Laws of Transactions as per the Qur’ān

Laws of Transactions as per the Qur’ān

Written by

DR. WAQUAR ANWAR

Published on

August 11, 2022

Verse 282 in the second chapter of the Qur’ān (2:282) is the longest verse of the book. Its another characteristic feature is that it deals with the laws of transactions that arise on account of contract of debt between two persons/parties. This is popularly known as Ayatud-dain (the verse of transactions). The next verse (2:283) is in continuation of the related issues; so it is better to study these two together. Translation of the two verses is reproduced hereunder:

(2:282) O Believers, when you contract a debt for a fixed term, you should put it in writing.  Let a scribe write with equity the document for the parties. The scribe whom Allah has given the gift of literacy should not refuse to write. Let him write and let the one under obligation (the debtor) dictate and he should fear Allah, his Lord, and should not diminish from or add anything to the terms which have been settled. But if the borrower be of low understanding or weak or unable to dictate (for any reason), then let the guardian of his interests dictate it with equity. And let two men from among you bear witness to all such documents. But if two men be not available, there should be one man and two women to bear witness so that if one of the women forgets (anything), the other may remind her. The witnesses should be from among such people whom you approve of as witnesses.  When the witnesses are asked to testify, they should not refuse to do so. Do not neglect to reduce to writing your transaction for a specified term, whether it be big or small. Allah considers this more just for you, for it facilitates the establishment of evidence and lessens doubts and suspicions. Of course, there is no harm if you do not put in writing the common transactions you conclude daily on the spot, but in case of commercial transactions you should have witnesses. The scribe and the witnesses should not be harassed: if you do so, you shall be guilty of sin. You should guard against the wrath of Allah; He gives you the knowledge of the right way for Allah has the knowledge of everything.

(2:283) If you are on a journey and cannot find a scribe to write the document, then transact your business on the security of a pledge in hand.  And, if anyone transacts a piece of business with another merely on trust, then the one who is trusted should fulfil his trust and fear Allah, his Lord And never conceal evidence  for he who conceals it, has a sinful heart: Allah knows everything that you do.

It is noteworthy that the Qur’ān has devoted its longest verse coupled with another verse to give detailed instructions related to an issue of this material world, an issue arising out of transactions between two persons. This is not an isolated case. The Qur’ān has similarly given detailed instructions about worldly issues like laws of succession dealing with the distribution of properties after death. In fact, the Islamic spirituality does not need negation of worldly affairs and a Muslim is required to deal with these matters in accordance with the commandments of the Qur’ān and the traditions of the Prophet Muhammad (peace and blessings of Allah be to him).

The above two verses relating to transactions between human beings deal with some basic and important issues that have been considered by the translators and discussed by the scholars and commentators of the Qur’ān. We are hereunder noting some of the finer points considered by the translators and elaborated by different scholars and commentators of the Holy Qur’ān, including Sheikhul Hind Mahmoodul Hasan, Fatah Muhammad Jalandhari, Ashraf Ali Thanvi, Shabbir Ahmad Usmani, Syed Qutb, Syed Abul Ala Maudoodi, Muhammad Mian Junagarhi and Abdullah Yusuf Ali (may their souls rest in peace).

1.     The question of debt in any transaction arises either when full or part of the value of the transaction is due or the goods traded or services are to be supplied on a future date. Thus it is either the case of amount payable or that of deferred supplies. No other case of creation of debt is legally conceivable.

2.     The time of payment of the debt and completion of any obligation arising out of the deal has to be fixed. All debt deals are valid within a time frame and they cannot be open ended with respect to period of execution.

3.     The terms of the deal should be written. The language of the Qur’ān makes it obligatory which would literally mean that anything otherwise is not permitted. That would make oral contracts of debt unlawful. However, there are other examples in the Qur’ān where command in the language is used to stress importance of that thing and its literal sense is not intended. In other words, the expression “you should put it in writing” means that it is better, advisable and preferable that one should put the terms in writing.

4.     There are three advantages of putting the deal in writing, namely: (i) obligation of one person will not go on the other and there will be total clarity of what is receivable or payable by which party and when; (ii) establishment of evidence will be facilitated; and (iii) possibility of occurrence of any doubt or suspicion of any of the parties will be lessened.

5.     The person who is capable of writing the deal should not refuse. However, he should do this job judiciously; any cunning drafting skills like assigning otherwise meaning between the lines or expressing things in “fine prints” that are initially not noticed in the beginning but that becomes vital at times, should be avoided.

