Comparative Commercial Law in the US and Saudi Arabia Report

Introduction

The commercial law under an Islamic legal system is fundamentally different from the structure seen in the Western systems and in particular the United States. In the latter, common law tends to regulate transactions as opposed to institutions for example, companies and other forms of business structures such as partnerships. Civilian law tends to regulate both of these. Additionally, in the US there is a formal distinction and/or categorization of commercial laws that is separate from non-commercial law. On the other hand, the constitution of the Kingdom of Saudi Arabia is the Koran and the Prophet’s tradition, the Sunnah. All other laws created to govern any activity, and indeed governing commercial activities are subject to these sources of law; and cannot contravene it.

Islamic law can be categorized into two portions; the Shari’a which is made up of the legal verses of the Koran and the Sunna; and the fiqh which is the interpretation of these verses that has resulted in a large volume of Islamic Jurisprudence. While some schools regard these two levels as being one, the general consensus is that they are distinct portions; however, there is not clear distinction between one and the other.

Different Islamic countries have used the Shari’a in different ways in regards to day to day laws of the land. While many have state laws that are different from the Shari’a, some have provisions in their constitution which cite the Shari’a as the primary source of their law. This should however be differentiated from a scenario where the Shari’a is the law of the land. Saudi Arabia has a unique structure; the Shari’a is the law, it is however supplemented by a large number of regulations that are instituted by the government (Majid, Herbert & Robert, 2008).

The gap between the Islamic and United States

The commercial law under an Islamic legal system is fundamentally different from the structure seen in the Western systems and in particular the United States. In the latter, common law tends to regulate transactions as opposed to institutions for example, companies and other forms of business structures such as partnerships. On the other hand, civilian law tends to regulate both of these. Additionally, there is a formal distinction and/or categorization of commercial laws that is separate from non-commercial law.

These classifications cannot be adopted for Shari’a; in addition, some of the provisions that have been invented by western law are completely absent in the Islamic law; such include the legal person; attempts have been made to describe the legal person in some of the supplementary legislations and interpretations, however, this idea is yet to be developed to any significant level. Additionally, no distinction is made between the transaction and the institution; and partnerships are not directly or explicitly described by the law. Jurist practicing under Shari’a have as expectedly classified the law so as to make their work easier; and not as a written attempt within the law to do so; the law is categorized as akhlaq (morals), ibada (religious observance) and mu’amalat (transactions). While this classification aims to separate the various sectors of the law as dictated by the Shari’a, it is not as comprehensive as American legislation in this regard.

As mentioned before, as opposed to western laws that function in some scenarios and not in others, Shari’a transcends all levels of life; a good example is morals. The moral code dictated by the Shari’a is always active; it doesn’t matter whether the person is at home or at work. As such, the issues of fairness and equality in treatment functions as strongly in business as it would in other venues of social interaction. This is directly opposite to the America scenario whereby different attitudes are adopted for business and general lie; and the business person has less protection from the law than in the Shari’a set-up.

Development of Shari’a

The teaching of Muhammad and the divine revelations were gathered together after His death into the Koran; this, together with the accounts of his words, deeds and practices recorded in the hadith have been the guide to Muslim life ever since. These however, were not sufficient in covering the entire legal scenario that could (and did) possible arise; consequently, jurists had to come up with rules to fill the gaps. This was done through two main ways; analogy and consensus. Another method of creating these rules was custom. The Shari’a was also open to creative interpretation by a person with a deep knowledge of it; as such it is very different from western laws which are very comprehensive and the room for individual interpretation is not as wide. Recent developments have led to the reduction of this room in Islamic commercial laws as an attempt of modernization and adaptation to western commerce.

The laws of contract in US and Saudi Arabia

The comparative law in both cases exemplifies a very wide gap, to what is seen to be the major problem. For example, in the law of contract, some conditions which must be fulfilled are not seen in the Sharia. Here;

• a person should lawfully do something for another person or deliver something to him.
• In doing the said thing or delivering the said thing, he must not intend to act greatifully
• The other person for whom something is done or to whom something is delivered must enjoy the benefit.

When the conditions are satisfied the laws of U.S. Constitution and Federal Statutes * 41 U.S.C. (Public Contracts) imposes upon the latter person the liability to make compensation to the former in respect of , or to restore, the thing so done or delivered. This according to Sharia law is partially agreeable, the difference only arise when it comes to compensating the aggrieved party in case damages or losses occurring as a result of the contract being breached, that is, after the failure to honor a contract the suffering party is legally entitled to receive compensation (coming from the party who has failed to honor the contract). Compensation for the caused damages or loss, arising naturally from the said breach of contract arising in the course of the contract or rather which was known to the parties at the time of entering the contract.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach in accordance with Code of Federal Regulations: 41 C.F.R. – Public Contracts.

On the other hand, The Sharia law is different. There are proverbs of the law of the Sharia and provide useful means for the expression of leading doctrines of the law of contract, which considers the reason of the breach. If the person did not succeed in a business and there was a loss, then this must form the basis of relief in case of penalties arising as a result of a breach of contract (ISLAMIC Commercial, Financial and Contract Law).

Explanation – In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non performance of the contract must be taken into account (LUJAN V. G & G FIRE SPRINKLERS, INC. US Supreme Court)

Illustration – (a) A contracts to sell and deliver 50 mounds of salt – petrel to B at certain price to be paid on delivery, A breaks his promise. B is entitled to receive from A, by way of compensation, the sum; if any, by the contract price falls short of price for which B might have obtained 50 mounds of salt petrel of like quality at the same time when the salt petrel ought to have been delivered.

