KHIYARAT (OPTIONS)

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KHIYARAT (OPTIONS)
Presenters Mahyuddin Daud Hairul Hafiz
Hasbullah Norlaili Mat Isa Nuur Azza Leenda
Chamingan

• The options / rights for contracting parties to
  confirm or exclude themselves from performing the
  contract

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INTRODUCTION

• What is Khiyar?(in general)
• is a right given to both parties or to either
  one of them to confirm, cancel or back down from
  the contract.
• Khiyar based on economic glossary
• A term used to express an option within a
  certain period after the conclusion of a bargain
  during which either of the parties may cancel it

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DEFINITION

• According to Al-Tayin
• One of the parties therefore reserves the
  option to choose, designate from among several
  objects, the true object of that contract during
  prefixed term

• The 2 Possible Decision
• To ratify by choosing from among the alternative
  objects or
• (ii) To cancel the contract entirely

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OTHERS DEFINITION
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TYPES OF KHIYAR
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KHIYAR AL-MAJLIS (OPTION OF MEETING)
Presenter Hairul Hafiz Hasbullah
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KHIYAR MAJLIS

• Definition
• Option during the meeting means each one
  the parties has the right to confirm or cancel
  the contract in the negotiation stage of the
  contracy, as long as the two parties still there
  and have not left.

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KHIYAR MAJLIS
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Continue..
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Different

• Khiyar al-Majlis is different from Majlis
  Aqad in the application because Majlis aqad is a
  gathering place or the place for such agreement
  or place of business. As for Khiyar Al-Majlis the
  purpose is to give a right and choice to the
  related party either to proceed or cancel the
  agreement aslong the Majlis not be dissolved.
• According to Mazhabs Shafie and Hambali
• Pursuant to surah Al-Maidah
• the parties which are binding to a contract
  and other party no right to revoke the contract

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LEGALITY
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LEGALITY
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LEGALITY
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View from the 4 Mazhabs

• Mazhab Shafie and Hambali
• The Ulamas have a different view pertaining to
  this Khiyar. According to Mazhab Shafie and
  Hambali, Both of them agreed with the Khiyar
  Majlis and stated that this contract is not
  binding and undecided as long the parties still
  in the place to execute the contract. Both
  parties still have the rights either to accept or
  cancel . However, when one of the party or both
  parties apart which each other or get out from
  the designated place automatically the contract
  is concluded and parties are bound to it.
• In addition, according to Mazhab Shafie it
  is an obligation to the party that accept that
  offer to accept immediately once the offer is
  out to give a chance to the parties to re-think
  about the offer and enough time to apply Khiyar
  Al-Majlis.

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• Mazhab Hanafi and Maliki
• (1) However according to Mazhab Hanafi and
  Maliki, once the contract is concluded with a
  positive offer proposal and acceptance, it is
  ultimate and binding and neither one the parties
  has the choice of backing down from it. They
  provide as evidence the Quranic commandment to
  the believers to keep their contract referring to
  Surah Al-Maidah ayat 1
• Meaning
• O mankind, satisfied and concluded the
  agreements.

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• The above surah stated that Muslim is binding
  with their contract and according to this 2
  Mazhab the application of this Khiyar is
  contradict with the stated surah.
• (2) Mazhab maliki also rejected this Khiyar
  Majlis because Madinah people did not practiced
  Khiyar al-Majlis during our Prophet time.

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• whatever the case maybe, the reason for the
  disagreement amongst scholars on he option of the
  meeting is their way of understanding the hadiths
  relating to it. Those who confirm the option have
  understood the hadiths as they were and have not
  offered any interpretation. Those who reject the
  option interpreted the hadiths in the manner
• mentioned above. This exposition of the
  jurisprudential opinions on the option of the
  meeting and the rulings pertaining to it should
  be seen as a great achievement of Islamic
  jurisprudence as it has been unique is doing it.

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ILLUSTRATIONS

• illustration (I)
• When Dr Azam has made a purchase and was not
  aware, at the time of sale or previously, of a
  defect in the article brought, Dr Azam has an
  option either be content with it at the agreed
  price or reject it.
• illustration (II)
• If Ijam has sold an asset as being possessed
  of some specific quality and that asset turns out
  to be without quality, Dr Azam has an option to
  annul contract.

