contracts in islamic law-the principles of commutative justice n liberality

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CONTRACTS IN ISLAMIC LAW: THE PRINCIPLES OF COMMUTATIVE JUSTICE AND LIBERALITY HUSSEIN HASSAN Mansfield College, Oxford I. INTRODUCTION: OBLIGATION AND CONTRACT In the classic manuals of Islamic law the term [aqd (contract) is most frequently used for two-party transactions, concluded by offer on one side, acceptance on the other. However, it is also used for transactions (guarantees, gifts, bequests) concluded by an offer only. Again, for acts merely juristic in nature (divorce, release, manumission of debts), the term is still [aqd. In fact, the term covers obligation in every field: one’s religious obligations to God, the interpersonal obligations of marriage, the political obligations expressed in treaties, and the commercial obligations of the involved parties in a range of particular contracts. 1 It would seem that [aqd is used in its etymological sense (‘tying up’, reflected, as it happens, also in the root of ‘obligation’) rather than as a technical term. 2 The jurists did not attempt a formal definition of the term, nor an explicit general theory of contract. 3 The presentation, by some of them, of sale as the archetype to which other contracts were expected to conform, did not provide enough premises for analogical general- ization: there were so many other different contracts that exceptions were bound to overshadow the theory. Arguably, a general theory of contract might have been derived from the Qur]a ¯ n: ‘You who believe, fulfil contracts (awfu ¯ bi-l-[uqu ¯d)’ (5. 1); ‘You who believe, be faithful 1 N. Mohammed, ‘Principles of Islamic Contract Law’, Journal of Law and Religion 6 (1988), 115–16. 2 M. E. Hamid, ‘Islamic Law of Contract or Contracts’, Journal of Islamic and Comparative Law 3 (1969), 1–11, esp. 1. 3 Even as late as the Majalla—the ‘modernizing’ civil code introduced in the Ottoman empire between 1869 and 1876—the authors did not provide an explicit general theory governing contracts. Journal of Islamic Studies 13:3 (2002) pp. 257–297 # Oxford Centre for Islamic Studies 2002

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Page 1: Contracts in Islamic Law-The Principles of Commutative Justice n Liberality

CONTRACTS IN ISLAMIC LAW:

THE PRINCIPLES OF COMMUTATIVE

JUSTICE AND LIBERALITY

HUSSEIN HASSANMansfield College, Oxford

I. INTRODUCTION:OBLIGATION AND CONTRACT

In the classic manuals of Islamic law the term [aqd (contract) is mostfrequently used for two-party transactions, concluded by offer on oneside, acceptance on the other. However, it is also used for transactions(guarantees, gifts, bequests) concluded by an offer only. Again, foracts merely juristic in nature (divorce, release, manumission of debts),the term is still [aqd. In fact, the term covers obligation in every field:one’s religious obligations to God, the interpersonal obligations ofmarriage, the political obligations expressed in treaties, and thecommercial obligations of the involved parties in a range of particularcontracts.1 It would seem that [aqd is used in its etymological sense(‘tying up’, reflected, as it happens, also in the root of ‘obligation’)rather than as a technical term.2

The jurists did not attempt a formal definition of the term, nor anexplicit general theory of contract.3 The presentation, by some ofthem, of sale as the archetype to which other contracts were expectedto conform, did not provide enough premises for analogical general-ization: there were so many other different contracts that exceptionswere bound to overshadow the theory. Arguably, a general theory ofcontract might have been derived from the Qur]an: ‘You who believe,fulfil contracts (awfu bi-l-[uqud)’ (5. 1); ‘You who believe, be faithful

1 N. Mohammed, ‘Principles of Islamic Contract Law’, Journal of Law andReligion 6 (1988), 115–16.

2 M. E. Hamid, ‘Islamic Law of Contract or Contracts’, Journal of Islamic andComparative Law 3 (1969), 1–11, esp. 1.

3 Even as late as the Majalla—the ‘modernizing’ civil code introduced in theOttoman empire between 1869 and 1876—the authors did not provide an explicitgeneral theory governing contracts.

Journal of Islamic Studies 13:3 (2002) pp. 257–297# Oxford Centre for Islamic Studies 2002

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to your contracts’ (4. 33); ‘Fulfil the covenant of God when you haveentered into it, and break not your oaths after you have confirmedthem’ (16. 91). These are moral injunctions of high generality andsanctity but they have never yet been made the basis of a systemof legally binding, enforceable agreements. Instead, what the juristsdid was to develop a law of contracts, each with its own distinctiverules, categorizing them into classes of nominate (more accurately,particularized) agreements (al-[uqd al-mu[ayyana), then supple-mented by mechanisms—to be discussed below—for giving effect toinnominate agreements.4

Arguing mainly from the existence of those mechanisms, somemodern scholars5 have claimed that Islamic law does have a generaltheory of contract, i.e. general default rules that apply to all contracts.The claim is untenable. Ways of giving effect to innominateagreements developed in Islamic law precisely because of the absenceof a general theory of contract. Further, the discussions among juristsrelating to freedom of contract were concerned with whether andhow to enforce the types of contract that fell outside the classes ofnominate contracts established by earlier jurists, and not with theissue of enforcing questionable contractual terms consented to withina private agreement.

In fact, the exceptions between the nominate contracts6 outnumberand outweigh the generalities by far. It is this that led scholars such asCoulson and Schacht7 to argue that Islamic law is a law of contracts(plural), rather than one of contract. A number of recent scholars havetried, in hindsight as it were, to abstract general rules from the seriesof specific contracts and their regulations formulated by the early

4 Such agreements are not in themselves enforceable: as the Roman law maxim (exnudo pacto actio non nascitur) puts it, a bare agreement is not legally actionable.

5 e.g. S. H. Amin, Islamic Law in the Contemporary World (Glasgow, 1985), 40–3.6 The classical manuals of Islamic law base the system of [uqud on four basic

contracts: bay[ (sale), hiba (gift), ijara (hire), and [ariya (loan). More recently Abdal-Razzaq al-Sanhurı (al-Wasıt

˙fı sharh

˙al-qanun al-madanı (Cairo, n.d., Beirut,

1952), vol. IV, pt. I, p. 1) has listed six nominate contracts: bay[ (sale), hiba (gift),sharika (partnership), ijara (hire), muqawala (piecework), and wakala (agency).There are, of course, many other forms of contracts which do not fall into any of theabove, and which are accorded separate treatment by the jurists under their respectivetitles in the texts. These, however, are the most commonly discussed and the contractof sale is the most commonly used by the jurists when they needed to draw analogies.The reason for that is the Qur’anic verse (2: 275): ‘God has made sale lawful andusury unlawful’. Thus sale became the archetype and usury the arch-antitype ofcontracts.

7 N. J. Coulson, Commercial Law in the Gulf States: the Islamic Legal Tradition(London, 1984), pp. 17, 27–31; J. Schacht, Introduction to Islamic Law (Oxford,1964), 144.

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jurists.8 These rules have to do with issues such as impediments toconsent and the classification of legal acts and their effects. In part,this effort seems to reflect the mistaken assumption that, if Islamic lawis indeed a law of contracts, it follows that it does not recognize theprinciple of freedom of contract.9 However, this is a non sequitur.That principle has little to do with the issue of whether a contractualscheme is nominate or not. Legal systems limit the principle offreedom of contract for various reasons, independently of whether thesystem concerned has a law of contracts or contract. In the case ofIslamic law the limitation is that the agreements people enter intomust not fall foul of the Islamic prohibitions—such as those on riba(usury), gharar (uncertainty), and maysir (gambling)—that applyequally to nominate and innominate contracts, and which wouldapply even if Islamic law had an explicit law of contract.

The absence of an explicit general theory of contract has beenattributed, by Coulson and Shacht among others, to (a) conceptual‘primitiveness’,10 or (b) mere ‘accident’—as just the way it was, withno further explanation offered.

(a) The notion of inability or unwillingness on the part of thejurists to generalize or conceptualize does not fit with the achieve-ments of those jurists in us

˙ul al-fiqh, one of whose main aims was

to rationalize the positive law of God. Perhaps the scholars who putforward this notion were misled by their focus on the case-orientedapproach of the jurists to the legal problems they encountered.That focus results in conclusions that cannot be sustained. Thus,Wakin states:

Apart from particulars concerning the subject matter, there is no great dealof difference among marriage contracts, agreements creating partnerships,claims for debts, or deeds of sale. Even instruments recording bilateralobligations seem very much like those concerning unilateral declarations.11

8 These authors have typically been not practitioners but academics teachingmodern law in universities. Among others: S. Mahmassani, al-Naz

˙ariyyat al-[amma li-

l-mujibat wa-l-[uqud (Beirut, 1948); [Abd al-Razzaq al-Sanhurı, Mas˙adir al-h

˙aqq fı l-

fiqh al-Islamı (Cairo, 2nd edn 1954–9); and Y. Musa, al-Amwal wa-naz˙ariyyat al-[aqd

(Cairo, 1953).9 This is the argument of Hamid, ‘Islamic Law of Contract or Contracts’.

10 Coulson (Commercial Law in the Gulf, 17): ‘It would perhaps seem natural fromthe experience of Western legal systems that this stage of the development of Islamiclegal doctrine would be followed by a further stage in which juristic analysis wouldderive from the various particular cases the general principles and would thus givebirth to a general theory of Contract.’

11 J. Wakin, The Function of Documents in Islamic Law: The Chapter on Sale fromTahawı’s Kitab al-Shurut al-Kabır (Albany, NY, 1972), 38.

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True, the case-oriented approach leads to overlaps between varioussubject matters. However, an effort to look behind that approachyields conclusions quite different from those of Schacht and Coulson.Baber Johansen’s careful analysis of the legal compendia on com-mercial exchange in H

˙anafı fiqh12 shows that, while the jurists do not

distinguish a form of contracts that pertains uniquely to commercialexchange, and almost never use commercial exchange as a rubric orchapter head (no bab al-tijara), the definition of commercial exchangeand its distinction from other legal subjects permeates the jurists’discussion of legal relations. Within the framework of their case-oriented treatment of legal problems, the jurists take great pains todraw clear lines of demarcation between commercial exchange and,for example, the sphere of those social relations that are mediatedthrough kinship, marriage, sexual relations, the affiliation to religiouscommunities, and even neighbourhood residential quarters.

(b) The second (mere ‘accident’) explanation is equally unhelpful.The treatment of contracts separately is not ‘just so’, but reflectsthe historical process through which the Islamic law evolved. Inparticular, it was a necessary consequence of scrutinizing andreforming (or rejecting) pre-Islamic custom and practice. A numberof what we now know as Islamic contracts were in existence inpre-Islamic Arabia, among them bay[ (sale), salam (prepaid sale),mud

˙araba (trading venture), sharika (partnership), rahn (mortgage),

ju[ala (job wages or reward), [umra (a type of gift) and ijara (hire).The form, incidents, and contents of these contracts were notnecessarily the same as those of the contracts that came to berecognized in Islam by the same names—some were, some were not.The point is the existing contracts were scrutinized individually andelements contrary to the substance or intent of the new Islamic normswere removed. Some of those norms were general in nature and hadconsequences not only for every contract but also for differentaspects (subject matter, price, etc.) of the same contract. Well-knownand pervasive examples include the prohibitions, mentioned above, ofriba and gharar in contracts.

The concern of the jurists to minimize the risk of riba and gharar ledthem to focus on the concrete elements of the contract and itsimmediate implementation rather than on the obligation, if any,that arises from a contract. They thus focused on the subject matterand its counter-value, where such counter-value was present. As aconsequence of this, Chehata has argued, contract in Islamic law is

12 B. Johansen, ‘Commercial Exchange and Social Order in Hanefite Law’, inC. Toll et al. (eds.), Law in the Islamic World: Past and Present (Copenhagen,1995), 81–95.

