Xxxxx’ah Law. The development and application of laws under Xxxxx’xx law regimes for commercial transactions and business contracts, has a lot in common with civil law regimes. The major difference being in the interpretation of certain terms of a contract and procedural steps of Xxxxx’ah courts. Even if the parties are given the freedom of choice of applicable law, the terms and conditions of a contract should not be in conflict with Xxxxx’xx principles. However, the interpretation and application of Xxxxx’xx principles is neither consistent nor restrictive but divergent across various jurisdictions of Xxxxx’ah law regimes. This often leads to ambiguity, and uncertainty resulting in conflicts or disputes. The general rule of contract under Xxxxx’ah is “all is permitted unless specifically prohibited.” Under Islamic law, parties are therefore free to enter into any contract they wish and will be bound by its terms, except for certain matters prohibited by Xxxxx’ah. The most common contractual terms that cause disputes and that may not be enforceable in Xxxxx’ah jurisdictions include:
a) Interest (Riba) on contractual payments overdue or outstanding. Riba literally means “an excess” in Arabic;
b) Gharar, which amounts to speculation or gambling on a specified but unsure event, such as selling shares in an unformed company;
c) Limitation of liabilities;
d) Liquidated damages vs penalty clauses;
e) Obligation to complete a contract despite payment of compensation for losses incurred; and
f) Special agreements if found to contradict the public morals or public order will be rendered void. Xxxxx’ah law is the law laid down by the Qur'an, which is the holy book of Islam, and the Sunnah (the sayings, teachings and actions of Prophet Xxxxxxxx). These are the principal sources of the Xxxxx’ah. The Sunnah is the most important source of the Islamic faith after the Qur'an and refers essentially to the Prophet's example as indicated by the practice of the faith. The only way to know the Sunnah is through the collection of Ahadith, which consists of reports about the sayings, deeds and reactions of the Prophet. One principle expressly stated in the Qur'an and Sunnah is that the charging of interest upon a loan, in whatever form, is Riba and is contrary to the Xxxxx’ah. At Sura II, 275-79 of the Qur'an it is stated that: Allah has made buying and selling lawful and has made the taking of interest unlawful. Remember, therefore, that he who desists because of the admonition that has co...
