Hawalah

Introduction:
Literal: Change, transfer or removal ( Ha wa la, Tahwil)
Technical: Transfer of debt (liability) by way of security and corroboration, from the original debtor (transferor) to another person to whom it is transferred (transferee)

Majelle:”to make a transfer from one debtor account to the debtor account of another” (same)

Nature: A has a debt owing to him from B and A himself owes a debt to C. All three agree that C, instead of realising his due from A, and A his due from B, C shall realise his duties from B.

Guarantee= Adjoining liabilities/ Hawalah: Transfer/ Removal
It must be absolute transfer, not subject to future and not conditional
It may subjected to the debt incurred in the future
Hawalah benefits the creditor and relieves the debtor difficulty

Essential Elements:
1: Muhal (creditor, transferred party)
2: Muhil (transferor, debtor)
3: Muhal `alayhi (transferee)
4: Al Muhal Bih (the transferred debt )
5: The debt owned by the transferee to the principal debtor
6: Contract Expression ( offer by a debtor) and acceptance by the transferee and the creditor)

Conditions:
1. Sighah: 1) Must be clear to show consent (words, express, writings, signs and gestures)
2) Must be in correspondence to one another (muwafaqah)

2. Transferor:
1) Must possess legal capacity , eligible(legally competent, sane, major and prudent, Hawalah Nafez) x interdicted persons (ok with guardian, Hawalah Mau`qufah)
2) Consent of the principal debtor (analogy to transfer of ownership)
Jurist- Legal age: Condition of enforceable, x condition of conclusion

3. Principal Creditor (Muhal): 1) Legal capacity (legally competent) 2) Consent 3)Acceptance to the contract (clear words)

4. Acceptance:
• Abu hanifa, Muhammad & Kasani- It must be made during the contract session (condition of conclusion)
• Abu Yusof- It is a condition of enforceability not conclusion (depends on his agreement)

5. Transferee: Same conditions as the conditions of the creditor/ Ability to repay the debt (if not contract can be terminated)
Transferee can be individual or group

6. Transferred Item:
1) It must be a debt
2) The debt must be binding or real debt (x binding such as debt of a young boy or incompetent person, debt for the price in a sale with an option)
3) It must be legal debt (debt of unlawful reason not under subject of Hiwalah)
• Validity of the new obligation will be effective only when it flows from a valid obligation (When the original has failed, the brance fails too)
4) The both debt must be known to the contracting parties
5) It must be transferable
• Muslim jurist also agree that the transferor may transfer a lesser amount of a debt owed to the transferee to settled from a larger amount of the debt owed by the transferor on condition that the transferee is entitled only to the equivalent amount of his debt

Debt:
1. Hanafi – Not a condition that the transferee must be indebted to the transferor prior, or whether transfer is restricted or unrestricted)
2. Malikis & Shafiis: 1) The transferee owes the transferor 2)The debt must be equal in kind and amount 3) The two debts must not be foodstuff that are objective of a salam sale ( because otherwise the contracts falls under the contract of selling foodstuffs prior to receiving them which is forbidden)
• Transfer a debt from sale with a debt from loan is permissible
• The two debt must be essentially similar (amount and due date)
• If Muhal `Alayhi debt to Muhil is higher is allowed, not lower

Consent of the contract parties (IMPO):
1. Hanafi- Consent of the principal creditor (bcoz debt is his due) and the transferee (bcoz new obligation) are required/ Consent of debtor is not a requirement because he bears no harm.
2. Hanbali & Zahiri- Only the consent of the principal debtor is required (hadith above)/ Sufficient to inform transferee & creditor
3. Maliki & Shafii- Consent of the principal debtor and creditor. Because the debtor is free to decide modes for settlement and due to creditworthiness of payment may be different from first (creditor).

• Third group say that Hadith above is mere recommendation to express his acceptance, not wajib
• Second group argue that the consent of the transferee is not necessary since the debtor has the right to collect what the transferee owes him and to avoid problems to the transferee later in the event of defects of the subject matter
• Hawalah is valid even without consent of the transferor. The consent of the transferee and creditor is sufficient to conclude a valid and enforceable Hawalah. (Consideration)
4. Practical application need the consent of the transferor (debtor) to affect a valid, enforceable and smooth functioning.