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linked to an object and is not intended to create obligations. Indeed heargued that in the works of the classical jurists, the notion of anobligation is missing in any definition of consent.13 However, this isnot entirely true. As Chehata himself realized elsewhere,14 one doesnot find in Islamic law a single generic ‘denomination’ of the conceptof obligation as understood in other systems of law. The conceptvaries in form and content depending on the object of obligation.Thus: ‘When what Western jurists call obligation relates to fungiblearticles or incorporeal property, that is called dayn by fiqh. Whenthe object of the so-called obligation is a specific article deter-mined in its individuality, then it is called [ayn’.15

[Ayn is differentagain from those rights that derive from real estate. Sanhurı, similarly,had held that contract in Islamic law was a generator of obligations,16

but later realized and admitted that the centre of a contract was itssubject matter and not an obligation. Indeed, he went on to define acontract as being the connection of an offer with an acceptance, notnecessarily with the view of creating obligations but of bringinga change to the status of the subject matter.17

At this point it will be worthwhile to review in summary form whathas been said above.1. The classical jurists, though well capable of abstraction and

generalization, did not attempt an explicit definition of contract,nor an explicit formulation of a theory of contract.

2. The scheme of nominate contracts in Islamic law drew upon pre-Islamic customs and practice, rigorously scrutinized and amendedto conform to Islamic norms of what is lawful and what isprohibited.

3. Mechanisms were developed to validate and legally enableagreements that fell outside the scope of the nominate contracts.

4. Nevertheless, the Law (of course) did not expressly recognizeunlimited freedom of contract, since violation of the Islamicprohibitions could never be valid. And:

5. The centre and focus of a contractual agreement was the objectof obligation, the subject matter of the particular agreement, theaction to be performed, not obligation itself.

13 C. Chehata, Droit musulman: Application au Proche-Orient (Paris, 1970), 135.(I am indebted to Amina Bashir for a trans.)

14 Chehata, Theorie generale de l’obligation en droit musulman hanefite (Paris,1969), 169.

15 N. Saleh, Unlawful Gain and Legitimate Profit in Islamic Law (London, 2nd edn1992), 103.

16[Abd al-Razzaq al-Sanhurı, Naz

˙ariyyat al-‘aqd (Cairo, 1934), 63.

17 Sanhurı, Mas˙adir al-h

˙aqq fı l-fiqh al-Islamı, i. 77.

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Given the absence of an explicit definition or theory of contract,what held Islamic legal reasoning together? What conceptual resourcesenabled sufficient coherence and consistency in legal practice for thesystem to operate successfully and evolve a stable tradition? I wouldargue that—whether or not one chooses to recognize in this thepotential to generate a formal theory of contract—Islamic legalreasoning and practice, across the major schools of the Law,referred consistently to two principles of justice that directed andstabilized commercial and other transactions in the Islamic world.The two principles are commutative justice and liberality, bothwidely recognized and familiar in Western legal reasoning andscholarship.

Distributive and commutative justice are still understood inbroadly the terms in which they were explained by Aristotle, andthen by his most famous Western commentator, Aquinas. Aristotle’sNicomachean Ethics was translated into Arabic by Ish

˙aq ibn

H˙unayn (d. c.910). The influence of this work on ethicists and

philosophers in the Islamic world was very considerable.18 It wasmediated to the Muslims through the work of Porphyry of Tyre,19

who is known exclusively from the Arabic sources to have writtena twelve-part commentary on the Ethics, then used by Miskawayh.The most famous and important of the Arabic commentaries onthe Ethics was by al-Farabı (d. 950). These commentaries cir-culated widely among a diverse group of intellectuals—Neoplatonistphilosophers like al-Farabı himself20 and Miskawayh (d. 1030);21

Aristotelian philosophers like Ibn Rushd (Averroes),22 who wasalso an influential jurist; and litterateurs like Abu-l-H

˙asan

al-[Amirı23 (d. 992) and al-Mubashshir ibn Fatik24 (d. eleventhcentury).

18 M. Fakhry, Ethical Theories In Islam (Leiden, 1991), 78.19 For the central role played by Porphyry, see R. Walzer, ‘Porphyry and the Arabic

Tradition’ in H. Dorrie, Porphyre: Huit exposes suivis de discussions (Geneva, 1966),275–99.

20 See his al-Jam[ bayna ra’yay al-h˙

akımayn (Beirut, 1968) and his Fus˙ul

al-muntaza[a (Beirut, 1971 edn).21 See his Tahdhıb al-akhlaq (Beirut, 1966) and his Fı Mahiyat al-[adl (Leiden,

1964).22 See Aristotelis opera cum Averrois commentariis: Venetiis, Apud, Junctas,

1562-1574 (Frankfurt, 1962).23 See his Kitab al-sa[ada wa-l-is[ad (Tehran, 1957–8).24 See his Mukhtar al-h

˙ikam wa-mahasi al-kalim (Beirut, 1980).

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II. COMMUTATIVE JUSTICE

It is in Book V of the Nicomachean Ethics25 that Aristotle makeshis famous distinction between distributive justice (dianemetikondikaion; V, 3: 1131b28) and corrective justice (diorthotikon dikaion;V, 2: 1131a1). Distributive justice is that which is ‘manifested indistributions of honour or money or the other things that fall tobe divided among those who have a share in the constitution’(V, 1130b–1133b). There is no single correct principle for determiningthe share each person ought to receive: on the contrary, Aristotleholds, different societies will come up with principles in conformitywith their own political arrangements. Corrective justice, on theother hand, is that justice which plays a rectifying part in tran-sactions between man and man.26 It requires and maintainsequality27 so that after a transaction or dealings (synallagmata)either party is neither richer nor poorer than he was before thetransaction. Thus, where the transaction is a voluntary one—i.e. theparties have entered into a consensual exchange of resources suchas in sale, hire, etc.—corrective justice requires that there beequality between the value of what one gives and receives. Wherethe transaction is involuntary—i.e. where one deprives another ofsome resource without his consent or against his will, for exampleby stealing from him—corrective justice requires the one whodeprives to compensate the one deprived. Both contract and tortcan be considered as systems of corrective justice.28 In tort, correc-tion means to restore the damage in the amount of the initialallocation; in contract, it means ensuring equal value in theperformances exchanged by the parties (Ethics V, 1132b–32b).

25 Aristotle, Nicomachean Ethics V, in R. McKeon (ed.), The Basic Works ofAristotle (New York, 1941). Hereafter cited as Ethics.

26 The relationship between distributive and corrective justice is discussed below.For the approach adopted here, see J. Gordley, ‘Equality in Exchange’, California LawReview 69 (1981), 1587–9; and W. J. Waluchow, ‘Professor Weinrib on CorrectiveJustice’, in S. Panagiotou (ed.) Justice, Law and Method in Plato and Aristotle(Edmonton, 1987) 153, 155. For a different view of the relationship, see P. Benson,‘The Basis of Corrective Justice and its Relation to Distributive Justice’, IowaLaw Review 77 (1992), 515, 529–49; and S. R. Perry, ‘On the Relationshipbetween Corrective and Distributive Justice’, in J. Horder (ed.), Oxford Essays inJurisprudence, 4th ser. (Oxford, 2000), 237. (My reasons for preferring the formerview are given below, pp. 10–12.)

27 See J. Gordley, ‘Tort Law in the Aristotelian Tradition’, in D. Owen (ed.),Philosophical Foundations of Tort Law (Oxford, 1995), 131–2.

28 This is not to suggest that all of tort is about corrective justice; there are areas,such as trespass to land, that corrective justice would have difficulty explaining.

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As Aquinas says, the exchange should impose the same burden onthe parties.29

The term ‘corrective justice’ does not adequately capture theessence of the category of justice that Aristotle had in mind. It focuseson the correction of an inequality that arises when one injures anotheror takes from him, or when one keeps his side of an arrangementand the other does not.30 It does not, even when taken together withthe concept of distributive justice, explain all the issues of justicethat can arise. After all, it is difficult to understand the notion of‘correction’ without some prior determination of what is to count asa crime, a tort or a contract.31 These problems are recognized byThomas Aquinas, who uses instead the term ‘commutative justice’.This term is not limited merely to corrections, nor to business orvoluntary transactions. It covers the whole range of proper dealingsbetween persons.32

In recognition of the difficulties with ‘corrective justice’, the term‘commutative justice’ will be used hereafter. One should neverthe-less keep in mind the core of the Aristotelian definition, i.e. thatdistributive justice is meant to ensure that each citizen is allocateda share of whatever is being divided: it accordingly follows ageometrical proportion (Ethics V, 1131a–31b). It is, as Gordley says,the mathematics of dividing a pie.33 Commutative justice, on theother hand, is concerned with preserving a citizen’s share of theresources: it follows an arithmetic proportion (V, 1131b–32b).

Aristotle makes clear that acts of voluntary commutative justice donot cover the whole range of voluntary transactions. These othervoluntary transactions are covered by the virtue of ‘liberality’ thatAristotle defines as the ‘mean with regard to wealth’ that arisesthrough spending and giving in a particular way. For Aristotle,spending and giving should express the virtue of liberality wherebyone gives ‘for the sake of the noble and rightly; for he will giveto the right people, the right amounts, and at the right time, withall the other qualifications that accompany right giving’ (EthicsIV, 1119b–20b).

Aquinas too believes that when one transfers property to anotheror promises to do so at a later date, he is either exercising the virtue

29 Thomas Aquinas, Summa Theologica (Madrid: Bibliotheca de autores cristianos,3rd edn 1961) II-II, q. 77 a 1. Hereafter referred to as Summa.

30 J. Finnis, Natural Law and Natural Rights (Oxford, 1980), 178.31 Ibid. 179.32 Ibid.33 Gordley, ‘Equality in Exchange’, 1587, 1589.

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of commutative justice or of liberality. He explains the difference asfollows (Summa II–II, q. 61 a. 3):

When one voluntarily transfers his property to another it is a voluntarycommutation. Where this transfer includes the notion of a debt it belongs tocommutative justice. Where the recipient is not meant to incur a debt asa result of the transfer, as in the case of gifts, the act is one of liberality.

II.1. The Relationship between Commutative and DistributiveJustice

Where a system accepts distributive justice, the common view is that itmust also accept commutative justice:

corrective justice requires a prior distribution of entitlements upon which tooperate, and _ its purpose or point is to maintain that distribution; for thatreason, it is regarded as both conceptually and normatively ancillary todistributive justice.34

The less common view, associated mostly with tort theorists suchas Weinrib,35 Benson,36 and Perry,37 argues that if the coherence ofcorrective justice is seen to depend on distributive justice, it will losethe distinct identity that these theorists think it has. There are otherviews than these,38 but the common theme in the most widely heldof them—those of Weinrib and others—is that it is important tounderstand corrective justice not in terms of its goals or functions, butin terms of its structure.39 They argue that if this is not done, concernsover ‘the distribution of wealth could sometimes trump claims based

34 S. R. Perry, ‘On the Relationship between Corrective and Distributive Justice’,in J. Horder (ed.), Oxford Essays in Jurisprudence, 4th ser. (Oxford, 2000), 237.

35 E. J. Weinrib, ‘Corrective Justice’, Iowa Law Review 77 (1992), 403, 420.36 P. Benson, ‘The Basis of Corrective Justice and its Relation to Distributive

Justice’, Iowa Law Review 77 (1992), 515, 530.37 S. R. Perry, ‘On the Relationship between Corrective and Distributive Justice’,

237–8.38 One such view (J. L. Coleman, ‘Tort Law and the Demands of Corrective Justice,

Indiana Law Journal 67 (1992), 349, 357; and ‘The Mixed Conception of CorrectiveJustice’ (id.), 427–28) is that corrective justice protects a distribution of entitlementsagainst distortion. Another, associated with J. Rawls (A Theory of Justice (Oxford,1971), 10) and W. J. Waluchow (‘Professor Weinrib on Corrective Justice’ in S.Panigiotou (ed.), Justice, Law and Method in Plato and Aristotle (Edmonton, 1987),153, 156), argues that corrective justice presupposes a distribution of resources that issufficiently fair to be worth preserving. It is not practicable here to comment on theseviews in any detail.

