Hawala: Definition and Conditions of the Four Parties to the Contract

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Hawala: Definition and Conditions of the Four Parties to the Contract

We deal here with the option of the session (khiyar al-majlis) in hawala, then with the conditions of the four poles of the contract: the transferor (al-muheel), the assignee creditor (al-muhaal lahu), the ceded debtor (al-muhaal 'alayh) and the transferred debt (al-muhaal bih). Hawala is the legal transfer of a debt from one liability to another, carried out by the debtor for the benefit of his creditor.

As for the option of the session: according to the opinion that hawala is a contract of assistance and alleviation, the option of the session does not apply to it, for it aims at remedying the harm of underestimation (ghabn) in contracts with counter-value. According to the opinion that makes it a contract of sale, there are two aspects: the first, it does not apply to it, if hawala is considered a sale of debt for debt; the second, it applies if it is said to be a sale of an item for a debt (al-Hawi al-Kabir, 6/916; al-Najm al-Wahhaj, 4/469-470; al-Mughni, 4/336; Kashshaf al-Qina', 3/446; Sharh Muntaha al-Iradat, 3/398).

The transferor (al-muheel): he is the debtor who transfers his creditor's claim upon another. The following is required of him:

• Contractual capacity: sound mind and majority. Hawala is not valid from the insane nor from the non-discerning child, who is treated like one who has no reason, reason being one of the conditions of capacity for all dispositions. As for the discerning child, his hawala does not take effect: it is suspended upon the guardian's ratification. Majority is thus a condition of effect, not of conclusion: the hawala of the discerning child is concluded, its effect being suspended upon his guardian's ratification, for hawala is in itself a release, with a meaning of exchange, especially if it is conditional; it is therefore concluded by the child like a sale.
• The transferor's freedom is not a condition of validity, nor indeed his good health: hawala is not an act of liberality on his side; it is therefore valid from a sick person (Bada'i' al-Sana'i', 6/16).

The transferor's consent: the majority of jurists, namely the Hanafis according to the madhhab, the Malikis, the Shafi'is and the Hanbalis, require his consent: even if compelled to transfer, the hawala is not valid, for it is a release containing a meaning of transfer of ownership, corrupted by coercion like other transfers. The transferor may indeed discharge the right from wherever he wishes, and nothing is imposed upon him from any angle; declaring it valid without his consent would impose it upon him by force.

Ibn Qudama (may Allah have mercy on him) said: the validity of hawala requires the transferor's consent, without dispute, for the right is upon him and no manner of payment is imposed upon him (al-Mughni, 4/336).

Al-Maziri (may Allah have mercy on him) said: the transferor is not obliged to transfer, nor compelled to make the hawala, without dispute, for rights are attached to his liability and he is not compelled to collect them from another liability; as if he had sold a specific commodity: he is not compelled to give another in its place, even if similar or lesser. Likewise, if he brings money, places it before him and intends to discharge from it what is due from him, and the creditor says to him: "I take from you those other dinars which are not present before you" (Sharh al-Talqin, 3/1/11).

A Hanafi opinion holds: the transferor's consent is not required for validity, but for recourse against him or for the extinction of his debt toward the assignee; for hawala contains his interest, which is the extinction of his debt: he is therefore like the guaranteed debtor, in whose case the guaranty is valid without his consent; without consent, however, there is neither recourse nor extinction.

Al-Marghinani said in al-Hidaya: the hawala of the transferor is valid without his consent, for binding the debt upon the ceded debtor is a disposition within the transferor's own right, by which he suffers no harm; rather it is in his interest: he has no recourse if the hawala was not by his order.

And he said in al-Nihaya that the debtor's consent and his order are not two conditions: to the point that one who says to another, "you have against so-and-so such debt, make it fall upon me", and the creditor approves, concludes a valid hawala; if the ceded debtor pays the sum, there is no recourse against the original debtor, who is discharged (al-Hidaya, 3/99; Mukhtasar al-Wiqaya, 2/166; Bada'i' al-Sana'i', 6/16; al-Ikhtiyar, 3/4; al-Jawhara al-Nayyira, 4/29; Ibn 'Abidin, 5/341; al-Lubab, 1/585; Mawahib al-Jalil, 7/18; al-Sharh al-Kabir, 4/529; Tahrir al-Mukhtasar, 4/201; al-Taj al-Jalil, 4/113; Rawdat al-Talibin, 3/432; al-Bayan, 6/286; Mughni al-Muhtaj, 3/154; al-Najm al-Wahhaj, 4/470; Nihayat al-Muhtaj, 4/485; al-Dibaj, 2/272; Kashshaf al-Qina', 3/446; Sharh Muntaha al-Iradat, 3/398; al-Rawd al-Murba', 2/34).