6.     The person under obligation, i.e. the person who is liable to pay or to supply the goods or provide services, should dictate the writing. However, if the person under obligation (the borrower) is not capable of dictating the writing on account of any reason like infirmity, low understanding, minor in age or old age his guardian should dictate the writing with justice.

7.     Two men should be witness to the written document so prepared. They should be honourable persons in the society and they should not refuse to do so. If such two men are not available then one man and two women should be made witnesses. The reason of treating one man equal to two women for the purpose of witness as elaborated in the above verse is “if one of the women forgets (anything), the other may remind her.” This unequal equivalence is related only to business and trade transactions and the logic behind is that in the Islamic familial and social system women are generally present more in the family than in the market. Though, no doubt, she is permitted to do business and go out for other engagements in addition to her household responsibilities, her presence in the market is more uncommon. Otherwise in the issues where she should be generally present, this disparity in witness does not exist.

Another example will clarify the situation. The whole system of Prophetic traditions, hadīth, is based on the witness of the companions of the Blessed Prophet who related the words spoken and deeds of the Blessed Prophet. The whole structure of Islam, its cardinal faith, laws and traditions, is based on this system of authenticity of the companions who were witness to what they heard and saw. Here the disparity of two women for one man does not exist. For example Ayesha (may Allah be pleased with her), the wife of the Blessed Prophet, is equal in importance to Abu Bakr (may Allah be pleased with him), the companion and father-in-law of the Blessed Prophet for the purpose of relating any hadīth. So on and so forth.

8.     As Allah has commanded witnesses to do the job, they cannot charge any fees for this service. To be witness is an obligation from Allah and they will get their reward from the Lord and no reward here in this material world is permitted! Thus this service should be free of cost and without any obligation to any of the party. However, any genuine cost like travelling and food may be borne or reimbursed.

9.     These witnesses will be the real basis of establishment of any legal claim whereas written document will serve as a memoir, to help them remember the correct situation. In other words, in case of dispute the witness of these men and women will be legally more important than the written document.

10.  The Qur’ān commands that such written document should be prepared even where the amount of debt created is low. “Do not neglect to reduce to writing your transaction for a specified term, whether it be big or small,” the Qur’ān says. However, on the spot and day-to-day transactions may be done without writing them down. It is preferable that these transactions should also be recorded but this has not been made obligatory.  Likewise, it is not objectionable if neighbouring shopkeepers do not record the frequent transactions that take place between them.

11.  The scribe, the person who has written, and the witnesses should not be harassed. Any compulsion to write a language favouring unduly any party or to give wrong witness will be a sin. The language used by the Qur’ān can be translated in the ‘active form’ too meaning that the scribe and the witnesses should not harass. Thus both the translations are possible: “the scribe and the witnesses should not be harassed” or alternatively “the scribe and the witnesses should not harass.” Harassment caused by the scribe or the witnesses may be to take any undue advantage of their respective position. The Qur’ān has forbidden and blocked all possible modes of corruption.

12.  If any scribe is not available in a journey, transactions may be done by hypothecating something as guarantee. The Qur’ān has provided this alternative method of entering into transactions on the basis of pledge, giving something as security. Such pledge becomes collateral of the party who is liable to pay any fixed amount or supply any goods or services at the expiry of a fixed period.

13.  The above mentioned alternative method of transaction on the basis of pledge has been prescribed by the Qur’ān while on journey. However, the scholars and commentators of the Qur’ān opine that this is a permitted method of transaction while the parties are stationed at home too. In other words this is an alternative method both in ordinary and extraordinary conditions. So it is possible to resort to this method even when any scribe is available to write down the deal.

14.  At this point the scholars and commentators of the Qur’ān have delved upon the usufruct of the thing provided in the pledge. It is not owned by the party which is holding it temporarily for a predetermined period. Any benefit accruing out of this temporary possession is to be passed on to the legal owner, the other party, despite the fact that he is not holding the asset in that period. For example, if any house has been hypothecated, the party in possession thereof can neither live in that house nor earn rent on the property. That would amount to interest (riba) that has been forbidden as the benefit will be the premium without any counter value.   However, if any milk-bearing livestock has been pledged, its milk may be consumed in lieu of the cost of fodder provided for its sustenance.

15.  If the parties have total faith on each other they can enter into transactions without giving and taking anything as security. The Qur’ān warns the one who has been trusted not to betray the trust, fearing Allah.

16. Concealing evidence covers both the cases of giving wrong witness or not giving witness at all despite being witness to an event. Both the behaviours are despised and disliked.