Muqassah
Types of Muqassah and their conditions
Definition
Ad-Dardir - The setting-off of a debt that is due to the debtor by a creditor who is at the same time indebted to the debtor with certain conditions.
Ibn al Qayyim - the clearance of a debt which is due with a debt similar in nature and character
refers to debt settlement by a contra transaction or set-off and also means the discharge of a debt receivable against a debt payable
Legality of Muqassah
no explicit Quranic verse that indicates the legality of muqassah, however a few verse contaning word qisas that is revived from the same root word as muqassah which is qasasa.
O ye believe! The law of equality is prescribed for you in cases of murder (qisas): the free for free...- Quran (2:178)
In the law of equality(qisas) there is saving of life for you... (Quran, 2:179)
tradition of the Prophet SAW which is narrated by Ibn Umar
I came to the Prophet SAW and said that I sell camels in Baqi' for a price maned in gold coins, but I collected in silver and vice versa. The Prophet SAW said: "There is no harm to do so if the exchange is carried out according to the exchange rates of the day and as long as you part without any debts between you (al-Nasa'i, hadith no.4593)
Ijma'
Muqassah is acceptable by the contemporary Muslim scholars. For instance, the AAOIFI Shariah tandard No.4 (Item 3) spells out that it is permissible for the IFIs and their customers to exchange bilateral promises to settle debts which may be created between them in the future, by way of muqassah
Mandatory set-off(al muqassah al jabariyyah)
spontaneous discharge of two debts that is not contingent on the consent of both or either party. The majority of Muslim scholars are of the opinion that this type of muqassah is permissible. on the other hand, Maliki scholars opine that muqassah shall only be allowed with demand or with mutual agreement (al Hattab, 1992)
Conditions for a compulsory muqassah
Each party should be a creditor and debtor simultaneiusly
both debts should be equal in kind, description and maturity
neither of two debts should be encumbered by an obligation to a third party
the muqasaah should not result in the vibration of the shariah
Mandatory set-off on demand (al muqassah al talabiyyah)
Affected by the demand of one of the parties to discharge the debts by way of set-off. normally, it is effective upon the request of the superior creditor who has a preference over the other
conditions for muqassah on demand
each party should be creditor and debtor simultaneously
the creditor for the superior debt in terms of quality and duration should consent to relinquish his additional right or privilege
both debts should be equal in kind but not necessarily in quality and date of maturity
the muqassah should not result in the violation of the Shariah
Contractual set-off (al muqassah al itifaqiyyah)
The discharge of two debts by the consent of the two parties to extinguish their obligations towards each other. In this case, no need for the debt to be similar kind, description and maturity
conditions for a contractual muqassah
each party should be a creditor and a debtor simultaneously
both parties must consent to the muqassah
the muqassah should not result in the violation of the shariah