However, the Sharia law may not consider the compensation within this fact. If the parties A & B had no intention to cause delay or fallout to deliver, then the compensation is impossible. This may affect their brotherly love; this is according to the Qoran, which it is perceived to be the supreme law “why hurt a brother” this is in accordance with the Islamic law which contain some Basic Characteristics of Islamic Contract Law which part states that while much of its substance derived from pre-existing laws, this matter was reconceptualized along lines of Qur’anic and prophetic precepts.

The general intentions of the comparative law in awarding damages for breach of contract is that the party complaining should, so far as it can be done by money, be replaced in the same position as he would have been in if the contract had been performed. In the sale of goods, where a contract is not honored damages incurred are measured as market price less contract price as at the date of the breach. That is to say, damages will be determined by ascertaining what good would have fetched if put for sale in the open market this was in the cases of ROBERTS & SCHAEFER CO. V. HARDAWAY CO. (8/31/1998, NO. 97-2664), BMC INDUS., INC. V. BARTH INDUS., INC. (11/18/1998, NO. 95-5137), The US Circuit Courts.

If the seller chooses to retain the goods after the breach it is not competent to him to recover from the buyer any further loss if the market subsequent to the date of breach, falls nor is he liable to have damages reduced if the market rises.

The law of property in US and Saudi Arabia

This is the transfer of a property act. Management and Islamic law are similar to what may be transferred, but the cause for transfer is one that differs, for example, the rights and liabilities of buyer and seller – in the absence of a contract to the contrary, the buyer to the liabilities and have the rights mentioned in the rules next follows a such of them as a applicable to the property sold (The US Code of Federal Regulations Title 41 — Public Contracts and Property).

1. The seller is bound

• To disclose to the buyer any particular defected in the property or in the seller tithe thee to which the seller is and the buyer is not aware and which the buyer could not, with ordinary care discover.
• To produce to the buyer on his request for examination all documents of title relating to the property where all are in the seller’s possession or power.
• To answer to the best of his information all relevant questions put to him by the buyer in respect to property as the tithe thereto.
• On payment or tender of the amount due in respect of the price, to execute a property convergence of the property when the buyer tenders it to him for execution at a proper time and place.
• To give on being so required, the buyer or such person as he directs such possession of property as its nature admits.
• To pay all public charges and rent accrued due in respecting property up to date of the sale, the interest as all encumbers on such property due on such data.

Under the Islamic laws the seller is not able to pay interests as this is against their brotherhood rule in their faith, but in case a new person and not of their believe this part is silence. If the pay is related to the Islamic activity one is automatically liable. This differs in the US financial laws where one has to pay all the charges and dues accrued in respect of the property.

Therefore the seller shall be deemed to contract with the buy that the interest of which the seller professes to transfer to the buyer subsides and that he has the power to transfer the same. This is strictly on the parties being governed by the Islamic Contract Law.

The only area that has similarity at the two commercial law is the where the whole of the purchases money has been paid to the seller; he is also bound deliver to the buyer all the documents of tithe relating to the property which are in the sellers possession of power.

The remedies under law of limitation

The principles governing law of limitation are related and financing propositions of law limitation does not extinguish the rights but only bars of remedy.

Here the word ‘Right’ is used to mean a primary a substantive right and the proposition is true only of the word is understood in this limited sense for remedy is also a right in the wider sense of the word sanctioning of secondary right, and limitation closes the position extinguishing such a right, though suspect to the course the remedy can be revived by a low for the purpose just as any other right, including a substantive right, can be created.

But in so far as the particular remedies right, to which it applies, is concerned limited.

And undoubtedly extinguishes the right. It is however important to remember that limitation extinguishes only the particular remedial right which is it victim and that since it leaves the substantive right unaffected, that right can still be enforced in other ways if other ways are available not merely indirectly by,

• the enforcement of lien
• obtaining a fresh promise
• reason of payment notwithstanding the bar being safe from recall but also in a positive and direct manner as in the US constitutional and federal statutes.

Limitation (or restrictive prescription as such) does not affect the existence or continuance of primary rights. The law of limitation merely limits the time after which the right is not allowed to be enforced by an action in a law court. The judicial remedy is barred, but substantive rights itself is not extinguished. It survives and continues to be available in other ways. For example, a creditor may, even after the expiration of the prescribed period obtain payment of the money due to him by the medium of lien that he holds on the property of his debtor. Further, if a debtor is barred by time but is discharged by payment, the payment cannot be recalled.

There is another kind of prescription which is called extinctive prescription, being the law of the limitation act. In which case not only the remedy is barred but the right of property itself is extinguished. If a person is dispossessed of his house by B and fails to institute a suit for recovery of possession within the prescribed period of limitation, not only his right to recover the property is barred but his right to search property itself is extinguished. On the other hand, the limitation act is a procedural law. It bars a suit for enforcement of rights but does not extinguish right itself, and therefore the defendant in a suit can set up a right in a defense though he could not have enforced that right by a suit. There is no limitation against a defense. The Contracts in Islamic Law are based on the Principles of Commutative Justice and Liberality and therefore there is no time for imitations in most of the cases.

References

1. Code of Federal Regulations: 41 C.F.R. – Public Contracts.
2. Frank E. Vogel (2004) Islamic Contract Law: Islamic Contract, Commercial, and Financial Law, New York: Harvard Law School.
3. Libson, G. (1997), ‘On the Development of Custom as a source of Law in Islamic Law<’, (4) Islamic Law and Society 132, p 146 (qt. in Nicholas HD Foster) Web.
4. Majid Khadduri, Herbert J. Liebesny, Robert H. (2008). Law in the Middle East The LAWBOOK EXCHANGE LTD, Clark, New Jersey. Web.
5. Nicholas HD Foster (n.d.) Islamic Commercial Law: An Overview (1) 384. Web.
6. U.S. Constitution and Federal Statutes * 41 U.S.C. (Public Contracts) Web.