39 See E. J. Weinrib, ‘Understanding Tort Law’, Valparaiso University Law Review23 (1989), 485, 488; and P. Benson, ‘The Basis of Corrective Justice and its Relation toDistributive Justice’, Iowa Law Review 77 (1992), 515, 530.

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on corrective justice’, and ‘a person who had less than his fair sharecould sometimes take something from someone who had more.’40

Whatever the merits of the desire to understand corrective justice interms of its structure, this understanding differs from that of Aristotle,which is the one applied in this article. In the Aristotelian account, andfollowing from Aristotle’s view of the world generally, one cannotreach an understanding of the structure of a thing independently of itsfunction. The fear that one who has less than his fair share could takefrom another who has more is not present in the Aristotelian account,where it is not against justice for someone in severe need to take theproperty of another. In the Aristotelian tradition, things (both as totheir parts and their activities) are described or explained in terms oftheir ends. Thus, one cannot analyse a virtue without considerationof how it might contribute to one’s leading a human life. In the Ethics(V. ii, 1130b), Aristotle explains how the different human virtues,including distributive and commutative justice, enable one to lead thedistinctly human life.

Aquinas adopts a similar view of the relationship betweencorrective and distributive justice. He argues that distributive justiceis concerned with ‘what [is] due to an individual as a part of the whole[while] corrective justice govern[s] the relationship of one part toanother’.41 The relationship of parts and whole is to be understoodteleologically. He explains that things are governed by a twofoldorder. The first, which is secondary, is the order of parts to the whole.The second is the order of means to an end, and it is primary becauseit is for the sake of the end that order exists in the parts.42 Aquinasalso concludes that a person in urgent need can take and use as hisown another’s property. Indeed it is doubtful that anyone, evenWeinrib and Benson, would dispute this, or want to remove altogetherconcerns for human welfare from the concept of corrective justice. Tothat extent they fail to establish an account of corrective justicewhose normal operations are not ‘trumped’43 by distributive justiceconcerns.

Distributive justice in IslamThose concerns are strongly emphasized in the Islamic legal traditionand, before I go on to discuss objections to the Aristotelian approach,

40 J. Gordley, ‘Tort Law in the Aristotelian Tradition’ in D. Owen (ed.),Philosophical Foundations of Tort Law (Oxford, 1995), 131, 133.

41 Ibid. quoting Summa II-II, q. 61 a.1.42 See ibid. 131, 134, quoting Aquinas, In Decem Libros Ethicorum Aristoteles

Expositio (ed. Angeli Pirotta, Taurini (Italy), 1934), lib. I, lect. i, no. 1.43 Ibid. 131, 135.

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it will be useful to give a brief account of that emphatic bent in Islam.A number of institutions are meant to ensure the just and equitablecirculation and distribution of wealth in Islamic society. Theseinclude:. Zakah.44 That zakah is not one among other sources of

government revenue but a distributive mechanism is clear fromthe list of those entitled to receive the proceeds of zakah. Qur’an 9.60 specifies the heads of expenditure from zakah: ‘the poor, andthe needy, and those who collect [it], and those whose hearts are tobe reconciled, and to free the captives, and the debtors, and forthe cause of Allah, and for the wayfarer; a duty imposed by Allah.’The same is clear also from the fact that the state cannot mix zakahrevenue with other public receipts.45

. Khums. This used to be an important source of wealth distributionin the early days of Islam. It was ordained in the second year ofthe Hijra after the battle of Badr. Khums means a fifth and refersto that portion of ghanıma (the spoils of war) that had to bedistributed to the poor: ‘The remaining fifth belongs to Allah, andto the Messenger, and to the kinsman (who has need) and orphansand the needy and the wayfarer’ (Qur]an 8. 41).

. Fay]. This was distinguished from ghanıma as booty surrenderedby the enemy without fighting. It was ordained in the fourth yearafter the Hijra: ‘That which Allah gives as spoils to HisMessenger from the people of the township, it is for Allah andHis Messenger and for the near kin and the orphan and the needyand the wayfarer, that it become not a commodity between therich among you’ (Qur]an 59. 6–7). The allocation of fay], unlikeghanıma, is left to the discretion of the head of state.

. [Ushr.46 This is in reality a part of zakah. It is calculated, as aproportion of all agricultural produce payable to the treasury byevery owner of land, at one-tenth (whence its name) for landswatered naturally, and half that for lands watered artificially.The rightful recipients of [ushr are the same as for zakah(see Qur’an 6. 141).

. Kharaj. A tax on all lands conquered by force that were either leftin the hands of the original owner(s) or allocated to non-Muslimsettlers brought from elsewhere, and not divided up as part ofthe spoils of war. Kharaj could either be fixed, i.e. a fixed taxon the land, or proportional, in the sense that it was imposed

44 See generally Y. al-Qaradawi, Fiqh al-zakah (Beirut, n.d.).45 Ibid. ii. 757.46 For a detailed discussion of both [ushr and kharaj, see Nicholas Aghnides,

Mohammedan Theories of Finance (New York, 1916), 358–75.

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proportionally as a share of the total agricultural produce of theland. Kharaj was first introduced after the battle of Khaybar whenthe Prophet allowed the Jews of that region to return to theirlands subject to payment of an agreed proportion of their produceas kharaj. The revenue from kharaj belongs to the Muslimcommunity as a whole and is to be spent on general welfare.47

. Jizya (poll tax). Christians and Jews, and later on other non-Muslims, were exempt from military service in the Islamic statethat guaranteed the security of their persons and property, andexempt from zakah. However, they were required (Qur’an 9. 29)to pay the jizya. The tax was imposed on non-Muslim adult maleswho had the means to pay it. Old men and monks (in any caseexempt from military service) were not liable to pay it, norchildren and women, nor beggars or poor persons unable to findwork. For those liable to the jizya, the precise amount usuallyvaried between twelve and forty-eight dirhams, depending onfinancial ability. As with kharaj, all the revenue collected fromjizya was to be spent on general welfare.

. S˙adaqat al-fit

˙r. This is the amount of wealth that the owner of a

certain minimum (nisab) is required to pay to the poor and needyon the occasion of the feast of ‘Id al-fit

˙r at the end of Ramadhan.

The owner of a nisab is also obliged to pay, as well as on his ownbehalf, on behalf of each of his dependents. In contrast to thecondition for liability to zakah, it is not necessary that the nisabshould have been held for a year.

. Inheritance. After zakah, the laws of inheritance are probably themost important of the wealth-distribution mechanisms in Islam.The Qur]an (9. 29) specifies those who are entitled to inherit froma deceased and the shares to which each is entitled. Corporate orcompact inheritance (taqsım murtakiz) is not recognized in theLaw, nor is primogeniture. A will that bequeaths more than a thirdof one’s wealth to a single beneficiary is invalid; likewise, namingin a will any person defined by the Qur’anic provisions (4. 11) asan heir and whose share is allocated therein. Where there are noheirs, the wealth of a deceased goes to the treasury and is to beused for the general welfare of the society.

Apart from these institutions, there exist voluntary arrangements,contractual in nature, such as gifts, qard

˙h˙

asan (benevolent loan) andwaqfs (endowments), which, one may argue, are also designed toachieve distributive justice.48 These contractual arrangements are

47 M. Ahmad, Business Ethics in Islam (Islamabad, 1995), 61.48 Ibid. 64–6.

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better explained by the virtue of liberality and will be discussed morefully below. The important point here is to bear in mind, throughthe discussion that follows on commutative justice and liberality, theemphatic bent in the Islamic legal tradition in favour of the claims ofdistributive justice.

II.2. Criticisms of the Aristotelian Approach

Two sorts of objections have been raised against the Aristotelianapproach. On the one hand, there are those who take issue with thevery idea that the law has any proper business seeking to preserve agiven distribution of wealth. On the other hand are those who mightaccept the idea in principle, but question, with different emphases, thepropriety or practicability of achieving commutative justice in the lawof contracts, and the impact of doing so upon the autonomy ofthe contracting parties.

The first objection: Distributive justice has no relevance for lawHobbes49 and Locke50 long ago disputed the notion that a societyshould seek to preserve a given distribution of wealth. More recently,Hayek51 and Nozick52 have argued that disparities in resourcesshould be tolerated. This is a vigorous debate with strong argumentson both sides and attention turned to many different aspects of theissues. Thus, one may question the principles upon which resourcescan be regarded as common and hence subject to distribution, or theinstitutional arrangements that would best achieve an appropriatedistribution, or the principles that should regulate such institutions.Then, before entering into these matters, one needs to resolve themethodological hitch: from which end of the spectrum of goodsdo we approach the problem? The direction of approach leads todramatically different results. Goods are commonly divided intomaterial resources, access to education and other society-widedevelopmental experiences, the home and family, inherited talents,and, finally, effort.53 Hayek54 and Nozick55 (among others),beginning from the talent–effort end, naturally argue that inequalities

49 T. Hobbes, Leviathan, ed. C. Macpherson (Harmondsworth, 1968), 223–4.50 J. Locke, ‘Second Treatise’, in P. Laslett (ed.), Two Treatises of Government

(Cambridge, 1960).51 F. A. Hayek, The Constitution of Liberty (London, 1960).52 R. Nozick, Anarchy, State and Utopia (Oxford, 1974).53 G. P. Fletcher, Basic Concepts of Legal Thought (New York, Oxford, 1996), 84.54 Hayek, Constitution of Liberty, 85–102.55 Nozick, Anarchy, State and Utopia, 149–64, 232–46.

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are simply given. It is pointless to ask whether it is fair that people areborn with different degrees of intelligence or drive—they just are.Then, if those with more talent and drive produce and acquire moregoods, why should they apologize for having more opportunities? Theargument thus begins by recognizing the fact of inequalities in talentand effort. The next step in the argument makes the point that societyshould not be unduly exercised by the inequalities that from birth givesome people such a head start in life. For if society accepts inequalitiesfrom birth, it is unlikely to challenge the idea that those who canafford it are entitled to better schools for their children, better health,and so on. Once these arguments are accepted, as they perhaps are bymost people in the West today, it is but a small step to the sentimentthat disparities in resources are facts that one should not be tooconcerned by.

Rawls, beginning from the opposite end and applying the famous‘veil of ignorance’, asks: ‘What would be the fairest division if noneof us knew who would be able to make the most effective use of theavailable resources?’56 This time the answer, naturally again, is thatthe resources should be distributed equally. In the real world somepeople do some things better than others and ought to be encouragedto make use of their talents for the collective interest. Therefore:‘Social and economic inequalities are to be arranged so that they areboth (a) reasonably expected to be to everyone’s advantage, and (b)attached to positions and offices open to all.’57 Once this so-called‘difference’ principle is accepted, the issue is how to delineate itsboundaries. To which of the common goods should it apply?Clearly resources and education, but what about family? Rawlswould admit that it is unjust for people to get a head start merelybecause they were born into a good family. As for differences in talentfrom birth, which cannot be prevented, Rawls argues that this sortof ‘injustice’58 is to be corrected by the more talented compensating

56 Quoted by Fletcher, Basic Concepts of Legal Thought, 85.57 J. Rawls, A Theory of Justice (Oxford, 1971), 60.58 It is against our intuition to believe that people have no natural right to the

talents they were born with. But remember that Rawls is arguing from behind the ‘veilof ignorance’. As Fletcher says (Basic Concepts of Legal Thought, 86): ‘The dimensionof the person that counts is the abstract universal self, the rational impartial being thatcan make decisions without knowing whether he or she is patrician or plebeian, strongor weak, religious or atheist, talented or untalented.’ This notion of the abstract selfhas led to all sorts of debates and criticisms; these cannot be pursued here. For theLibertarian criticism, see Nozick, Anarchy, State and Utopia, 183–231. For theCommunitarian criticism, see Michael Sandel, Liberalism and the Limits of Justice(Cambridge, 1982). Also interesting is the criticism by G. P. Fletcher in Loyalty: AnEssay on the Morality of Relationships (New York, 1993).

