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Gharar


Arabic (غرر) for an element of uncertainty or ambiguity, whether insignificant or excessive, in any sale contract (aqd al-ba’i) or business with regard to its subject matter (underlying-mahall al-aqd) or the contract itself (construction or wording- sighah). Gharar related to subject matter may arise from the price (thaman) or the item being exchanged (commodity, asset, etc). This type of gharar results from asymmetry of information available to each party, or from ignorance of one party of the whereabouts of the underlying.

It is a shari’a stipulation that the underlying’s whereabouts are expressly known to both parties in order to avoid gharar. Graveness and impact of gharar differs from contract to contract. In commutative contracts (such as absolute sale, murabaha, mudaraba, ijarah, etc), excessive gharar renders the contract null and void. However, in noncommutative contracts (such hiba, wasiyya, etc), excessive gharar, in general, doesn’t affect the validity of contract, as it involves a one-way, willful giving out, without a consideration or countervalue in return. Gharar that leads to undue loss to a party and unjustified profit or benefit to the other is prohibited from a shari’a perspective.



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