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KHIYAR AL-SYARAT (OPTION OF CONDITION)
Presenter Nuur Azza Leenda Chamingan
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Khiyar Al-Syarat

• It is a right given to the parties or another
  person to confirm or cancel the contract during
  an agreed period of time.
• Contradict with Prophetic tradition but accepted
  on 2 reasons
• Prophet accepted and sanctioned it
• Some people may not be clever about trading and
  need expert opinion
• Applicable to binding, necessary and committing
  contract which are cancellable even it was
  committing to one party e.g. sae,rent
  partnership, warranty

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Issues

• Who has the option of condition
• Both or either one of the parties
• Abu Hanifah, Malik, Ahmad Ibn Hanbal, the Zaidis
  and Al-Shafie one of the parties may delegate
  it to the stranger
• Parties may not be knowledgeable and need expert
  opinion
• Al-Shafie and Zufar not permissible to delegate
  to another person. Option was meant originally to
  be used by contracting parties. The practice of
  delegating it to another person means
  transferring the power over the contract to a
  stranger

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• 2.Period of Option of Condition
• Abu Hanifa, Zufar and Al-Shafie
• -does not exceed 3 days
• -this period is given to the parties to determine
  
• Abu Yusuf, Muhammad and Ahmad ibn Hanbal
• -can exceed 3 days and may be longer provided
  that the time is determined and defined
• -to give ample time to decide, so should not
  limit
• Imam Malik
• -originally 3 days but can be extended to
  sufficient time
• -in case where the subject matter of contract was
  in a place which is very far and could not be
  reached within 3 days
• Zaidis
• -period should be set and made known provided it
  is within 3 days
• Parties claim different agreed period-shorter one
  would be considered
• Parties keep silent and do not specify the period
  3 days

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• 3.Cancellation of contract in the option of
  condition (verbal / action)
• Abu Hanifa Muhammad
• -other party has to be informed of the
  cancellation
• -this is to safeguard the interest of the other
  parties
• Hanbalis, Abu Yusuf and Hanafi
• -the party who has the option can cancel the
  contract in the absent of the other party without
  his consent
• Zaidi
• -The other party has to be informed of the
  cancellation

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• 4. Ownership of subject matter during the period
  of option
• Abu Hanifa
• -the ownership does not transfer to the buyer
  during the period of option, price also should
  not paid by the buyer to the seller during this
  period.
• -but, if the option belongs to the seller alone,
  ownership not transfer but the price should go
  out of the ownership of the buyer
• -to avoid having both price and sold object in
  the possession of the seller
• Abu Yusuf and Muhammad
• -Price ownership of the seller
• -but if option be on the buyer, price does not go
  out of his possession but the sold object goes
  out the possession of the seller without entering
  the possession of the buyer
• Abu Hanifah, Abu Yusuf, Muhammad and Malikis
• -the sold object does not go out of the ownership
  of the seller during the period of the option
• Shafie and Hanbalis
• -the ownership should be transferred during the
  period of option

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• 5.Responsibility of the maintenance expenses of
  the subject matter and right to the increase
• -Hanafi and Maliki
• Responsibility of the seller
• -Other scholars
• -responsibility of the buyer
• 6.Option nullified with death
• -Hanafi and Hanbalis
• -option is dropped and not transfer to the heirs
• -consider it as personal right
• -Malikis and Shafies
• -option is transferred to the heirs as it is a
  financial right not personal right
• -the option of condition is lost by the death of
  the parties who has it

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• 7.Delegating the option of condition to others
• -cannot withdraw except with the death of the
  third person
• -agent cant delegate the option to another
  person except with the approval of the appointer
• If the agent dies, the right goes back to the
  original party
• 8. Differences in the option of condition
• -burder of proof one who denies on the
  condition and he has to deliver solemn oath in
  the absence of the conclusive proof

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KHIYAR AL-RUYAH (OPTION OF VIEWING)
Presenter Norlaili Mat Isa
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General rule

• In order to conclude a valid binding contract the
  subject matter must exist at the time of the
  contract in order to avoid gharar or uncertainty.
• But, this strict rule will caused hardship to
  the contracting parties
• Thus the Muslim jurist had allow exceptions to
  the strict rule of existence.
• As for example, bay al-salam (sale by advance
  payment for the future delivery), bay
  al-istisna (contract of manufacture), Ijarah
  (contract of hire) and musaqat (contract of
  irrigation).

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• But still all this kind of transaction still has
  its own stage of uncertainty (gharar) because the
  party still has not seen the subject matter yet.
• Thus, to avoid uncertainty the purchaser given
  power to opt whether to continue or rescind the
  contract concluded between them after seeing and
  inspect the subject matter.
• This option known as option of viewing or option
  of sight (khiyar al-ruyah). This option also
  known as option of inspection because not only
  see but

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Purposes of khiyar al-ruyah

1. To avoid injustice that may lead to ignorance and
   dispute among parties.
2. To protect the interest (istihsan) of Muslim and
   to prevent any disputes among them.
3. To avoid unfairness when they have no experience
   or ability to market place to buy things they
   have not seen.

