Vandervell v. I.R.C.

Vandervell v. I.R.C.

[1967] 2 A.C. 291 (HL)

Facts and issues
Mr Vandervell wished to make a gift to the Royal College of Surgeons in order to endow a Chair of Pharmacology. They needed about £150,000.
He was equitable owner of a substantial number of shares in Vandervell Products Ltd, a private limited liability company which he controlled (which made, among other things, Vanwall racing cars).
The legal interest in Vandervell's shares was held by a bank as nominee.
In order to endow the Chair, he arranged with the bank orally (presumably to avoid stamp duty) to transfer both legal and equitable interests in these shares to the Royal College of Surgeons (RCS), giving a trustee company (Vandervell Trustees Ltd., which he controlled) an option to re-purchase them for £5,000 (well under the value of the shares).
This enabled the RCS to receive dividends of some £266,000 (£157,000 net after tax), but since, as a charity, RCS was not liable to pay income tax, it hoped to claim the tax back. Because of the option to re-purchase, Vandervell did not irrevocably relinquish control of Vandervell Products.
At this stage, therefore, the legal and equitable interest in the shares had been transferred to the RCS. This raises a formalities point.
Vandervell Trustees Ltd had the legal interest in the option. But where was the equitable interest? If it remained in Vandervell himself, he would be liable to surtax, on the basis of s. 415 of the Income Tax Act 1952:

(1) Where, during the life of the settlor, income arising under a settlement ... is, under the settlement and in the events that occur, payable to or applicable for the benefit of any person other than the settlor, then, unless, under the settlement and in the said events, the income ... (d) is income from property of which the settlor has divested himself absolutely by way of settlement ... the income shall be treated for the purposes of surtax as the income of the settlor and not as the income of any other person ...
(2) The settlor shall not be deemed for the purposes of this section to have divested himself absolutely of any property if that property or any income therefrom or any property directly or indirectly representing proceeds of, or income from, that property is, or will or may become, payable to him or applicable for his benefit in any circumstances whatsoever.

Held
The House of Lords held (Lords Reid and Donovan dissenting) that the option (the legal title to which was now in the trustee company) was held on resulting trust for Vandervell, along with liability to pay surtax on the dividends.
Vandervell had failed to state where the equitable interest was to go. He had not decided whether the option should be held on trust for his children, or for the employees of his products company. His only concern was that it was not held on trust for him.
Lord Wilberforce noted that the trusts upon which the option was supposed to be held were undefined and in the air. The trustee company itself was clearly not a beneficiary, and an equitable interest cannot remain in the air, and so the only possibility was a resulting trust in favour of the settlor.

Lord Wilberforce at 329B:

The conclusion, on the facts found, is simply that the option was vested in the trustee company as a trustee on trusts, not defined at the time, possibly to be defined later. But the equitable, or beneficial interest, cannot remain in the air: the consequence in law must be that it remains in the settlor. There is no need to consider some of the more refined intellectualities of the doctrine of resulting trust, nor to speculate whether, in possible circumstances, the shares might be applicable for Mr Vandervell's benefit: he had, as the direct result of the option and of the failure to place the beneficial interest in it securely away from him, not divested himself absolutely of the shares which it controlled.

Standing

S 31(3) of Supreme Court Act 1981 provides that the court must not grant leave for an application for judicial review ‘unless it considers that the applicant has a sufficient interest (otherwise expressed as “standing” or locus standi) in the matter to which the application relates’. The justification for such a requirement lies in the need to limit challenges to administrative decision making to genuine cases of grievance and to avoid unnecessary interference in the administrative process by those whose objectives are not authentic. The applicant may be an individual whose personal rights and interests have been affected by a decision, or an individual concerned with official decisions which affect the interests of society as a whole.

Alternatively, the application be brought by an interest or pressure group desiring to challenge a decision which affects the rights and interests of members of that group or society at large. The rules of standing are not unique to administrative law. They are its equivalent of privity in contract and land law, or proximity within the law of negligence. The rules of standing are as important as equivalents in defining the class of persons entitled to bring an action in any particular case.

Constitutional principles of democracy mean that every citizen has an interest in the decision‑making of governmental bodies. Its legality is a matter of great public interest. Furthermore, the control of such decision‑making through the process of law is an aspect of the rule of law of vital importance within a healthy jurisdiction. Nonetheless, it could be argued that the rules of standing should not be abolished. They too have an important role to play within the legal system, and their existence can provide a worthwhile contribution to the preservation of the rule of law. The rules of standing are usually thought of as being a unique and restrictive force within the sphere of administrative law.

Whilst it is generally agreed that the ultra vires rule is concerned with review of the legality of public decisions, rather than with an appeal on the merits of such decisions, there is a conflict of opinion over whether review should be primarily concerned with ensuring the protection of human rights through effective challenges to the decisions of public bodies (the ‘red light theory’), or whether review should be exercised upon the primary consideration that public bodies need protection from unnecessary numerous challenges in order to ensure efficient public administration (the ‘green light theory’). The red light theory contends that judges should be activists in developing liberal approach of review so as to safeguard human rights from the many varieties of misuse of public power. In this regard they also follow a liberal approach of standing.

The starting point for consideration of locus standi is now the decision of the House of Lords in R v Inland Revenue Commissioners, ex p National Federation of Self‑Employed and Small Businesses Ltd.

The Federation sought to challenge the Inland Revenue’s decision to grant a tax amnesty to casual workers in Fleet Street. In particular the Federation sought a declaration that such an agreement was ultra vires the Revenue, and an order of mandamus compelling the Revenue to collect the amount due.

In concluding that the Federation did not have locus standi to challenge the tax amnesty, Lord Wilberforce sought to outline how the matter should be addressed. He explained that the issue of sufficient interest was to be regarded as a mixed decision of fact and law for the courts to decide on legal principles, ie it was not simply a matter of judicial discretion.

Further, that it should not be assumed that because one generic phrase was used as the test for standing it would necessarily be applied in the same way regardless of the remedy sought. As regards mandamus, for example, he agreed with the views expressed by the Lord Advocate to the effect that the courts should be guided by the definition of the duty, and should inquire whether expressly, or by implication, the definition indicates that the complaining applicant is within the scope or ambit of the duty.