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the less talented. Thus, by beginning at the opposite end of the goodsspectrum, Rawls has arrived at a conclusion different from Hayekand Nozick.

Can one argue that one strategy is better than the other? The answeris not at all self-evident and, as one would expect, conditioned byone’s broad political beliefs, disposition and temperament. TheIslamic tradition, as I have indicated above, is strongly weighted infavour of distributive justice.

The second objection: Distributive justice is relevant, but _The core of this objection is that it is not the proper business ofcontract law either to preserve a given distribution of wealth or tocorrect one deemed unfair. The objection is sustained by a variety ofarguments in two broad camps. (1) There are those who argue, withKronman,59 that contract law is indeed concerned with distributivejustice but not with commutative justice. Then, (2) those who arguethat contract law is not directly concerned with either distributive orcommutative justice but only with implementation of the decisionsof the parties, whatever the effect of those decisions may be.60

. Contracts have a role in distributive, not in commutative,justice—Kronman. Kronman disputes that contracts have any-thing much to do with commutative justice, a view based inter aliaon the belief that ‘contractual disputes do not provide an arena forthe disputation of wider political and moral issues that are notnecessarily of immediate concern to the parties in dispute.’61 Heargues that the notion of a voluntary exchange, which is central tocontract law, must be understood as a distributive notion, andthat contract law may therefore, in some situations, be more usefulthan taxation in achieving distributive justice.62

59 A. T. Kronman, ‘Contract Law and Distributive Justice’, Yale Law Journal 89(1980), 472; and ‘Wealth Maximisation as a Normative Principle’, Journal of LegalStudies 9 (1980), 227. For critiques of Kronman, see W. N. R. Lucy, ‘Contract Law asa Mechanism for Distributive Justice’, Oxford Journal of Legal Studies 9 (1989), 132;J. Murphy and J. Coleman, The Philosophy of Law: An Introduction to Jurisprudence(Totowa, NJ, 1984), 169; L. Alexander and W. Wang, ‘Natural Advantages andContractual Justice’, Law and Philosophy 3 (1984), 281; T. Dare, ‘Kronman onContract: A Study in the Relationship between Substance and Procedure in Normativeand Legal Theory’, Canadian Journal of Law and Jurisprudence 7 (1994), 331; andM. H. Kramer and N. E. Simmonds, ‘Getting the Rabbit Out of the Hat: A Critique ofAnthony Kronman’s Theory of Contracts’, Cambridge Law Journal 55 (1996), 358.

60 J. Story, Commentaries on Equity and Jurisprudence as Administered in Englandand America (London, 3rd edn 1920), 337.

61 Lucy, ‘Contract Law as a Mechanism for Distributive Justice’, 132.62 Kronman is primarily concerned with the Libertarian conception that considers

voluntary exchange as one of only two questions relevant to contract adjudication. His

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Kronman claims that voluntariness must be understood as adistributive concept because the questions raised in decidingwhether a particular exchange was voluntary or not are similarto those raised in deciding which of various forms of advantage-taking are compatible with the concept of individual freedom.63

Involuntariness may be based on coercion, deliberate mis-representation or non-disclosure or other cognitive or volitionalimpairments.64 In such situations, if one party exploits anadvantage to the detriment of the other party, does allowinghim to do so amount to a deprivation of the other party’s freedom,which is a necessary component of any promise that is trulyvoluntary and hence binding.65

Advantage-taking, as Kronman uses it, includes all those thingsone benefits from, both natural endowments (such as beauty andintelligence) and the outcomes of social factors (health, wealth,education, etc.). In this sense of advantage, there is advantage-taking in every contractual exchange, and indeed, ‘in mutuallyadvantageous exchanges, there is advantage-taking by bothparties’.66 The real issue then is to determine the principles bywhich one can decide which forms of advantage-taking aremorally acceptable and therefore which contracts to enforce. Ofsuch principles, Kronman names three as plausible for thispurpose.

(i) The liberty principle. This holds that advantage-taking isacceptable so long as the liberty of the other party has notbeen infringed. It is not very helpful, Kronman says, becauseit cannot tell us what rights people have. It begs the questionand is therefore useless. Indeed, it would not be satisfactory evenif it did try to determine what rights people have. This follows

arguments are equally applicable to Liberalism and to any notion of contract thatplaces importance on voluntariness. This article does not seek to defend eitherLibertarianism or Liberalism, but it is necessary to answer the arguments thatKronman puts forward before one can offer to analyse contract law in terms ofcommutative justice. My focus is on Kronman’s normative claim that contract lawshould be understood in distributive terms. His descriptive claim that the rules ofcontract law, for example those relating to duress, undue influence, fraud andmisrepresentation, have a relationship to distributive justice has been shown by others(see in particular Lucy’s ‘Contract Law as a Mechanism for Distributive Justice’) to beunconvincing.

63 Kronman, ‘Contract Law and Distributive Justice’, 472, 480.64 Lucy, ‘Contract Law as a Mechanism for Distributive Justice’, 132–3.65 Kronman, ‘Contract Law and Distributive Justice’, 472, 480.66 Ibid.

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from W. G. Gallie’s thesis that certain concepts are ‘essentiallycontested’.67

(ii) The utilitarian principle. This would justify those forms ofadvantage-taking that increase the total amount of some othergood. Kronman rejects this principle on the grounds that it doesnot necessarily result in the protection of individual liberty orautonomy.

(iii) The paretian principle.68 This principle (the one thatKronman really favours) allows advantage-taking if and only if thedisadvantaged individual is better off in the long term than ifadvantage-taking is not allowed. For Kronman the plausibility ofthis principle derives from its egalitarian and individualisticemphasis, and its conformity with Libertarian beliefs.69 However,he goes on to reject this formulation of it (meant to be applied asa test to the individual parties to a transaction70), in part becausethe highly individualized assessments that it demands would meanthat courts and legislatures could not cope, but also because itwould lack the predictability of application of less individualistic,but more formal formulations. Kronman prefers an alternativeformulation that allows advantage-taking when it increasesthe welfare of most people initially disadvantaged by it:71 inother words, it applies to classes of transactions, rather than toindividual ones.72

There is, however, a serious problem, with this formulationthat Kronman prefers. The rejected formulation rests on the

67 W. G. Gallie, ‘Essentially Contested Concepts’, Proceedings of the AristotelianSociety 56 (1956), 167. Kronman uses the thesis to argue that theories of rights arevacuous and therefore unable to provide the distinction between acceptable andunacceptable forms of advantage-taking.

68 This principle takes different forms—e.g. pareto-superiority and pareto-optimality—of which Jules Coleman (‘Efficiency, Exchange and Auction:Philosophic Aspects of the Economic Approach to Law’, California Law Review 68(1980), 221) has provided a very good analysis. An allocation of resources (S1) ispareto-superior to another (S) where no one is made worse off in going from S to S1,and if the welfare of at least one person is enhanced. On the other hand, resources aredistributed as pareto-optimal if and only if any further allocation can make one personbetter off only at the expense of another.

69 Kronman, ‘Contract Law and Distributive Justice’, 472, 485.70 Alexander and Wang, ‘Natural Advantages and Contractual Justice’, Law and

Philosophy 3 (1984), 281, 283.71 Ibid. 472, 486–7.72 Ibid. 281, 284. By using the formulation of paretianism that he does, Kronman

seems to be trying to get away from the criticisms levelled against the law-and-economics approach to contract law, which is unable to accommodate relationalconcerns. See Ian MacNeil, ‘The Many Futures of Contract’, Southern California LawReview 47 (1974), 691, 722–3.

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idea that initial disadvantage is ‘voluntarily’ accepted to the extentthat it benefits the disadvantaged individual in the long term.In the preferred alternative, however, the long-term advantageaccrues to most, not all, of the people initially disadvantaged.But then, how can one argue that the initial disadvantage is‘voluntarily’ accepted by the individual if the long-term advantageaccrues only to others in the class, and not necessarily to thatindividual?73 Furthermore, there is an element of arbitrariness inthis formulation of paretianism, which is unacceptable. How, forexample, does one decide the relevant classes of transactions?One of Kronman’s examples involves a trained geologist (B)buying a piece of property without disclosing to the seller (A) thatthe land has a rich mineral deposit. Kronman claims that allowingpurchasers (B) the advantage of deliberately acquired geologicalinformation should boost mineral exploration, and the prices ofminerals and other commodities, making sellers (A) better off inthe long run. For that reason, purchasers should not be forced tomake disclosure.

The example is superficially convincing but Kronman does notexplain why the class of the disadvantaged should be sellers ofland with undisclosed mineral deposits. Why not a narrower orbroader classification? Maybe sellers of land with hidden oil andnatural gas would be better off in the long term, but what about,say, sellers of land with uranium, gold, or iron deposits? Perhapslands with different mineral deposits could be governed bydifferent rules of contract. But then, why narrow the class byreference to mineral deposits? Equally one might plausibly narrowit by reference to a geographic or economic region, or, conversely,broaden it to all sellers to whom relevant material informationis not disclosed. The point is that one needs a rule by which tobroaden the class or make it narrower, and there isn’t one: theproblems of defining the relevant classes of transactions areunresolvable.74

Even if there were such a rule, there is the still more fundamentalproblem with this formulation of paretianism of moral arbitrari-ness. So long as a particular type of advantage-taking will be oflong term benefit to 51 per cent of the initially disadvantaged class,the remaining 49 per cent can be sacrificed irrespective of howlittle the 51 per cent gain or how much the 49 per cent lose, or howmuch harm is caused to other members of society outside the class.

73 Alexander and Wang, ‘Natural Advantages and Contractual Justice’, 281, 285.74 Ibid. 281, 287.

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The converse is, similarly if a particular form of advantage-takingresults in the long term benefit to 49 per cent of the class, it will bedisallowed irrespective of how much the 49 per cent actually loseand how little the 51 per cent actually gain, and how much the restof society is worse off for disallowing it.

It may be possible to refine the principle of Paretianism thatKronman favours so as to disallow a small gain to the 51 per centat the expense of a huge loss to the 49 per cent. It may also bepossible to define the long-term gain to most people in a way thatwould include the whole class. However, one must still justifythe focus on the particular class of transactors. This Kronmandoes not attempt to do. If he did, it would still exclude, andexclude quite arbitrarily, impacts on those not party to particulartransactions.

Let us allow, for the sake of argument, that there are noproblems with Kronman’s formulation of the paretian principle.Does he succeed any way in explaining contract law in distributivejustice terms?

There are two distinct ways in which Kronman’s claim aboutthe relationship between contract law and distributive justice maybe understood. The first involves recognizing that when peoplecontract with each other, they engage in a transfer of theirresources. They therefore create and share ‘surplus’ understoodas the gains resulting from trade.75 Thus in every case, ‘contractsredistribute wealth, the gains from trade’.76 This seems indisput-able and in this sense contracts do necessarily involve distributivejustice. However, if this is all that Kronman claims then it is anuninteresting claim. In this sense, even Fried’s conception ofcontract as promise is a redistributive principle for it would onlybe arguing that courts should allow the redistribution of wealthaccording to the desires of the parties as expressed through theirpromises.77 It is most improbable that the extensive discussionthat Kronman’s work has aroused is the result of this true butuninteresting claim. The second way in which the relationshipbetween contract law and distributive justice may be understood isconcerned with the analysis of voluntariness and advantage-takingin distributive terms. The argument in favour of the claim thatcontract law necessarily enforces some principle of distributivejustice is that the issue to be decided in contracts is whether a party

75 J. G. Murphy and J. L. Coleman, The Philosophy of Law: An Introduction toJurisprudence, 203.

76 Ibid.77 Ibid.

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should be allowed to take advantage of a particular resource ortalent he has. Allowing him to do so then redistributes wealth inhis favour.

