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8/20/2019 Historical background of commercial transactions.pptx
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HISTORICAL BACKGROUND
OF COMMERCIAL
TRANSACTIONS
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Islamic commercial law not only
creates new system but re-evaluate orratify the existing pre-Islamicinstitutions of contractual obligations
and commercial laws completely orpartially.
Makkah and Madinah regarded as twoislands in the waterless steppes and
desert, had close economic ties withthe nomads.
In Madinah, the Christian and Jewish
communities represented the
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Madinans traded in commodities, like perfume,clothing and wine.
hey were also involved in business of money-lending on interest !riba" to foreign businessmen.
Makkah was a busy and prosperous city beforeIslam.
Quraysh developed international trade and tradetreaties with other countries.
Makkah was the most suitable place to becomean international trade centre in the region due
to# the existence of haram!sacred or sanctuary".
Haram was a place where men could come inwithout fear of any hostility and molestation.
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ypical combination of place ofpilgrimage and of a commercial centre.
Makkah by the time became a neutralcity due to the trade activities withvarious tribes.
rade and commerce remainedinseparably related to the religious rites,especially the pilgrimage.
Many merchandise caravans wereprotected by the established institutionof the sacred months and en$oying freeaccess to the markets.
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Makkah was also assisted by itsfavorable geographical location, it wassituated at a strategic place in the%rabian peninsula.
here was active circulation of capitalin the Makkan society.
%gents, brokers and the great ma$ority
of the population lived on credit orloans.
he contract of Mudarabah waspopularly practiced, any sum of moneyor capital was invested in this
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Makkah being a banking centre, businessmencould make payments to many distance places
or countries.Makkah was also a clearing house for
international trade and a provider of tradingfacilities and insurance of the goods on a very
dangerous route.Women also took active part in mercantile
enterprises.
Khadijah bint Khuwaylid, Asma bint
Mukharribah, I.e. %bu Jahl&s mother, who was aperfume merchant and Hind bint Utbah, thewife of %bu 'ufyan were among the leadingbusinesswomen at that time.
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Many taxes and charges imposed onforeign merchants for their entry,
travelling about the city, permit to stay,passage of their foods, trading,departure and crossing the borders of
the market areas.(re-Islamic %rab was an important
place which attracted many people,whether they were %rabs or non-%rabs.
Makkah was centre of worship orpilgrimage since the time of (rophetIbrahim.
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he pre-Islamic customary law in
%rabia provides some of theterminologies to the later technicalterminologies of Islamic law.
'ome legal technical terms have oftenac)uired, a modi*ed or strictly di+erentmeaning in Islamic law.
he use of written document by thepre-Islamic %rabs is a well-attestedfact.
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Makkah after Islam
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on-Muslims were not allowed to enterthe city of Makkah, after it had beencon)uered by Muslims.
rading in Makkah became a Muslimmonopoly
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Quran and the Commerca! !"e o"Mu#!m#
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he (rophetic life ofMuhammad!(.../" is spread over aperiod of twenty three years.
0ast thirteen years in Makkah
en years in Madinah
'ome verses related to bay !sale" ortijarah !trade and commerce" were alsorevealed during his period in Makkah.
he Makkahan surahs of the 1urantestify that Islam promotes trading andcommercial activities.
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%rabs were guilty of fraudulent dealingsin every day trade transactions.
hey use false weights and measuresand exchange di+erent kinds of coins.
1uran condemned these activities and
all Muslims are prohibited from gettinginvolved in any un$ust businesstransaction.
In surah al-Mutafn, 1uran usesstrong words against such o+endersand against short measures andweights# !23#4-5"
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he riba was prohibited early in the makkanperiod.
6uring Madinan period, the 1uranicin$unctions on commercial transactions wereextended and became more sophisticated.
Muslims become an ummah or nation with
their own constitution and government,(rophet himself become their leader.
Madinan surahs stipulated variousrestrictions.
% distinction is made between decenttrading and usury !riba", which is unlawful.
