CAVEAT EMPTOR VERSUS KHIYAR AL-'AYB Muhammad Ma'sum Billah It is an obligation in any commercial (sale-purchase) transaction that prior to entering into an agreement, the seller is to allow the buyer to inspect the goods, in order to ensure that they are free from any unknown defect. Such an obligation on the seller is known in common law as caveat emptor.' The doctrine, in other words, gives the buyer a right to determine whether the goods to be purchased are free from any defect before the actual agreement is completed, so as to protect him from any future risk from a defective product. Thus, this doctrine implies that the buyer, after such inspection or investigation of the fitness of such goods, will shoulder the responsibility of any risk on the goods after the con- clusion of the said sale and purchase agreement. Jowitt's Dictionary of English Law explains that a buyer must be on the alert, for he has no right to remain in ignorance of the fact that what he is buying belongs to some- one other than the vendor and that any buyer who fails to investigate the vendor's title does so at his own risk.2 However, caveat emptor does not imply any obligation on the seller to point out a defect in the goods to be sold.3 He is, therefore, only obliged to allow the buyer or purchaser to investigate the goods himself and nothing more. The buyer, in h s case, can decide before any sale and purchase agreement whether to carry out such an inspection on the goods to be sold. The buyer is then at liberty whether to exercise this means of protection against any defective goods! Islamic law also provides such a safeguard against any defective products or goods in a sale and pur- chase agreement. The Islamic doctrine which allows such safeguard is called in Islamic commercial terminology khiyur al-'ayh. Thus, under Islamic commercial law, the seller, in a sale and purchase agreement, is Muhammad Ma'sum Billah is ufliliurrd with K u r d Agrncies. UIA, Mukuysiu. Billah: Caveat Emptor vs Khiyar al-'Ayb 209 under the obligation to allow the buyer to inspect or examine the fitness of the goods to be sold not only before the conclusion of the agreement but also after it. If there is any defect in the goods, regardless of whether this defect is discovered before or after the conclusion of the agreement, Islam grants the option (khiydr) to the buyer either to continue with the agreement or to rescind. Imam Nawawi defines khiydr aZ-'ayb in the fol- lowing words: A purchaser has a right of opinion on account of defects in the thing bought, of which he has become aware only after taking possession, but which existed previously? In consideration of the definition given by Imam Nawawi above, the right of option regarding whether to continue with the sale and purchase contract or not (after the inspection and investigation by the buyer of the fitness of the goods sold once the contract has been concluded) is clear, while the right of option before the agreement is vague. However, it can be implied that the Islamic doctrine, which allows the buyer the right to investigate the fitness of the goods sold (and thus giving him the right of option, after the conclusion of the agreement) also allows such rights of inspection and option to be exercised by the buyer before the contract is concluded. Hence, as I have already mentioned it earlier, the Islamic doc- trine of khiydr al-'ayh ensures that the seller must give the buyer an opportunity to inspect the goods and the option whether to continue with the sale and purchase agreement or not, both before and after the con- clusion of the said contract. This article examines both how caveat emptor and khiydr al-'qb pro- tect the rights of purchasers in sales agreements and how these doctrines differ. The article proposes solutions to some of the problems that arise in commercial dealings. Caveat Emptor: A Principal Scenario It is an obligation on the seller under the common law principles to allow the buyer to inspect the goods to be sold before entering into a sale and purchase contract. In other words, the buyer has a legal right to cany out any inspection or investigation on the goods to be sold in ensuring that the goods are fit and free from any hidden defect before concluding the agreement. Such right and obligation is embodied in the common law doctrine of caveat emptor, which found its origin in the early 17th cen- tury in the case of Chandelor v Lupos.6 In this case, it had been decided that the defendant, who was selling his store to the plaintiff, was not liable for the defect of that store as the plaintiff was at liberty to inspect the store so as to ensure that the store to be sold was, in fact, in accor- dance with the expected quality before the conclusion of the said agree- ment7 The c o k e , in this celebrated case, paved the way to the birth of 210 The American Journal of Islamic Social Sciences 14:2 a common law doctrine called caveat emptop which gave the buyer the right to inspect the goods to be purchased to ensure that they are free from any hidden defect before entering into a binding sale and purchase agreement. Sir Josiah Child, in A New Discourse on Trade, made an observation in 1693 on the development process of this doctrine; he said that "no man can be cheated except it be with his own cons en^"^ It implies that the buyer is not supposed to be cheated in a sale and pur- chase contract because the common law doctrine of caveat emptor has given him full liberty, before concluding the said contract, to ensure that the goods to be sold are free from any unknown defect and meet his expectations. Hence, if a defect is discovered in the goods only after the contract has been concluded (due to the buyer's careless prepurchase investigation) the responsibility for that defect will be shouldered by the buyer himself. Cheshire has pointed out the importance of buyers inspecting goods carefully before proceeding to conclude the sale and purchase contracts as such right of inspection of goods before the actual contract exists under caveat emptor. The buyer, after being given this right, has no right to complain of any defect found in the goods after the sale and purchase contract has been concluded, because he should have used his own judgment in assessing the goods to be sold to him. Furthermore, the buyer should not have expected the seller to depreciate his own wares.'O In Keates v Lord Cadogan," the plaintiff (tenant) brought an action against the defendant (landlord) for a defect found in the agreed house. The court, however, set aside the action in reliance of the doctrine of caveat emptor and held that the tenant was at liberty, before signing the contract, to inspect the house so as to ensure that it was free from any defects; should any defects be found after the conclusion of the sale and purchase agreement (due to the carelessness in which the inspection has been conducted earlier by the tenant), the tenant will shoulder such risks of the defects. l2 The general principles which govern the doctrine of caveat emptor could be highlighted as follows: (a) The seller is under an obligation to allow the buyer to inspect the goods so as to ensure that they