Some of the major conditions that must exist for Islamic Law of Business Contracts and Transactions under Shariah are the following-:
1. Existence of Parties to the Contract
The parties to the contract need to be real, mature, sane, and able to take responsibility.
2. Existence of Subject Matter of the Contract
The subject matter of the contract needs to exist at the time of the contract, it should be permissible and should be in the possession of the relevant part.
3. Existence of Offer and Acceptance
The offer and acceptance can be oral, implied, or written. They also need to be immediate or within the timeframe agreed upon by the parties.
4. Free Will of the Parties
The parties should be free to enter into a contract and determine its contents, there should be no coercion or undue influence.
5. Contract Should Not Contradict Any Objective of Shariah
The objectives of Shariah are referred to as Maqasid Al-Shariah and contracts should not contradict any of these objectives.
6. Contract Should Be Free From The Prohibition of Shariah
The parties to the contract must ensure that the contract is free from all the prohibitions identified by Shariah. Apart from the five major prohibitions, these also include:
- Prohibition of sale of debt with debt
- Prohibition of combining two mutually inconsistent contracts, or contingent contracts, in one contract
7. Al-Kharaj Bi Al-Daman
This is a Shariah maxim that states that the entitlement of profit corresponds to the liability for bearing losses. In other words, an entity only has the right to profit under the Islamic Law of Business Contracts and Transactions. If it is willing to accept losses arising from the contract as well.