Khiyar al-naqd (option of payment)

Khiyar al-naqd is a right a contractor stipulates to be able to annul for non-payment. ¹ Among the linguistic senses of naqd are giving and taking possession; one says "I paid the man the dirhams and he took them", meaning I gave them and he received them. ¹

It has two forms. The first: contracting with the stipulation that if the buyer does not pay the price by a known period there is no contract between them; its exerciser is the buyer though its greater benefit is the seller's, and it stands in the position of a stipulated option for the buyer. ¹ The second: contracting, then the buyer pays, on the agreement that if the seller returns the countervalue within a set period there is no contract between them; its exerciser is the seller who alone benefits, and the case closely resembles bay' al-wafa' so that some include that sale under khiyar al-naqd, standing in the position of a stipulated option for the seller. ²

This option is affirmed by the Malikis, the Hanbalis and the Hanafis except Zufar ibn al-Hudhayl; it was held by al-Thawri, Ishaq and Abu Thawr, attributed to Umar and Ibn Umar, and held among the Shafiis by Abu Ishaq al-Shirazi who argued from Umar's report. ² It is opposed by the Shafiis on the sound view and by Zufar. ²

The affirmers argue by analogy with the option of stipulation, the cause being one — deliberation: the seller deliberates whether the price will reach him, and the buyer whether the sale suits him so he takes back what he paid. ² Among Companion reports, it is related as adopted from Umar and others; Abd al-Razzaq records in the Musannaf that Amr ibn Dinar affirmed it and that Shurayh ruled by it when the buyer brought the price the next day and the parties disputed before him, saying "you broke your word". ² From reason they cite the need for it like the need for the stipulated option: deliberation by the buyer on his ability to pay, and by the seller on whether the price will reach him in time, guarding against the other party's stalling. ²

Those who deny it argue it is no option-condition but a corrupt condition corrupting the contract, since it stipulates an unqualified condition and hangs annulment on a gharar, like stipulating "if Zayd arrives today there is no sale between us". ² Zufar argued it is a sale in which a corrupt rescission is stipulated through its attachment to the condition, and stipulating even a valid rescission in a sale corrupts the contract, let alone a corrupt one. ² Al-Kasani records that khiyar al-naqd is established against analogy, permissible by istihsan, since a sale with it shares with a sale carrying the stipulated option the feature of conditionality, differing only in what is conditioned on — the lapse of the period without annulment or without payment; the point is its analogy with the stipulated option, both established against analogy. ³

The holder of the option may be the buyer or the seller according to the stipulated form: if it appears as "on condition the buyer pays within the period, else there is no sale", its holder is the buyer as the one able to annul by non-payment; if as "if the seller returns the price within the set period the sale is annulled", its holder is the seller whose returning the price is his act of annulment. ³ The seller's benefit from this option exceeds the buyer's, since he profits whether the option is the buyer's or the seller's, gaining the annulment if the buyer delays. ³

The jurists' views did not settle on its term, like the dispute over the stipulated option since it is in its meaning, with some difference as the stipulated option is established by text while this is established by juristic reasoning. ³ One view leaves it to the parties to fix whatever term serves their interest even beyond three days: the Hanbali school and Muhammad ibn al-Hasan alone among the Hanafis, also al-Thawri and Ishaq. ³ Another fixes it at three days or thereabouts with no stipulation of more: three days being the view of Abu Hanifa and Abu Yusuf — who departed from his own rule on the stipulated option since reports allow more there while the payment option stays on the original prohibition — also the school of Abu Thawr and attributed to Ibn Umar, while "about three days" not exceeding twenty is Malik's view. ³ If more than three is stipulated on Abu Hanifa's and Abu Yusuf's view, payment within the three validates, else the sale is corrupt but not annulled, as Zahir al-Din determined and Ibn al-Humam and Ibn Abidin approved: they read the words "there is no sale between us" as producing corruption, meaning the sale merits annulment but can turn valid if the corruption does not materialise, as when payment comes before the three days end. ⁴

Khiyar al-naqd matches the stipulated option in its causes of lapse and rules, and likewise in transfer: it is not inherited at the Hanafis, like its origin the stipulated option. ⁴

Ibn Nujaym among the Hanafis made the fittest place to discuss bay' al-wafa' under khiyar al-naqd, reasoning that it is one of the instances of its question. ⁴ The glossator Ibn Abidin did not accept this reasoning, transmitting from al-Nahr that bay' al-wafa' is an instance of it only on the view voiding it beyond three days, not on the view upholding it, since khiyar al-naqd is capped at three days while bay' al-wafa' is not. ⁴