are free from any defect before the con- clusion of the sale and purchase contract; (b) The seller is under no obligation to disclose to the buyer any exist- ing defect in his goods and, hence, the seller has a right to remain silent; 3 (c) The buyer has no right to return the goods or seek damages for any defect found in the goods after the conclusion of said sale and purchase agreement. This is because, as far as the doctrine of caveat emptor is con- cerned, the buyer has been given full right and liberty to inspect the goods before the agreement is concluded and any defect found after the Billah: Caveat Emptor vs Khiya al-‘Ayb 21 1 conclusion of the said agreement due to careless inspection on behalf of the buyer will not bind the seller in any manneq14 and (d) The seller is also under no duty to inform the buyer of his mistake in his inspection of the quality of the goods to be ~01d.l~ The exceptions to the general principles are as follows: (a) The buyer, after the agreement, has the right to rescind the sale and purchase contract and return the goods purchased if the defect is pur- posely concealed by the seller before the agreement. Hence, the seller shoulders full responsibility for any fraud made purposely by him as regards to the quality of the goods to be sold. Lord Kenyon in Mellish v Motteaux16 opined that the seller is liable when he “had sold ‘with all faults’ a brig which turned out, on examination, to be utterly unseawor- thy.”17 paley meanwhile observed that “it is dishonorable to sell any- thing without revealing any defect known (concealed purposely by) to the seller.”’* A. G. Guest remarked that if a seller of the goods deliber- ately conceals any defect in the quality of the goods, the seller should be found guilty of mi~representation.~~ Such fraud or misrepresentation in concealing any defect of the goods to be sold by the seller could be done in various ways such as by artificial suggestions, words, and promises or by fraudulent acts or omissions such as active concealment of the defects.2o (b) Even though the seller is not bound to inform the buyer of the actu- al defect of the goods to be sold, he may be under an obligation to do it if so requested by the buyer. If the seller fails to disclose the actual defect upon such a request, the seller may become liable for misrepresentation should the defect be discovered after the agreement. (c) The seller is bound to disclose the defect of the goods which are represented by the seller intentionally if the seller thinks that the buyer has made a mistake as to the actual quality of the goods?l (d) The seller is also under the duty to disclose the defect of the goods to the buyer before the sale and purchase agreement if the seller has a fiduciary relationship with him.22 Such relationships include the rela- tionship between a solicitor and his client, a trustee and his cestui que trust, a spiritual adviser and his devotee, a doctor and his patient, a woman and her confidential managing agent, parents (or guardians) and their child, a creditor and a debtor:3 and a fianc6e and her f i a n ~ t k , ~ but not a husband and his ~ i f e . 2 ~ Caveat Emptor: Its Impact On the Following Aspects Defective Products It is undeniable that the birth of the caveat emptor doctrine in the early 17th century served as a starting point in protecting the rights and inter- ests of society against defective goods and products. This is because the doctrine obliges the seller to allow the buyer, before the contract, to 212 The American Journal of Islamic Social Sciences 142 inspect the goods to be sold, ensuring that the goods meet the buyer‘s expectations for CoIlSumption and am free from any unknown defect. The nature and spirit of this doctrine spread out in the commercial field. previously, the doctrine was applied in simple sale and purchase contracts that imposed on the seller the obligation to let the buyer inspect the goods to be sold so as to ensure that they were free from unknown defects. Now, we find the spirit of this doctrine being applied on a much bigger scale involving manufacturers and consumers. Hence, consumen have the right to reject the goods sold to them and rescind the contract based on the defect found in the products after the sale agreement, if the manufacturers purposely concealed these defects. The affected con- sumers may thus claim for damages.% The UK ~ a w Commission even held that manufacturers or producers should, as a general rule, bear the risk of and be strictly liable for injuries caused by their defective prod- u c t ~ . ~ If, for instance, the buyer or consumer orders a specific quantity and quality of goods from the manufacturer, the manufacturer is under an obligation to prepare the goods exactly in accordance with the speci- fications ordered. Therefore, once the goods are delivered the consumer or buyer has a right to inspect the goods so as to ensure that they fulfii the requested specifications and standards. If not, the consumer has the right to rescind the contract and claim damages?8 Howard Abbott views that “a product should be r e g d as defective if it does not comply with the standard of reasonable safety that a person is entitled to expect of it” 29 Consumer Protection We have already seen how the doctrine of caveat emptor plays a role in protecting buyers and consumers against defective products. It may be summed up as follows: (a) Prior to the sale and purchase agreement, the buyer has the right to inspect the goods in order to ensure that it is free from any unknown defecL30 (b) In a sale and purchase agreement, if the seller purposely conceals any defect in the goods from the buyer, the buyer may, upon realizing the defect after the conclusion of the contract, rescind the contract and the seller may be found guilty of misrepre~entati011.3~ (c) If the seller is requested by the buyer to disclose any defect of the goods to be sold prior to the conclusion of the sale and purchase agree- ment, the seller must do so. If he fails to give such disclosure, or delib- erately gives any misinformation on the quality or quantity of the goods, the buyer may rescind the agreement upon realizing the defect of the goods after the conclusion of the ~ ~ n t r a c t . ~ ~ (d) When the buyer has a fiduciary relationship with the seller, the sell- er (regadless of any request from the buyer to disclose any defect of the goods) is obligated to disclose any defects. Should he fail to do so, the Billah: Caveat Empmr vs Khiyiir d-‘Ayb 213 buyer has the right to return the goods and rescind the contract even if the goods were found to be defective after the conclusion of the contract. Since the doctrine caveat emptor first gained its footing cenhuies ago, there have also been various laws and regulations enacted for the pro- tection of consumers’ legal rights and interests, including the buyer’s right to inspect the goods so as to mure that they fulfill cetaln expec- tations and are not defective. The United Kingdom has the Unfair Contract Terms Act of 1977 (at g 4,5,6, and 12)?3 and the Consumer Protection Act of 1961 and 1974, the Fair Trading Act of 1973?4 In Malaysia 8 17 and 18 of Thp Contract Act of 1950 protect the consuma (buyer) from b e i i cheated by the seller by way of fraud or misrepre- sentation. The Sale of Goods Ordinance of 195735 (at 6 15, 16, 17, and 41) also provides protection of the consumer in the following ways: (a) If there is an agreement for the goods to be sold by description, or by a particular purpose of the buyer on the goods known to the seller or the goods agreed by sample, in all circumstances the goods should cor- respond a~cordingly;~~ (b) If there is a delivery of goods to the buyer which the buyer has not examined yet, the buyer has the right to examine them before a legal acceptance?’ The introduction of the doctrine of caveat emptor has also propelled the emergence of other independent and social bodies around the world which are concerned with the protection of the comumer‘s rights and interests against defective products. In Malaysia, the Consumer Association of Penang (CAP) is a good example. Insurance for Goods Many insme companies have recogmed irwmnce policies aimed at protecting society from being harmed by defective products. There are mainly two types of pokk: property insurance and liability insurance. Let us now iookat the kurnstmces in which these pcdkies are used: (a) If the buyer fails to inspect the gods properly before the actual agreeneat despite being given ample opporhlnity to do so, he may not rescind the s& and purchase agreement or return the goods (if the goods are later found to be defective) because the delgy of h e recovery is the result of his own careless inspection, making the buyer, ~~II&QR, solely mponsible for such a defect. However, if the buyer a k a d y entered into a property insurance policy, such instrrance policy may protect him from any losses caused by the defective products or goods purchased. (b) In the case whereby the seller deliberately conceals any defects in the goods, or, despite a request by the buyer to do sob Ws to disclose the defects of the goods, or, in a fiduciary relathship between the seller and the buyer, the seller fails to dis;dose the defects to the buyer prior to the sale and purchase agreement, the seller is guilty of fraud or misrepresen- tation and will be liable for such defects even if the defets are discov- 214 The American Journal of Islamic Social Sciences 142 ered by the buyer after the contract has been concluded. However, if the seller holds a liability insurance policy, he could be protected from the loss over the said liability. It is now common in the United States to use insurance policies to pro- tect the buyer or the seller in the above two situations. In Malaysia and Third World countries, the practice of such coverage is rapidly growing. Warranty of Goods Another measure aimed at protecting the society from defective prod- ucts appears in the form of warranty of goods. Such a warranty, which is extremely popular in the sale and purchase of any electrical goods, offers the consumer or buyer a warranty for a certain specified period, where- by, should there be any damage or defect to the goods purchased, these defective goods could be repaired. Among the main features in a war- ranty of goods are the following: (a) The seller has an option, not an obligation, to give a warranty for the goods sold; (b) A warranty does not imply any right of the purchaser to return the goods or rescind the contract despite whatever damage or defect it might have; it only implies the right of the purchaser to have the defective or damaged goods nqmkd by the seller or manufacturer; (c) In a warranty, the seller must be notified about the damage or defect within the agreed specified period. A quick glance through the above main features of a warranty of goods will reveals that there are some differences between the way the doctrine of caveat emptor protects the buyer/consumer from defective goods or products and the approach adopted by a warranty. First of all, while the doctrine of caveat emptor is always available at common law to protect the buyer from defective goods once he enters into a sale and purchase agreement with the seller, the right of the buyer for a warranty of the goods p h a s e d is not absolute but only conditional, depending on whether the seller wishes to provide it. Second, cuveat emptor implies the right of the buyer to return the defective goods and rescind the con- tract of sale, while a warranty does not imply such rights but only the right of the buyer to have the defective goods rem by the seller or manufacftrrer. Third, as far as the common law doctrine is concerned, such protection of the rights of the consumer or buyer is for a very long period, while a warranty protects the buyer for a shorter specified peri- od. However, there is an exception, as far as warranty is concerned. Hence, in an exceptional situation whereby the seller deliberately and purposely conceals &'defect that is later discovered after the conclusion of the sale and purchase agreement, or when the seller has a fiduchy relationship with the buyer, the buyer has the right, regardless of the warranty, to mcind the agreement and return the defective goads to the seller. Billah: Caveat Emptor vs Khiyu al-'Ayb 215 Caveat Emptor: The Justification No law or regulation is enacted and no principle is introduced unless there is ground for justification, and the common law doctrine of caveat emptor is no exception. As a whole, the doctrine is aimed at the pmtec- tion of the rights and interests of the society against the problems faced as the result of the sale of defective products. Therefore, the grounds for justifymg the application of the said doctrine could be summed up as fol- lows: (a) In a case whereby the buyer is not given a chance to inspect the goods to be purchased (in ensuring that they are fnx from any defect before the conclusion of the contract), and the buyer later discovers any defect on the goods that have been purchased, he will smly bring an action against the seller in order to return the defective goods and rescind the contract and claim innocence. Since (without the right of the buyer to inspect the goods before the contract is concluded), there is no proof of the buyer's claim, this situation could lead to a very complex conflict between the seller (who claims to be innocent) and the buyer (who, indeed, has suffered a loss by buying the defective goods)?* (b) The common law doctrine will also eventually save both disputing parties from unnecessary excessive litigation because it provides useful guidelines to expedite a settlement. (c) The doctrine also acts as a useful reminder to the buyer to be more careful and responsible when buying goods.4o (d) The doctrine of caveat emptor also acts as a useful reminder to the seller to act honestly and justly in selling its products or goods. As Paley puts it: It is dishonorable to sell anything without revealing any defects known to the seller.4l Comment In spite of the above grounds which have been put forward in justify- ing the application of the doctrine of caveat emptor, one aspect of it may still be criticized, i.n, the fact that the seller has the right to keep silent and not to disclose any existing defect in the goods to the buye#* while giving the buyer full right to examine and inspect the ppexty before the conclusion of the sale and purchase a p m e n t . It might still be slightly unfair of the seller, because the buyer may negligently overlook any defect which is nahdly hidden or unseen. As such, it is sjIlcerely hoped that this common law doctrine be reviewed so as to eliminate any ele- ment which might be detrimental to upholding justice in society. 