The assignee creditor (al-muhaal lahu): he is the creditor whose debt is transferred so that he may collect it from someone other than his debtor; he is also called muhtal, the one who requests the transfer. The jurists differed: is his consent to the hawala required?

The Hanbalis according to the madhhab and the Zahiris hold that his consent is not taken into account if the ceded debtor is solvent, and that he is compelled to follow, based on the saying of the Prophet (peace and blessings of Allah be upon him):

The delay in payment by a solvent man is injustice; if any of you is transferred to a solvent man, let him follow him.Narrated by Bukhari (2287) and Muslim (1564)

In a version: "whoever is transferred, concerning his right, to a solvent man, let him charge the debt to him". This is a command, and a command implies obligation; moreover the transferor may discharge the right by himself or through his agent, and the ceded debtor has stood in the creditor's place in collection: acceptance is therefore obligatory upon the assignee, as if he had appointed someone to pay in the debtor's place.

The Prophet (peace be upon him) specified the solvent in the ruling because of the predominant case, which is a condition of permissibility. The solvent is one who has the ability to pay, is not a delayer, and whose presence at the session of judgment is possible (al-Mughni, 5/60, Dar al-Fikr edition; al-Insaf, 5/227; al-Ifsah, 1/438; Kashshaf al-Qina', 3/450-451; Sharh Muntaha al-Iradat, 3/400; al-Rawd al-Murba', 2/34).

The majority of jurists, namely the Hanafis, the Malikis, the Shafi'is, and Ahmad in one report, require his consent: for the assignee's right is in the transferor's liability and does not pass to another liability without his approval; he is not compelled to move to a liability he does not approve while the first remains. By analogy: one who hires a mount for a journey to a city cannot transfer the hirer onto another to collect the rent from him. And because it is a sale of ownership, a transfer of ownership for a counter-value to which no right of Allah is attached: the owner is therefore not compelled. Its origin is the sale of items; it is an established right which cannot be transferred to another without the approval of its holder; and when the right attaches to an item, we draw an analogy between the liability and the item.

Imam al-Maziri said: the consent of the creditor who requests the debt is likewise taken into account: he is not compelled to move from the liability in which the debt was established to another, as if he had bought a specific item: he is not compelled to be given a similar or a better one. There is no difference between entitlement to specified items and entitlement to debts in a specified liability; nor does the creditor compel them to take another kind in replacement, even though, were he to consent, he would obtain his right. All the more should he not be compelled to move to a liability whose mere designation does not constitute the collection of his right.

The Hanbalis of the madhhab (and the Zahiris) hold that he is compelled to transfer and cannot refuse it, based on the hadith of the Prophet (peace be upon him) already mentioned: "if any of you is transferred to a solvent man, let him follow him": He commanded him to follow, and commands imply obligation according to most jurists. Those who deny that the assignee is compelled to accept the hawala bear the hadith upon recommendation: it is recommended for one who is transferred to a solvent man to accept the hawala. They have two paths: the first consists in diverting the words "let him follow him" from obligation to recommendation by the presumptions already presented; this path is sound only if one says that the command, as to its meaning of obligation, belongs to interpretable expressions and not to explicit texts: a command may bear obligation as well as recommendation, but obligation is more apparent in it, so that it may be diverted to recommendation by presumption. The second path consists in holding to the opening of the hadith: it began with "the delay in payment by a wealthy man is injustice", and deferring the payment of a debt until it moves to another liability involves a form of delay; the Prophet (peace be upon him) described delay as injustice, all the more so as his words "if any of you is transferred to a solvent man, let him charge the debt to him" imply that the creditor, once transferred by the debtor onto another man, must accept, and likewise if the second transfers onto a third; and this would lead to the unlimited, taking us out of delay into the annulment of rights.

