Khiyar al-Majlis: The Default Option
The hadith “The two parties to a sale have the khiyar as long as they have not separated” (Bukhari) established the principle that a completed sale can still be cancelled while both parties are in the same physical space. This prevents rushed or regretted transactions.
Hanafi exception: The Hanafi school does not recognize khiyar al-majlis — their position is that an accepted offer creates a binding contract immediately. This has significant implications for Islamic finance documentation.
Khiyar al-Shart: The Stipulated Option
Either party may stipulate a period (up to three days per most schools; unlimited per some Hanbali views) during which either party may rescind the contract without cause. After the period, the sale becomes binding.
Khiyar al-shart is the most commercially important option type — it is the basis for:
- Cooling-off periods in Islamic consumer contracts
- Islamic option structures in derivatives frameworks
- Commitment fees in financing arrangements
Khiyar al-‘Ayb: Defect Option
If goods are found defective at the time of the contract (not a defect arising afterwards), the buyer has the right to return the goods and recover the price. The defect must have existed at the time of sale — this is tested by examining whether the defect could naturally exist at the time of sale.
Modern Islamic Finance Applications
Murabaha documentation: Khiyar clauses are used to structure the customer’s right to choose whether to purchase after the bank acquires the asset.
Wa’ad (promise) structures: A promise to purchase combined with an option not to purchase (khiyar al-shart) is used in some sukuk to approximate conventional put/call options within Shari’ah parameters.
See also: Fiqh Al Bay Al Amanah, Fiqh Al Gharar, Fiqh Al Musharaka Al Mutanaqisa, Fiqh Al Kafalah, Fiqh Al Mudarabah Al Mutlaqa