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Why Percentage-Based Ijarah Contracts are Invalid in Islamic Finance

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Islamic Economics Expert Dwi Condro Triono, Ph.D., stated that determining ijarah contracts on marketplaces (MP) using a percentage of the sale price is invalid and falls under fasad (corrupt).

"This is a critical point in ijarah. The determination of wages must be clearly known (maklum) and cannot be ambiguous (majhul). Therefore, the wage must be fixed; this is what is referred to as an ijarah contract. Hence, if the determination of an ijarah contract in a marketplace is based on a percentage of the sale price, according to the scholars I have studied, it is invalid and falls under fasad," he explained during the discussion on "The Law of Buying and Selling on Marketplaces" on the Tsalis Group YouTube channel, Sunday (17/09/2023).

He explained that when the marketplace takes an admin fee, it is essentially a service fee. The marketplace provides a service in the form of a platform for selling. Since this service provides a place, it falls under the category of service or ijarah contracts.

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"For example, if above fifty sales or above one hundred sales an admin fee is taken, it is essentially a service fee. If the amount is based on a percentage of the item’s value, then the contract is fasad and invalid. However, if the contract is fixed, for instance, if we set a rate per day or per month in rupiah, that is what is considered valid according to shari'a," he elaborated.

He explained that the benefit does not necessarily mean a product, but rather the facility provided by one party, which another party pays for. It is not related to the product owner. Ijarah is aqdun ala manfaatin bihi waqdin, which means a contract of benefits with compensation. If buying and selling is the meeting of goods with money, then ijarah is the meeting of benefits with compensation. "So what we value is not the goods but the service provided," he said.

According to him, buying and selling can also be done through bartering. For example, a phone is exchanged for a laptop. If one laptop is valued at two phones, then it cannot be that one phone is exchanged for one laptop.

"So, the formula in learning muamalah (ijarah) is first to look at its pillars. The pillars of ijarah are three (As-Sabatin, 2009): Al-'Aqidani (the two contracting parties), which are the lessee (musta`jir) and the lessor or employer (muajjir or ajiir). Al-Ma'qud 'alaihi (the subject of the contract), which includes the benefit and the wage. Shighat, which is anything indicating offer and acceptance, either through words or actions," he explained.

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Further, he detailed that al-'aqidani refers to the two contracting parties. Here, the contracting parties are the seller and the marketplace. Al-ma'qud 'alaihi (the subject of the contract) is used to determine the nature of the contract, as there are many types of contracts that must be judged accurately.

"If one party is the seller and the other party provides the platform, it's like providing a stall for selling. So, the marketplace essentially provides a virtual stall for selling. Thus, the first party wants to obtain the service of a selling platform. The second party provides the platform. If this is the fact, then it is indeed a service," he stated.

As per the definition of ijarah, which he emphasized as aqdun 'ala manfaati bi 'audin, it is a contract for a benefit with compensation. Therefore, the compensation is based on the benefit provided. The benefit in MP is providing the service of a selling platform. Thus, the fee or ujrah paid is based on the benefit of providing the platform.

He emphasized that wage determination in ijarah is crucial. There are three important criteria for determining wages in ijarah: the job description (na'ul 'amal), the time limit for completing the work (muddatul 'amal), and the effort of the work (juhdul amal).

"Providing a place is muddatul 'amal, or the time limit that can be used to determine the wage based on time. Muddatul 'amal is the limit for compensation. This limit can be in terms of quantity or in terms of time," he said.

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He compared it to a driver, whose wage based on quantity is determined by kilometers. For example, every 100 kilometers earns 50 thousand rupiah. This means the muddatul 'amal is based on quantity.

Therefore, according to him, the condition in ijarah is that wages are earned when the benefits clearly meet the compensation (iwadh). If it is ambiguous, it falls under fasad. If it is fasad, it is invalid. Maklum itself means that wage determination must be with a definite nominal value.

"So if the benefit's limit is clear, it can be based on quantity or time. Therefore, the nominal value must also be definite. For example, per day it could be 100 thousand rupiah. Or by kilometer as mentioned earlier, it is permissible," he assessed.

He stressed that what is not permissible is using a percentage of sales results because whether or not the sales are successful is uncertain. If the wage is a percentage, it could end up being zero rupiah.

"For example, if we ask someone to sell our product with a working time of seven hours a day. The wage is ten percent of the sales results. Such a contract is invalid. Why? Because it uses a percentage of the sales results. Meanwhile, selling can either be successful or not. However, the benefit provided by the worker is already certain, which is working seven hours a day," he concluded.

 

Source: Topswara.com (18 Juli 2024).

 

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