The question as to whether there is standing should be examined in two stages. At the first instance, standing should be considered when leave to apply is sought. At that, stage, the court is concerned, according to Lord Scarman, to ensure that ‘it prevents abuse by busybodies, cranks and other mischief makers’. If leave is granted, the court may ‑ at a second stage, when the merits of the case are known ‑ revise its original decision and decide that after all the applicants do not have sufficient interest.

It is submitted that this two‑stage test is unlikely to have any damaging effect on the requirement of the rule of law that decision‑making be subject to judicial scrutiny. The first stage should simply exclude cases where there is clearly no real merit in the application, and is appropriate as a means of preventing wasteful litigation. By the time the second stage of the test comes to be applied, the court should have looked at the factual and legal context of the case and should thus have begun its scrutiny of the decision in question.

The flexibility of this two‑stage test provides the courts with a useful additional string to their bow in scrutinising cases of public interest, judicial review proceedings in this context may be compared with the relator action in civil law proceedings. The correct approach in public interest cases is normally to use the relator action under which the Attorney‑General brings the action.

But there is a serious gap in this type of case in that the Attorney‑General’s discretion in the matter is unchallengeable (Gouriet v Union of Post Office Workers (1978). So, there is no guarantee that the matter will reach the courts. The courts have used the more modern rules of standing to allow individuals or representative groups to bring judicial review cases of wider public importance, thus to some extent by, passing the deficiencies of the relator action.

On the other hand in R v IBA, ex parte Whitehouse (1985) a television viewer was held to have standing to challenge a decision of the Independent Broadcasting Authority to broadcast a particular programme. Thus, with other two important cases viz ex p Leigh (1987) and ex p Smedley (1985), ex p Whitehouse (1985) could be justified on the common ground that constitutional issue of general importance were persuasive.

From the academic point of view, three issues have, however, attracted attention since the English procedural reforms introduced by RSC 1977.

The first relates to the stage in judicial review proceedings at which, any standing question should be resolved. On the one hand, the rules themselves require that the ‘sufficient interest’ test be applied at the application for leave stage. This is readily coupled with an instinctive view that standing is a threshold procedural question to be resolved positively as a prerequisite of further progress on the application. This is not, however, a historically sound approach, and the questions of locus standi have been viewed as aspects of the substantive case to he made in pursuit of a particular remedy.

More importantly, it is clear that the statutory rules, while enabling standing to be raised at the leave stage, do not require it to be dealt with finally at that stage; neither do they preclude the raising of standing issues at a later stage. The point has furthermore, been taken that standing issues are intertwined with - and may indeed be the same as ‑ issues of substances. Most obviously, the same circumstances of fact and law which establish a person’s ‘legitimate expectation’ to a procedural benefit may also form the basis of the same person’s argument for standing in the case.

Thus, one of the principal conclusions reached by the majority in the famous IRC case was indeed that standing will usually need to be decided in the light of the legal and factual context. The point was also taken that a person’s standing may become relevant at the time at, which the court exercises its discretion whether to award a remedy and, if so, which, a person  may need to establish a different relationship to the subject matter of the case to be awarded an injunction or order of mandamus than for the award of a declaration. So, the ‘common’ approach to standing, which may be acceptable and indeed desirable at the outset of the litigation, is much more or less appropriate at its close.

A second feature of the standing literature has been a developing sophistication in the schematic categorisation of the principles to be applied in decisions on the standing of different types of applicant {to which Peter Cane has made the most substantial contribution, in particular his ‘Standing up for the Public (1995) Public Law 276 and Standing, Representation and the Environment’ in Loveland, Ian (ed)}.

Cane has distinguished those, who establish standing on the basis of their own personal interests from those who seek standing on the basis that they represent the interests of others. Regarding the former, the standing requirement is relatively easy to satisfy, since each of their members would have individual standing. Those claiming such ‘representative standing’ are then divisible into three groups.

1. ‘Associational standing’ is typified by the organisation suing on behalf of its members.

2. ‘Public interest standing’ is asserted by those who claim to represent not a group with identifiable membership but a wider ‘public interest’.

3. Cane’s third category, which is more formal in nature, is that of ‘surrogate standing’, where a nominal applicant represents the interests of the real party to the proceedings.

Such an analysis be used to explain why it is insufficient simply to claim that standing in public law proceedings should be treated differently from its private law counterpart: account should be taken of the different ways in which litigants may make legitimate use of judicial review and, therefore, of the different, tests of standing which may be appropriately laid down.

The third general issue of note is that adopting the Cane analysis, it is possible to conclude that while those applicants for review in the categories of ‘personal’ and ‘associational’ standing have benefited from the generosity of approach already referred to, there were initial difficulties with the treatment of the ‘public interest’ type which have only more recently been resolved, at least for the time being. These difficulties were demonstrated in the infamous R v Secretary of State for Environment, ex p Rose Theatre case (1990), where Schiemann J denied standing to a company formed to challenge the refusal of the minister to list an archaeological site. Incorporation could not of itself increase the sufficiency of interest of the individuals concerned.  Where individuals did not have sufficient interest, they did not obtain it by incorporating themselves into an association. Thus, it had to be anticipated that, in some circumstances, there might be no one at all with an interest sufficient to challenge an unlawful decision.

However, in ex p Blackfordby (2000) it was held that the court will not readily find that the incorporation of an action group is a bar to the bringing of an action for judicial review.

It has been argued that, on its particular facts, Rose Theatre is defensible. Whether viewed as a claim to ‘associational standing’  or to ‘public interest standing’ in circumstances in which the public interest had already been adequately accommodate, the applicant’s case may have been appropriately denied. On the whole, however, it has been interpreted as a case in which a very ungenerous attitude to standing was, rather provocatively, adopted.

There have been more recent signs of an apparently liberalising shift of approach. Two cases in particular are interpreted as illustrating this trend viz ex parte World Development Movement Ltd (1995) and the EOC case.

In the first case, the World Development Movement (WDM) sought judicial review of the Foreign Secretary’s decision to grant financial aid to Malaysia for the building of the Pergau dam. The WDM argued that the Secretary of State had exceeded his powers. The court held that the WDM had sufficient interest. The WDM played a prominent role in giving advice and assistance in relation to aid and had consultative status with United Nation’s bodies.