Ibn al-Qassar indicated a way of inference: hawala was permitted for necessity and indulgence; the Companions (may Allah be pleased with them) needed its ruling to be made clear; if acceptance were obligatory upon them, the Prophet (peace be upon him) would have made it widespread and famous among them; what he did not state implies a non-binding command, that is, a recommended act; and recommended acts do not become as widespread as obligations. He thus sheds light on what the principles of the law (usul al-fiqh) require in this issue (al-Talqin, 3/1/11, 13; see also al-Hidaya, 3/99; Mukhtasar al-Wiqaya, 2/166; Bada'i' al-Sana'i', 6/16; al-Ikhtiyar, 3/4; al-Jawhara al-Nayyira, 4/29; Ibn 'Abidin, 5/342; al-Lubab, 1/585; al-Ishraf, 3/57; Mawahib al-Jalil, 7/18; al-Sharh al-Kabir, 4/529; Tahrir al-Mukhtasar, 4/201; al-Taj al-Jalil, 4/113; Rawdat al-Talibin, 3/432; al-Bayan, 6/287; Mughni al-Muhtaj, 3/154; al-Najm al-Wahhaj, 4/470; Nihayat al-Muhtaj, 4/485; al-Dibaj, 2/272; al-Insaf, 5/227; al-Ifsah, 1/438).

The ceded debtor (al-muhaal 'alayh): he who owes a debt similar to that of the first debtor, or he who accepts the hawala upon himself. The jurists differed: is his consent required? The Hanafis, a non-well-known Maliki opinion and the Shafi'is according to the most correct view, take his consent into account, whether he owes the transferor a debt or not: even if compelled to accept, the hawala is not valid, for the debt binds him and his commitment is required, and there is no commitment without his acceptance. He is one of those through whom the hawala is completed: his consent is therefore taken into account like that of the transferor and the creditor. Moreover, hawala is a disposition with regard to him, transferring the right into his liability: it is not completed except by his acceptance and approval, unlike the mandate to collect the debt, which is not a disposition transferring the obligation to him in the first place, but a disposition consisting in the fulfillment of the obligation, for which acceptance is not required. And because people differ in the collection of debts, some being easier to claim and collect, others harder: his acceptance is therefore necessary, so that the hardship be added to his commitment (Bada'i' al-Sana'i', 6/17; al-Hidaya, 3/99; Mukhtasar al-Wiqaya, 2/166; al-Ikhtiyar, 3/4; al-Jawhara al-Nayyira, 4/29; Ibn 'Abidin, 5/341; al-Lubab, 1/585; al-Bayan, 6/287; Mughni al-Muhtaj, 3/154; al-Ifsah, 1/438).

The Malikis according to the well-known opinion, the Shafi'is according to the madhhab and the Hanbalis do not require his consent: he is compelled to pay the debt he owes to the one onto whom the hawala was made, for the transferor has placed the creditor in his own place in collection, with the right to collect by himself or through his agent: payment to him is therefore obligatory upon the ceded debtor, as upon the agent. Based on the saying of the Prophet (peace be upon him): "The delay in payment by a solvent man is injustice; if any of you is transferred to a solvent man, let him follow him" (Bukhari 2287, Muslim 1564), and in a version: "whoever is transferred, concerning his right, to a solvent man, let him charge the debt to him". The debtor's consent was not stipulated therein, but only the transferor's: for it is he who pursues his own debtor onto the one against whom he has a similar debt; and because the right belongs to the creditor, who may transfer it to whomever he wishes, like other rights.

For whoever has a claim upon a man may appoint the creditor against him, and the ceded debtor's consent does not prevent the mandate; it is also the fulfillment of the debtor's right and his discharge, and nothing more: if the creditor is appointed and the agent collects, the claim is extinguished; likewise if the debt is transferred to the ceded debtor and he pays the assignee.

The ceded debtor's consent is required only if there exists between him and the assignee creditor an enmity prior to the time of the hawala: the hawala is then not valid according to the well-known opinion, which is Malik's view. If the enmity arises after the hawala, the assignee creditor, prevented from collecting from the ceded debtor, appoints someone to do so in his place, so as not to go to excess in harm through the violence of his demanding. This is because established enmity indicates the intention to harm, to take revenge on the enemy and to bring harm upon him by every means; this is why the testimony of an enemy against his enemy was rejected, suspicion of harming through testimony being established.