Bear in mind that Kronman would disallow advantage-takingunless and until it passes his paretian test. He disregards everymode of advantage-taking except the particular form of it withwhich he is concerned at a particular moment. He thus takes forgranted a background of established norms and practices againstwhich a paretian judgement about each specific kind of advantage-taking can be reached.78 However, as Kramer and Simmonds haveargued, ‘since decisions about the legitimacy of countless sorts ofadvantage-taking will collectively have an overwhelming effect onthe distribution of wealth, our initial decisions about advantage-taking will not have any clear distributional background againstwhich to proceed’.79

Even if it were possible to specify the distributional background,one would need some clear sequence in which the various typesof advantage-taking are looked at, for decisions about one lot ofadvantage-taking will have an impact upon the decisions aboutanother lot, and so on. Kronman does not provide this sequence,nor does he provide help in deciding how to choose one sequenceover the many possible others. Moreover, while the choice ofsequence is crucial, it is also arbitrary.

In sum, Kronman does not succeed in establishing the normativerelationship between contract law and distributive justice. It isimportant that the argument here is not misunderstood. I do notwish to make the general argument that voluntariness, however itis defined, has no distributive consequences. Rather, my argumentis that the best existing analysis of the relationship betweenvoluntariness and contract in distributive terms (i.e. Kronman’s)does not work.

. Against ‘just price’, for autonomy of the contracting parties. Theother objection to the relationship between commutative justiceand contract law asks whether it is right or even possible to affectdistribution of wealth by interfering in the contract price, whichleads on to the argument that contract law should not in factinterfere with the wishes of the contracting parties. The objectionis in effect an argument against the concept of ‘just price’, and forthe autonomy of the contracting parties.

78 Kramer and Simmonds, ‘Getting the Rabbit Out of the Hat’, 358, 369.79 Ibid.

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Against ‘just price’. The objection is similar, if not quite identical, toan argument advanced in the eighteenth and nineteenth centuries:‘one could not meaningfully speak of equality in exchange and,that even if one could, the terms of the exchange were a matterthe contracting parties should be free to decide’.80

The argument that one cannot speak meaningfully of equality inexchange was based on the idea that value was not an intrinsicproperty of things but derived from the judgement of the contractingparties. Following this line of thinking, the eighteenth-century juristThomasius felt able to conclude that the distinction betweendistributive and commutative justice as put forward by Aristotlewas wrong.81 In the nineteenth century, Joseph Story argued that thevalue of a thing ‘must be in its nature fluctuating and will depend uponten thousand different circumstances. One man, in the disposal of hisproperty may sell it for less than another would.’82 Pollock, relying inpart on Hobbes, argued that ‘the value of all things contracted for ismeasured by the appetite of the contractors, and therefore the justvalue is that which they be contented with to give’.83

The value of a thing may also mean its market value. But the marketvalue is deemed irrelevant as it reflects the judgement of a third party,not directly engaged in the transaction. The only determinant of valuethen left is the subjective view of the transacting parties themselves.That being so, the argument for autonomy of contract follows asa corollary. Since value is subjective, one has no measure, other thanthe agreement of the concerned parties, by which to evaluate thefairness of the exchange or ‘just price’.

In order to answer these two apparently powerful objections, I willnow consider more closely what the concept of ‘just price’ meant inthe Islamic tradition, and whether enabling contracts at this price is aninfringement of the autonomy of the parties.

The idea that contracts ought to be concluded at a just price hasa long history in Islam. It is reported that the Prophet charac-terized overcharging of a trusting customer as riba.84 Another term,qımat al-[adl (fair price or fair measure) sometimes appears in the

80 Gordley, ‘Equality in Exchange’, 1587, 1592.81 Ibid. 1592 where Gordley discusses C. Thomasius, Dissertatiorum Academi-

corum Varii Inprimis Iuridici Argumenti (1777), 43.82 Ibid. 1587, 1598, where Gordley cites J. Story, Commentaries on Equity

Jurisprudence as Administered in England and America (Boston, 14th edn 1918), 339.83 The relevant passage is found in F. Pollock, Principles of Contract (London, 4th

edn 1885), 172.84 Muslim, Sah

˙ıh˙

, k. al-[Itq and k. al-Buyu[ (Cairo, n.d.), pt. 4, pp. 212–13; see alsoIbn H

˙anbal, Musnad (Beirut, n.d.), ii. 11, 15, 156.

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Traditions. It is used, for instance, in a Tradition about the case ofa master who frees part of a slave,85 who becomes a free man whenthe master is compensated for the remaining at qımat al-[adl (a fairprice).86

The doctrine of just price plays a role in realizing justice rather thanin determining price.87 The question of just price (thaman al-mithl)seems to come, in Islamic law, under the larger doctrine of justcompensation ([iwad

˙al-mithl), although some believe that the two

are distinct.88[Iwad

˙al-mithl, which may be read as either ‘just com-

pensation’ or ‘compensation of the equivalent’, arises as an issue inrelation to the discharge of moral or legal obligations generally. Thusit may arise, for example, in relation to cases where an individual isheld responsible for causing injury to the person or property or profitof another.89 The H

˙anbalı jurist Ibn Taymiyya (d. 1328) says that it is

also involved in those situations where a person is required to settleinvalid contracts or valid contracts that have some defect. On theother hand, thaman al-mithl, or price of the equivalent, is specificallyan issue in those situations where there is an actual sale, purchase, orexchange of goods. Thus, thaman al-mithl is defined as ‘the rate atwhich people sell their goods and which is commonly accepted asequivalent for it and for similar goods at that particular place andtime’.90 It is therefore the market price.

While the concept of just price has a long history, it was IbnTaymiyya who subjected it to detailed analysis—the formal distinc-tion between [iwad

˙al-mithl and thaman al-mithl is attributed to

him. He says that the measure is assessed by its equivalent and this isthe essence of justice (nafs al-‘adl).91 Throughout an elaboratediscussion, he uses ‘just’ and ‘equivalent’ interchangeably.92 Heconcludes that just price is the market price of a commodity in acompetitive market. He says, for example: ‘If people are dealingwith their goods in the normal way without any injustice on theirpart and the price rises either due to shortage of the goods (i.e.decrease in supply) or due to increase in population (i.e. increasein demand), then it is from Allah.’93 Much the same formulation is

85 It is relevant to note that the manumission of a slave is itself a contract in IslamicLaw.

86 Ibn H˙anbal, Musnad, v. 327.

87 A. A. Islahi, Economic Concepts of Ibn Taimiyah (Leicester, 1988), 75.88 Ibid. 81.89 Ibn Taymiyya, Majmu[ Fatawa (Riyadh, 1963), xxix. 520.90 Ibid. 345.91 Ibid. 521.92 Islahi, Economic Concepts of Ibn Taimiyah, 81.93 Ibn Taymiyya, al-H

˙isba (Cairo, 1976), 25.

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found in Aquinas—Schumpeter explains Aquinas’s just price asthe price of a commodity in a normally competitive market, so tooNoonan and de Roover.94 Furthermore, as the Muslim jurists do,Aquinas links unjust prices with fraud: ‘It is sinful to practise fraud forthe express purpose of selling a thing for more than its just price, in asmuch as a man deceives his neighbour to his loss’ (Summa II. II, q. 2,q. 77, art. i). From this, Gordley concludes that for Aquinas just priceis the current market price established in the absence of fraud andmonopolistic trading practices.

Both the Muslim jurists and Aquinas are concerned to ensure thatcontracts are concluded at a just price that is, for both, the marketprice. Both focus on fraud because, assuming a normal competi-tive price, ‘individual deviations are hardly possible except throughfraudulent representations about the quantity and quality of goods’.95

Where there is a significant disparity between the price of the contractand that of the equivalent, the presumption is, in the absence of fraud,that one party was practising the virtue of liberality (i.e. choosing toenrich the other party).

There is an ongoing debate about what exactly the concept ofjust price meant in medieval times and how it was calculated. Some,like Aquinas, seemed to equate it with the normal competitive price;others thought that it was the price quoted beforehand and wasdetermined by custom or communal estimate.96 While this debate is ofinterest, what matters here is that the definition and calculation usedby the majority of Muslim jurists coincides with that of Aquinas,rather than with the other common definitions of the time. In factthe medieval scholars, apart from Aquinas, were more concerned withhow to arrive at a just price than why prices ought to be just. AmongMuslim jurists, the departure came with Ibn Taymiyya who extendedand refined the discussion. In contrast to Aquinas who hardly toucheson the question of just wage—except to say (Summa I. II, q. 144, art. i)that it is subject to the same rules as just price—Ibn Taymiyyadescribes it as the wage of the equivalent (ujra al-mithl) andlinks it to the price on the labour market, making detailed defini-tions of quantity and quality. He eventually concludes that the

94 J. A. Schumpeter, History of Economic Analysis (London, 1972), 78; J. Noonan,The Scholastic Analysis of Usury (Cambridge, 1957), 82–8; X. de Roover, ‘TheConcept of the Just Price Theory and Economic Policy’, Journal of Economic History18 (1958), 418.

95 Schumpeter, History of Economic Analysis, 93 n.96 For a brief discussion of these different positions, see Islahi, Economic Concepts

of Ibn Taimiyah, 76–80.

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wage of the equivalent is governed by the same rule as the price of theequivalent.97

Ibn Taymiyya also discusses just profit or the profit of theequivalent. It is the normal profit that is generally earned in thatparticular type of trade without harming others. He of course seesnothing wrong with earning a normal profit98 but disapproves ofabnormal or exploitative profit (ghabn fah

˙ish), especially where

people are not aware of the normal conditions of the market(such a person is classified as being mustarsil—in fiqh the term isapplied to one who fully trusts the other party to the contract).99 Heis particularly concerned to ensure that needy persons are notexploited.100

All the thinking about just price, just wages, just profit, and relatedconcepts indicates marked concern to maintain justice in commuta-tive dealings.101 But the earlier scholars and writers who did thisthinking did not raise the question that we are bound to raise: sincethe market price is by nature fluctuating, how can just price preserveequality?

There is an extensive discussion of the subject in Gordley’s article,cited earlier, ‘Equality in Exchange’.102 One argument is (i) that anexchange conducted at the market price is not really unequal evenif the seller does not recover his loss. The other is (ii) that suchan exchange is unequal but this inequality is not one of concern tocommutative justice (Gordley, p. 1610).

(i) It does not matter, the first argument goes, that in any singletransaction a seller fails to recover his costs. What matters is thatover a number of contracts, the final outcome will level out to equal.Moreover, the seller who (in one transaction) received something lessthan his production costs could (in principle) just as well have receivedmore. Contracts are therefore best viewed as a series of ‘fair bets’,whose outcome, if the series is sufficiently long, will be equality.Equality is here understood in an actuarial sense, i.e. the personwho received more had the same chance of doing so as any of theother players (Gordley, p. 1610). The argument can be made moresophisticated by including, within production costs, the risk of

97 Ibn Taymiyya, al-H˙

isba, 34; see also al-Masa’il al-Mardıniyya (Damascus,1964), 103.

98 Id. al-H˙

isba, 37.99 Id. Majmu[ Fatawa, xxv. 299.

100 Islahi, Economic Concepts of Ibn Taimiyah, 86.101 Ibid. 87.102 Gordley, ‘Equality in Exchange’ (see n. 26 above), 1587, 1609–17. Hereafter

cited as ‘Gordley’.

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price fluctuations as well as labour and other expenses. Thefundamental idea remains that ‘a price can be fair, not becausesellers actuarially recovered the value of their labour and expenses,but because, as they might have recovered more, they might also haverecovered less’ (Gordley, p. 1611).

(ii) The second argument is content with the possibility of particulartransactions being unequal, in the belief that it is not the task ofcommutative justice to rectify every inequality and that, in part,prices do and must fluctuate in response to supply and demand ofparticular commodities. This is then coupled with the view that,if particular fluctuations are preventable, it is up to the publicauthorities to attempt to set prices so that they apply equally toeverybody. On the other hand, where the parties do not contract atthe market price, there is usually a bad reason, such as one partybeing unaware that he could get a better price in the market, or beingprevented from using the market. Whatever the case, there is a goodreason for not allowing him to be disadvantaged (Gordley, p. 1611).In short, what commutative justice demands is that avoidableinequalities be corrected, not that perfect equality be preserved.