216 The American Journal of Islamic Social Sciences 142 Islamic Jurisprudential Response To the Doctrine of Caveat Emptor The nature of the common law doctrine of cmea emptor is that the buyer is allowed to examine and inspect the goods to be pwchased before entering into a sale and pmhase agreement so as to c d m that the g& are free from any unknown defect. The general rule of that principle also states that the s e k is not bound to discloje my defect in the goods to the b~yer.4~ While agreeing on the ~ t u l e of the common law doctrine in allowing the buyer the right of inspection of the goods before the sale, Islamic law does not approve that, as a general rule, the seller is under no obligation to disclose the defect of the goods before the agreement. This is because Islamic law determines that, for the purpose of upholding justice in a commercial transaction, the seller is under an absolute duty to lose whatever defects the goods might have before the conclusion of the sale and purchase agreement in all circumstances and at all times, regardless of whether the parties to the agreement have any fiduciary relationship or whether such disclosure of the defects is requested by the seller. In fact, thexe is an implied warranty in Islamic law that the thing sold should be free from defect.& The MejeZfa also clarifies this point: An accent defect is a fault which existed in the thing sold when it was in the hands of the ~eller.4~ This argument is further enhanced by the following holy tradition: Uqba b. Amir said “it is illegal for one (seller) to sell a thhg if one (seller) knows that it has a defect unless one (seller) informs the buyer of that defect.”* The Prophet himself had warned against selling goods whose defects were not disclosed: If anyone sells a defective article without drawing attention to it he will remain under Gal‘s anger, or the angels will continue to Curse Following the above Islamic principle of an absolute obligation on the seller to disclose any defects of the goods to be sold to the purchaser, mother Islamic principle states that the buyer or pwhaser shall have the right of inspection of the goods before and after dre conclusion of the sale and purchase agreement so as to ensure that they am not defective. This meam that, in accordance with Islamic principle, the buyer or purchaser, upon discovering through his inspection any defect on the goods, has the right to return the defective goods to the seller and rescind the contract both before and after its conclusion, in all circumstances. Hence, in B i l k Caveat Emptor vs Khiyat. al-'Ayb 217 Islamic Law, the buyer or puchaser does not have to wait for any of the exceptions under the common laups in order to have his right of return- ing the defective goods and tenninating the contmct after the agreement of sale is being concluded. The Islamic law principles Seem to be more practical in ensuring the establishment of justice and fairness in commercial transaction than the common law principles. Indeed, AUah had reminded His servants: 0 ye who believe! Eat not each other's property by m n g f d means. . . (429) honesty in transactions: The Holy Prophet remarked on the importance of truthfulness and If both parties spoke the truth and described the defects and quantities (of the goods), then they will be blessed in their trans- action, and if they told lies or concealed anything, then the bless- ing on their transaction will be blotted Khiyilr aC'Ayb: The Principal Scenario As we have already highlighted earlier, the doctrine of khiycfr ul-'qb is one of the legal methods under Islamic commercial dealings which protects society from the problems arising from purchasing defective products. Generally, the Islamic doctrine of khiycfr al-'uyb and the com- mon law doctrine of cuveut empfor share some similarities in the sense that both doctrines aim at protecting society from problems smunding the sale of defective products, and the buyer has been given the right of inspection of the goods so as toensure that the goods are fit and free from any defects. Despite these two general similarities, we have seen how the Islamic doctrine adopts a more practical approach in holding that the buyer has the right of inspection (to ensure that the goods are not defec- tive) and the right of option (either to continue with the contract or rescind it) both before and after conclusion of the sale and purchase agreement. On the other hand, we have seen that the common law doc- trine adopts a more rigid approach in determining that the buyer can only exercise his right of inspection and option before the contract is con- cluded, with some exceptions determined by the common law principle. The Islamic doctrine of khiycfr ul-'uyb. hence, allows the buyer the right of inspection of the goods (to ensure its quality, etc.) and also the right of option (whether to continue with the contract or o t h e h ) both before and after the contract of sale and p h a s e is being concluded. In fact, Islam gives an implied condition hat all goods sold (or to be sold) should be free from any (bidden) defects.5o The buyer is then authorized, by the Islamic principle of khiycir d-'uyb, to exexcise the right of option 218 The American Journal of Islamic Social Sciences 142 (either to continue with the contract or rescind it)51 upon the discovery of any defect on the goods, regardless of whether that discovery happens before or after the conclusion of that contract of sale and purchase?2 The Mejellu terms such option as khiydr ul-‘uyb, or “option for defects.”53 The Legislative Rules of the Doctrine of Khiyar a/-‘Ayb In practice, there are certain conditions to be met before the party exer- cises the option for defect (khiyiir ul-‘uyb). These conditions are as fol- lows: (a) The existence of the defects on the goods should be before or at the delivery of the goods. 54 It is thus immaterial whether the defects in the goods exist before or after the sale-purchase agreement so long as the defects existed before the delivery of the goods or when the goods were in the hands of the seller. The Mejellu reads: a defect coming recently to existence after the sale and before the delivery while the thing is in the hands of the seller, . . . is a good ground for re~cission?