The Shafi'is however except: his consent is required absolutely if he owes the transferor no debt; if he owes one, his consent is not required according to the most correct view, as has been said (see al-Talqin, 3/1/11, 13; al-Ishraf, 3/57-58; al-Ma'una, 2/200; Mawahib al-Jalil, 7/18; al-Sharh al-Kabir with al-Dasuqi's gloss, 4/529; Tahrir al-Mukhtasar, 4/201; al-Taj al-Jalil, 4/113; Rawdat al-Talibin, 3/432; al-Bayan, 6/287; Mughni al-Muhtaj, 3/154; Nihayat al-Muhtaj, 4/485; al-Dibaj, 2/272; al-Najm al-Wahhaj, 4/471; al-Mughni, 4/336; al-Insaf, 5/227; Kashshaf al-Qina', 3/450-451; Sharh Muntaha al-Iradat, 3/400; al-Ifsah, 1/438; al-Rawd al-Murba', 2/34).

The transferred debt (al-muhaal bih): the similar debt, that is, the right which the ceded debtor holds against the transferor and by which the hawala is carried out. Conditions are required for it, some agreed upon, others disputed; each school is presented separately.

The Hanafis require of the transferred money:

• that it be known: hawala is not valid with the unknown. If one transfers to one's own liability an unknown money, saying: "I transfer to you what melts upon so-and-so", the hawala is not valid because of the ignorance of the money, nor is it valid with this wording either;
• that it be a debt: items and rights do not suffice, hawala being valid only by debts, for they alone pass from one liability to another: the transfer it involves is a legal transfer, inconceivable in items, in which only physical transfer is conceivable. It is therefore a matter of the transfer of the legal attribute which is the debt: the creditor must have a debt against the transferor, and hawala announces a change of seat which concerns the debt, not the item. Explanation: hawala is a legal change of seat, conceivable only in what is legally transferable, that is, the debt, a legal attribute established in the liability whose effect appears at the claim: the Law may therefore consider it in another person's liability by binding him with it. As for the item, if it is perceived in one place, it cannot be considered in another where it is not: the senses belie it, and only physical transfer is possible, which is not our subject (Ibn Nujaym, al-Bahr al-Ra'iq, 6/269, citing al-Siraj al-Wahhaj: hawala is not valid by items and rights, without any example being given);
• that the debt be binding: hawala is not valid with a non-binding debt, such as the compensation of the written manumission and what runs along its course, a debt in name and not in reality, the master owing nothing to his slave. The principle is that every debt which does not admit a valid guaranty does not admit a valid hawala (Bada'i' al-Sana'i', 6/17; al-'Inaya, 10/179; al-Ikhtiyar, 3/4; al-Jawhara al-Nayyira, 4/26-27; al-Bahr al-Ra'iq, 6/269; Ibn 'Abidin, 5/343; al-Lubab, 1/585).

The Malikis require of the transferred debt:

• the existence of a debt of the transferor against the ceded debtor: otherwise it would be a mere carried burden (himāla) and not a hawala, for the reality of hawala is the exchange of the debt owed by the transferor against the debt owed to him, with the change of seat of the right from one liability to another: a debt is therefore required through which the hawala is accomplished; the detail will come with the scholars' dispute;
• the existence of a debt of the ceded debtor against the transferor;
• that the debt be binding upon the ceded debtor: hawala is not valid with the debt of the manumission deed, nor with the price during the option period, the price of the option sale not being established, the well-known opinion being that this sale is dissolved and the merchandise remains the seller's property, ownership not having passed entirely to the buyer;
• that only the transferred debt be due upon the transferor, that is, the debt the assignee creditor has against him; the falling due of the ceded debtor's debt is not required. The falling due of the transferred debt follows from the saying of the Prophet (peace be upon him): "the delay in payment by a solvent man is injustice", which implies that hawala is only instituted for a due debt, delay and injustice being conceived only in what has fallen due; otherwise it would be an exchange outside the gate of propriety, the change of liability being accepted only for swiftness. If the debt were not due, liability upon liability would be perpetuated, up to the sale of debt for debt, gold for gold, silver for silver, or one for the other, without immediate hand-to-hand exchange, if the two debts are of monetary species, unless the ceded debtor's debt is due and he takes it before the two separate, as in currency exchange: then it is valid. As for the absence of the condition of falling due for the ceded debtor's debt: the exchanged debt may be a due one transferred upon a due or a deferred one; if the debt is due and exchanged against a due or a deferred one, this is valid, for the due against the due is a valid hawala, and it is reported from the Prophet (peace be upon him): "if any of you is transferred to a solvent man, let him follow him"; and if it is exchanged against a deferred one, it is pure propriety, for he may hasten his right from the transferor or from the ceded debtor should the transferor become insolvent;
• the equality of the two debts, the transferred one and the one upon which it is made, in quantity and description: hawala is not valid by ten against more, nor against less, nor by ten muhammadi dinars against ten yazidi dinars, nor the reverse. Equality does not mean that the transferor's debt equals that of the ceded debtor in quantity and description: one may transfer by ten against ten out of a debt of twenty, or by five out of ten against five of one's claim;
• and that the two debts not be two foods from any salam sale, so that the sale of food before possession is taken, which is forbidden, not be entailed. If one of them is from a sale and the other from a loan, this is valid if the transferred debt is due, the sale of food before possession being valid when it comes from a loan.