Of course, neither Aquinas nor the Muslim jurists make either ofthese arguments explicitly. However, they may be supposed to favourthe second argument because they believed that there is a good reasonwhy market prices fluctuate and ought to be allowed to do so, andthat, apart from the virtue of liberality, there is no good reason forparties not to contract at the market price.103

For autonomy of the contracting parties. We can now discuss theargument that it is against the autonomy of the parties to a contractfor a third party to interfere by judging the fairness of the exchange.

The contracting parties enter into the contract in the expectation ofadvantage and assuming that they will be better off entering thecontract than not. However, entering into the contract at certainterms is not better than entering into it on more favourable ones.In other words, it is important to distinguish between the decisionto enter into a contract and the decision about whether the priceoffered is the best available price (Gordley, p. 1616). The principle ofautonomy requires that the parties be free to enter a contract ata certain price, but does it require that they be free to determinethe price absolutely? Requiring them to conclude the contract at‘just price’ does not in fact infringe their autonomy because, asGordley points out: ‘the court is merely putting them in the same

103 For the view of the Muslim jurists, see Islahi, Economic Concepts of IbnTaimiyah, 88–102; for those of Aquinas, see Gordley, 1611–17.

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position as any two parties trading on a market with a definite price.It is not infringing on any autonomy that either party would exerciseunder normal circumstances in a market’ (Gordley, p. 1619).

The argument that it is against the autonomy of the parties torequire them to contract at the market price is unconvincing. Theseparties will contract at a price other than the market price only if theyare ignorant of that price or otherwise unable to use the market.Holding the disadvantaged party to a contract entered into underthese conditions cannot be in line with his autonomy. On other hand,where the parties know what the market price is and still chooseto contract at a different price, the only presumption must be thatone party intended to enrich the other party. In this case, the operativeprinciple is that of liberality which has its own rationale, to bediscussed below. Here again there is wisdom in the Aristotelianscheme: acts of voluntary commutative justice are voluntary becauseit is up to the parties to agree or not to enter into the contract atthe price dictated by commutative justice, i.e. the just price, ratherthan because the parties decide what price will be in accordance withcommutative justice.

III. ISLAMIC CONTRACTS ANALYSED IN TERMSOF COMMUTATIVE JUSTICE

Islamic law is concerned with promoting a just distribution ofwealth and with ensuring that it is maintained. The question hereis whether its rules and doctrines are in line with the principlesof commutative justice and liberality. It will be answered byillustrating the application of those principles by reference to a fewexamples.

III.1. Nominate Contracts and Compulsory Terms

As I stated at the beginning of this article, Islamic contract law is a lawof particular contracts. The jurists did not develop a general theoryof contract—few general principles of contracts are found in theirworks—but concerned themselves with specific rules for sales, forleases, etc. However, there is a bridge between the rules applicable tospecific contracts and a ‘theory’ of contract. That bridge is found inthe ‘essence’ attributed to each contract, and in the analysis of theterms that flow ‘naturally’ from it and govern its operation. Toexplain how this works it is necessary to go back to Aristotle andAquinas.

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Aristotle claims that commutative justice encompasses transactionssuch as sale, purchase, loan for consumption, pledging, loan for use,depositing and letting (Ethics V, 1131a). He does not tell us if and howthese transactions can be distinguished according to some rationalprinciple. Nor does he claim that each transaction had a set of naturalterms that flows from the definition or ‘essence’ of it. It is Aquinaswho does so. In his discussion of commutative justice, Aquinas makesthe following classification (Summa II–II, q. 61 a. 3):

Voluntary commutations take place when a man voluntarily transfershis thing to another. If he transfers it simply so that the recipient incursno debt, as in the case of a gift, it is an act, not of justice but of liberality.A voluntary transfer belongs to justice in so far as it includes the notion ofdebt. This may occur in three ways. First, one may simply transfer histhing to another in exchange for another thing, as happens in sale andpurchase. Second, one may transfer his thing to another so that the lattermay have the use of it with the obligation of returning it to its owner. If onegrants the use of the thing gratuitously, the transaction is called usufructin things that bear fruit, and simply loan for consumption or loan for usein things that do not bear fruit such as money, pottery, and so forth. If,however, not even the use is granted gratis, the transaction is called leaseand hire. Third, one may transfer his thing to receive it back again, not sothat it can be used but so that it can be kept safe, as in deposit, or because ofan obligation, as one obligates his thing by a pledge or stands surety foranother.

In Aristotelian and Thomist philosophy, the ‘essence’ of an action isdefined in terms of its end in the same way that the end of a man-madeobject is defined. The different types of contracts are accordinglydefined in terms of their ends. As Gordley says: just as, in thisphilosophy, the end of a house corresponds to the immediateconscious purpose of the builder, and the end of archery to that ofthe archer, so the end that defines a certain contract correspondsto the immediate conscious purpose of the parties who made it.However, the end of a certain contract is more than the purpose in theminds of the parties. Rather, it is the end to which the parts ofthe contract are means just as the parts of a house are means to theend of giving shelter.104 For the achievement of that end, certainterms would be appropriate and others inappropriate. The reason,therefore, that Aquinas defines the contracts, and that contractsshould be generally defined, is that it is only when the definition of

104 J. Gordley, ‘Natural Law Origins of the Common Law of Contract’, in J. Barton(ed.), Towards a General Law of Contract (Berlin, 1990), 367, 411.

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a contract is known that one can decide the terms that would beappropriate and those that would not. The appropriate terms are‘natural’ in the sense that they belong to the contract by reason of itsessence or nature. Aquinas (Summa, Suppl. q. 44; q. 48 a. 2; q. 50 a. 1)uses the marriage contract as an analogy. What furthers the endsof marriage is natural and therefore part of the obligations entailedby marriage. What goes against those ends does not form part ofmarriage.

The jurists in Islamic law went to great lengths to define and classifycontracts. Most contemporary experts in the field have presumed thatthis activity is adequately explained as mere habit or temperament.Coulson states: ‘with their zeal for tidy and systematic classification,Muslim jurists often state that the system of [uqud [sic] rests upona quartet of basic contracts _’.105 This approach fails to see thatthe process of definition is an important prelude to other processes.For, as with the Thomist approach, the jurists then proceed to identifythe terms that govern each type of contract and flow naturally fromit. Given this approach, the rules of the contract are generallymandatory. Again as in the Thomist approach, any additional termagreed by the parties that modifies the nature of the contract is itselfnull and may even nullify the contract as a whole.106 The status ofthe will of the parties in Islamic law is best understood, once again,in Thomist terms. If a party willed to enter into a certain type ofcontract, he willed whatever obligations followed from the nature ofthe contract, even if he did not know precisely what those obligationswere. The essence of a contract is defined in terms of its end, and itsterms are means to that end. Thus ‘a party who desires the end alsodesires the means’.107

The terms that flow naturally from the type of contract that theparties entered into are not only in accordance with the will of theparties, they are also fair. This is because the terms are meant toensure equality in the value of what is exchanged between the parties.This, of course, only applies to what Aristotle calls onerouscontracts. If either party intends that the other benefit at his expense,this indicates that the parties intend a gratuitous contract rather thanan onerous one, and the virtue of liberality is operative.

It is interesting that in the four-fold classification that Coulsonhimself uses, the contracts he lists can be analysed either in terms of

105 Coulson, Commercial Law in the Gulf States, p. 19.106 See S. Habachy, ‘The System of Nullities in Muslim Law’, American Journal of

Comparative Law 13 (1964), 61.107 Gordley, ‘Natural Law Origins of the Common Law of Contract’, 367, 418.

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commutative justice (i.e. the receipt of a performance in return forone’s own)108 or in terms of liberality:

(i) bay[, or sale, is the transfer of the corpus for a consideration(tamlık [ayn bi-[iwad

˙);

(ii) Hiba, or gift, is the transfer of the corpus without aconsideration (tamlık [ayn bi-la [iwad

˙);

(iii) ijara, or hire, is the transfer of the usufruct for a consideration(tamlık manfa[a bi-[iwad

˙);

(iv) [ariya, or loan, is the transfer of the usufruct without aconsideration (tamlık manfa[a bi-la [iwad

˙).109

Even more interesting, indeed striking, is that the classificationCoulson gives should mirror so closely that of Aquinas (Summa II–II,q. 61 a. 3).110

III.2. Equality in Islamic Contracts

Equality is the central theme of commutative justice. Commutativejustice throughequality explainsmanyof the rulesanddoctrines, aswellas the general structure, of Islamic contracts. This will be demonstratedthrough concrete examples of two rules and two principles. The firstrule is (i) that the property in the object of sale passes as soon as thecontract is concluded, i.e. upon offer and acceptance. The secondrule concerns (ii) the notion of istighlal, or unfair exploitation. As forthe principles, they are (iii) riba (usury) and (iv) gharar (uncertainty),principles whose weight is felt in every type of contract.

Passing of property, possession, and riskAn essential element of the contract of sale in Islamic law is that therebe an immediate transfer of ownership from the seller to the buyer.111

As soon as the contract is validly concluded, the property, whether itis immovable or movable, passes from the seller to the buyer.112 It isthis immediate passing of property that then gives rise to an obligationon the part of the buyer to pay the price to the seller. The concern withpreserving equality is clear from the fact that the reason why the buyeris obliged to pay when he is, is that he cannot combine in his hands

108 Gordley, The Philosophical Origins of Modern Contract Doctrine (Oxford,1991), 77.

109 Coulson, Commercial Law in the Gulf States, 19.110 See ibid. 29–30.111 Coulson, Commercial Law in the Gulf States, 20.112 See Ibn Naqıb al-Mis

˙rı, [Umdat al-salik, 397; and also C. Chehata, ‘L’Acte

translatif de propriete en droit musulman hanefite’, Revue al Qanoun wal Iqtisad 21(1951), 455.

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both the object and its price.113 Since the price is the equivalentof the object, to retain both the price and the object gives rise toan imbalance. It goes against the demands of commutative justice. AsChehata said: ‘Not to pay the price is to break the equilibrium thateach contract must assure.’114

For the same reason, if the object is destroyed before delivery, thebuyer no longer has a duty to pay the price.115 The equivalent of theprice is no longer in existence and, as the buyer does not combine inhis possession both the object and the price, there is no imbalance.Similarly, if the buyer has not conveyed the price to the seller, theseller is not under an obligation to deliver the object. If the buyer isdispossessed of the object by the seller, he has a right to have the pricehe paid reimbursed. Where the buyer has destroyed the object, he isobliged to pay its price. This is because his destruction of the object isconsidered to be the equivalent of taking possession. Where the objectis destroyed by the act(s) of a third party, the buyer has the choice ofrevoking the contract, in which case the price of the object becomesa debt that the third party owes to the seller. Alternatively, the buyermay pay the price to the seller in which case the third party becomesindebted to the buyer for the price.

The concern with maintaining equality between the buyer andseller is evident. However, it is worth clarifying that the equality orequivalence at issue here is not equivalence in value between the priceand the object—the just price discussed earlier—here it is theequivalence in performance that is the concern.

An exception to the requirement that property passes immediatelyon conclusion of the contract occurs in the salam contract, validbecause the Prophet explicitly allowed it.116 Salam is a forwardpurchase whereby goods are purchased and paid for immediately butfor delivery at a specified future date. Property passes at that date.The price must be paid as soon as the contract is concluded andduring the contractual session (majlis al-[aqd), otherwise the contractis invalid.117 Now the salam contract falls foul of the prohibitionof riba and, more directly, of gharar. However, the dictates ofcommerce necessitated that it be accommodated. The nature of the

113 Chehata, Theorie generale de l’obligation en droit musulman hanefite: LesSujets de l’Obligation, 67–8.

114 Ibid. 67.115 For this and the following rules on possession and payment of the price see al-

Mis˙rı, [Umdat al-salik, p. 397; and also Chehata, ‘L’Acte translatif de propriete en

droit musulman hanefite’, p. 455.116 See al-Kasanı, Bada[i al-sana[i fı tartıb al-shara[ı (Cairo, 1909–10), v. 210–15.117 al-Mis

˙rı, [Umdat al-salik, 400.

