Saturday, May 23, 2009

Part 12, The Islamic Rules of Trade - Transfer of a Right (Al-Hawala)/Bill of Exchange

Due to the current global financial crisis there is increasing interest in the Islamic Economic System, the most comprehensive book on this topic is 'The Economic System of Islam' by Sheikh Taqiuddin an-Nabhani. However as people have many questions relating to the Islamic rules of trade we will be posting related extracts from the draft translation of the Fiqh masterpiece 'The Islamic Personality, Volume 2' by Sheikh Taqiuddin an-Nabhani

(Al-Hawala) is derived from transferring the right from one’s responsibility to another one’s responsibility. It is transferring by the one upon whom is the right of the one seeking the right from him to another one on whom he has a right. The transfer is established by the Sunnah. Al-Bukhari narrated via the way of Abu Hurayra that the Messenger of Allah (SAW) said:
The delay of the rich man (in paying the right) is injustice. And if one of you is transferred on a rich person then let him follow him” and in other words: “Whoever is transferred in his right on a rich person , then let him transfer” (narrated by Ahmad).

It is permitted in the debt and the thing i.e. immediately and deferred, because it is transferring the right of a person on another which is general covering all rights. Also because the words of the hadith: “If one of you is transferred on a rich person” is general including in regards of (ahad) one of you and the rich man, each of them has an immediate right over him; and it includes that there is over him a deferred right, so it remains upon its generality. The (malee’a) rich man is the one capable to pay.

It came in the hadith from the Prophet (SAW) that he said:
Verily Allah (swt) says: ‘Whoever lends the rich man who is (ghayr al-‘adam).”
However the command of the Messenger to follow the rich man if transferred upon him, requires that he is not denying or a (mumatil) procrastinator (over the right). This is understood from compelling the transferred one to follow the rich man; so the rich man becomes the one capable of repayment, not the denier or procrastinator. The reality of the transfer and the wording of the hadith indicate that there should exist in the transfer a (muheel) transferring one, the (muhtal) transferred one and the (muhal ‘alaihi) transferred upon. The one who transfers is the (muheel), and the word (ahadakum) “one of you” who is the one commanded to follow in his debt is the (muhtal) person. And the rich man, whom the person is commanded to follow him, is the transferred upon (muhal ‘alaihi).


Four conditions are stipulated for the validity of the transfer:-

Firstly: The similarity of the two rights in kind, and in immediacy or deferred period, because it is a transfer of the right and convey of it, so it is conveyed according to its description. Hence it is valid for the one upon whom gold is due to transfer for gold, or silver for silver. However, it is not valid for the one upon whom gold is due to transfer for silver or transfer silver for gold. It is valid for the one upon whom there is a debt for (a period of) a month to transfer for a debt for a month, and the one upon whom there is a debt due for a due debt. It is valid to transfer an immediate (right) for immediate (right), and a deferred (right) for a deferred (right). However if one of the two debts is immediate and the other deferred, or the period of one of the two for a month and the other for two months, then the transfer is invalid.

Secondly: That the transfer must be upon an established fixed/settled debt. So if the woman transfers upon her husband for her dowry before consummation, it is invalid as it is not settled/established. Were an employee to transfer for his wage before the end of his work or before the end of the period of his wage, it is invalid. Were someone, who had no debt upon him due to another, to transfer him to another who owes him a debt, this is not a transfer but a delegation on which apply the rules of (wakalah) delegation not the rules of transfer. If the one upon him is a debt transferred someone who has no debt upon him, this is also not a transfer so payment is not obliged upon the one transferred upon the (muhal ‘alaihi) nor is the (muhtal) transferred obliged to accept that, because the transfer is mutual compensation whereas there is no mutual compensation here. If the (muhtal) transferred received the debt from the (muhal ‘alaihi) transferred upon, the debt returns to the (muheel) transferring.

Thirdly: It should be for known money and is invalid for unknown money.

Fourthly: That the (muheel) transferring person transfers with his consent and not compelled upon the transfer, because the right is upon him. So he is not obliged to pay it in a specific manner, since he is not obliged to pay it from the side of the debt which is upon the (muhal ‘alaihi) transferred upon. Rather it is for him to pay it in any manner he wishes. It is not necessary to have the consent of the (muhtal) transferred and (muhal ‘alaihi) transferred upon; rather their consent is not considered at all. The (muhtal) transferred is obliged to accept the transfer, and the (muhal ‘alaihi) transferred upon is compelled to accept the transfer. As for compelling the (muhtal), this is due to the statement of the Prophet (SAW): “If one of you is transferred upon a rich person, let him follow (him)” and because the (muheel) have the right to repay the right due upon him by himself or his delegate, and he placed the (muhal ‘alaihi) transferred upon in his place in receiving (the right) so the (muhtal) is compelled to accept. As for rejection of the (muhal ‘alaihi), this is because the creditor placed the (muhtal) stand in his place in receiving ( the right) so it does not need the consent of the one upon whom the right is due like (wakalah) delegation.

Accordingly the transfer in deed notes bonds which include sums like checks or deferred sums whose period falls due—which are known as the transfer of the thing itself is permitted with the consent of the (muheel) alone, where the consent of the (muhtal) or (muhal ‘alaihi) is not stipulated. Similarly the transfer of deed notes (bonds) which include sums whose period has not fallen due like promissory notes—which is known as the transfer of debts—whether the (muhtal) consented or not, and whether the (muhal ‘alaihi) consented or not. The transfer is not a contract so as consent be stipulated therein. So there is no offer and acceptance therein. Rather it is only the disposal of a person himself like the guarantee (dhaman), standing security (kafala), bequest (wasiyya) and their like of the disposals which are not considered contracts.

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