Ibn Rushd (may Allah have mercy on him) said: the condition is that the debt not be a food from a salam, or one of the two, and that the exchanged debt not be due according to Ibn al-Qasim; if the two foods are both from a salam, the hawala of one upon the other is not valid, whether the terms have fallen due or not, or whether one has fallen due and not the other, for this belongs to the sale of food before collection. Al-Ashhab says, for his part: if the two capitals are equal, the hawala is valid, as a mandate of resale (tawliya); Ibn al-Qasim does not say so when the terms differ. The ceded debtor, for the debt transferred to him, is placed in the rank of the one who transferred, as regards what he intends to take in compensation or to sell from another: only what is permitted with the one who transferred is permitted to him therein, and to the latter what is permitted with the ceded debtor. Example: if he exchanges a food he holds from a loan against a food from a salam, or a food from a salam against a food from a loan, he is not permitted to sell it from another before taking possession of it: if he exchanges a food from a loan against a food from a salam, he is in the rank of the transferor and may not sell what is owed by his creditor before collecting it, the food coming from a sale; if he exchanges a food from a salam against a food from a loan, he is, together with the ceded debtor, in the rank of the one who transferred: what was permitted to him of selling the food owed by his transferring creditor before collection is likewise permitted for the transferred food, even if it comes from a loan. All of this is Malik's madhhab, and the proofs of these distinctions are weak (Bidayat al-Mujtahid, 2/224-225; see al-Mudawwana, 13/292; al-Muntaqa, 5/70; al-Ma'una, 2/200; al-Dhakhira, 6/241-243; al-Bayan wa-l-Tahsil, 11/296; al-Muqaddimat al-Mumahhadat, 2/404; Mawahib al-Jalil, 7/19-22; al-Sharh al-Kabir with al-Dasuqi's gloss, 4/529-534; Tahrir al-Mukhtasar, 4/201-204; al-Taj al-Jalil, 4/113-115; Sharh Mukhtasar Khalil, 6/17-19; Balghat al-Salik with al-Sharh al-Saghir, 3/269).

The Shafi'is require of the transferred debt:

• that it be a debt: hawala is not valid by items, for the item is not a debt and hawala is a sale of debt for debt. It is illustrated thus: one who transfers a usurped item, a deposit or an owed item, like one who usurps a book from Zayd while he has against another a similar book: the hawala is not valid by it; or one who buys a book for a specific dinar: the hawala is not valid upon the specific dinar nor by it;
• that the debt be binding, like the price after delivery of the merchandise and expiry of the option period; or tending toward bindingness, like the price during the option period: the hawala is then valid by the price during the option period, if the buyer transfers the seller onto someone, and likewise if the seller transfers someone onto the buyer, according to the most correct view, for it tends by itself to bindingness, permissibility being merely incidental. According to the other opinion, neither is valid, for lack of present bindingness. According to the first, the option is voided by the hawala upon the price, by the consent of the contracting parties and because hawala requires bindingness: if the option remained, its rationale would be missing; in the hawala made upon the buyer, the option is voided with regard to the seller by his consent, not with regard to a buyer who has not consented; if he consents, it is voided with regard to him as well, according to the more correct of the two views.

Hawala is valid with a debt not yet due, such as the dower before consummation of the marriage, the wage before the hire term has elapsed, or the price before possession of the merchandise is taken; and whether the two debts agree or differ in the cause of obligation, one being a price and the other a loan or a wage. Substitution must however be permitted: it is not valid with what does not admit substitution, such as the debt of salam, even if binding.