~ (b) The purchaserbuyer should not have been aware of the defects at the time of the agreement; 56 (c) There should not be any stipulation by the seller for waiving the lia- bility of the seller for the defects;57 (d) The defects must have existed and been proven at the time when the purchaser wishes to exercise the option (either to accept the goods or reject them);5* (e) There should not be any agreement by the buyer in taking all the responsibilities for the defects of the goods, thus, exempting the seller from any liability arising from those defe~ts.5~ There are also certain circumstances whereby the buyer loses his right of option even though the goods are discovered to be defective: (a) If the seller gives a prior notice to the buyer about the defects of the (b) If the seller stipulates an exemption clause to the buyer, prior to an agreement, exempting him (the seller) from any liability arising from the defects of the goods sold.6l On the contrary, if the seller, upon knowing the defect and/or concealing it, purposely stipulates such clause, it will not exempt him from the liability of that defect; hence, the buyer will not have his right of option renounced. Imam Malik referred to this when he said: he who sells (with an exemption clause from the defects of the goods) will not be responsible for any defect unless he knew about that defect and concealed it, and if he did know of the defect of the goods and purposely concealed it, the earlier g0ods;rn Billah: Caveat Emptor vs Khiyar al-'Ayb 219 exemption clause shall have no effect and he (the seller) shall still be responsible for that (c) If the buyer stipulates prior to an agreement that he is solely respon- (d) If the buyer accepts the defective goods upon knowing it;@ (e) If the buyer exercises ownership over the goods even after know- ing the defects on themF5 such as eating up any portion of the goods (if in the form of eatable goods),66 keeping the goods in possession for an unreasonable period of b e t 7 inhabiting, repairing, or demolishing any part of the goodsF8 or disposing it;69 sible for any defects of the goods bought;63 (f) If the defect happened in the possession of the buyer?" Generally speaking, in accordance with the doctrine of khiydr ul-'uyb, the buyer, upon discovery of the defect in the goods, may exercise the option of either continuing with the contract and accepting the defective goods as is or rescinding the contract and returning the defective goods to the seller, without having any right to seek compensation for it.71 However, there are certain exceptions to the above situation whereby the buyer may seek compensation. These exceptional situations are as fol- lows: (a) In a case whereby the defect happened while the goods were in the possession of the buyer and he afterwards leam that there was another defect that existed while the goods were in the possession of the seller;72 (b) In a situation whereby the good sold is cloth or something of sim- ilar nature, and the buyer discovers a defect only after the cloth has been cut;73 (c) In a case whereby the good sold is flour or some other thing of sim- ilar nature, and the buyer discovers the defect after taking it into his pos- sessi0n.7~ Khiyar a/-'Ayb: Its Impact on the Following Aspects Consumer Protection There is not a single Shari'ah principle that does not guarantee the pro- tection of human life, and the present Islamic doctrine of khiydr ul-'uyb is no exception. This doctrine not only safeguards the purchaser from the implications of the sale of defective products before the agreement is being concluded, but it also guarantees similar protection after the con- clusion of the sale and purchase agreement. The purchaser or buyer then has the right, under this Islamic doctrine, to exercise his right of option (of either continuing with the contract of sale or not) upon the discovery of the defect on the goods, regardless of whether the discovery takes place before or after the conclusion of the said agreement. Under the practical application of this doctrine, we find that the rights and interests of the buyer, with respect to the sale of defective products, 220 The American Journal of Islamic social Sciences 142 ate d l y piesewed and protected. This protection against such sale of defective goods is further enhanced by the fact that, in Islam, it is implic- it that any goods sold should be free of any defect unlmown to the The vital role played by this dochine in the ptection of society from the effects of the sale of defective products is summed up as follows: (a) The ponchaser or buyer has the implied right to inspect the goods prior to an awment and confirm whether the goods to be pmhased a (b) After the delivery of the goods by the seller, if the consumer (pur- chaser) discovers any defect in the good which existed while it was in the hands of the seller, the consumer has the ri t of option to reject the item (c) If the seller put an exemption clause of no responsibility for any defect in the goods while the defects we= known to him or d e d by him purposely, the exemption clause in the situation has no effect and, thus, the consumer is not bound by the exemption clause and has the right of option to reject the goods or to take them. Imam Malik said: . . . who sells. . . without a liability agxtxment, in that he is not responsible for any defect in what he sold unless he knew about the fault and concealed it. If he knew that there was a fault and concealed it, his declaration that he was free of responsibility doesnotabsolvehim.. .7* buyer?5 flee from unknown defects;76 purchased or to take it at the agreed price. R Defective Products It is an implied tern that any goods sold should be free from defects unknown to the buyer.m Relying on this provisim, the b~lyer has a legal right to pmtect himself from receiving a defactive pduct. Khiyir ul- ‘uyb plays a vital role in protecting the buyer from being deceived by defective paducts in the following manners: (a) The pmhaserhas a right to inspect the goods (to be phased) prior to an agnement and toconfinn whether the goods are free fromany defects.a (b) It is a legal duty of the seller or manufactu~er to notify the buyer of the goods before the conclusion of the sale and pmhase agreement. UqLm bin Amirsaid in one traditim It is illegal for one (seller) to sell a thing one (seller) knows has a defect Unless one (seller) infoxms the buyer of that ~ e c t . 8 ’ (c) If the buyer discovers, after the conclusion of the agmement, the defect of the goods and pmves that the &fact occumd in the hand ofthe seller (or w), the buyer has the right of option either to reject tbe &fective goods or to take it for the agretd pice.