Impact of Contingent Incidents on Commitments: Shariah Perspective


ln principles,the Shari'ah law is always enforced as agreed by the contracting parties, where the contracting parties are bound by the terms and conditions as agreed in the legal agreement. Hence, no amendment or modification can be executed on the legal agreement without prior consent of the contracting parties,  induding any third parties such as government or its agencies to intervene in  the terms and condi­tion of the contracting parties.The restriction is due to the binding features of the legal agree­ment in Shari'ah. It is also shows that the Shari'ah law grants the highest respect to the resolutions and determination of the contract­ing pa rties to preserve and protect the commit­ment expressed and documented in the agree­ment.


The Contigent Incidents on Commitments in The Legal Document

The possibility that there are some contingent incidents happen in the future as a result of an unforeseen circumstance could be related to different reasons and scenarios that may give impact and implication to the nature of the commitment agreed upon.The future incident that may happen without prior notice and suddenly could represent a treat and risk to the agreement and could have a significant impact on the nature of commitments and undertaking captured in the legal agreement. The contin­gent incident is normally beyond the capacity of the contacting parties and may affect both or one of them, depending on the nature of the incident and its domino effect. Hence, the contingent incident is not related to default of the contracting parties in relation to the perfor­mance of the contract.


The Significance of The Contigent Incidents

The contingent incident may have several levels which may impact the legal agreement completely or partially,  and this will lead either to the intervention of other parties to the contracting agreement such as govemment or otherwise. The good example of the situation is the outbreak of NovaI Coronavirus (COVID - 19) which treated as a global health issue with significant impact on the economics, finance and social welfare.The Bank Negara Malaysia (BNM) i.e. the central bank of Malaysia has intervened by providing payment moratorium of six (6) months in order to reduce the finandal load and stress on the consumers/ businesses especially small and medium size entrepreneurs (SMEs), who have financing facilities with the banks. Hence, the financial institutions were obligated to review these financing facilities in order to comply with the directive and guidelines of the Central Bank to realize the benefit and maslahah intended by the payment moratorium, which provide a positive impact on the welfare of the people, economics and finance as well.


The Theory of The Contigent Incident in Shari'ah Law

In Shari'ah law, the early scholars did not look at the above scenarios and their implications ·on the contract and finance are depending on the nature of contingent incident and the result of the negotiations  between the contacting partiesor the result of the arbitration process, in case the contracting parties opt for arbitration option to address the situation.


The Shari'ah Basis for Consideration of Contigent Incident

There are several Shari ah provisions and principles that support the consideration of the contingent incident and the revision of the commitment based on mutual interest within the Shari'ah rulesand prindples, among others:

  • Allah (s.w.t) says: "And do not consume one another's wealth unjustly or send it [in bribery] to the rulers in order that [they might aid] you [to] consume a portion of the wealth of the people in sin,while you know [it is unlawful]", (al Baqarah: 2: 188), Quran mentioned that it is not allowed to take the property of others without the proper right or justification.
  • Principles of Shari'ah in justice and equity requires the contracting parties to relook at the contract and ensure that justice and equity prevail within the environment of the contin­gent incident. Hence, to check and balance and calibrate the rights of parties involved as a result of the incident.
  • The legal maxims that says: (al Darar Yuzal/ Harm must be eliminated), hence the hardship and harm on the contracting parties must be removed by considering all the above possible scenarios that can reduce the difficulties and restore happiness, which is in line with Maqasid al Shari ah.



Shar'ah law is always enforcing and binding both contracting parties,however some contin­gent incident may happen which change the course of commitment of the contracting parties and call for some consideration and specific arrangement to accommodate some of the significant impact caused by the contingent incident such as war, health pandemic, natural disaster, calamities, significant flood, economy fallout, financial crisis. The current COVID - 19 pandemic, which create a systemic global chaos is a good example  for the contingent incident. Some of the amendment or adjustment of the terms and conditions are encouraged by Shari'ah to be considered subject to the level of contingent as some of the incident may require intervention from third parties such as government or regulator, some of the contract may require certain level of amendments, others may require compensation and remedies with the objective  to safeguard the interest of the contracting parties. In relation to the contingent incident, arbitration option could play a significant role in resolving the conflict between the contracting parties and moderate the problem by looking at the nature of commitment in the agreement and try to resolve it within the Shari'ah rules and principles that observe justice, equity and overall interest of the contracting parties. Most importantly, the course of action that could be taken should always be measured against the Maqasid al Shari'ah to ensure justice, and equity are observed.






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Assoc. Prof. Dr. Ahcene Lahsasna
Chief Executive Officer,

Shariah Advisory

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