Much of Islamic economics and finance is based on contracts between two or more parties. Whether it is a contract to purchase goods or a contract to make a loan, one needs to understand the concept of contract in Islam and how/if it differs from the one we see in the man-made law.

Definition of Contract in Islam

According to Kharofa, the word ‘aqd (contract) in Arabic language means tying tightly, as in tying a rope. Arabs used the word to speak about firm belief or determination. They used to say ‘aqd al ‘ahd to mean ‘make a covenant’ and ‘aqd al yamin to mean ‘give an oath’. Along the same line is ‘adqat al nikah meaning a marriage contract.

The word ‘aqd also carries the meaning of obligations, as used in the first verse of Surah al-Maida. O ye who believe! Fulfil your obligations.

In Islamic jurisprudence the word contract is used to mean an engagement and agreement between two persons in a legally accepted, impactful and binding manner.

Definition of Contract in Man-Made Laws

The definition of a contract according to the French Civil Law in article 1101 is ‘an agreement which commits a person or a group of persons to give something, do something or refrain from something to another person or group of persons.’

The Distinction

The definition of a contract in both Islamic jurisprudence and the civil law are fairly similar. Kharofa states that the Islamic definition is stronger, however, I personally believe the difference is nothing more than artificial.

Source: Kharofa, Ala’ Eddin. Transactions in Islamic Law. 2nd ed. Kuala Lumpur: A.S. Noordeen, 2000. 1-7.