More importantly, the House of Lords has itself added to the weight of authority recognising the legitimacy of bona fide interested organisations, albeit without citing either the Rose Theatre or Greenpeace, by way of its ruling in ex p Equal Opportunities Commission and Another (1994).

Perhaps the most compromising and pragmatic solution has been made by Otton J in ex p Greenpeace Ltd (No 2) (1994). He explained his ruling on standing in favour of the applicants on the grounds that the court would take into account the nature of the applicant body, the extent of its interest, the remedies sought, the extent to which the applicant was a responsible body, its consultative status if any, the extent of its membership and support and whether the applicant body would have any other viable means of challenging the matter in question.

So, it could be submitted that the present law of standing provide some significant barriers to persons wishing to challenge the lawfulness of government decisions as a vexed body otherwise they are not so reluctant as Rose Theatre to provide standing.

STIPULATIONS IN MARRIAGE

Valid Stipulation

All the schools and sects regard as valid and enforceable any stipulation there merely seeks to reinforce the normal effects of marriage. Thus agreement to fix the amount of dower that shall be paid. Another example might be that express stipulations that hold the husband responsible for maintaining the wife and those which state that the wife will obey her husband within the permitted parameters. These are valid and enforceable stipulations but are not necessarily required to be covenanted as such because they are the objectives of the nikah itself, but if done, then it will reaffirm the already existing duties and obligations.

Invalid Stipulation

Invalid stipulations, which omit a condition in the marriage contract, for instance, one stating that the husband will not maintain his wife; one cancelling the wife’s dower; restricting a man’s sexual relations with his wife; or, one allowing a woman to partake from the share of her husband’s second wife. Imam Bukhari, reporting on the authority of ‘Abd Allah ibn-i-Mas’ud, states that a woman may not lay down in her marriage contract that her sister in Islam, i.e. the co-wife, be divorced. He also relates, on the authority of Abu Hurayrah, that the Holy Prophet (PBUH) has said that it is not legal for a woman to stipulate that the cowife be divorced in order to increase her own share because she will only get what Allah has prescribed for her.

Stipulations that invalidate the entire contract are those held to be contrary to the very essence of marriage. Into this category the four Sunni schools and the Ismaili sect of the  Shia place all stipulations attempting to impose a time limit on the marriage, as the law  regards marriage as being a life-long union. The Ithna‘ashari sect of the Shia regard such  stipulations as valid and recognise the institution of the mut’a, or temporary marriage.

Mut’a is concluded by the same way as the Nikah (i.e. by an offer and acceptance). As  in Nikah the wife receives a sum of money on the conclusion of the contract. This is  not referred to as dower but is termed salary or wages. The contract may stipulate  any time-limit. The wife is under no obligation to obey her husband and accordingly  her husband is under no obligation to maintain her. Any children born of a mut’a marriage are legitimate but if either party dies during the subsistence of the mut’a the other party will not inherit from them. Either party may terminate the marriage at  will. If the husband chooses to end the marriage before the expiry of the time-limit he  may not reclaim any of the money he has paid to her. However, if the wife terminates  the marriage she must repay her husband a proportionate amount of the money  paid by her husband, taking into account the time she has spent with him. When the  marriage ends the woman must observe an iddat of forty days or, if she is pregnant,  until the delivery of the child. A man may have an unlimited number of wives by the  mut’a contract. A mut’a marriage is dissolved ipso facto by the expiry of the term but if  cohabitation continues after the expiry of the term, the inference is that the term was  extended for the whole period of the cohabitation and that the children conceived  during the extended period are legitimate.

Neither Prohibited nor allowed Stipulation

This category of stipulations is the most important and consists of conditions that benefit the wife, but are neither prohibited, nor expressly allowed in Islam. The husband will give up some of his rights by accepting them, for example, when his wife lays down the restriction that he will not marry a second time during their marriage, or that she should not be taken out of her matrimonial home/city. Not surprisingly, the validity of such stipulations is disputed amongst different schools of thought. The Hanafi, Shafi‘i and Maliki schools regard these conditions to be illegitimate while the nikah containing them will itself remain valid. Meanwhile, the Hanbali School considers them to be valid and binding on both parties.

Arguments against stipulations

There is a Prophetic saying that goes, “Any stipulation that is not in the book of Allah (the Qur’a¯n) is void.” The majority of scholars believe that the above-stated stipulations are not mentioned in the Qur’a¯n and are, therefore, not binding.

Arguments for stipulations (Hanbali view)

There are, however, many great names in the list of those who regard these stipulations as legal and valid. ,whose arguments run as follows:The Holy Qur’a¯n states: “O you who believe abide by your contracts”. (Sura 5, verse 1) This verse, being the basis of all contracts, prevails and therefore all obligations, when undertaken, should be carried out accordingly. The Hanbalis regard the above verse as the basis of the law of contract, thereby invoking the principles of freedom of contract. Another Qur’a¯nic verse that is cited to support this view is: “And fulfil every engagement, for it will be enquired into (on the day of the Reckoning)” (27:34). These arguments are further supported by the following verse, “And fulfil the covenant of Allah when you have covenanted.”

Accordingly in Hanbali law, any stipulation, not itself forbidden or not contrary to or inconsistent with the essence of the contract of marriage, is valid. A stipulation falling  into this category would be a provision to the effect that the husband will not take a  second wife or that the wife will be free to leave the matrimonial home whenever she  wishes. If such a stipulation is inserted into the contract and the husband breaches it,  the wife’s remedy is to apply to the court to grant her a dissolution of the marriage on  the grounds that her husband is in breach of contract and she is therefore no longer  bound by it.

Reform

Reformers in many parts of the Muslim world have adopted the Hanbali law allowing stipulations which vary the normal incidence of the marriage contract to be inserted  if such stipulations are for the benefit of one or both parties to the contract. Such a stipulation in the marriage contract that restricts the husband’s right to practice polygamy is specifically recognized in many Middle Eastern Countries. Article 38 of The codified 1917 Ottoman Family Rights Code was the first piece of legislation that had adopted the Hanbalite’s rules on inserting stipulations in marriage contracts. This stipulation includes allowing the wife to seek a divorce in case the husband contracts another marriage.

