36 AN INTRODUCTION TO ISLAMIC FINANCE
of property. This body of rules established the principle that, in matters of
civil and economic dealings, any agreement not specifi cally prohibited by
the Shari’ah is valid and binding on the parties and can be enforced by the
courts, which treat the parties to a contract as complete equals.
Islam forcefully anchors all social-political-economic relations on con-
tracts. More generally, the whole fabric of the Divine Law is contractual
in its conceptualization, content and application. Its very foundation is the
Primordial Covenant between the Creator and humans—the Mithaq—
which imposes an obligation to comply with the rules prescribed by their
Supreme Creator as its Cherisher Lord (Rabb). In Islam, faithfulness to the
terms of all contracts entered into is linked to the fulfi llment of obligations
incurred under the Primordial Covenant.
The rule of remaining faithful to the discharge of contractual obligations
derives its power and authority from the generalization of the responsibility
of remaining faithful to the Primordial Contract.^2 A believer will only take
on contractual obligations intending to fulfi ll them.^3 Believers are said to
protect their contractual obligations as a shepherd protects his sheep.^4
Muslims are constantly reminded of the importance of contractual
agreement, as they are required by their faith to honor their contracts.^5 As
directed in the Qur’an, Muslims put their contracts in writing in order to
reduce the possibility of any misunderstanding or ambiguity concerning the
responsibilities of the parties to the contract. Shari’ah scholars often point
out that one of the reasons why the Islamic system of muamalat (trans-
actions) is so highly articulated is that it is based on solid principles of
contracts and the rights and obligations of the parties to the contract. The
dynamic of contracts and the process of ijtihad inherent to Shari’ah have
ensured that Muslim jurists continue to comment and build upon the theo-
retical constructs.
The concept of contracts in Islam transcends its usual conception as a
legal institution “necessary for the satisfaction of legitimate human need.”
The entire fabric of the Divine Law is contractual in its concept and content
and, as Habachy (1962) points out, binds humans to their Creator:
This is not only true of private law contacts, but also of public
law contracts and international law treaties. Every public offi ce in
Islam, even the Imamate (temporal and spiritual leadership of the
society), is regarded as a contract, an agreement (áqd) that defi nes
the rights and obligations of the parties. Every contract entered into
by the faithful must include a forthright intention to remain loyal
to performing the obligations specifi ed by the terms of contract.Trust
Trust is considered the most important element of social capital in Islam
and the cornerstone of the relationship of individuals with Allah (swt) and