The Economic System 35
religion and its God. Private ownership and individual rights are
gifts from God, and creative labor, inheritance, contract, and other
lawful means of acquiring property or entitlement to rights are only
channels of God’s bounty and goodness to man.... All Muslim
schools teach that private property and rights are inviolable in rela-
tions between individuals as well as in relations with the state....
It is not only by their divine origin that the Muslim institutions of
private ownership and right differ from their counterpart in the
Western system of law; their content and range of application are
more far-reaching... If absolutes can be compared, it can be safely
said that the right of ownership in Muslim law is more absolute
than it is in the modern system of law.... The Muslim concept of pro-
perty and right is less restricted than is the modern concept of these
institutions. (Habachy 1962)The Shari’ah outlines the obligations concomitant with property rights.
Among the obligations is, fi rst, the responsibility of sharing the proceeds
or the use of property—and, secondly, the obligation not to waste, destroy,
squander, or to use the property for purposes not permitted by the Shari’ah.
To do so would be to transgress the limits set on one’s rights and an
encroachment on the rights of the collectivity. This position of the Shari’ah
is in conformity with the Islamic conception of justice and the rights and
responsibilities of the individual and the community.
Contracts
In any economic system, individuals not only make choices for themselves,
but they also interact with other members of the society through transac-
tions facilitated by explicit and implicit contracts entered into within the
bounds specifi ed by the institutional setting of the society. A contract is a
time-bound instrument with an objective. The contract stipulates the obliga-
tions that each party is expected to fulfi ll in order to achieve the objectives
of the contract.
The concept of contracts in Islam is not only important in the legal
aspect of exchange, as an institution necessary for the satisfaction of legiti-
mate human needs, but it is also a concept upon which the Shari’ah is based.
The whole fabric of the Divine Law is contractual in its conception, content
and application. The foundation of the Shari’ah is the covenant between
Allah (swt) and man, which imposes on man the duty of being faithful
to his word. The Qur’an reiterates that “Allah (swt) will not fail in His
Promise.”
Throughout the legal and intellectual history of Islam, a body of rules
constituting a general theory of contracts—with explicit emphasis on spe-
cifi c contracts, such as sales, lease, hire, and partnerships—was formulated
on the basis of the Shari’ah. Contracts are considered binding, and their
terms are protected by the Shari’ah, no less securely than the institution