VOIDABLE FINANCIAL CONTRACTS (‘UQUD FASIDAH) AND THE RECTIFICATION MECHANISMS: A FIQH JURISTIC REVIEW

Abstract

This paper examines the concept of voidable financial contracts ('Uqūd Fāsidah) and explores rectification mechanisms within Islamic jurisprudence (Fiqh). Despite their pivotal role in Islamic finance, the complexities surrounding 'Uqūd Fāsidah remain underexplored. This study aims to delineate the conditions that render contracts voidable, and the permissible corrective actions as prescribed by Fiqh. Using a qualitative methodology, the research synthesizes classical Fiqh literature and current applications in Islamic financial practice. The findings reveal that 'Uqūd Fāsidah can arise from violations of contractual conditions regarding subject matter, contract terms, or the contracting parties' capacity. The study identifies several rectification mechanisms, including contract amendment, renewal, and the option of rescission, each aligned with the principles of fairness, transparency, and mutual consent. These rectifications ensure that all parties return to a state of equilibrium, preserving the ethical and economic objectives of Islamic finance. The implications of this study are significant, offering practical guidelines for Shariah-compliant financial institutions and contributing to the robustness of contract enforcement in Islamic finance.