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Legality of khiyar al-ruyah
Hanafis, Malikis, and Hanbalis Shafiis
They admitted the legality of this option based on the authority of hadiths reported by Ibn Abbas and Abu Hurairah He who buy something which he has not yet seeing has the option upon seeing it either to accept or refuse it. Hanafis, Malikis and Zaidis give the right of the option of viewing only to the buyer Hanbalis and Zahiris give the right to exercise this option to the seller and the buyer Refused and remains with the strict rule of transaction. Any transaction will be consider void and invalid if the subject matter is not existing and cannot be seeing. Following is the authority of hadith Prophet Muhammad S.A.W. forbid cheating in selling (Reported by Abu Muslim from Hurairah) Second, Shafiis does not accept the hadiths mentioned by Hanafi, Maliki, and Hanbali as authority which he describes as weak or incorrect hadiths (hadiths daif).
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Conditions of the Option of Viewing

1. The subject matter of transaction must define as
   to its kind, genus, value to prevent any
   imbalance between the parties obligation.
2. The party should not have seen the subject matter
   before. If the party has seen the subject matter
   before, the option will not applicable anymore.
   The viewing can be in other form such as touch,
   smell, or taste.
3. The party can only exercised the option after the
   purchaser have seen the subject matter.

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The Period to have the Option and its Duration
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Muslim jurists differ in term of determining the
period in order to avoid existence of uncertainty
(gharar) in the contract. Gharar here refer to
the decision whether the parties still want to
continue or terminate the contract.
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(No Transcript)
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The Effects of Option of Viewing
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KHIYAR AL-AYB (OPTION OF DEFECT)
Presenter Mahyuddin Daud
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Meaning of khiyar al-ayb

• It is an option given to a party to rescind the
  contract when he discovers in the subject, defect
  that reduces its value or that makes it fall
  short of its requirements or specifications.
• The Malikis termed this option as khiyar
  al-Naqisah or the option of reduction.
• It is a general rule that there should be no
  deceit or fraud in sale transactions among
  Muslims. As such, this necessitates the security
  of sale i.e. the right of option

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• This type of option arises only if the contract
  has been concluded.
• If the contract is still in the state of
  negotiation or still under discussion, the
  affected party cannot exercise this option.
• If anything appears in the subject of the
  contract which does not match its original use or
  decreases its conventional market value, or makes
  it unfit to meet requirements expected of it,
  then the buyer have the right to exercise option
  of defect, as freedom from defects is the right
  of the buyer given in any commercial
  transactions.

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Purpose of the Option

• If the defect reduces the value of the object, so
  it is only fair to give the party a choice as
  when the subject matter has defect, the consent
  or satisfaction of parties involved are
  one-sided.

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Surah An-Nisa Verse 29

• Allah S.W.T prohibits taking money of others
  illegally and command that trading should be
  conducted with mutual consent as stated in
  an-Nisa29.
• O ye who believe! Eat not up your property among
  yourselves in vanities but let be there amongst
  you traffic and trade by mutual good will nor
  kill or destroy yourselves for verily God any
  hath been to you Most Merciful!

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Hadiths

• The Prophet s.a.w says
• A Muslim is a brother to another Muslim. It is
  illegal for a Muslim to sell his brother a
  deficient thing unless he makes it clear to him
• It is illegal for someone to sell something
  without showing its real qualities and it is
  illegal for someone who knows about it not to
  show it.

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• It is reported that the Prophet s.a.w passed by
  someone selling foodstuff. He (the Prophet) put
  his hand in it and found it wet, then he said, He
  who cheats us is not one of us
• The Mejelle, Article 336
• Any buyer in Islamic law has an automatic
  implied warranty against latent defects in the
  goods purchased.

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Conditions for Option of Defect to Become
Applicable

• The defect have existed in the subject matter
  prior to the time of sale or it occurs before the
  delivery and while it is still in the hands of
  the seller.
• The defect which existed in the subject matter
  decreases its value or renders it unfit for the
  purpose to which it is intended
• The buyer must be unaware of the defect at the
  time of contracting and taking the subject matter
  into his possession. If the seller indicates that
  the defect is so manifestly obvious so as not to
  escape defection and the buyer accepted it
  without protest, he is considered to have waived
  his right.
• The absence of stipulation for waiving or
  releasing the seller from liability for the
  defect in the subject matter

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What if express provisions were stipulated on
acquittal from liability if defects found?

• the Option is not lost if both parties agree to
  acquit each other of all defects.
• Abu Hanifah and Abu Yusuf consider a sale which
  contains a provision of acquitting of defects as
  valid, even if the defects were not mentioned in
  detail.
• It is of no consequence whether the defect
  existed before the contract or after it BUT
  before the buyer receives the sold object.

