Contracting

E- Contracting In Shari’ah Discipline

By: Prof. Dr. Mohd. Ma’sum Billah masum2001@yahoo.com applied-islamicfinance@yahoo.com

006-019-3699542 006 019-2790542

A contract is an agreement, which will be enforced by law. Many laws allow contracts to be formed in any available manner i.e. oral, by telephone, by written document, or by fax. Similarly people are not debarred from forming contracts by e-mail and the World Wide Web. A model law on E-commerce of the United Nations Commission on International Trade Law (UNCITRAL) states:

“In the context of contract formation, unless otherwise agreed by parties, an offer and the acceptance of an offer may be expressed by means of data message. Where data massage is used in the information of the contract, that contract shall not be denied validity on the sole ground that data massage was used for that purpose”

Electronic contracts typically falls under three categories: goods, services, and digitized services.

In the consideration of goods contact, the issue of an implied term is vital. This is to determine satisfactory quality and that the good is fit for the intended purpose, its price, defects, and other relevant attributes. On the services part of the E-contracts, services such as on- line-banking, financial services consider the ability of the performer and not the end results of his/her actions. Lastly, the digitized services such as software, video, books, newspapers and magazines in digital format posses a question of whether they are goods or services

e-contract just like traditional contracts, should enforce pre-contract considerations of caveat emptor (let the buyer beware). This could be through advertisements (unilateral or bilateral)

Electronic contract creation

Formation of electronic contracts requires four elements :offer; acceptance; consideration; and an intention to create legal relations. For example, e-contract could proceed in the following manner:

The consumer offers RM10 (the offer price) to a music website to listen to new track to be included in the forthcoming Nasyid CD. The website accepts the offer and begins to download a high quality digital recording. In this situation, the parties exchange something of valuable value (consideration), namely the RM10 from the consumer to the website owner and the supply of the digital recording of the music, and they intend on forming binding agreement. Thus all requirements for binding contract are present.

There are conditions that must be fulfilled for the transaction to be lawful, otherwise it is nullified. For the contract to be legitimate, there are number of pillars that must be present. These are:

Offer

The offer of something by someone is when he/she is expressing a desire to enter a contract. Offers can be made by any form of communication __ post, fax, e-mail etc. While making an offer issue need to be considered such as invitation to treat. There must be clear distinction between the two. Invitation to treat is advertisements that promote the sale of the product but are not offers themselves.

Selection of customers is also an issue to be considered in an e-contract. Online merchant may not wish to deal with all customers from all jurisdictions like children, countries with trade embargo.

Acceptance

Acceptance takes place after the offer has been made. The offeree accepts it and thus creates a contract. In cyber space, acceptance a is contentious issue because the offeror and the offeree are distanced in time and space. Where is t he contract actually formed? How is it formed? In what ways can the acceptance be communicated? Acceptance is the unconditional agreement to the presented offer. It can be a message merely notifying the offeror that the offer has been received,; nor can it involve a change of terms, as this amounts to counter offer, unless explicitly specified, acceptance can generally be made via any communication method that is ‘reasonable’ in the circumstance.

Speed and reliability of the method are taken into consideration

Consideration

Consideration is the element, which typically transforms a mere promise in to a legally binding contract. Consideration is often defined as the exchange of something of value, but can include a detriment to the promisee or benefit to the promissor. For the normal commercial transactions, consideration posses no threat to e- contracts and e-commerce. The goods, services and digitized services provided by the online merchant and the payment given by the customer fully satisfies the requirement for consideration

Intention to create legal relations

In fact in a commercial transaction with an explicit contract, intention is automatically presumed. The onus of proving otherwise “is on the party who asserts that no legal effect is intended, and the onus is a heavy one”

Electronic contract terms and conditions

Most online contracts will not be formed after a lengthy discussions and negotiations over specific terms and clauses. Rather, they will generally be standard form contracts, also called contracts of adhesion. Some of the issues address in the terms and conditions of e-contract are: - Displaying contract terms online. (Through reference statements, with or without hyperlinks; bottom of page display; dialogue box) - Express, implied and mandatory terms - Warranties (of satisfactory quality) - Payment and delivery terms

Shari’ah outlines these pillars and thus the same pillars can be applied to e-contracting. In reality, it hard to achieve all these pillars at the same time. The buyer has the right to see and examine the product before purchasing it, but when an e-contract is prepared, it lacks buyer physical observation. This is hard if not possible to do. It will be costly to send the product for the buyer to see and examine the product before purchasing it, and who would guarantee that the buyer would return the product to the seller if he/she dislikes it!!

The argument is that, often-exact measures of the product will be given, but then again it is subject to manipulation and deceives from the seller side!! Therefore, truthfulness and honesty plays a very important role and indeed it is very important factor that must be fulfilled from both parties (buyer and seller)

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O ye who believe! Fulfil (all) obligations.[1]

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…And fulfil (every) engagement, for (every) engagement, will be enquired into (on the Day of Reckoning).[2] [pic]

It is not righteousness that ye turn your faces towards East or West; but it is righteousness to believe in Allah and the Last Day, and the Angels, and the Book, and the Messengers; to spend of your substance, out of love for Him, for your kin, for orphans, for the needy, for the wayfarer, for those who ask, and for the ransom of slaves; to be steadfast in prayer, and practise regular charity, to fulfil the contracts which ye have made;[3]

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For the worst of beasts in the sight of Allah are those who reject Him: they will not believe. They are those with whom thou didst make a covenant, but they break their covenant every time, and they have not the fear (of Allah).[4]

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But those who break the Covenant of Allah, after having plighted their word thereto, and cut asunder those things which Allah has commanded to be joined, and work mischief in the land, on them is the Curse; for them is the terrible Home![5]

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Allah hath purchased of the Believers their persons and their goods; for theirs (in return) is the Garden (of Paradise): they fight in His Cause, and slay and are slain: a promise binding on Him in Truth, through the Law, the Gospel, and the Qur’an: and who is more faithful to his Covenant than Allah? Then rejoice in the bargain which ye have concluded: that is the achievement supreme.[6]

There should be mutual consent from both parties. In other words the offer and acceptance should not be forced. Rather the offeror and the offeree should voluntarily agree on whether to form the contract or not.

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O ye who believe! eat not up your property among yourselves in vanities: but let there be amongst you traffic and trade by mutual good-will: nor kill (or destroy) yourselves: for verily Allah hath been to you Most Merciful![7]

In summary, this chapter has addressed the issues concerning e- contract via e- commerce. Issues such as selecting customers, in which area does e- mail fall (postal rule or receipt rule). Does electronic document constitute writing and many more. It has also been seen that it is difficult to specify every thing in the standard terms and conditions. However, some areas that should be explicitly addressed in the terms and conditions of an e-contract may include: a) Selecting customers b) Offer invitation to treat c) Acceptance methods and procedures d) Revocations e) Limitations of liability/warranty f) Application law/jurisdiction

----------------------- [1] Qur’an 5:1 [2] Qur’an 17:34 [3] Qur’an 2:177 [4] Qur’an 8:55-56 [5] Qur’an 13:25 [6] Qur’an 9:111 [7]Qur’an 4:29