Jordan

The Jordanian Law of Personal Status 1976  maintains provisions that allow the insertion of the stipulation in the marriage contract whereby the husband should not take another wife. In this stipulation the wife has the right to divorce in a situation where the husband has violated the stipulation.

Syria

The Syrian Personal Law Code of 1953 provides general provisions that allow the wife to insert a stipulation in her marriage contract. This general provision in actual fact does not state specifically that the wife has the right to divorce in case the husband violates the stipulation by contracting another marriage. However, such a stipulation was made possible under article 14 of the Syrian Personal Law Code 1953.

Morocco

The Moroccan Code of Personal Status of 1957 and 1958 has a similar provision. In Article 31:

… A woman has a right to stipulate in the marriage contract that her husband should not take any co-wives, and that if the husband does not comply with that to which he has bound himself, the wife shall have the right to demand that the marriage be terminated.

Iraq

Article 6(4) of the Iraqi Law of Personal Status (no. 188) of 1959 also gives a woman the right to apply to court for a divorce if her husband fails to honour a stipulation agreed upon in the marriage contract.

Kuwait

Kuwaiti law differentiates between three types of stipulations that may be incorporated into the marriage contract as stated in Articles 40 and 41 of Law No. 51 concerning personal status:

Firstly, a condition that violates the very purpose of marriage shall render the marriage contract absolutely void.

A stipulation that runs counter to the implications of marriage, without contravening its principles, shall be void, but the marriage contract itself will remain valid.

But a clause that contravenes neither the roots nor the implications of marriage is not prohibited by Shariah, and thus shall be binding and enforceable, but only if it is included in the marriage contract.

Tunisia

Article 11 of Tunisian Code of Personal States, 1956, permits stipulations in a marriage contract. ‘If any stipulation is violated the aggrieved party may apply for dissolution of marriage.’

Indian Sub-Continent

Similarly, such stipulations have been accepted as valid by courts in the sub-continent. However, they did not adopt the Hanbali doctrine but iterated that a Muslim marriage is a civil contract, and as long as a stipulation does not contravene the Indian Contract Act 1872, it will remain valid and binding. In Muhammad Amin v. Amina Bibi Addison J. put it this way: “marriage is a civil contract and the parties may contract in any way they wish to within certain limitations.”

Polygamy

The Arabs of pre Islamic era were governed by tribal customary law that permitted unlimited polygamy. Islamic law severally restricted this by providing that a husband could not have more than four wives concurrently. Surah AL NISA (Verse 3) is that source of the law of polygamy in Islam. The verse also said that a man must treat all his rights equitably.

The surah has been interpreted to the effect that law obliges the husband to treat his wife equitably and he must spend an equal amount o9f time with each wife.

All the schools are agreed that it is not necessary for a man to obtain any short of permission before remarriage.

The legal remedies for woman whose husband decides to take a further wife are limited. Hinchcliffe has commented that a non Malik wife who reluctantly finds herself a co-wife will have no recourse at all unless her husband agreed to delegate to her the Talaq-e-tafwid. Whether the moral obligation on the Husband to treat his wife equally relates only to nafaqa (material support and maintenance) or also to equal affection has remained heavily contested.

The Quran itself appears to suggest that the later is an impossible task. Surah AL NISA (Verse 129) says that a man shall not be able to deal unfairness and justice between women however much he wished. It has therefore been possible to argue that polygamy was never really allowed in Islam and should consequently be prohibited by modern Muslim law.     

The fundamentalist reacted strongly to such a suggestion, arguing that such interpretation would render the Quranic allowance for up to four wives absurd and in operative and that in order to honor it a distinction much be made justice in verse 3 which would mean equality between the wives in material and tangible matters and justice in verse 129 which would mean inner feelings over which man has no control. They quoted traditions (sunnah) of the prophet to substantial their opinion. 

Reform:

The controversary over polygamy started in early 20^th century in the grounds that it was an injustice to woman. Many jurists have taken different views on the need for restricting polygamy.

An Indian Muslim author known as Siddiqi takes a balanced view. The permission given by the Quran for polygamy arises out of particular circumstances. There will always be individual cases where polygamy may become necessary in order to avoid more serious social and moral consequences. So it may not be right to prohibit polygamy by legislation since the Quran has made it conditional on a just an equal treatment of the wives. It is open to the countries to prescribe conditions under which polygamy may be allowed.

Polygamy has been subject to reforms and many countries have legislated to impose restrictions on it. The trend is in favor of restriction polygamy of not prohibiting it completely.

TUNISIA:

Tunisia has ban polygamy outright and has declared a polygamous marriage void. Under Tunisian law, polygamy is forbidden and constitutes a criminal offence, rendering a man who marriage before his previous marriage is dissolved, liable to a penalty of one year imprisonment and or a fine.

The Tunisian jurist took economic criteria as a key element arguing that since in modern socio economic conditions impartial treatment of several wives was a practical impossibility, the essential Islamic conditions of polygamy was impossible to fulfill.

LEBANON:

Polygamy is also prohibited in Lebanon.

IRAQ:

 In Iraq marriage more than one wife is allowed only by permission of the judge, who shall not grand such permission unless he makes sure of fulfillment of two conditions.

1. The Husband is financially capable of supporting more than one wife.
2. That there is a legitimate interest.

A man who contravenes above is liable to a penalty of one year imprisonment and or fine.

SYRIA:

The Syrian legislation is less categorical while following same course. The judge has the power to forbid a married man from taking another wife unless there is the legitimate justification and the financial capability to support both wives is proven.

Jordan

Although the Jordanian law imposes no obvious restrictions upon polygamy. It allows the wife to stipulate I marriage contract that the husband shall not take another wife and entitles the wife to sue for divorce if such same allowance for the wife is repentant in the Moroccan law. 

Alzeria

According to the Algerian law, a man who wishes to take a second wife must establish a clear and genuine need. The court will grant him such permission if it is satisfied of such need and further if there is evidence that the man is able and willing to treats the wives and children with equality. The first wife may obtain a on the sole ground of husband second marriage.

