Kafalah

Introduction:
• Kafalah: Conjoining Guarantor’s liability to the liability of the debtor resulting in both of them being liable to the same liability. (It is a unilateral conract “tabruaat”=No Commercial Gain like Iaarah, Qard and Wadiaah. Therefore, both creditor and guarantor can cancel the Kafalah)
• Za’amah: Guaranteeing substantial financial amount.
• Himalah : Guaranteeing the blood money
Hiwalah: Transfer of debt.
In Kafalah : The original debtor is still liable for the debt, unlike Hiwalah . The original debtor is not released from the debt.

• Kafalah Hukum:
Wajib
Sunnah (fardu Kefayah)
Makrooh
Haram

• Kafalah Conditions:
1. Kafeel
2. Makfool Lahu
3. Makfool Alihe
4. Makfool Bihi(the debt must be true and certain debt on the debtor to be paid to the creditor, but Kafalaf can be on Yad Damanah and not Yad Amanah...examples of the makool bihi are: Debt, work to be performed and surrender...etc)
5. Sighah:
a. Majority: Only the Kafeel must express his clear intention to guarantee the debtor, at unilateral action. Therefore, there is no need for Creditor or Debtor agreement because Kafalah benefit both and it is Tabarru from the guarantor.
b. Abu Hanifah and Al-Shybani said the creditor must agree, because it involve his right, and by not having the agreement fraud can occur.
c. The third opinion said that as long as the creditor and debtor did not reject, then the Kafalah is valid.

Modes of creating Kafalah :
• Munjazah (Immediate)
• To be effective Future
• Made conditional to Future Event
• Made condition on certain preconditions

After the creation of Kafalah:
The debt is now a liability on the debtor and the guarantor, they share the liability. The creditor can recover from the debtor or creditor. But Maliki said creditor must ask from the debtor first and if he can’t recover his debt from the debtor then he can ask from the guarantor.

Qard and Kafalah : Tabarru Ibtidaa wa muaawadah intihaa
(If the debtor request, but if it is done by the gauarantor request then it is Tabarru until the end)

Fee can’t be charged on kafalah
Classical view: becaoz it involve Qarar, Kafalah is Tabarru, It can be Riba, It is like Qard and No subject matter is exchanged)
Modern view: Can if the debtor is the one who requested for the kafalah, becoz it can serve beneficial objectives, if people are not ready to do kafalah, the concept of al-jah and tabrru can be turned into exchange contract) The way out in this case is to invoke wakalah in the process so that the fee is not paid for the mere guarantee.

Multiparty kafalah:
If there are more than one guarantor, guaranteeing one debtor, then there will be 3 cases to be considered:
1. If the guarantors guaranteed the debtor at different times, then each guarantor will have to bear the whole liability.
2. If the guarantors guaranteed the debt at the same time then each of them bear his share of the liability.
3. If the guarantors guaranteed the debtor at the same time but they decided also to guarantee each other , then each one of them bear the whole debt.

Discharge of the Makfool Alihi by the creditor (Hibah or Ibra) : will discharge the Kafeel
Discharge of the Kafeel by the creditor (Hibah or Ibra) : doesn’t mean the discharge of Makfool alihi

Recourse after payment: (Only possible if the debtor requested for the Kafalah)
1. Hanafi: The Kafeel can only recourse the amount guaranteed not the actual amount paid.
2. Majority: The Kafeel should recourse the amount paid to the creditor by the debtor
3. Hanbali: The lesser of the 2 amounts
• If the gauarabtor is indebted to the debtor previously then Muqassah can take place (netting)

Application:
Mudarabah: Kafalah against breach of contract by Mudarib
Murabahah: Daman Al-durr (Buyer Benefit)
Daman Al-uhdah (Seller benefit)

Termination of Kafalh:
• Paying the deb
• Hibah
• Hiwalah
• Ibra
• Sulh
• Debtor acquire right of the debt

• If the creditor gives discount to the Kafeel and the Kafeel paid the debt discounted, then he can claim the full debt from the original debtor because the discount given by creditor is for the kafeel only.