Difference between a Promise and a Contract

The distinction between a promise and a contract has vast implications for Islamic finance in the contemporary era (especially in murabahah financing) as we will explore later.

Kahrofa describes a promise as a verbal proposition made by one party to undertake something to the benefit of the other. Note the absence here of an explicit ijaab and qabool. Taqi Usmani further explains a promise as a one-sided commitment as opposed to a contract which typically requires two sides (with the exception of unilateral contracts that are rare in nature).

Kharofa explains that a contract has to be executed both from the legal and moral point-of-view, whereas a promise implies only a moral duty. Kharofa argues that fulfilling a promise is not an obligation (wajib), however, it is a noble quality. This view is particularly ascribed to Imam Abu Hanifah, Imam Shafi’e and Imam Ahmad.

Both Kharofa and Taqi Usmani point out that a promise is enforceable in the court under certain circumstances in accordance with the views held by Hasan al-Basri, Sa’id bin al-Ashwa, Imam Bukhari, Ibn al-‘Arabi, al-Ghazali to name a few. This implies that a promise is legally enforceable.

Taqi Usmani argues that circumstances in the modern economy necessitate that a promise, for the purposes of Islamic commercial law, be considered binding.

We will not go into the details of the proofs provided for each of these positions as they are available on the Internet in Taqi Usmani’s book (referenced below). For our purposes what is important to understand is that promises are considered binding in Islamic commercial law by the majority of the contemporary scholars with the following conditions:

  1. it should be a one-sided promise;
  2. the promise must have caused the promisor to incur some liability;
  3. If the promise is to purchase something, the actual sale must take place at the appointed time by the exchange of offer and acceptance. Mere promise itself should not be taken as the concluded sale; and
  4. If the promisor backs out of his promise, the court may force him either to purchase the commodity or pay actual damages to the seller. The actual damages will include the actual monetary loss suffered by him, but will not include the opportunity cost.

Sources:
Kharofa, Ala’ Eddin. Transactions in Islamic Law. 2nd ed. Kuala Lumpur: A.S. Noordeen, 2000. 20-23.
Usmani, Taqi. Islamic Finance – Musharakah & Mudarabah. Karachi: Darul Uloom. Jamia Darul Uloom. 17 January 2006
[http://www.darululoomkhi.edu.pk/fiqh/islamicfinance/islamicfinance.html].

Advertisements

1 Comment

Filed under Contracts and Transactions

One response to “Difference between a Promise and a Contract

  1. David

    Thanks, because I have known the meaning of A promise and Contract but what I want to say concern it; is A promise no need respondance while A contract need both sides to respond even if you dont like coz u have contracted with him/her

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s