively serves the very purpose of its existence; for the cause of justice and fairness in contractual transactions.

Arab Law Quarterly - Dissolution of Contract in Islamic Law

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