Asian sub-continent

The modern south Asian secular view of the law considers polygamy at best as an institution to be tolerated but not encouraged [an Indian case of irwari v asgari]

India

There has been no direct legislation reform of Muslim personal law in India in the subject of polygamy. Many judges have called for government to enact legislation on this subject. Muslim marriages in Indian are therefore potentially polygamous. And the husband may subject to conditions stipulated by the wife, make arrangement for polygamy which the wife has legally, very little control, unless she has inserted relevant stipulations in her marriage contract. Such stipulation would be enforced in that the wife would be entitled to claim divorce from the husband or a judicial desolation of marriage under the DMMA 1939

Pakistan

The Pakistani law in Muslim polygamy was the subject of reform in the context of MFLO 1981.although Pakistan has academically impressive restrictions to men’s right to polygamy in practice the requirement that prior permission for a polygamous marriage  be  obtained  from the council appears to be a formality rather then a effective deterrent. If a second marriage is completed with out the approval of council the second marriage is clearly valid.

Bangladesh

Bangladesh has inherited the provision of MFLO1961 from Pakistan. Bangladesh has made some amendments to the provision of MFLO. Polygamous marriage in contravention on MFLO remains fully valid marriage in Bangladesh. The couple is not allowed to register the marriage. But it may be doubted whether this is in fact really punishment. So, the existing law is clearly not as effective as theory could be.

Conclusion:

Bharatliya says that, there are certain factors under which polygamy historically portrayed as a consequence of wars and the presence of many widows and orphans. However, it is also true that, the existence in law of the right to take a second wife severely hinders the progress of Muslim woman.

But as Menski stated easy divorce rules without a legal right to polygamy would lead to a large pool of divorce woman, many of whom are presumable either ill, infertile or in some way unsuited to full material life. Prohibition of polygamous arrangements would perhaps required the toleration of extra marital relation of man. Hence there has always been ample room for debating whether strict legal monogamy is preferable- or whether restricted right to monogamy should be allowed. Some reforms in the Muslim world have prohibited polygamy whether as other have only imposes certain procedure burden. It is a fact that some Muslim husbands justify there choice in favor of polygamy by arguments phrased in terms of sharia. 

Islamic Contract Law

6.1

The classical law of contracts and obligations have adopted the principle of freedom of contract and elaborated various requirements for formation and validity of contract.

The elements of contract under Islamic law:

1.     Capacity to contract

2.     There must be an offer & acceptance

3.     Consideration

4.     Ther must be absence of Riba and Gharar

6.2

Capacity to contract:

Contractual capacity, other than for contracts of marriage, is (with the exception of Maliki females) attained for males and females alike at the onset of physical puberty. There is an irributable presumption of law that no male below the age of 12 and no female before the age of nine has achieved majority and an equally irrebuttable presumption of law that by the age of 15 both males and females are adult. In between the minimum and the maximum ages whether majority has been attained is a question of fact. Moreover, a minor’s coming of age according to symptoms or age is not sufficient for perfection of his capacity and obligation of making over his property to him, and to give him a free hand in disposing of it. But it is necessary that he must possess sound judgment along with legal majority. The proof of that is the following quranic verse

“And put the orphans to test until they reach the age of marriage; then if you perceive in them sound judgment deliver to them their property” (Sura 4, verse 6)

This verse is decisive about the fact that making over property to the orphans, that is minors, is qualified by two conditions, the first is reaching the marriageable age, and the second is that sound judgment is found in them. If a child comes of age but has no sound or right judgment, he will have no perfect capacity and this property will not be made over to him. But he will be interdicted until right judgment is found in him.

A person having sound judgment is he who disposes his property well and know the method of its investment and protection. The Shafi jurist define sound or right judgment as competence of a child for disposing of his property well and observing the injunctions of the islamic shariah. If a child comes of age while he manages the affairs of his property and disposes of it very will according to the requirement of intelligence and wisdom, but does not manage his other affairs according to the injunctions of Shariah, he will not be considered having sound judgment. Abu Hanifa holds that when a person reaches the age of twenty-five years, he becomes a man having perfect capacity and his property must be delivered to him so that he may dispose of it. That is after this age no person is expected to improve his capacity to dispose of his property, and therefore it is useless to interdict him and prohibit him from disposing of his proerty. (An Introduction to the Study of Islamic Law, Dr. H.H. Hassan, 2005, p.p 356-357)

Children below the age of majority are subject the control of the guardian of their property. The person with the prior right to deal with the property of the child is the father. If the father is absent then a person appointed by the father has the right. If the father has not named the guardian of the property of his infant child the right passes to his nearest male kinsmen in the order of succession on death. The guardian of the property has the duty to safeguard the interests of the minor and to deal with the property of the minor as if it was his own.

A child below the age of majority who has reached the age of seven, which the Muslim jurists considered the age of discernment, has a restricted contractual capacity. The child may enter into a contract which is manifestly to its advantage so that it may be the recipient of a gift. Conversely the child may not enter a contract manifestly contrary to its advantage such as making a gift. Other contracts made by a child below the age of majority are not void but are deemed to be suspended pending the guardian’s consent or otherwise to their execution. The only exception to the general rules relating to contractual capacity are insane persons, persons who are, while not certifiably insane, feeble-minded, acknowledged spendthrifts and persons who are easily deceived. In their cases, the age of entering into contract is higher than the ordinary persons. In the case of persons possessing these defects the guardianship of minority may, with the permission of the judge, be extended. Also persons who are in their death-sickness are under an interdiction restricting their contractual rights.

Maliki women also do not achieve contractual capacity at puberty. A Maliki woman achieves contractual capacity only upon consummation of a valid marriage. Even then her contractual capacity is not absolute. She may not dispose gratuitously of more than one-third of her property. The Maliki jurists argued that as a married woman is presumed to be having sexual relations with her husband there is a possibility that she could become pregnant, with the inevitable result that she would deliver a child. Death in childbirth is equated with death-sickness.