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What if express provisions were stipulated on
acquittal from liability if defects found?
Imam Malik, Al-Shafie and Muhammad ibn Al-Hasan Zaidis
The provision of acquittal covers only the defects which exist at the time of the conclusion of the contract it does not cover defects occuring after that and before the buyer receives the sold object If the two parties agree to acquit of all defects, apparent or hidden, the option is dropped
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Conditions under which right of Option of Defect
cannot be exercised

1. When the buyer, after he has known the defect in
   the subject matter, insists or continues on
   buying the thing.
2. When the buyer knew the defect in the subject
   matter but transfers or gives it to other persons
   as a gift or as a selling thing. He loses his
   right of option of defect.
3. When the seller sells a thing with a condition
   that he shall not be made liable for any defect
   in the subject matter and the buyer agreed upon
   that condition. The buyer loss his right of
   option of defect.

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Conditions under which right of Option of Defect
cannot be exercised

1. If the defect is slight and if it does not reduce
   the value of the object, and if it is
   conventional to overlook it, then the party
   cannot use it as a pretext to return the sold
   object
2. If the new defect occurs in the subject matter
   while it is in the possession of the buyer and he
   discovers that the object had an old defect while
   it was in the possession of the seller, then the
   buyer can claim the reduction of the value but he
   cannot return the object.

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What if the buyer keeps silent of the defect in
the subject matter?

• The right of khiyar will not be available if the
  defect is the one which could be apparent with
  usual examination and the buyer knows of it.
• However, if the defect does not appear at the
  usual examination, the option is never dropped.

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Is the Option Transferable to Heirs?

• The option of defect is one of the options that
  are transferable to the inheritors as it is
  attached to the subject of the contract.
• The option holders death does not cause the
  option to be lost because the object itself is
  transmitted to inheritors, and thus so is the
  option.
• This is because inheritors should inherit a sound
  and not a defective object.

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Applicability of the right of Option

• contract of sale
• contract of Ijarah (hire)
• contract of exchange of currency
• Mahr payment,
• Sulh (reconciliation) involving agreement or
  setting blood money, that is all contracts whose
  purpose is the exchange of counter values.
• However, in contracts whose primary aim is not
  mutual exchange of counter-values there is no
  dispute that defects have no effects in them
  whatsoever.

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KHIYAR AL-TAYIN (OPTION OF DETERMINATION)
Presenter Mahyuddin Daud
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• The parties have the option to choose the object
  of sale out of multiple varieties of a given
  article.
• The purpose of this Khiyar is to give wide choice
  to the buyer to choose and the seller to
  stipulate the subject matter of the contract.
• For example the parties may purchase one out of
  three varieties of commodities of different
  qualities (excellent, average and poor) without
  specifying which particular varieties would be
  purchased on the condition that those the subject
  matter from the same class but different
  qualities and different price.

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• For example the object were car and have three
  types, Audi, Perdana V6, and Dutson also have
  different qualities and different price. In this
  situation, the seller have the option to
  determine the object, price and the qualities of
  the subject matter of the contract itself.

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• This option only applicable to the parties of the
  contract only in a stipulated time.
• This option cannot be stipulated by the third
  parties. However, some scholar in the opinion
  that this option only applicable to the buyer
  only.
• Duration of this option according to the nature
  of the transaction. Imam Abu Hanifa maintain that
  the period of this khiyar At-Tayin same as
  khiyar al syakk which is 3 days. However duration
  of option must be precisely defined by
  contracting parties.

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• Syafie and Hanbalis do not recognize this option.
  They are in the opinion that if the subject
  matter of the contract is not determined
  sufficiently then it is not confirming the basic
  principle of Islamic Transaction. They also
  argued that there is no authority on Hadith about
  Khiyar At-Tayin.
• Hanafi and Maliki approved Khiyar at-Tayin on
  the basis of Istihsan and affirmed that the
  option has been introduce to prevent any damages

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CONDITIONS OF KHIYAR AL TAYIN

• This option is applicable in commutative contract
  (unchanged of quantities) for valuable
  consideration and in which property is
  transferred. It is therefore restricted to the
  contract of sale, barter, give and trust.
• Choice of determination may only be exercised
  between a maximum of 3 object which have three
  qualities, good, medium and bad
• If the object were less or more than 3, the
  contract will be voidable on the ground of
  Gharar( uncertainty)
• This option only applicable to the parties of the
  contract only and not to the third party it is
  for the purpose to avoid in justice among the
  parties of the contract
• Option of determination must expressly stipulate
  in the contract which means that both of them
  knew that they have the option to choose the
  subject matter of the contract. If not, the
  seller must inform the buyer.
• Hanafis require that the object which the choice
  is made must be all the same class but must
  different quality or kind for the option to be of
  any consequences.

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Conclusion

• The Options are another alternative which could
  assist in ensuring the fairness in trade.
• It also ensures the contracting parties to have
  transactions which are in line with the Shariah
• The right of Options has also been adopted in the
  modern financial transactions