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accommodation differs between the schools of law, each of which—inthe effort to restrict the risk of riba and gharar as much as possible—has formulated its own detailed rules for salam, though there isgeneral agreement concerning the basic rules: that the price and objectof the contract of salam cannot both be currencies, and that theobjects of the contract must be mithlı (i.e. fungible), waznı (i.e.measurable), etc.118 The rules relating to description of the objectdiffer amongst the schools. For the H

˙anafı and Malikı schools, the

object must be described well enough for the buyer to identify it. Forthe Shafi‘ı and H

˙anbalı schools, it must be described in full detail

including colour, country of origin, and any other characteristic thataffects the price and use of the object. Again, however, the underlyingprinciple common to the different rulings is to minimize the risk thatgoods will be delivered that do not correspond to what was agreed. Ifthat happens, the contract cannot be enforced as doing so favours‘one contracting party to the disadvantage of the other through animbalance of the benefits’.119

Istighlal (unfair exploitation)120 and ghubn (lesion)Istighlal is an impediment to consent. It exists where there is ghubn(lesion), i.e. a disproportion in the obligations assumed by the parties.As Rayner says: ‘Istighlal is based on the principle of la d

˙arar: There

must be a requisite balance between the rights and balances of thecontracting parties.’121 The moral basis of istighlal is clearly equality.However, in actually applying the principle in practice, the schoolsagain come up with different rules. Thus for the Malikı and H

˙anafı

schools, contracts will generally be set aside for istighlal wherethe victims are inexperienced or innocent, and where there existsdisproportion and misrepresentation. For the Shafi[ı and H

˙anbalı

schools, the disproportion has to be gross (laesio enormis) andaccompanied by fraud.122 The question to be answered is why theseschools require some form of ghubn (lesio, wrongdoing) for contractsto be set aside on the basis of istighlal, and also why the disproportionin these situations has to be gross.

Islamic contract law is at great pains to ensure that contracts arebased on equality. That is why the rules relating to the various options

118 See J. D. Latham, ‘Salam’ in the EI2 viii. 914–15.119 N. Comair-Obeid, The Law of Business Contracts in the Arab Middle East

(London, 1996), 30.120 S. E. Rayner, The Theory of Contracts in Islamic Law (London, 1991), 254–7.121 Ibid. 254.122 Ibid.

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(h˙

aqq al-khiyar) available to the contracting parties are so technicaland so central to the validity of the contract.123 The general effectof such options is that the parties have the right to avoid thetransaction even after conclusion of the contract. The prohibitions ofriba and gharar add further layers of protection. Thus, the view of thejurists is that there are adequate precautionary measures to ensurethat the contracting parties may avoid the transaction. If, in spite ofall these measures, there is still disproportion then the presumptionis that the party at disadvantage has willingly intended to benefitthe other party at his own expense124 and is therefore, in essence,exercising the virtue of liberality. And, as Aristotle and Aquinas said,liberality—in contrast to commutative justice—does not requireequality.125 It is in formulating the requirements that must be metto rebut the presumption of liberality that the different schoolscome up with their different requirements. The core concern is,however, clear.

It is all very well to discuss unfair exploitation and disparity invalue. Without some way of knowing what the appropriate value ofa good or service is, these concepts lose much of their force. Hereagain the concept of just price discussed above has its role.

Riba and equality126

The basis of the prohibition of riba is clear from the relevantverses of the Qur]an. The earliest verse (30. 39) says: ‘That whichyou lay out for increase through the property of [other] people willhave no increase with God; but that which you lay out for charity,seeking the countenance of God, will increase; it is these whoget a recompense multiplied.’ The prohibition is explicitly on theinequality of the benefits, while at the same time affirming thevirtue of liberality. The most explicit verse (3. 130) is the thirdrevealed on the subject: ‘You who believe, devour not usury, doubleand multiplied; but fear God that you may [really] prosper.’ Al-T

˙abarı

123 For a detailed discussion of these rights or options, see N. A. Saleh, UnlawfulGain and Legitimate Profit in Islamic Law (Cambridge, 1986), 61; N. Comair-Obeid,The Law of Business Contracts in the Arab Middle East, 66–94; S. E. Rayner, TheTheory of Contracts in Islamic Law, 305–50.

124 See N. A. Saleh, Unlawful Gain and Legitimate Profit in Islamic Law, 116.125 See J. Gordley, The Philosophical Origins of Modern Contract Doctrine, 14.126 See Saleh, Unlawful Gain and Legitimate Profit in Islamic Law; Schacht’s

article ‘Riba’, in EI2 (1995), viii. 491, has a helpful bibliography of both traditionaland modern writing.

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(d. 923), the famous commentator on the Qur]an, clarifies how ribaoperated in the pre-Islamic period, in his exegesis of this verse:

When payment of the debt was due, the creditor went to see his debtor andsaid, ‘Pay me what you owe me, or you will have to pay more.’ If the debtorhad the means, he would pay his debt; otherwise he would put off hiscreditor to the following year. When it was a question of a sum of moneythat the debtor could not pay off when due, he would find himself thefollowing year obliged to pay double, and the following year the double ofthis sum if he was still unable to pay.127

The other important verse on riba (2. 280) distinguishes the sin of ribafrom the virtue of liberality: ‘And if the debtor is in a difficulty, granthim time till it is easy for him to repay. But if you remit it by way ofcharity, that is best for you if only you knew.’

It is in the Traditions of the Prophet that the jurists found most oftheir evidence for the extensive prohibition of riba. They are almostunanimous that riba al-fad

˙l and riba al-nası’a are prohibited by way

of Prophetic Tradition.128 The Prophet said: ‘Gold for gold, silver forsilver, wheat for wheat, barley for barley, date for date, salt for salt,of the same quantity and quality, from hand to hand. If there is asurplus, this is usury. If the articles are of a different nature, sell asyou please, but from hand to hand.’129 This Tradition has led todifferences in opinion between the different schools as to the extent ofthe prohibition of riba al-fad

˙l. The diversity of views may be grouped

into two. In the first group are H˙anafıs and H

˙anbalıs, in the second

Shafi[ıs and Malikıs.The Hanafıs argue that any transaction where the conditions of

similitude and equivalence are not applied is prohibited even if thetransactions are of the same nature and of the same quantity.130 Thosein this group argue that the basis of the prohibition of riba al-fad

˙l is

‘the excess exchange value of the reciprocal benefits due to inequalitybetween objects of the same species and quantity’.131 The Shafi[ısargue that riba al-fad

˙l exists in the bartering of foodstuffs and in the

exchange of gold and silver. Ibn Rushd (Averroes), the famous Malikıjurist, and the equally famous H

˙anbalı jurist Ibn Qayyim al-Jawziyya,

looked for an alternative basis of riba in the attempt to justify their

127 Al-T˙abarı, Tafsır al-Qur‘an (Cairo, n.d.), iv. 55.

128 See Abu Zahra, al-Milkiyyat wa-nadhariyyat al-[aqd (Cairo, 1939), 233.129 Quoted and explained by Saleh in Unlawful Gain and Legitimate Profit in

Islamic Law, 34.130 Kasanı, Bada‘i al-sana‘i fı tartıb al-shara‘ı, v. 188.131 Comair-Obeid, The Law of Business Contracts in the Arab Middle East, p. 48.

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argument that only riba al-nası’a is expressly prohibited whereas ribaal-fad

˙l one may allow if there is need.132 Contemporary jurists are

coming up with more ingenious bases for differentiation. Doualibihas sought to distinguish between the riba of production and thatof consumption;133 Sanhurı, the eminent Egyptian jurist, rejected thisdistinction.134 Other definitions are available, as are other rejectionsof them.135 What is important is that these definitions seem to ignorethe main reason for the prohibition, namely the concern to ensure thatequality is maintained in commutative dealings. One cannot considerthat the benefits arising out of a contract are equivalent when thecontract involves the exchange of goods belonging to the same genusbut where one of the parties obtains a larger quantity than the other.The same reasoning applies where a fungible good is to be delivered ata future date in exchange for another fungible good of the same genusdelivered immediately.

Gharar and equalityThe origins of gharar go back to the Prophet’s prohibition of atransaction known as talaqi al-ruqban—the practice of townsmengoing out of the marketplace in order to meet the tribesmen and buytheir goods at a lower price than the market price of the time, thusexploiting the tribesmen’s ignorance of the true value of their goods atmarket. Abu Hurayra, a Companion of the Prophet, is reported tohave said: ‘The Prophet forbade anyone to go out to meet the caravansand forbade the townsman to sell to the Bedouin.’136 I have alreadydiscussed at some length the rationale for equating just price withprevailing market price which also applies here.137 In addition, theconcern for protecting the weak and ill-informed from losing out intransactions was a reflection of the wider concern to protecthuman beings from their own folly. This wider concern is one thatthe Qur]an treats seriously, as evidenced by the general prohibition ofhazardous games or games of chance. This prohibition was effectedprincipally through 2. 219: ‘They ask you concerning wine and

132 Ibn Rushd, Bidayat al-Mujtahid (Cairo, 1981), ii. 116–19.133 He made this distinction in ‘La Theorie de l’usure en droit musulman’ in a paper

presented in a seminar in Paris in 1951.134 Sanhurı, Mas

˙adir al-h

˙aqq fı l-fiqh al-islamı, 243–4.

135 A helpful way into the debate is Saleh’s Unlawful Gain and Legitimate Profit inIslamic Law.

136 Al-Bukharı, S˙ah˙

ıh˙

, in al-Kutub al-Sitta (Damascus, 2000), ah˙

adıth no. 2166,p. 168.

137 See nn. 102–3 above, and accompanying text.

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gambling. Say, ‘‘In them is great sin, and some profit for men, but thesin is greater than the profit’’.’ That verse and verse 5. 91 were used asthe basis for the prohibition of gharar.

To ensure that neither party loses out by entering into speculative,risky, or uncertain transactions, rules were drawn up to ensure thatthe parties had perfect knowledge of the countervalues they intendedto exchange. In the absence of such knowledge, the transactionwould not be upheld. Thus the concern was broadened so thatit applied equally to both parties to the transaction because the effectof gharar is that the benefit of one of the parties is contingent uponsome uncertain event. The existence of such uncertainty means thatone cannot know whether one is going to lose or gain from aparticular transaction as the benefit or loss is a function of theuncertainty.138 All that is clear is that one party will definitelygain while the other party may either gain or suffer a loss—anevident imbalance. Furthermore, it is an imbalance whose outcomedepends on luck rather than on effort, thereby making it doublyreprehensible.

Bearing that in mind, it would seem clear that those who say thatthe wrong in gharar lies in the nonexistence of the subject matterare mistaken: Ibn Qayyim al-Jawziyya argued in this way thatexistence or nonexistence is not the issue.139 Likewise mistaken arethose who do not consider majhul (unknown) to be a factor in theprohibition of gharar. For example, al-Qarafı equated gharar with anuncontrolled subject matter.140 However, Sanhurı added jahl (want ofknowledge) to this definition so that when it is not known whetherthe subject matter exists, or if it is not known whether an object inexistence can be handed over to the buyer, there is gharar. Similarly,where there is ignorance regarding the species or the genus to whichthe subject matter belongs there is gharar.141

Others preferred not to define gharar at all, but to give examples ofsituations in which the transaction would fall foul of the prohibitionof gharar. The famous Malikı jurist Ibn Juzay gave a list of ten suchtransactions.142 By far the most comprehensive definition, which

138 Comair-Obeid, The Law of Business Contracts in the Arab Middle East, 55.139 Ibn Qayyim al-Jawziyya, I[lam al-Muwaqqi‘ın (1970), i. 357–61.140 See his al-Furuq (1344–6 ah), iii. 265.141 Sanhurı, Mas

˙adir al-h

˙aqq fı l-fiqh al-islamı (Cairo, 1954–9), iii. 49.