Hawala is not valid in favor of the pilgrim performing the rites (al-sa'i), for it is an act of worship requiring intention, which cannot enter it; nor in favor of the recipient of zakat from the one upon whom it is due, nor the reverse, even if the nisab perishes after being constituted, because of the impossibility of substitution; thus, if the zakat obligation is in silver, substitution by gold is not valid, nor the reverse.

Hawala is valid upon a dead person, for the ceded debtor's consent is not required therein, and it is valid upon him even though his liability is ruined; this concerns only the future: his liability accepts nothing after his death; otherwise, his liability remains pledged to his debt until payment. It is not valid upon the estate, for lack of the person of the ceded debtor.

It is valid with a debt of fungible kind (mithli), such as currencies and grains: the purpose of hawala is the fulfillment of the creditor's right without increase or diminution, which is achieved thereby. It is likewise valid with a valuable (mutaqawwam) that can be pinned down by description, such as a slave, a garment, an animal or commodities, according to the most correct view: it is a property established in the liability, due, so the hawala by it is valid, like dirhams and dinars. Thus one who buys an item against a price in his liability, a valuable described so as to remove ignorance, by its kind, its type and its description as needed: the hawala by it is valid. Likewise one who borrows a valuable may transfer the lender by it: if 'Amr borrows an animal from Zayd while he has against Bakr an animal, 'Amr may transfer Zayd onto Bakr by this animal, for it then becomes a debt. According to the other opinion, the view opposed to the most correct, this is not valid: the purpose of hawala is the conveyance of the right without variation, which is not achieved in what has no determined like, which is why its like is not owed in case of destruction.

The Shafi'is further require the existence of a debt of the transferor against the ceded debtor: hawala is not valid otherwise, for it is a sale of debt for debt permitted for need; the transferor must therefore have something against the ceded debtor that compensates the creditor's right. It is also said that it is valid by his consent, as will be detailed later. And knowledge is required, on the part of the transferor and the creditor, of the transferred debt and of the debt upon which it is made: their quantity, such as one hundred, and their attributes valid in salam, for the unknown cannot validly be sold.

Finally the equality of the two debts, the transferred and the counterpart, is required in falling due, term, length of term, kind, quantity and description: if the two rights differ in anything, the hawala is not valid, for it is a contract of exchange for mutual benefit, permitted for need and cooperation, in which agreement is taken into account as in the loan; if the rights differ, an increase beyond the right would be sought, which is forbidden. Hawala thus follows the regime of set-off (muqassa): through it, what is in the transferor's liability is extinguished against his credit in the ceded debtor's liability, and set-off is not valid when the two rights differ. It is therefore not valid by dirhams against dinars, nor the reverse; nor by five against ten, nor the reverse, that is, by taking the ten in full against the five; it is valid upon five out of the ten, for equality is not understood between the transferor's debt and the creditor's debt as to their source, but between the transferred debt and the counterpart debt, even if the transferor's debt in itself exceeds the transferred debt: he has transferred only against part of his debt, not the whole.

If a due debt is transferred upon a due debt, or a deferred one upon a deferred one equal in term, this is valid; if a due debt is transferred upon a deferred debt, this is not valid, for the due cannot be deferred according to the Shafi'is, and the creditor has diminished his own right: his debt was due and he made it deferred by transferring his right from one liability to another; it is like one who has a deferred debt and is told by the debtor: "reduce your debt and I will pay it before its term": this is not valid. If the transferor has a deferred debt against a man and transfers it upon a due debt he himself holds, validity is discussed: according to a first view it is valid, for he can hasten the deferred debt; according to the other it is not, for the transferor has increased the creditor's right in order to transfer his right from his liability to that of another, as if he owed a thousand due and had increased them to make them deferred (see Rawdat al-Talibin, 3/432, 434; al-Bayan, 6/280-287; Mughni al-Muhtaj, 3/154-156; Nihayat al-Muhtaj, 4/485-489; al-Dibaj, 2/273-274; al-Najm al-Wahhaj, 4/471-474; Kanz al-Raghibin, 2/802-805; Tuhfat al-Habib on Sharh al-Khatib, 3/423-424).