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%llah says#
7God will deprive usury of all blessing, but will
give increase for deeds of charity: for He lovethnot creatures ungrateful and wicked 8 !9#9:;"
In other verse
7O Ye who believe !ear God, and give up whatremains of your demand for usury, if ye are
indeed believer" If ye do it not, take notice of war
from God and his #postle: but if ye turn back, ye
shall have your capital sum: deal not un$ustly,and ye shall not be dealt with un$ustly% !9#9:2-:
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(unishment for the practice of usury#
0oss of =od blessing in this world
orture of hell in the next1uran also prohibits gambling, bribery,
consuming other&s property unlawfully
(rohibition of trading during >riday prayer
1uran imposed the regulation of writing andtaking witnesses on contract of loan orcommercial contract.
In contracts where payment and delivery ofgoods are made immediately or withoutdelay, then putting it into writing is optional.
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If a contract of loan or a commercialcontract is made on $ourney and a
scribe is not available, the 1uranpermits the making of contract on apledge or security.
%ll evidence including any contractualobligation must be given truly.
%ll obligations must be ful*lled.
he prophet liberal attitude to trade isobvious from the fact that he himselfhad taken an active part in trade.
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Code# o" ethca! d#c$!ne# n I#!amc
commerca! tran#acton#
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&here are some practices of good
manners, decency and ethical standards
in business contracts, which Muslimsare encouraged to follow and some
practices are discouraged from
following .
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(ractices encouraged
?ariness of doubtful property and work
0egal and illegal things are clearly de*nedand in between them are some doubtful
things which should be avoided.6oing business early in the morning
it is encouraged to start business or open
shops early in the morning. he prophet reported to have sent his
servants for trade in the early morningand got a lot of pro*t.
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rustworthiness and trustfulness inbusiness transaction
rustworthiness is encouraged inbusiness transactions. (rophet!(/"said#
7the truthful merchant!is awarded bybeing ranked" on the day of@esurrection together with the (rophet,the truthful ones, the martyrs and the
pious people8 6ishonest traders on the other hand are
blameworthy.
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=enerosity in argaining and Modestyin claiming debts
Ane should be easy and generous inbargaining and whoever demands hisdebts do so in a modest manner.
=iving time to debtor to pay his debt
'uBcient time should be given to a richperson to pay his debt at hisconvenience.
Ane should wait for a poor person to payback his debt when he can.
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oluntary rescission of an unwanted sale !al-Iqalah)
%l-I)alah is cancellation of sale !faskh bay" andit is allowed if it has been concluded beforethe possession.
It had been universally recogniDed during pre-
Islamic times. It was encouraged later by (rophet as a
recommendable act to relieve anyuneasiness.
%l-I)alah is not a sale.
%fter the rescission of the contract, theparties have to return what they have takenfrom one another, i.e. price and goods.
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It&s a voluntary cancellation of sale.
If there is no harm to the parties in
case of rescission of a contract andthey are agreed to such an action thenit is allowed.
It is discouraged if it is based on fraudor any confusion.
=enerosity in business
=enerosity is strongly recommended topurify wrongfulness, mal-practices andunsuitable acts while doing business.
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(ractices discouraged
usiness transactions in the Mos)ue
6oing business transactions in the
Mos)ue is disapproved by the(rophet !(/".
(rophet !(/" said#
7whenever you see a man who isselling or purchasing goods in themos)ue you should say# =od willnever give pro*t in your business8
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@aising voices in the market
It cause much inconvenience, uneasiness,
chaos and indiscipline in the markets. Inpre-Islamic times traders used to make alot of noise to attract customers orprospective buyers. Islam discouraged
such practices.
>alse 'wearing
it cause loss of blessing therefore, it is
disapproved while selling.>alse swearing is sinful, even though the
transaction is valid.
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0ies and hiding facts in sale
he seller and buyer should explain thegood and bad points of the transaction.0ies and hiding in a deal will cause the
loss of the blessing.>raudulence in rade
'ome kinds of fraudulence transactions hadbeen commonly practiced in the pre-Islamic period like, sale by keepinganimals unmilked for a long time. Islamdiscouraged such practices.