SS 51: Options to Revoke Contracts Due to Incomplete Performance

What this standard is about

Sometimes a deal does not deliver what was agreed. The goods have a hidden fault. A package deal arrives missing some items. Or the item does not match the description in the contract. This standard gives the buyer clear options in three situations: defect, deal fragmentation, and breach of description.

It does not cover dishonesty by the seller (that is SS 48) or cooling-off rights (SS 52 and SS 54). It covers deals that fall short through fault, incompleteness, or mismatch rather than trickery.

Why it exists

The basic rule in Islamic contract law is that what is sold should be free from defects. A buyer pays for a specific thing at a specific quality. If the thing is faulty or incomplete, the buyer should not be forced to keep it at full price. This standard turns that principle into practical rules: when the buyer can return the item, when he can only claim compensation, and when the right ends.

The key rules, simply put

• If a hidden defect appears that the buyer did not notice when contracting, the buyer may cancel the deal and return the item, or keep it.
• The defect must be material: it makes the item faulty by normal standards, unfit for its purpose, or worth less. It must not be repairable without cost, the buyer must not have known about it, and the buyer must not have caused it.
• A seller may not add an "as is" clause to escape liability for defects, and in lease (ijarah) and manufacturing (istisna'a) contracts such exclusion is prohibited outright.
• The item must be returned within the period normally allowed for such returns after the defect is found. If return is impossible, the buyer gets compensation for the loss in value (arsh).
• The right ends if the defect disappears, the buyer expressly waives it or accepts the item, the buyer's behavior shows acceptance (keeps using it, delays return without excuse, or resells it), or the buyer destroys the item.
• If a package deal becomes fragmented, for example part of it turns out to belong to someone else or is destroyed before delivery, the buyer may cancel the whole deal or accept what remains and pay only the matching part of the price.
• If the item does not match a condition stated in the contract, such as a car not being the agreed color, the buyer may return it or accept it at full price. If return is impossible, the buyer gets a partial refund equal to the price difference.
• A contract description must be lawful, specific, and free from uncertainty (gharar), and must relate to the buyer's purpose or the item's value.
• The option for breach of description can pass to the buyer's successors and assignees.

An everyday example

A woman orders a blue sofa from a furniture store's catalog. The store delivers a green one. Under this standard, she can send it back and cancel the order, because the item breached the contract description. If the store cannot take it back for some reason, she is entitled to a partial refund reflecting the difference in value.

Words to know

• Arsh — compensation paid for the drop in an item's value caused by a defect.
• Gharar — excessive uncertainty in a contract. Forbidden in Islamic finance.
• Ijarah — a lease contract.
• Istisna'a — a contract to manufacture or build something to order.
• Salam — a contract where the price is paid in advance for goods delivered later.

Source

• AAOIFI Shariah Standard No. 51 (full text PDF) — https://aaoifi.com/wp-content/uploads/2020/08/SS-51-Options-to-Revoke-Contracts-Due-to-Incomplete-Performance.pdf