142 Ibn Juzayy, Qawanın al-Ah˙

kam al-Shar‘iyya (1973), 282. Saleh lists these in hisUnlawful Gain and Legitimate Profit in Islamic Law, 51.

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captures the essence of gharar, was given by another Malikı jurist,Ibn Rushd. Saleh summarizes it as follows:

Gharar in sale transactions causes the buyer to suffer damage (ghubn) and isthe result of a want of knowledge (jahl) which affects either the price or thesubject matter. Gharar is averted if both the price and the subject matter areknown to be in existence, if their characteristics are known, if their amount isdetermined, if the parties have such control over them as to make sure thatthe exchange shall take place and, finally, if the date of future performance,if any, is defined.143

Chehata, in the light of these attempts to define gharar, concludesthat the basis of the prohibition of gharar is the desire to ensureequivalence in commutative transactions.144 Comair-Obeid, aftera similar analysis of gharar, comes to the same understanding:‘the concept of the balance of benefits so much desired by Islamicmorality is the fundamental principle of gharar in Muslim law’.145

Commercial expediency has resulted in the creation of exceptions.Inevitably, the different schools have differed on which transactionsought to be allowed under these exceptions and which must remainprohibited.

IV. CONTRACTS AND THE PRINCIPLEOF LIBERALITY

Not all contracts are acts of voluntary commutative justice. Aristotleexplained that other contracts expressed the virtue of liberality, whichhe defined as ‘the mean with regard to wealth’. The virtue of liberalityis manifested in spending and giving of a certain kind, the descriptionof which merits repeating: the one who give rightly gives

for the sake of the noble and rightly; for he will give to the right people, theright amounts, and at the right time, with all the other qualifications thataccompany right giving. (Ethics IV, 1119b–1120b)

Various contracts in Islamic law can be explained in terms of thevirtue of liberality. A good example is hiba (gift). Other contractsseem to combine both elements of voluntary commutative justice andliberality. Examples of such hybrid contracts are [ariya (loan for theuse of property not consumed by their use), qard

˙(loan of fungibles),

143 Ibid. 52.144 Chehata, Theorie generale de l’obligation en droit musulman hanefite, 82.145 Comair-Obeid, The Law of Business Contracts in the Arab Middle East, 58.

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etc. For the immediate purposes of illustrating the concern with thevirtue of liberality, I will discuss only hiba.

HibaHiba is a transaction whereby the ownership of an object is trans-ferred to another without consideration. It is one way of giving.Another way of giving is through s

˙adaqa, which is a charitable

donation. Because it is not an exercise of the virtue of liberality,s˙adaqa is always revocable and requires no offer and acceptance.

A third method is hadiyya,146 the gift of a movable object. It is apresent and some accept the validity of it even in the absence of anacceptance by the donee.

While generosity has always been acknowledged by the Arabs asa primary virtue both before and since the advent of Islam, it waslong ago recognized, for example by Abu l-H

˙asan al-‘Amirı in

his Sa‘ada147 and Miskawayh in his Tahdhıb,148 that the virtue ofgenerosity can only be complete where both the appropriate size ofthe gift and the deserving character of the recipient are taken intoaccount. The jurists, to reflect this need for right giving, drew up rulesto govern hiba and to ensure that it remained separate from s

˙adaqa,

hadiyya, etc. They defined hiba as a contract formed by offer andacceptance where there is an unconditional and absolute transfer ofownership.149 The contract of hiba is valid only if the donor is of fullcapacity. It is not open to the semi-competent, the prodigal, or theweak-minded, even if attended by a duly appointed guardian. It ispermissible, but morally reprehensible, for a person of full capacity totransfer inter vivos the whole of his property to a total stranger bythe contract of hiba, because what is mandub (recommended) is togive first to one’s relatives and to do so with some measure ofequality.150 The reason that this is not legally enforceable is thatone cannot have precise measures as to when it is right to give, andhow much it is appropriate to give: strangers may be more needythan relatives, and equal shares do not help equally—some have

146 Some restricted the use of the word hadiyya to transfers from a person of lowersocial rank to someone of higher social rank, as a device to win favour (seeF. Rosenthal, ‘Hiba’, EI2 (1986), iii. 342–3). Hiba, on the other hand, was consideredto transfer from a more highly placed person to one of lower standing. None of thesedefinitions, which are restricted to the etymology of the terms, is relevant to theexpression of the virtue of liberality.

147 Abu al-H˙asan al-‘Amirı, Sa‘ada, ed. M. Minovi (Tehran, 1957–8), 87–8.

148 Miskawayh, Tahdhıb (Beirut, 1966), 8.149 al-Mis

˙rı, [Umdat al-salik, 457–8.

150 Ibid. 457.

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heavier burdens than others and so justifiably need more. Thecompromise that was reached allowed people to gift away as muchas they wanted while imposing certain legally enforceable checks ontop of the moral check that is contained by the declaration of whatis mandub. Thus, an individual suffering from a fatal disease or atthe point of death cannot gift away more than one-third of hisproperty even if he is in full possession of his mental faculties. Further,the donee in such a situation should not also be an heir. If anindividual makes a gift in such a situation, the gift is considered tobe a bequest and then subject to the strict rules governing bequests.A second common rule is that a bankrupt person cannot dispose ofgoods acquired before the sentence of interdiction. A third rule,this one peculiar to the Malikı school, is that a married woman,though considered fully competent, cannot gift away more thanone-third of her property. If she does so, the husband can contestit as excessive.151

The schools also come up with different rules to regulate otheraspects of the contract. Thus, for the H

˙anafı152 and Shafi[ı153 schools,

the fact that there has been an acceptance of the offer of a gift neithertransfers ownership to the offeree nor imposes any legal obligationson the offeror. Only possession can effect the transfer of ownershipand until this happens, the offeree cannot even compel the offerorto transfer the ownership or the possession of the subject matter. If,therefore, the offeror dies before the transfer takes place, the contractis terminated. The Malikı school154 gives more weight to the fact ofacceptance, in that once an offer for a gift has been accepted, theofferee has the legal right to compel the delivery of the subject matterand thus the transfer of ownership. Consequently, if the offeree diesbefore this transfer is effected, his right to compel the transfer passeson to his heirs. The H

˙anbalı school155 has given greatest weight

to the acceptance so that immediately the offer has been validlyaccepted, and the contract does not suffer from any other defect,ownership of the subject matter is transferred to the offeree. Theexception relates to objects that are subject to measurement either by

151 For these rules, see generally Linant de Bellefonds, Des donations en droitmusulman (Cairo, 1935) and by the same author ‘Hiba’ in EI2 (1986), iii. 350.

152 Burhan al-Dın al-Marghınanı, Hidaya: Sharh˙

Bidayat al-mubtadi], ed. Halabi(Cairo, 1937), 16ff.

153 al-Mis˙rı, [Umdat al-salik, 457–8, and Khayr al-Dın Ramlı, Nihayat al-muhtaj

ila sharh˙

al-minhaj (Cairo, 1938), v. 405ff.154 Ibn Rushd, Bidayat al-mujtahid wa-nihayat al-muqtas

˙id, trans. Imran A. K.

Nyazee (Reading, 1996), ii. 397–404.155 Ibn Qudama, Kitab al-Mughnı (Cairo, 1367 ah), v. 591ff.

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weight or volume in which case there is no transfer until the offeree isput in possession.

The major differences amongst the schools relate to the degree towhich revocation is permissible. One view, held by the H

˙anafı school,

allows revocation of gifts by the offeror unless there is a particularrelation between him and the offeree. Thus, unless the offeree is thespouse of the offeror or belongs to the category of persons that theofferee is forbidden from marrying, the gift is revocable. The H

˙anbalı

view is that every gift is irrevocable unless it is made by a father. TheMalikıs say that every gift is irrevocable unless it is made by eitherparent, whereas the Shafi[ı view is that a gift is irrevocable unless it ismade by a male descendant. For the Malikı, Shafi[ı, and H

˙anbalı

schools where revocation may harm the creditors of the offeree, it isinvalid. It is interesting to note that these rules do not apply to s

˙adaqa

where revocation is always allowed.There are a number of sub-categories within hiba. These include

[umra (where the transfer of ownership is for a limited period, i.e. thelife of the offeree) and ruqba (where the transfer of ownership isconditional on the offeror passing away before the offeree). One ofthe more interesting sub-categories is the hiba bi-shart

˙al-[iwad

˙, a gift

whereby the offeree undertakes to compensate the offeror. Becausethere is an exchange of obligations and thus a requirement ofequilibrium, most of the schools treat such a transaction as a normalsale or barter and so subject to the rules of sale. The H

˙anafı school,

exceptionally, treats this as a mixed contract. The process offormation is viewed as an act of liberality; it becomes subject to thedemands of commutative justice at the moment the offeree takespossession.156 Thus such a gift is never revocable.

There are many more rules that could be mentioned. I hope what isclear from the few discussed above is that the rules are concerned toensure right giving (not mere giving), which is the virtue of liberality.

V. CONCLUSION

The theory of commutative justice and its nominate scheme ofcontracts bypasses the shortcomings of the other theories in its abilityto accommodate both discrete and relational contracts. In this schemethe context is important, for it automatically leads to particularrules that are meant to ensure that the demands of commutativejustice or liberality are fulfilled in that particular context. At the same

156 Linant de Bellefonds, ‘Hiba’, 350, 351.

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time, the will of the parties, while not given as prominent a place as itis in common law, is nevertheless of some importance in the sense thatthe parties are free to decide whether or not to enter into a certaintype of contract. Once they have made this decision, the rulesgoverning the particular contract follow as a matter of course. This isa consequence of the desire to ensure that the exchange is fair and thateither equality is preserved or that the virtue of liberality is properlyexercised.

While there seems little doubt about the importance of com-mutative justice and liberality in Islamic contracts law, it is perhapsworth clarifying that I am not arguing that the Muslim jurists weredeliberately drawing up rules and doctrines of contract law with therelevant chapters from Aristotle’s Nichomachean Ethics or Aquinas’sSumma Theologica before them. What is probable is that the Muslimjurists had similar concerns to Aristotle and Aquinas, and thereforecame up with similar approaches. That the Muslim jurists were awareof Aristotle’s approach to these concerns, and aware also of hissolutions, is of course relevant. However, further wide-rangingresearch is needed before any confident claims are made regardingthe deliberate or direct and explicit usage of Aristotelian concepts inthe Law. What is certain is that, by looking into how the jurists weredoing their reasoning, one gets a clear sense of their attachment tocommutative justice and liberality as the appropriate principles forthe regulation of voluntary dealings between people.

There is a wider point, which for the moment I intend to betentative and to fill out the details in subsequent publications. Inanalysing legal systems—especially legal systems based on differingfoundations—many of the great Western experts on Islamic law havecompared Islamic law with other legal systems (whether Roman law,common law, or French law) by taking these other legal systems asparadigms against which Islamic law is then compared. Inevitably,Islamic law is and will be different from these other legal systems,and these differences are then taken as evidence of Islamic law’sprimitiveness or underdevelopment.

Some recent scholarship (such as Baber Johansen’s)157 has begunmoving away from this trend by focusing on an understanding ofIslamic law in its own right. The conclusions already coming out ofthis new approach are far more interesting, and ultimately moreaccurate, and one hopes that this trend will take hold. Some of thenon-Western experts on Islamic law have fallen into the same trap as

157 See e.g. his Contingency in a Sacred Law: Legal and Ethical Norms in theMuslim Fiqh (Leiden, 1999).

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the previously mentioned Western experts. In their desire to show theviability of Islamic law and its maturity they have attempted to provethat Islamic law has a theory of this or that. In doing this they alsotake these same legal systems as paradigms. Proving that Islamic lawhas a general theory of contract or a principle of freedom of contract,etc. is taken as evidence of the sophistication of Islamic law; nevermind if in the process we distort some important principles of Islamiclaw. Few pause to ask the question why we should take these otherlegal systems as paradigms in the first place.

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