SS 36 · Options and promises

SS 36: Impact of Contingent Incidents on Commitments

What this standard is about

Contracts assume the world stays roughly as it is. Sometimes it does not: a war breaks out, a storm destroys a harvest, a government suddenly bans imports or adds new taxes. This standard deals with such contingent incidents — sudden, abnormal events outside either party's control (what lawyers call force majeure).

It sets two kinds of outcomes. Some incidents only cause harm or extra cost; the contract survives, but the damage must be fixed fairly through negotiation, arbitration, or the courts. Other incidents make the contract impossible or pointless; then the commitment can end without blame on either side.

Why it exists

Long-term financing contracts (murabahah, ijarah, construction deals) run for years. Unexpected events are bound to happen eventually. Without agreed rules, one side bears the whole loss or both end up in court. The standard gives a fair, predictable way to handle the unexpected.

The key rules, simply put

If a new tax or duty appears after signing, the party who bears it under the contract or the law carries the extra cost.
If input prices change so much that the contractor faces serious harm, the harm is removed through reconciliation, arbitration, or legal process — not by one side suffering alone.
If imports are banned so goods cannot be delivered under a murabahah or ijarah deal, the affected party's loss is addressed the same way.
If a law changes and adds new financial burdens, the contract or the law decides who bears them.
When delivery becomes truly impossible or pointless — for example, supplies ordered for a conference that is then cancelled — the commitment can be cancelled, but only if the failure was unavoidable, came from objective causes, and was triggered by an outside event.
For crops damaged by natural calamities (jawa'ih), such as storms, the price is reduced in proportion to the damage.
Personal excuses do not count. The event must be external and beyond human control, such as wars, unrest, or natural disasters.

An everyday example

An Islamic bank agrees to deliver imported machinery to a client under a murabahah contract. Before delivery, the government bans imports of that machinery. The bank cannot deliver through no fault of its own. Under this standard, the parties renegotiate or go to arbitration to settle the loss fairly, instead of the bank being blamed for breaking its promise.

Words to know

Force majeure — a sudden event outside anyone's control, like a war or natural disaster, that disrupts a contract.
Jawa'ih — natural calamities that damage crops or produce, such as storms or floods.
Murabahah — a cost-plus sale: the bank buys an item and sells it to the customer at a disclosed cost plus an agreed profit, paid later.
Ijarah — a lease contract, or a contract for hiring a person's services, for an agreed payment.
Arbitration — settling a dispute through an independent referee instead of a court.

Source

AAOIFI Shariah Standard No. 36 — https://islamicmarkets.com/publications/impact-of-contingent-incidents-on-commitments-scope-of-standard