In many parts of the Muslim world today the age of majority has been fixed by the various civil codes. It is interesting to note, however, that the courts in Abu Dhabi (where Maliki law prevails), have held that a woman who was over the age of 18, the age of contractual capacity for commercial contracts in that Emirate, was unable to validly contract because she was unmarried. The courts of Pakistan have sought to safeguard the interests of women. Where a Purdasheen woman disposes gratuitously of property the burden of proof is on the person who is claiming a right under the property she executed to prove that she had proper understanding of the effect of the contract.

6.3

Offer & Acceptance:

An offer is the first stage for making a contract. The offer has to be accepted in the same session in which the offer is made. However, what is meant by the same session is a question of fact, which may take a variety of forms.

A offer can be made in a number of ways:

1)     It can be made verbally. This kind offer is to be made in the same meeting.

2)     This can be made in writing. This form of offer becomes effective as soon as the letter leaves the person offering and will remain valid until received by the recipient. The offer must be replied to immediately.

3)     It can be made through message sent with some person, whose honesty is not doubted and if the offer is accepted it will be a good acceptance.

4)     It can be made through signs and gestures particularly in those cases where the person offering is deaf or dumb or when the recipient does not understand the language of the person offering.

5)     It can be made by conduct. An offer made through the delivery of goods is valid according to Maliki school. An offer can not be made by silence.

The Hanafi and Hanbali jurists says that the person offering has the option to withdraw his offer before it has been accepted since the person who is to receive has nem giving the chance to make up his mind whether to accept or reject the offer. It seems equitable that the person offering should have the right to withdraw his offer before acceptance is made.  It is likely that the person offering might have made some mistake or forgotten to include something in his offer, therefore he can quickly withdraw his offer while the other party is still busy in making up his mind. But Maliki school takes a different view and said that once the offer is communicated to the recipient the person offering it has no right to withdraw the offer because he ought to have made up his mind before making an offer but will not be permitted to change it later on. (Abdur Rahman Ibn Doi, 1984, p. 357)

On the other hand, doctrine of Khiyar Al Majlish is relevent for the parties to the contract, duly completed by offer and acceptance, which gives the right to repudiate the agreement during session of bargain. A Prophet’s tradition express this doctrine which is:

“Each of the parties to a contract of sale has the option against the other party as long as they have not separated”

Imam Malik comments on this tradition in the following words: “Here in Medina, we have no such known limit and no established practice for this” and the points he then proceeds to discuss show that for Imam Malik a contract was binding as well as complete immediately mutual agreement had been reached. In this point  professor Coulson remark that: “This is one of the many occasions on which the law expressed in the reported precedent of the prophet or later authority was rejected by the early Medinan scholars when it ran counter to their currently adopted doctrine”. Though Hanafi school also do not recognise this doctrine however, the Shafi and Hanbali jurist accept this doctrine.

6.4

Consideration:

In Islamic law, the consideration for the contract must be something which is ritually clean, and which has some value recognized under shariah. Thus contract for selling 100 bottle of wine shall not constitute a valid contract since wine is not recognized under shariah as goods.

6.5

Ther must be absence of Riba and Gharar:

The first principle of Islamic contract law is that ‘Muslims must abide by their stipulations’. This principle of ‘pacta sunt servanda’ does not entail complete freedom of contract but is accompanied by a recognition of the ethical dimension

of a transaction. Freedom of contract is restricted by ethical considerations. The scope of commercial activity in Islamic law is limited by two principles, namely the prohibition on interest (i.e. riba) and on gharar (i.e. an uncertainty in the object of a contract).

6.5.1

Prohibition on interest (Riba)

All schools of Islamic law agree that the taking of interest (i.e. the exchange of money for money with excess and delay), is prohibited. The prohibition placed by Islamic law on interest-based loans is derived directly from the Qur’an in several different revelations, which is the primary source of Islamic law.

Firstly in Sura 30 (Ar-Rum), Verse 39:

“That which you give in usury so that it increases in other people's wealth, will not increase with Allah; but the charity you give desiring the Face of Allah, to those, they shall be recompensed many times over.”

Secondly in Sura 4 (An Nisa), Verse 161:

“And for their taking of usury, that they were prohibited, and consuming the wealth of people in falsehood, for the unbelievers among them We have prepared a painful punishment.”

Thirdly in Sura 2, verse 275–279 provides that:

“Those who devour interest stand like one whom Satan has smitten with insanity. That is so because they keep saying: The business of buying and selling is also like lending money on interest; whereas Allah has made buying and selling lawful and has made the taking of interest unlawful”.

Though, in the Holy Koran, the term Riba has not been defined. However, islamic jurists have defined Riba as taking a monetary advantage without giving a counter value, or more specifically it refers to the “premium” that must be paid by the borrower to the leder along with the principal amount as a condition for the lone or for an extension in its maturity.

In Shariah the term riba is used in two senses:

a)     Riba al nasiah

b)    Riba al Fadl

6.5.1.1

Riba al Nasiah:

The term nisiah means to postpone, defer or wait and refers to the time that is allowed for the borrower to repay lone in return for the addition or the “premium”. Prohibition of Riba al naisah essentially implies that the fixing in advance of a positive return on a lone as a reward for waiting is not permitted in shariah. It makes no difference whether the return is a fixed or a variable precent of the principal or an absolute amount to be paid on maturity.

6.5.1.2

Riba al Fadl:

Riba al Fadl relates to the hand to hand purchase and sale of commodities. The discussion of riba al fadl has arisen from the hadith requring that if gold, silver, wheat, barley, dates and salt are exchanged against themselves, they should be exchanged on the spot and be equal and like.

Apparently it seems to be something very innocuous because even in a barter transaction one would be tempted to sell a given quantity of wheat for a similar quantity of wheat paid and delivered then and there. But on a deeper examination it becomes clear that this prohibition was primarily to close the slightest possiblity of increase on the principle amount which was possible if this back door is left open. For example if a person want to sell salt in exchange of wheat then there is possiblity of riba. As the price of wheat and salt are not same. For this reason there is a possiblity that one party will suffer loss and other party will get some extra economic benefit over the premium. Moreover, if this trade do not took place on the spot then also there is a possiblity of riba. This is because the price of the product might not be same in the whole period. So here also one party will suffer loss; whereas other will gain though uncosciously. For this reason it is said that this hadith is in fact a discouragement to enter into this kind of transaction.

