Borehole Drilling Wakaalah Agreement

Borehole Drilling Wakaalah Agreement


Mufti Saheb, is the Agreement provided Shari’ah complaint?


In the name of Allah, Most Compassionate, Most Merciful,

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

We have reviewed the contract provided and hereunder are our observations.

1)  In our understanding, it would be better to enter into an agreement wherein all investors will collectively form one party, and the company will be the other party.

The contract in reference considers each investor to be in an independent agreement with the company. It is easier to have all investors pool together and come forward to the company as one investor.

2) Clause 2.6. contains an error.

The Wakaalah fee is stipulated as R15,000 (Twenty Thousand Rands). We have been informed the correct figure is R15,000 (fifteen thousand rands). Therefore, this error must be rectified.

3) Clause 3.2. should be worded as follows:

“The company shall be obliged to exert itself to its capacity to ensure the project is completed smoothly. The company shall be obliged to fulfil the responsibilities outlines above. In the event of loss of capital or profit in any circumstance, including in the event the project delays or fails, the company shall be obliged to exert itself in order to facilitate a suitable outcome to the project. However, in the event of loss of capital or profit despite their best efforts, the company will not be liable for any losses.”

4) Clause 7.1.3. should be worded as follows:

“Upon the occurrence of any event of default, the matter will be referred to the DarulIftaa to determine through Fatwa or mediation and arbitration what is due and payable to each party.”

5) After consultation with you, we have agreed that the entire clause 7.6 section will be removed.

Besides the above, the contract of WakaalahbilIstithmaar provided is Shari’ah compliant.[i]

And Allah Ta’āla Knows Best

Mirza Zain Baig & Bilal Yusuf Pandor

Student - Darul Iftaa

Checked and Approved by,

Mufti Ebrahim Desai.

[i]AAOIFI Standards pg. 1151