Laws on Commerce

views updated

Laws on Commerce

A Mercantile Economy . Since business is as old as civilization, the early Muslims inherited existing economic systems instead of creating a new system. Indeed, the revelation of the Qur’an may be seen on the economic front as mainly concerned with fairness in dealing within the existing sys-tem(Qur’an 6:152; 7:85; 11:35, 84–85; 17:35; 26:181–182; 55:7–9; 83:1–3). Thus, in many respects, the medieval Muslim economy resembled the other economic systems of its time. Other systems were also interested in fair business practices. Even in the relatively arid Middle East, wealth was principally derived from land, so most laws dealing with commerce were based on the central and well-understood background assumption that wealth was vested in land. Like several other premodern systems, the medieval Muslim economy was based on a bimetallic currency standard of gold and silver coins, a situation that extended back to the time of the ancient Greeks, more than a thousand years before Muhammad. There was also a copper- token coinage. The main underlying difference between the medieval Muslim economy and that of other regions was, perhaps, that commerce and trade were more important in the Middle East than elsewhere—partly owing to the aridity of the region but also because the occupation of merchant was not despised, as it often was elsewhere, for example, in western Europe, China, and Japan. Indeed, Muslims could hardly despise buying and selling for a living when the Prophet himself had been a merchant. For this reason, in fact, the Muslims of the Middle East developed more-advanced business practices than existed elsewhere during medieval times. Modern capitalism eventually grew from these practices as trade took the Middle Eastern Muslim experience across the Mediterranean to Europe.

Profit and Risk . Although Muslim commercial law resembled other civilized Old World legal systems in its stress on fair dealing, its effect was somewhat different from that of European law. The limits Muslim law set on business were not always thoroughly enforced, of course, but they were constantly present and thus had a considerable influence. Overall, commercial law was based on respect for private property and preservation of real value, as well as on an aversion to exploitation and dishonesty. In particular, earning money from interest—which is solidly and fiercely condemned in the Qur’an (2:275–278; 3:130; 4:161; 30:39) and some hadiths—was strictly prohibited by the religious leaders. Demanding the payment of interest—which in medieval times was often extracted at usurious rates because there was high risk attached to making loans—was discouraged and prohibited elsewhere too, including medieval Christian Europe. In Islam the prohibition was firmly ensconced in the sacred law (Shari‘ah), which was the law of the land, and therefore usury was not permissible at all. For this reason pious Muslims have thus always been cautious about any business activities that include the payment of interest. Likewise, Muslims have always striven to avoid debt, which is commonly related to interest payments.

Ownership and Fairness . Another major feature of Muslim commercial law was the prohibition of uncertainty (gharar)in the law of sale. That is, when a sale took place, the parties had to know exactly what was being bought and sold, and the item being sold had to be in the possession of the seller. Thus, fruit not yet grown could not be sold in advance because such transactions had in them an element of speculation. In modern terms, Muslim law forbids not only the sale of products not yet in hand but also trade in futures or the sale of insurance, which is also seen as a species of uncertain speculation. Because the prohibition on interest eliminated the possibility of leveraging (using credit to enhance one’s buying capacity) and because of premodern technology, the medieval Muslim economy was relatively stable and—barring unforeseen political upheavals—one could count on life going according to accustomed patterns. In general, Muslim law viewed ownership as restricted to real property and actual objects in the possession of an owner. Because rentals and leases were permitted, rights of use could be rented, but sale of rights of use was not possible because such a transaction would violate the law that the property being sold must be in the possession of the owner. This prohibition appears to militate against such modern concepts as copyright and “intellectual property.” However, modem Muslim jurists have overwhelmingly favored extending property rights to these concepts as well.

Financial Instruments . The medieval Muslim economy is well known for its elaboration of advanced financial instruments, such as an early form of bank draft or check (derived from the Arabic word sakk). This word

does not occur in the Qur’an, which does describe the document that Muslims should write between one another when one incurs a debt (Qur’an 2:282), and thus the sakk has a Qur’anic basis. Because Muslim law approves of the transference of debts, the use of the sakk as a system of payment over long distances was established and greatly facilitated interregional and international trade. Indeed, Muslim trade continued to flourish and grow during the medieval period even though it suffered from occasional local setbacks.