Of the six commodity specafied in the relevant tradition of the Prophet dealing with Riba al Fadl, two unmistakably represent commodity money; whereas, the other four represent staple food items. Hence the jurist have over the centuries debated the question whether Riba al Fadl is confined only to these six items or it can be generalised to include to other commodities; and if so, what should be the reasoning used for this purpose. On the basis of the characteristics of gold and silver as commodity money, it has been almost unanimously concluded that all the commodities used as money enter the sweep of Riba al Fadl. With respect to there four items, there is a difference of opinion. One opinion argues that since all four commodities are sold by weight or measure (Hanafi, Hanbali, Imami and Zaydi) therefore, all items which are so saleable by weight or mesure would be Riba al Fadl. A second opinion is that since all four items are edible, Riba al Fadl would be involved in all commodities which have the characteristics of edibility (Shafi and Hanbali). A third opinion is that since these items are necessary for substence and are storable (without being spoiled) therefore all items that sustain life and are storable are subject to Riba al Fadl (Maliki). The Zahiri school however confines Riba al Fadl to only to six commodities specifically mentioned by the Prophet. It is however the only school and a minority to be so restrictive. A fourth but perhaps a more plausible, explanation is that all the six commodities were used as money in and around Medina, particularly among the Bedouins, and therefore Riba al Fadl would be involved in the exchange of any commodity which is used as money. It is apparent that Joseph Schact, in his Introduction to Islamic Law has adopted the opinion of Hanafi view that the prohibition of Riba al Fadl applies in case of any commodities which can be weighted and measured. The learned Author’s analysis of the prophibitioncan be summarised as follows. Riba will occure if-

a)     An exchange of two commodities of the same species takes place

b)    The commodities can be weight and measured

c)     There is a delay in performance or excess in quantity

d)    Excess in quantity may be allowed if the commodities are from different species but no circumstances delay in performance can be allowed.

If there is any element of riba in any contract, then the contract would be void to the extent of excess amount and the other pert will remain valid.

After discussing both kind of riba it appears that the prohibition on interest-bearing loans is a strict one in Islamic law. Islamic banking practice is therefore limited to financial agreements that do not involve the charging of interest. One of the means of avoiding the charging of interest is the Murabaha contract that is widely used in Islamic banking.

6.5.1.3

Murabaha contract:

A Murabaha contract can be defined as the sale of a commodity for the price at which the vendor has purchased it, with the addition of a stated profit known to both the vendor and the purchaser. It is therefore at its most basic an ordinary contract of sale.As such it must satisfy all the usual conditions of a regular contract of sale.

A Murabaha contract is not a loan given on interest but a sale of a commodity for a deferred price, which includes an agreed profit, added to the cost. In order to make a Murabaha contract distinguishable from an ordinary, interest-bearing loan the following essential conditions have to be fulfilled.

1)     The Murabaha contract must fulfil all the usual requirements of an ordinary

          contract under Islamic law.

2)     The institution providing the finance to the client must purchase the commodity in its own name from a third party.

3)      At the point of purchase the commodity must come into the possession of the institution and the commodity must remain in the risk of the institution until the commodity is sold to the client.

In addition, the Murabaha must comply with the basic rules of a contract of sale under Islamic law.

a)     The object of the sale must be property (i.e. an object having a legal use).

b)    The commodity must be in the ownership of the seller at the time of sale (i.e. it must be in the physical or constructive possession of the seller when it is sold to another person). Constructive possession means that the commodity has not been physically delivered but has come into the control of the seller and all rights and liabilities in the commodity, including the risk of its destruction or disappearance, are borne by the seller.

c)     The delivery of the commodity must be certain and not dependent on contingency or chance.

d)    The price must be certain at the time of the contract.

e)     ‘In the event of an intrinsic defect existing in the object, the buyer has the

          unconditional right to rescind the sale. This right (khiyar al-‘ayab) cannot be           ceded by a contractual stipulation, any such stipulation would be null and void.’

The above requirements are regarded as essential for the validity of a Murabaha

contract since the contract would otherwise be indistinguishable from an ordinary

interest bearing loan which, of course, is invalid under Islamic law.

The rules formulated by the religious supervisory boards of the main Islamic banking organisations insist that the bank can only legally sell the object of the Murabaha contract to the client once the bank has received it. Nicholas D. Ray, in his book Arab Islamic Banking and the Renewal of Islamic Law (Graham & rotman, 1995) found that the rules of the International Association of Islamic Banks stipulate that ‘Selling is postponed until the bank gets actual ownership and possession of goods and becomes responsible for any defects therein’. The same applies to the Faisal Islamic Bank of Egypt, the Islamic International Bank for Investment of Development as well as the Second Conference of Islamic Banks.

In a recent decision the Supreme Court of Pakistan defined the essential characteristics of a Murabaha agreement.

[...] Murabahah is a sale and not a financing in its origin. It must, therefore, conform to all the basic standards of a sale. It may be used only where the client of the bank really wants to purchase a commodity. The bank must purchase it from the original supplier after taking into its ownership and (physical or constructive) possession sells it to the client. All these elements must be visibly present in a valid Murabahah with all their legal and logical consequences, including in particular, that the bank must assume the risk of the commodity so long as it remains in its ownership and possession. This is the basic feature

of the Murabahah which makes it distinct from a interest-based financing and once it is ignored, though for the purpose of simplicity, the whole transaction steps into the prohibited field of interest-based financing.

(M. Aslam Khaki v Muhammad Hashim PLD 2000 SC 225, at pp.748–749, per Justice Maulana Muhammad Taqi Usmani.)

The ownership of the goods by the bank for the interval between the two sales can be identified as the most important difference between an interest bearing loan and a Murabaha agreement. During that interval the bank bears the risk that the goods may be destroyed or harmed, or develop a defect. In practice, Islamic banks will procure insurance cover for the period during which they bear the risk in the object of the Murahaba contract.