= Billah: Caveat Emptor vs KhiyW al-‘Ayb 221 (d) If the seller (or filamuEacmr) stipulates to the buyer an exemption &use prior to an rtgreernent exempting him from my liability for defects of fhe goods to be sold, while knowing about the defects and concealing tham pucpcmb, h i t exemption clause will not exempt the seller from liability. Emam Mahk cliuSed this point: who sells with an exemption clause exempting himself (the sell- er) from liability, of my defect of the gloods will not be respon- sible for that defect unless he knew abut it & concealed it. If the seller knew and concealed the defect, such lypl exemption clause will not exempt him fmm the liabiIity of such defective pFoducts.83 (e) For the sake of further protectian of the buyefs rights and inteTests against the problems of the d e of defective goods and products, it is also the duty of the selier to tell the truth and not to conceal whsrpever defect the goods might have. The Prophet said if they (the seller or the buyer) tell a lie and d anyding (in ehe tramslacthn) ehe hkssing m their tsmactim will be blotted 0ut.U Such is ahe vital mk that the Islamic doctrine of khiyiir al-‘ayb plays in sheltering society fromthe proMuns arising h the sale of defative goods and poducts. However, besides this doc*, Jslam also has other measllns that protect victims. These protective measms, legalized by the shari’ah, ale described below. Insurance for Goods inclined to accept the principle of an inswince policy. While accepting the fact that an insurance policy is in line with the Shari’ah concept of helping om another with rightmusmss and piety and that it dots not go against any injunctions oftheQur’anand the Sunnah, still the ‘ulamii find that the legality of insurance depends on the legality of its modus operun- ance comjmy must be in line with the Shari’ah principles embodied in bre Qur’an and the Sunnah. In orhcr words, all tmnsactiom involved must be based onmutual trade andcommerce a d be free from unlawful trans- actions such as ri& (usury), rishwuh (cormption), maysir (gambling), and ghurur (unnecessary risk), as well as from unlawful substances such as pig, wine, or blood. Allah says: contrary to the opinions of previous ‘l&kmi, &)day’s ‘UlamCT are mole di, which me8115 that all transaction^ involved in the Nnning of an insur- Help ye one anocher in ri- and piety.. . (5:2) 222 The American Journal of Islamic Social Sciences 142 Thus, in light of the legal system of Islam, the insurance policy may now step in to help eradicate the problems faced by society from the sale of defective goods and products. The insurance policy acts as follows: (a) If the buyer discovers any defect in the goods before or after the conclusion of the sale and purchase agreement, he has a legal right to exercise his option either to continue or rescind that contract. This means that should the buyer opt to rescind it,85 the seller, in accepting the retum of the defective goods, suffers an economic loss. However, should the seller hold an insurance policy, he could overcome the economic loss. (b) An insurance policy could also protect the seller from yet another type of economic loss whereby the buyer, upon discovering the defect of the goods bought and upon learning that there was another defect which occurred earlier when the goods were still in the possession of the sell- er,% seeks compensation against the seller. For this situation the seller who holds an insurance policy could file a claim with the insurance com- pany. (c) An insurance policy could also protect the buyer who losses his right of option as the result of a stipulation of an exemption clause by the seller:’ or by way of an agreement on his own behalf to bear all liabili- ty of any defect of the goods bought.88 The buyer who holds an insur- ance policy could seek to recover from the insurance company in such a situation. (d) A buyer who buys an insurance policy could also seek to recover from the insurance company in a situation whereby he loses his right of option as the result of the using of that defective or exercising ownership over it,% or c o n s ~ ~ n i n g ~ ~ or damagingw any part of the defec- tive goods. These are the other protective measures offered by any insurance pol- icy to the society effected by the problems of sale of defective goods and products. The Shari’ah, as we have smssed earlier, approves of such principles so long as the mdus operundi does not contravene any Shari’ah principles as embodied in the Holy Qur’an and the holy tradition of the Prophet. Warranty of Goods In addition to the Islamic doctrine of khiycir ul-‘uyb, there is yet anoth- er protective measure recognized by the Shari’ah and aimed at sheltering society from the effects of the sale of defective products. Today it is commonly known as a warranty of goods. A warranty of goods is usually issued by the seller in a sale and pur- chase transaction and guarantees that the seller or manufacturer will take responsibility for repairing any damage or defect that might occur after the goods are bought by the buyer. A warranty is normally valid for only a specified period (one year or so). Specifically, a warranty operates as follows: Billah: Caveat Emptor vs Khiyllr al-’Ayb 223 (a) In a sale and purchase contract that offers a warranty, the buyer enjoys the right to have any damaged or defective product repaired by the seller or the manufacturer if the damage or defect occurs and the sell- er is notified within the warranty period. (b) The warranty is no longer operative after the expiration date; hence, any damage or defect reported to the seller or manufacturer after this period shall not be covered by the warranty. (c) The buyer is entitled by a clause in the warranty to have free repair of the damaged goods. (d) A warranty does not authorize the buyer to reject the defective (e) A warranty will not be effective in a case whereby it is proven that the defects occurred before the agreement and the seller deliberately con- ceals them. This is because the Islamic principle, “the option for defect” or khiydr al-‘ayb, will automatically become available for the buyer to exercise his right of option either to reject the defective goods or accept them for the agreed price.93 (f) A warranty differs from the doctrine of khiydr d‘ayh: a warranty only gives the buyer the right to have the damaged goods fixed or repaired, whereas khiydr al-‘ayb effectively gives the buyer the option either to reject or accept the defective goodsw on account of defects which occurred while the goods were in the possession of the ~eller.9~ goods. Khiyar a/-‘Ayb: The Justification No principle or doctrine could be effective in its application and no transaction could be implemented successfully unless justice and hon- esty are also present. The Prophet himself outlined the ethics of the par- ties involved in transactions in order to ensure their success. He said . . . If both parties spoke the truth and described the defects and quality (of the goods), there would then be blessings in their transaction, and if they told lies or concealed something then the blessings of their transaction would be blotted out. . . 