Gharar, misrepresentation and fraud
It is clear that gharar is more aligned with the concept of misrepresentation under English contract law, rather than any other similar concepts. Misrepresentation under English common law is considered to be a false statement or representation about fact that is made to induce the other party to enter a contract. This definition has a parallel definition in the context of fraud, which is defined as a false representation of fact, whether this misrepresentation is made intentionally (knowingly), without believing it to be true, or carelessly (Curzon, 2002, p.183). This suggests that fraud or deceit reflects the meaning of gharar, as well as cheating. The analytical approach of this paper, using the Arabic-Arabic dictionaries, has found that the verb gharra means to misrepresent or to defraud, which puts misrepresentation and fraud in the same category or classification. This falls under the same purpose of the Prophet’s Hadith when prohibited the sale of unborn animals and uncaptured birds (An-Nawawi, 1987, p156)
As mentioned earlier in this paper, English-Arabic dictionaries translate misrepresentation using the words khida’a, tadlees (fraud), and kathib (lying), and they state that misrepresentation means the releasing of a false statement by the misrepresentor about fact to induce the other party to achieve the misrepresentor’s desires (Faruqi, 2005, p.460). This meaning can be translated to mean “misleading” as well (Faruqi, 2005, p.459). It can be seen that the contradictory definitions of gharar among Muslim scholars are not based on the Qur’anic verses discussing gharar.
Defining gharar as risk or uncertainty raises some questions with regards to the applicability of Islamic contracts in non-Islamic courts. These questions arise if the contracting parties decide that the contracts are governed by Islamic law in non-Islamic courts. The problem starts if one of the parties claims against gharar, and asks the court to nullify the contract as result of gharar, considering it as risk, uncertainty, and speculation. It has been suggested, in an actual case, that the court would face some difficulties in making a decision due to the ambiguity of elements of gharar. In addition, the court could conclude that one of the reasons for gharar as speculation being prohibited under Islamic law is that only Allah can predict and know the future (Trumbull, 2006, pp.611,636). Accordingly, people cannot deal in risky transactions or trade, as they cannot predict or evaluate the level of risk, and the prohibition of gharar has been built to prevent people dealing with any business involving risk. Of course, according to this paper’s view, this is not an acceptable reason to prohibit gharar, as many types of business, trade, or commerce involve or cannot avoid risk. Applying such an interpretation or understanding of gharar would stop a huge number of business transactions, and make them haram (prohibited).
The most important point is to establish whether gharar means risk and/or uncertainty. In emphasising the viewpoint of this research, there is no objection to recommending that some categories of risk, uncertainty, and speculation should be forbidden under Islamic law. The Qur’an mentions and clarifies that clearly, as have all the Islamic schools, including their jurists or scholars, both early and contemporary. These categories are restricted to the meaning of gambling (maysir or qimar), which is clearly prohibited by Allah (God), who asks believers to avoid it as causing animosity and hatred between people (5:90,91). This also comes under the same understanding of the Prophet’s Hadith which was narrated by Ahmad from Ibn Masoud. In this Hadith, the Prophet prohibited the purchase of the fish while still in the sea. (Al-Shawkani, ND, p230). It is worth noting the Prophet prohibited the purchase in this case, which would be interpreted as preventing the buyer from falling in risk or uncertainty as a reflection of strict prohibition (tahreem) of gamble.
This prohibition is linked with satanic behaviour. In other verses, gambling is described as a sinful and harmful activity (1:219). The translation of the word “gambling” from English to Arabic becomes excessive risk or speculation with a high level of uncertainty and with no guaranteed result (Ba’albaki, 2006, p.278).
The previous discussion concerning the concept of gambling and its prohibition gives the clear view that interpreting gharar as risk, speculation, and uncertainty does not provide the correct perspective with which to express the meaning of the term. It would be expected that the courts would be confused in interpreting gharar as uncertainty or risk, which is difficult to be defined in an absolute sense. This confusion would not arise if the word gharar was used as it is in the Qur’an, that is, meaning misrepresentation or fraud, which is not acceptable under any legal system.
Also, gharar “has been translated as ‘trading in risk,’ or ‘risk-taking.’ These usages in context of ignorance of material attribute of transaction, such as existence of the subject matter, deliverability, terms, and timing of payment” (Shah, 2007, p.10). It can be seen that almost every explanation raises some contradictions, because some writers refer to the prohibition of gharar as coming from the Prophet Muhammad (Arabi, 1999, p.29), which is correct, as he understood the Qur’an in the most proper way, but very few Muslim scholars understand his point with regard to the prohibition of gharar. This can be concluded from the Prophet’s Hadith as he stated “do not sell what you do not own” as part of prohibition gharar. (An-Nawawi, 1987, p156). This is more likely to be related to the concept of misrepresentation or fraud from the seller’s side.
Very few of the Muslim scholars refer to this prohibition in the Qur’an in completely the wrong way, as some do not mention at all what the Qur’an says about gharar, while some claim that there is no Qur’anic verses prohibiting gharar (Al-Saati, 2003, p.6). Of course, this gives the impression that most of the scholars who have discussed gharar did not focus their attention on what the Qur’an says about this concept, or they did not understand it properly.
As mentioned earlier, the Prophet clearly prohibited gharar in one of the Hadiths. He also prohibited some other kinds of sales and transactions due to the involvement of specific elements.