Construction plays a major role in the civilization and development of nations throughout the history since the ancient era. All the civilizations that have survived to the date, including the Pyramids, the Eiffel Tower, the Great Wall of China, and the Babylonian civilization, all of which are of construction nature.
Due to the ongoing construction boom in many countries in the Middle East, whose civil codes are based on Islamic law, so, there is widespread interest in the application of FIDIC form of contracts in construction contracts in these countries. As a matter of fact, Shari’ah law is a part of the law in most Islamic countries, as usually Islamic legislation refers to the Sariah as a legal source.
Using the FIDIC form of contracts raises many issues related to Shari’ah law. As the FIDIC contract is considered as contracting agreement (Muqawala) and has some relations with the Istisna, the contracts which have been created by Muslim jurists. Further, it is necessary to clarify the position of Islamic jurisprudence on some clauses provided for in the FIDIC form of contracts such as the penalty clause, variation order and emergency conditions.
2. Source of Shari’ah Law.
There are two fundamental sources of Islamic law, the Holy Qur’an and Sunna, which referred to also as Hadith.
Qur’an is divided into 114 Surahs (chapters) of unequal length. However, the Qur’an is in no sense a comprehensive legal code. No more than 80 verses deal with strictly legal matters; while these verses cover a wide variety of topics and introduce many novel rules, their general effect was mainly to modify the then existing customary law in certain important areas.
The Sunna is the most important source of the Islamic faith after the Qur’an and refers essentially to the Prophet Mohammad (Pease Be Upon Him) example as indicated by the practice of the faith. The only way to know about the Sunna is through the collection of Hadith, which consists of reports about the sayings, deeds, and reactions of the Prophet (PBUH). However, the two other subsidiary sources of Islamic law are Ijma (derived from consensus among Muslim scholars) and Qiyas (derived from analogy or reasoning by analogy), which solves new legal problems based on the fact that Islamic law permits legal rules to be changed and modified in accordance with changing circumstances. Detailed practical rules drawn from these sources are called Fiqh (or “Islamic jurisprudence”).
3. Construction Contracts Under Islamic Law
Contractual arrangements under Islamic law prohibit dealing with matters that are not in existence at the time of making the agreement, with two specific exceptions of unnamed contracts that developed through Ijtihad. The reason for this prohibition is to avoid what is referred to as gharar (risk and uncertainty). The first exception is a specific contract for sale known as A’qd Al Salam, which is defined as a contract for the sale of an item which is not in existence at the time of the agreement, but which will be in existence and will be delivered within a specific period of time. The nature, quantity, specification, and price must be known at the time of agreement. The second exception is a contract of manufacture, known as A’qd Istisna’, which is defined as an agreement for the delivery of future, non-existent physical goods, but their nature and type are specified, for a certain price that is generally not due until delivery. These two forms of contract are permitted under Islamic law despite the fact that the subject matter does not exist at the time of contracting.
As we are concerned here with construction contracts, it is worthy of note that the construction contract or contract for work, known as A’qd Muqawala, draws its origin in Islamic law from the A’qd Istisna’ and thus it is accepted by all jurists in Islamic law as a valid form of contract on the grounds of custom and need of society, which has prevailed from the time of the Prophet Muhammed (PBUH) and is therefore justified by the necessities of business and equity. This is despite the belief held that it constitutes an element of uncertainty in the future performance.
4. The Implied Principles to Construction Contract in Sharia Law
As mentioned above, the construction contract is permitted as per the Sharia law, however, there are four principles of particular importance to construction contracts are to be considered, which represent in avoiding Riba and gharar, and considering the good faith, with the following details:
Riba means ‘usury’ in some verses of the Qur’an, but in others it seems to express the broad notion of illicit gain or unjustified profit and enrichment.
Riba arises with loan, such as car loan, home loan, term loan or overdraft, hire purchase loan and personal loan; Riba in savings and fixed deposit account; Riba in credit card. Often Riba is intertwined with modern banking and finance.
Etymologically, gharar means an act with three characteristics: cheating, danger and
unwariness. It is said that gharar is an arrangement that is alluring on the outside
surface, but unknown in its inner content.
Based on a study of the literature on the causes of disputes in construction and on a number of case studies, it can be said that gharar is a major cause of disputes in construction.
4.3 Good faith
It worth to note that the various customs of the Islamic world play a significant role in the concept of good faith in contract law. The reason for this can be attributed to the fact that agreements were mostly oral. If an agreement was in writing, such words were merely evidence of the oral agreement, not the actual contract itself. Therefore, all private agreements between parties are enforceable under Islamic law once they comply with Islamic norms. The reality of such a principle is clear in most modern Islamic legislation.
The main conclusions of this paper may be summarized as follows:
FIDIC contracts provide an attractive option for construction projects in Shari’ah law-based countries, by offering a range of benefits, including clarity, consistency, flexibility, and a mechanism for dispute resolution.
To comply with Shari’ah principles, FIDIC contracts must adhere to certain rules and regulations, such as transparency and fair to both parties, the avoidance of prohibited activities, such as interest-based transactions, Gharar (uncertainty) or Jahala (lack of Knowledge), further, the contract must not violate the principles of justice and fairness and finally, the contract should maintain the good faith and observe the due process.
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