96 Clearly, the doctrine of khiydr al-‘uyb is solely based on the principle of justice. Its application is further justified on the following grounds: (a) The doctrine gives the buyer the opportunity to inspect the goods before any agreement is finalized in order to ensure that the goods are indeed free from any defect.97 After all, there is an implied condition in Islamic commercial law that the goods sold should be free from any unknown defect9* (b) It will also be unjust to the buyer if the seller conceals any defect of the goods or if he remains silent about any defect. The Prophet reminded the seller: 224 U q h htn Amiralso regwded such tmnwmns ' illegal: It is illegal for one (seller) BO sell a thing if cme (seller) hows that it has a defect. . .lW (c) It is a h the buyer's l e d rigido1 to Eject rhe defective g& if thedefect oocufied inthehck of the &.This is became inmy trans- action rhere must be honesty and h e amsent so as to emme Ehat both parties eqjoy maximum benefits h a tmnsactiori and nobody s&m from any injustice or dkhmesq. All& says: Eat not up your pmprty among yourselves in VBLTIities. . . (4:29) (d)The cbctrhealsoeimnes theest&hhe . nt of justice for the sell- er, in the sense that, should rhe buyer upon realking rhe defect of the goods - * tQ enjoy or cxmsume the defstive progperty h any way, the buyer shall lose his right of op tba lm Such a prhcipk is giso in Line with the concept of natufal justice as Allah says to the effect in the Qm'an: Verily, Auah commands [not to go against] justice . . . (1690) (e) Tht dochine also gives the buyer the right to seek a compensation in an exceptional case whereby the buyer, who discovers the defect of the p p e q after the agreement of sale, later fuds out that there was indeed another defwt which occucred while the property was in the possession of the seller.'03 To emure faimess to the seller, Islamic law has deter- mined that, in such an exceptid situation, the buyer who has already obtained the right to seek compensation shall not have the right of option as well as it would create a hardship for the seller. This is because AUah has commanded mankind to cooperate and help each other in righteous- ness and piety: Help ye one another in righteousness and piety. . . (52) Final Remarks We have a h d y seen how the common law doctrine of caveut enrpror and the Islamic doctrine of khiydrul-'ayb differ from each other. In con- clusion, let us summarize the fundamental points underlining both legal doc*. Billah: Caveat Emptor vs Khiyu d-'Ayb 225 Summary of the Conflict (a) The common law doctrine gives the right to the buyer expressly to inspect the goods (so as to ensure that it is free from any unknown defect) prior to an agreement.'" Meanwhile, the Islamic doctrine of khiydr al-'ayb gives an implied right to the buyer to carry out an inspection on the fitness and quality of the goods to be bought.'05 (b) Generally, under caveat emptor, the seller is not under a duty to dis- close any defect to the buyer106 as the buyer has been given an opportu- nity to inspect the goods before any agreement; therefoxe, if, after the conclusion of the contract of sale, the buyer discovers any defect in the goods bought, he loses any right of option, except in c a m when the sell- er has purposely, before the contract, concealed the defect,lm or the defect has been so requested by the buyer before the agnement, or when there is a fiduciary relationship between the seller and the buyer.'@ Hence, it is clear that, as a general rule, the right of option according to the doctrine of cuveat emptor exists only before the conclusion of the sale and purchase agreement and not after (with some exceptions). Khiydr aZ-'uyb, on the other hand, reserves the right of inspection of the goods to the buyer both before and after the conclusion of any sale and purchase agnxment and as such, the right of option either to continue the contract or rescind itIm is also reserved to the buyer both before and after the agreement of sale and purchase. The Pmphet said in one of his traditions: If anyone sells a defective article without drawing attention to it, he will remain under God's anger, or the angels will continue to Curse h i m . " O (c) While h e common law doctrine of cuveat emptor does not, gencr- ally, give any room to the buyer to exercise any rights of inspection and option after the conclusion of the sale and purchase c o n a t , the Islamic doctrine of khiy& aZ-'uyb does provide such rights to the buyer after the agreement. These rights of the buyer could, however, be annulled if the seller inserts an exemption clause, exempting him from any liability aris- ing out of the defective product,111 or if the buyer himself has promised to be responsible for any defect.Il2 (d) The common law doctrine does not allow the buyer to seek com- pensation as a result of any defect discovered after the conclusion of the sale agreement. This is because the buyer has been given ample oppor- tunity to cany out an inspection on the goods before the agreement to ensue that it is free from any defcct, which means that there is no com- pensation for any defect not seen during the buyer's meless inspec- t i0n1l3 The Islamic doc& of M y & d'uyb, however, does allow the buyer to seek compensation only (without any right of option) if the buyer who has 'created a defect of the goods after the agreement, later 226 The American Journal of Islamic Social Sciences 142 realizes that there was another defect which had occurred while the goods were in the hands of the seller.II4 The Proposed Solutions to This Conflict The following are among the possible solutions to the conflict between the doctrines of caveat emptor and khiydr al-'uyb protecting society from the problems arising out of the sale of defective products and goods: (a) The seller, prior to an agreement of sale and purchase, should noti- fy the buyer of the defects (if any) of the goods to be sold;'15 (b) The buyer should be allowed, before entering into the agreement, to inspect the item to be purchased so as to ensure that it is fit and free from any unknown defect,' l6 and if the buyer is unable to do so the sell- er himself should assist him in doing so; (c) The buyer should be given the right, after the transaction, to reject the purchased goods if they are found to be defective while in the hands of the seller;' l7 (d) The seller should not be held responsible for any defect in the goods should he add an exemption clause exempting him from such lia- baty;118 (e) The seller should also not be responsible for any defect of the goods should the buyer agree to bear such responsibility;119 (f) There must be a situation whereby the buyer has the right to seek compensation (without having any right of option) if he creates a defect on the purchased goods after the agreement and realizes afterwards that there was another defect when the goods were in the possession of the seller; (g) The buyer's right of option and to seek compensation should be revoked if he discovers the defect of the goods bought but continues to exercise an ownership over those defective goods; l2I (h) The buyer should not be granted the rights of option and for seek- ing a compensation if the defect in the goods occurs in his own posses- sion. 122 Justifications for the Solutions The above solutions to the conflict between the two rival doctrines could well be justified by the following grounds: (a) Allowing the buyer the rights of inspection (of the goods) and option before the agreement is in line with the principles of fairness and justice, as the buyer is fairly treated by the seller in a situation whereby he (the buyer) is at liberty to determine that the goods are free of defect. Allah has indeed commanded all mankind to embrace the concept of jus- tice: Verily, Allah commanded (to practice) justice. (16:90) Billah: Caveat Emptor vs Khiyar al-‘Ayb 227 (b) Prior to a transaction, the seller is under an obligation to notify the buyer of any defect in the goods to be sold. The Prophet said It is illegal for one (seller) to sell a thing if one (seller) knew that it has a defect. unless one (seller) notifies the buyer of that defect.lD