Defective Contracts

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A summarized translation from the “Fiqh of Financial Contracts” by Dr. H Chouat and Dr AH Hemmish

A contract can be afflicted by a number of defects that may render it invalid or incapable of generating its intended results intended for it by the shar’iah. These defects, which may inflict the will of the contractors, are generally due to four things:


They fall into two types:

1-Internal mistake: It is an assumption in the mind of the contractor but nothing in the formulation of the contract indicates its existence. For example, when a person buys a cow thinking that it yields a lot of milk, but nothing mentioned in the contract indicates it does.

2-Apparent mistake: It is an assumption made by the contractor and which is supported by the formulation of the contract. Example: If a contractor says “I am buying from you this diamond with such and such price” and the second says “I accept”, then what he thought was diamond turns out to be glass.

There is no disagreement among the scholars that the internal mistakes do not affect the validity and execution of the contract, because what matters here is the formulation of the contract not the internal assumptions which have no proofs.

As for the apparent mistakes, if they concern the nature of the property then they render the contract invalid, and if they concern the description of the property, then the contract is pending, and can be revoked by the contractor who has been induced to the mistake.


It is of two types:

1-Complete coercion, which is to force a person by threatening to kill or dismember him.

2-Incomplete coercion, which is to threaten by beating or jailing him. Effects of coercion on the contract.

The Hanafis consider that the deals conducted verbally are not affected by coercion and are valid. The majority of scholars, however, consider that the words and acts of the coerced have no effect and are discarded; therefore his divorce, selling and buying do not take effect. The proof is in the hadeeth: “Verily, Allah has removed from my ummah [i.e., they will not be accountable for] the mistake, forgetfulness, and what they are coerced to do.” (Ibn Majah). The most acceptable opinion is the opinion of the majority.


It happens when the traded properties are not equal in values. There are two types of unfairness:

1-Negligible unfairness; which is usually overlooked because it happens often in deals, and is within the appraisers’ evaluations.

2-Excessive unfairness; which is not within the appraisers’ evaluations, such as when a person buys a ten Dollar book for one hundred Dollars.

If the unfairness is negligible, then it has no effect on the contract. As for the excessive unfairness, the scholars have differed concerning its effect on the contract; Some see that it has no effect on the contract, and so the contract is still binding. Some see that the contract is not binding and the party who is treated unfairly is given the choice to void the contract whether it was due to transgression or not. Some have considered the question in details: If the contract is free from deception and trickery, then the unfairness is considered as a result of negligence from the cheated person and that he did not consider the matter carefully; therefore the responsibility falls upon him. But if the unfairness is due to deception and trickery then the wronged person is excused from executing the contract.

This last opinion is the most acceptable because it respects both sides of the parties and preserves their rights, and it also respects the real will and preserves the stability of dealing as much as possible.


It is to use tricks to convince a person to enter into a contract thinking that it is in his own interest, while it is otherwise. It is of two types:

1-Verbal deception; when it is a result of a lie uttered by one of the contractors.
2-Actual Deception; this is when the contractor engenders an act on the object of the contract so as to make it appear in a way that is different from what it really is. Example: Letting milk accumulate in the cow’s udder to make her appear as if it always gives much milk.

Verbal deception is forbidden by the shar’iah, for it is cheating and trickery. It however does not affect the validity of the contract, unless it engenders unfairness to one of the contractors, and therefore the wronged person has the right to void the contract due to the unfairness he was subject to.

Deception by action affects the contract rendering it non-binding, and the wronged person has the right to void the contract. This is called ‘khyar attaghreer’ (choice due to deception), or ‘khyar fawaat al-wasf al- marghoob feeh’ (choice due to the failure to provide the desired description).

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