SS 52: Options to Reconsider (Cooling-Off Options, Either-Or Options, Revoke for Non-Payment)

What this standard is about

This standard covers three options that let parties reconsider a deal. The first is the cooling-off option (khiyar al-shart): one or both sides get an agreed period to confirm or cancel the contract. The second is the non-payment option (khiyar al-naqd): the seller may cancel if the buyer does not pay on time. The third is the either-or option (khiyar al-ta'yin): the buyer picks one or more items from a list named in the contract.

These options must be agreed in the contract. They cannot be bought and sold separately.

Why it exists

People sometimes sign contracts too quickly or need protection against a buyer who never pays. Islamic law has long allowed parties to build thinking time and safeguards into their deals. This standard turns those classical rules into a modern framework so banks and customers use them consistently, and it blocks two misuses: using thinking time to get free use of goods (a disguised loan) and using it to bet on price movements like a conventional option.

The key rules, simply put

• A cooling-off option gives one or both parties, or even a third party, the right to confirm or cancel within a set period. The period must have a definite time limit and starts when the contract is signed.
• If the contract covers several items, it must say which items the option applies to. The item must be kept in good condition so it can be returned.
• Cooling-off applies to binding contracts such as sales, leases (ijarah), debt transfers, and guarantees. It does not apply to contracts that need advance payment (salam) or instant exchange (sarf, currency exchange).
• The buyer may test the item during the option period. Testing it normally does not end the option, but abusing the test or using the item as an owner does.
• The option ends when the period expires, the holder confirms or cancels, or the item is destroyed before delivery.
• The non-payment option lets a seller or lessor cancel if the buyer or lessee misses the payment deadline. It must be clearly written into the contract and applies only where instant payment is not required. It ends with the holder and cannot be passed to heirs.
• The either-or option lets the buyer choose from a named list within a set period. The items need not be identical or the same price. If the buyer takes all the items home to choose, he holds the unchosen ones as a trust and is liable for the ones he keeps.
• If the either-or period expires with no choice made, the seller may force the buyer to choose or cancel the deal. This option can pass to the buyer's heirs.
• More than one of these options may exist in a single contract.

An everyday example

A man agrees to buy a car and the contract gives him three days to reconsider. On day two he finds a better car elsewhere and cancels. Under this standard, the cancellation is valid because the cooling-off period was stipulated, definite, and still running, and the car was kept in good condition.

Words to know

• Khiyar al-shart — a cooling-off option: an agreed period to confirm or cancel a contract.
• Khiyar al-naqd — a non-payment option: the seller's right to cancel if the buyer does not pay on time.
• Khiyar al-ta'yin — an either-or option: the buyer's right to choose items from a named list.
• Salam — a contract where the price is paid in advance for goods delivered later.
• Sarf — currency exchange, which must be done on the spot.

Source

• AAOIFI Shariah Standard No. 52 — full text in the 2015 Shariah Standards book — https://aaoifi.com/download/24233/