Furthermore, there should be no concealment of any defect of goods to be sold; because that practice amounts to cheating. A person came to the Holy Prophet and told him that he was always betrayed in purchasing. The Prophet advised him to say at the time of buying: “No cheating.”124 (c) Selling defective goods or products to the buyer when the seller is, at all times, aware of that damage or defect to the goods would amount to an unjust enrichment on behalf of the seller and is against the concept of natural justice. Allah says concerning such unjust enrichment: . . . eat not up your property, among yourselves in vanities. . . (4:29) (d) Presenting the buyer a right of option whether to continue with the agreement or rescind it in the case of any defect in the goods purchased is also in harmony with the general concept of mutual cooperation as there is always a possibility for the seller to innocently deliver defective goods unknowingly. In this situation the seller, with the spirit of broth- erhood and mutual cooperation, should accept back the defective goods sold. Allah says: Help ye one another in righteousness and piety . . . (5:2) (e) The fact that the buyer has the right to seek for compensation only in a situation whereby he discovers the defect after the agreement of sale and purchase, and also discovers that there was indeed another defect which occurzed earlier on while the goods were in the hands of the sell- erla is aiso in consonance with the general principle of mutual help enshrined by Allah in the Holy Q ~ ’ a n . ’ ~ (f) It is also in line with the general concept of justice and fairness to revoke the rights of the buyer to option and to seek for compensation for the defect of the goods bought if the buyer, upon knowing of the said defect, exercised ownership over the defective goods. Allah command- ed: Verily, Allah commanded [not to go against] justice. (16:W) 228 The American Journal of Islamic Social Sciences 142 Notes 1. See "caveat emptor" in Mozley & Whiteley's Lmv Dictionary, 1993. 2. Ibid.. p. 300. 3. T.S. Venkatesa Iyer, The Lmv @Contract, Vol. 2,5th ed. (Hydembad: Asia Law House, 1990). p. 100. 4. Cheshire Elfoot & Fumston's Lmv Contract, 12th ed. (London: B u t t e w o ~ , 5. Mahiuddin A h ZPkaria Yahya bin Sharif al-Nawawi. Minhaj al-Tahibin (Wms. E C. Howard). (Lahore: Law Publishing Co.. n.d.). p. 131. 6. (1603) Cro. Jac. 4.79, ER 3. 7. See P.S. Atiyah, The Rise an3 Fall of Freeabm @Contract, (Oxford: Clarendon Press. 1979). p. 179. 8. Ibid., p. 178. 9. Ibid., p. 179. 11. (1851) 10C.B. 591. 12. A.G. Guest. Anson's Lmv @Contract, 26th ed. (Singapore: Oxfod Univ. h s s . 13. Ibid 14. Cheshin, p. 136. 15. V-p. 100. 16. (1792) pealre. 115.170 ER 113. 17. Atiyah, p. 466. 18. Ibid 19. Guest. p. 211. 20. See The Contract Act (Malaysia) I950 at 0 17. 21. vmkatesap. 100. 22. See generally in G.H. Treitel. An Outline ofthe Lmv @Contract, 3rd ed. (London: wluerworth, 1984). p. 14of. 23. See Artar Singh, Lmv qfcontract, 3rd ed. (India: Eastem Book Co.. 1980), p 121f. 24. T1eitel.p.144. 25. Ibid 26. See, for example, the fact and decision in DoMghue v. Stevewn (1932) AC 562. 27. See Howprd Awott, Product Risks Management, (Londom Pit- Publishing, 1992). p. 13. 29. A W p . 1 3 . 30. Guest.p.210. 31. Ibid. at 211. 32. Ibid. a t 21Of. 33. See in Ian Bmwn et al.. Lmv QConna~t (LonQn: Blackstone Press Ltd, 1994). 34. 1991). p. 136. 10. Cheshin, p. 136. 1984). p. 210. 28. See Tht CWUCY Act (1950). 00 15-17. P 9of- 35. 36. 37. 38. 39. 40. 41. 42. 43. See 'Consumer Rotection" in lowin's Dictionary qfEnglish Law, 1W7. Ibid.. 00 15-17. See Ibid., 8 41. See cheshin, p. 136. See Atiyah, p. 465. Ibid,at466. Ibid. See 09 17-18. Guest, p. 210. Eixcept m cases such as when the defects a~ purposely d e d by the seller, or when the seller is requested by the buyer to disclose the &fccts of the good.., or when then is a fiduciary n h t h s h i p between the seller and the buyer. 44. The Mejeh. at Art. 336. 45. IbkL.atArt.339. 46. Mdwi Muhsin Khan (trans.) , Wih al-hkhari. Vd. 111, no. 292 (Dad Elkir. n.d.), p. 166. Mishkafd M a . vd. 1. Sh. Mdwrmad Ashrpf, Uum, 1981 at 613. 47. Ibn Majah (cornpilad in) Mishkarul Marobih (trans. En&) James Robson, Illrh: Caveat Emptor vs K h i w al-'Ayb 229 48. seefoomote43. 49. Khrtn, no. 293, p. 166; .w dso AWul Hamid Siddiqi (trans.), Sahilr Muslim, vol. 111, no. 3 6 1 (Lahmx !%. M h & Adwaif, 1976). p. 805. 50. See Thc Mejda, An. 336. 51. Chules Hamilton (t~u~s.). The He@, vol. I1 (India: Kitan Bhavan, 1985). p. 406. 52. E.C. Howard (tram.), Minhaj-er-Tdi&in (Lahore: Law Publishing Co, n.d.), p. 131. 53. Ibid., Sect. VII. 54. See Neil D.E Bailie, The M-n Lmu of Safe (India: Dclhi Law House, n.d), p 99. 55. The Mejclla, Art. 348. 56. Ibid. 57. Ibid. 58. S.E., Rayner, The Theory GContrarr in Ishmic Luw, (LonQn: Graham & 59. Ibid. 60. The MejeUa, Art. 341. 61. Ibid., Art. 342; see dso Aisha AWumhman Bewley. Al-Muwam oflmom 63. The Mejek , Art. 343. 64. Raper,p. 340. 65. Ballie, p. 105. 66. The Hedgya. p. 415. 67. Nawawi, p. 133. 68. Ibid..atIM. 69. The M e j e k . Art. 344. 71. S.C. S i m . Al-Shon': Swrni & Immia Codcs. Vol. I, (Lahore: Law Publishing Co., n.d.). p. 4%. Liaquat Ali Khan Niad. Islamic Lmv 0fControcr. research cell. (Lahore: Dyal Singh, Trust Lib., nd) , p. 188. 72. The Hehya. p. 410. 73. Ibid. 74. lbid 75. The Meielh. Art. 336. Trohnm, 1991). p. 331. MuU ilm A m (Ladon: Kegan pull Inteanational. 1989). no. 31.4, p. 248. 62. Al-M-, p. 249. 70. Al-MmtU, IU). 31.4. p. 249. 76. Ibid 77. The He-, p. 406. 78. Al-Muwana. 110. 31.4. D. 249. 79. See The MejeUa. Art. 336. 80. Ibid. 8 1. Sahih ai-Bukhari, 110.292. p. 166. 82. The He-. p. 406. 84. Sahih Muslim. no. 3661, p. 805. 85. See The He-, p. 406. 86. Ibid. p. 410. 88. See The MejeUa. Art. 343; see also Rayner, p. 335. 89. NawaWi. p. 133. 90. Baillie. p. 105. 91. The Hcdaya, p. 415. 92. Baillie, p. 108. 93. The Hedayu, p. 406. 94. Rayner, p. 333. 95. The Mejella. Art. 339. 97. Gues4p.210. 98. The Mejelh, Art. 336. 99. lbn Ma* (compiled in) Mishkur. p. 613. 83. Al-M~watU, IU). 31.4. p. 249. 87. See Al-Muwatta, Iw). 31.4, p. 348f. 96. Sahib a l - B M . 110.293, p. 166. 100. Sahih d-Bt ikkd . 110. 292, p. 166. 230 101. Rayner, p. 327. 102. Baillie, p. 107. 103. The Hedaya, p. 410. 104. See "Caveat Emptor" in Mozley. 105. The Mejella, Art. 336. 106. Guest, p. 210. 107. See footnote 16. 108. See footnote 22. 109. The Hedaya. p. 406. 110. Ibn Majah (compiled in) Mishkat, p. 613. 1 1 1. See AI-Muwatta, no. 31, p. 249. 112. The Mejella, Art. 343. 113. See Cheshire, p. 136. 114. The Hedaya, p. 410. 115. See Ibn Majah (compiled in) Mishkat, p. 613. 116. For instance, see "Caveat Emptor" in Mozley. 117. See The Mejella, Arts. 337 and 339. 1 18. AI-Muwatta, no. 31.4, p. 249. 119. The Mejella, Art. 343. 120. The Hea'aya, p. 410. 121. Baillie. p. 107. 122. The Mejella, Art. 339; the buyer has the right to reject the goods purchased on accounts only for defects that occurred in the hands of the seller and not for defects that occurred in the hands of the buyer. 123. Sahih al-Bukhari. p. 410. 124. Ibid., no. 328, p. 186. 125. The Hedaya, p. 410. 126. AI-Qur'an, 5:2. The American Joumal of Islamic Social Sciences 142