Compensation for late payment is permitted in modern Islamic banking practice as long as it does not amount to the charging of interest. A contractual provision for the payment of liquidated damages which is calculated on the basis of an annual or daily interest would obviously be prohibited since it amounts to riba (i.e. interest) which is, as explained above, repugnant to Islamic law. In practice, damages for late payment by the purchaser can be contractually provided for by agreeing a pre-determined (i.e. contractually fixed) price for the object of the Murabaha contract if payment takes place after a certain settlement date. This price will be higher than the price payable for the object if payment is effected on the due date.

Other restrictions include the prohibition of an exchange of an obligation for an

obligation and the prohibition of a delay in the exchange of goods.

The essential ingredients of a contract are the offer and the acceptance which must be made in the same meeting (majlis). The offer can be withdrawn as long no acceptance of it has taken place and the majlis, or meeting, has not been terminated. The object of the contract must be specified in order to prevent speculation or interest. A classic example for the specificity requirement is the prohibition on the selling of dates which are still unripe, to be delivered when ripened. Since it is unknown when they will ripen the contract is void. For the same reason Islamic law prohibits gambling, although some of the present day civil codes of the Middle East, for instance the Jordanian Civil Code, allow gambling on racecourses.

Contractual liability arises out of the non-performance of a contractual obligation or the negligent performance of a contract. Liability and obligation are extinct as soon as the contract is properly performed or the debtor is ‘acquitted’ (i.e. the creditor waives his right to the performance of the contract unconditionally). An amicable settlement is also possible, as is the renegotiation of the contract. Another way to extinguish a contractual obligation is to transform it into a new one by way of assignment. A debt owed can, for instance, be assigned to satisfy a claim.

6.5.2

Uncertainty in the object of a contract (Gharar)

Literally Gharar means fraud, the word gharar has often been used to mean risk, uncertainty and hazard. In Islamic law of contract, gharar means uncertainty and ignorance of one or both parties over the substance, attributes of the object of sale, or of doubt over its existence at the time of contract.

For Gharar to have legal consequence it must fulfil four conditions:

a)     It must be excessive and not trival: There is a consensus of opinion that gharar to have effect it must be excessive. Excessive gharar may originate as Ibn Rushd has explained, in ignorance and lack of information over the nature and attributes of an object, a doubt over the availability and existence, doubt over its quantity, or want of exact information concerning price, unit of currency in which the price is paid and the terms of payment. It may concern with the time of payment or prospect of delivery. On the other hand traffling gharar is one which is found in nearly all contract but does not feature prominently, in other words which is negligible. This is not so fundamental as to likely give rise any dispute.

b)    It occures in case of cominutatuve contract ( a contract in which each of the contracting party gives and receives and equivalent): therefore gharar does not occure is case of obligations crated unilaterally e.g declaration of wakf.

c)     It affects the subject matter fo the contract directly, for example in a cow it is the animal itself and not its yet to be born calf.

d)    No public interest would be served by the entering into such contract if such a contract is made for the purpose of public interest, then even if there is excessive gharar the contract would be valid. This is because satisfying the people‘s need takes priority by virtue of the quranic principle of removal of hardship (raf cal haraj). For this reason salam contract (advance purchase) and istisna (manufacture contract) contract have been made valid regardless the gharar element therein simply because of the people’s need for them.

A gharar is prevented in the following circumstances:

1)     When the parties have adequate knowledge of the counter value they intend to exchange

2)     When the object is known to exist and is obtainable

3)     When its quality, quantity and attributes are identified and it can be deleivered.

Apart form these, despite gharar, Islamic law recognizes two kindes of contract namely competition for horse ride and competition on islamic quiz.

6.6

Pre-emption:

In contracts for the sale of real property the right of pre-emption (Shuf’a) may arise. Shuf’a means that in certain cases where property is sold a third party may replace the vendee by paying to him the amount which the vendee paid for the property. The right to pre-empt arises first when property is jointly held. Where one of the co-owners sells his share the other co-owner may repurchase the property from the purchaser. Also, where a person is a joined owner of an easement attached to the property sold, he has a right to pre-emption. In Hanafi law a person whose property is immediately adjacent to the sale property has a right to pre-empt. The Hanafi law giving the neighbour a pre-emptive right is preserved in the Egyptian civil code. In many cases where Hanafi law applied, the right of a neighbour was thwarted by the vendor making a gift to his purchaser of choice of a narrow strip of land adjacent to his neighbour’s property and then of course selling the purchaser the remainder of the property. This device was effective as the right of pre-emption does not arise over gifted property. A person

wishing to exercise his right to pre-emption must act immediately upon learning

of the sale. He must exercise his right with due formality and in the presence of

witnesses.

6.7

Gift

Every sane Muslim who has attained majority (with the exception of women in Maliki law as explained above) may dispose of his entire property by gift. A transfer of property by one person to another constitutes a Hiba (i.e. a gift), if the transfer of the property is made immediately, is accepted by or on behalf of the other person and nothing is given in exchange for the property so transferred. With the exception of Maliki law a gift is completed on acceptance by the donee and transferred to him. The Malikis, however, consider that the gift is completed before the handing over is made. It is essential for the validity of a gift that the donor should divest himself completely of all ownership of and control over the property which is the subject of the gift. However, as explained in the chapter on succession, certain conditions exist in respect of death-bed gifts: a gift made by a Muslim during a death-illness cannot take effect beyond a third of the estate nor can it be made in favour of an heir, unless the other heirs give their consent to the gift after the donor’s death.

6.8

Law of torts

You have seen in the chapter on penal law that many crimes are treated in a fashion that is more similar to torts in English law than it is to criminal law. The law of civil liability for tortious actions is not well developed in Islamic law. Perhaps the basis of the law lies in the Qur’anic verse ‘There is no dhara [prejudice] in Islam’. The basic principle of the Islamic law of torts is that compensation is only available for actual damage. No damages in traditional law can be awarded for moral damage, like injury to one’s reputation or for pain and suffering. However, many codes in the countries

of the Middle East do allow damages to include compensation for pain and suffering. The courts in Saudi Arabia, however, still apply traditional law and, besides refusing compensation for future loss, also refuse moral damages. Various regulations in the Kingdom do provide for compensation to be awarded for pain and suffering but such compensation can only be ordered by a tribunal appointed to enforce the regulation itself, like the Labour Court which hears cases of work-related injuries suffered by

workers.