INTRODUCTION

Contract, from an Islamic legal perspective is conceptually divided into two main categories, namely unilateral and bilateral contract.
The bilateral contract covers the remaining transactions in Islamic law which can be further divided into different classifications according to the very purpose and reason of the deal and agreement.

Six (6) classifications of contracts :

1) Contracts of Exchange (Uqud Al-Muawadat) 2) Contracts of Security (Uqud Al-Tawthiqat) 3) Contracts of Partnership (Uqud Al-Shirkah) 4) Contracts of Charity (Uqud Al-Tabarruat)

CONTRACT OF EXCHANGE (UQUD AL-MUAWADAT)

Main contract of exchange in Islamic commercial law is the contract of sale Involves an exchange of a commodity for another commodity (barter trading) or of a commodity for money (sale) or of money for money (sarf).
Trading activities in example in contracts of exchange of a commodity for money however, are relatively more exposed to the element of gharar, literally hazard or risk.

The difference between the two types of contract such as between the contract of exchange and gratuity would induce different legal effects for example khiyar or the right to revoke the contract.
Uqud Al-Muawadat which will include a variety of contracts which differ from one another on terms of specific legal requirements, rights, obligations and liabilities but common to each other in terns of the result of the contract, namely the transfer of ownership from one party to another.

4 categories of sales :
Sale of property Sale by exchange of money for money Sale by barter Sale by immediate payment

Another perspectives:
Sales are also divided into four (4) categories:
Musawamah sale Murabahah sale Tawliyyah sale Wadiah sale

3 possibilities of payment pertaining to a sale contract:

Cash sale Deferred payment sale Lump sum payment Earnest money (Bay Al-Arabun) in which advance payment

Subject matter of the sale, it can be divided into three (3) categories namely :
Sale of commodity (movable and immovable) Currency (sari) Debt (dayn)

The personal reflection on certain contracts of sale available in the Islamic law of transactions. These classifications are as follows: The price is mentioned by the offeror and accepted by the offeree. The price is mentioned by the buyer and later accepted by the seller. The price in some sale transactions is divided into two stages.

The fundamental basis of sale contract consists of one piece of property being exchanged for another. Offer and acceptance are also referred to as the fundamental basis of sale, since they imply exchange.

CONTRACT OF CHARITY (UQUD AL-TABARRUAT)

Tabarruat means a donation or gift

The purpose of Tabarruat is not for commercial but is done to seek the pleasure of Allah Example: i. Hibah (gift or donation) ii. Waqf (endowment) iii. Ibraa (waiving of debt)

CONTRACT OF HIBAH
Hibah is the giving of a gift whether it is given to one who is in need or to a well-to-do person

CONTRACT OF WAQF
Waqf is a religious endowment, a property giving revenues, as regulated by Islamic law

CONTRACT OF IBRAA
Ibraa is waiving of debt Ibraa arises out of a deferred payment sale where the buyer makes early redemption

The essential elements and the conditions of essential elements of Ibraa are as follow:

4 Essential Element :
Creditor (seller) and debtor (buyer) The necessary conditions of creditor and debtor are the same as those of buyer and seller in a contract of sale Debt (deffered selling price) The debt as the selling price must meet these two necessary conditions: i. absolute in amount ii. known currency

Contract (offer and acceptance) The contract is incorporated in the ASA. It must be absolute and in definite and decisive language

Ibraa (the partial refund of money paid) There are two ways of dealing with Ibraa: i. It must not be stated in absolute amount or percentage in the asset sale agreement. ii. It may be stated in the ASA in an absolute amount and a known currency. When this is done there will two prices in he contract and the seller (creditor) is entitled to the lesser of the prices only. It is then invalid and forbidden for the seller to withdraw the Ibraa.

CONTRACTS OF SECURITY (UQUD AL-TAWTHIQAT)

Islam recognizes other additional contracts to provide security to the parties in a contract This contract concern with the provision of securities to protect the interests of the parties to the contract e.g Kafalah(Guarantee/Suretyship), Rahn(Pawning or Mortgage), Hiwalah (Transfer of Debt)

These security contracts are normally combined with other types of contracts e.g the contract of BBA may be secured by a contract of security involving collateral (Rahn)

CONTRACTS OF KAFALAH
Kafalah means to add an obligation to an existing obligation in respect of a demand for something Not release the principal debtor in whose favor the contract is concluded Relate to
Person : for whom the kafalah is given Finance : implies the obligation to pay the debt due to inability of payment by the debtor Act (performance) : to ensure the performance of certain act

5 Essential Element :
Guarantor (Dhamin) Able to take responsibility Not prohibited from dealing with his property Creditor (Madhmun lah)

Debtor (Madhmun anh)

Debt (Madhmun bih) Must be establish and sure Must be obligatory (obligation on the debtor) The amount must be specified Contract offer and acceptance Clear wording etc Understandable language Absolute all information required

CONTRACTS OF RAHN
Creditor prefers to secure the loan either through personal surety or a pledge To make the a property a security to have a right of claim

5 Essential Element :
Pledgor customer
Pledgee Islamic bank Obligation or right to a claim debt Must be establish Must be known

Pledge property pledged (anything that can be bought and sold) Exist Pure (halal) According to Syariah Owned by pledgor Can be delivered Must be known and specific all information is included
Contract offer and acceptance

CONTRACTS OF HIWALAH
Transferring debt from one debtor (transferor) to another (transferee)

CONTRACTS OF PARTNERSHIP (UQUD AL-SHARIKAH)

It means signifies the conjunction of two or more persons to carry on a business to share the profits by joint investment It is by the sharing in the capital contribution, management of the capital as well as profits and liabilities

CONTRACT OF MUDHARABAH
Mudharabah is a contract where the owner of capital entrusts his funds to an entrepreneur who contributes skills is business and the profit generated is to be shared between them

4 Essential Element :
Owner of capital and Entrepreneur Capable of taking responsibility Not prohibited from dealing with their properties No coercion (force) is exerted on either of them Capable of appointing agents and be appointed as agents

Capital Money only Not debt Specific amount From owner of capital only Paid to entrepreneur Business Halal business Managed by entrepeneur only

Profit Sharing Profit shared according to agreement in fraction, ratio or percentages not in absolute amount Loss is to borne by owner of capital only
Contract (offer and exchange) In definite and decisive language (in the present or past tense, not future tense nor imperative) Acceptance must agree with the offer and The offer and the acceptance made at the one and the same meeting

CONTRACT OF MUSHARAKAH
It is a general partnership whereby two or more parties enter into a contract to exploit their labour and capital jointly and to share the profit and losses or the partnership.

5 Essential Element :
Partners Capital Business Profit Sharing Contract (offer and acceptance)