The Hanbalis require of the transferred debt:

• the similarity of the two debts: hawala is a transfer of a right, which moves with its attribute; similarity is considered according to four points. The kind: dinars against dinars, dirhams against dirhams; transferring gold upon silver or the reverse is not valid. The attribute: transferring from the Egyptian coin (misriyya) to the amiri coin, or from clipped coin to sound coin, is not valid. Falling due and term: the terms of the two deferred debts must agree; if one is due and the other deferred, or if the terms differ, one falling due after a month and the other after two, the hawala is not valid. If the two rights are due and the creditor is made to stipulate that he will take his right, in whole or in part, after a month, the hawala is not valid, for the due cannot be deferred, and the stipulation of what would have voided the validity had it been in the act itself produces the same effect. Quantity: the hawala is not valid by five against six, for it is a form of alleviation like the loan; were it permitted with difference, what would be sought from it would be the surplus, and it would leave its subject. The surplus does not affect validity: transferring by five out of ten against five, or by five against five out of ten, is valid, that upon which the hawala fell being in agreement, and the surplus remaining with its owner. When these conditions are met and the hawala is valid, if the two agree that the ceded debtor pay better than his due, or if the creditor accepts without the attribute, or if the debtor of a deferred debt accepts early payment, or if the creditor of a due debt accepts deferral, this is valid, for it is permitted in the loan, all the more in hawala; if the transferor or the creditor dies, the term remains; if the ceded debtor dies, two reports diverge on the falling due of the right.
• knowledge of the quantity of each of the two debts: delivery and similarity are taken into account in hawala, and ignorance prevents them, as for fungible goods, excluding what does not admit salam, such as jewels. Hawala is not valid in what does not admit salam, for it is not established in the liability, only its value being owed in case of destruction. It is valid in everything whose like is established in the liability by destruction: prices, grains, fatty substances; and for what admits salam otherwise, such as the measured and the approximately counted, there are two views: it is not valid, the like not being determined therein, which is why the like is not owed; or it is valid, for it is established in the liability. Hawala is not valid in the debt of salam, even if one owes camels from a loan, with a like debt against another: in that case the hawala by it is valid, for if the like is established in the liability it is valid, and if the value is established, it is valid as well. If one owes camels as blood-money (diya) and transfers them onto someone who owes a like amount as another diya, this is valid, with the obligation to give the minimum covered by the term; another view holds that it is not valid. If one owes camels as diya and holds a like amount from a loan, and transfers by them, there are two views: valid, for, in the delivery to the transferor, he accepted that his property be placed in the borrower's liability; or not valid, for the obligation in the loan is, according to one report, the value, so that the kind differs. If the borrower transfers the debtor of the diya by his debt, it is not valid by unanimous view, for the obligation is the value and the kind differs; and if one says the like is owed, the borrower owes the like of what was lent him in its attributes and value, which the debtor of the diya is not bound to.
• the establishment (istiqrar) of the property of the ceded debtor: hawala implies binding the ceded debtor with the debt without restriction, and what is not established is exposed to extinction and is not established in what is exposed to extinction. The establishment of the transferred debt is on the other hand not considered, delivery of the non-established being permitted. Hawala is therefore not valid by the debt of salam nor upon it, exchange in compensation not being valid by it nor against it. If the husband transfers his wife before consummation onto her dower, this is valid; if the wife transfers by it upon him, it is not valid, for it is not established. If the buyer transfers the seller by the price of the merchandise during the option period, this is valid; if the seller transfers him by it, it is not valid for this reason. If the mukatab transfers his master by a property that has entered his possession, this is valid; if he transfers his master upon himself, it is not valid for this reason. And if a debt other than the money of the manumission deed is transferred upon the mukatab, this is valid, for in matters of debts he is treated like free men (see al-Mughni, 4/336-338; al-Kafi, 2/18-20; Sharh al-Zarkashi, 2/139-140; al-Mubdi', 4/271-272; al-Insaf, 5/225; Kashshaf al-Qina', 3/449-450; Sharh Muntaha al-Iradat, 3/399-400; al-Rawd al-Murba', 2/33-34).

The Creditor's Right of Recourse Against the Transferor

When does the assignee creditor have recourse against the transferor? The jurists differed: does he have recourse when the ceded debtor becomes insolvent, dies, or the property perishes, or does he have none? According to the majority of jurists, namely the Malikis, the Shafi'is and the Hanbalis, he has no recourse at all, with the detail that follows for each. According to the Hanafis, recourse is possible in specific cases.

The Hanafis said: when the hawala is completed, the transferor is discharged from the debt by the acceptance, and the assignee creditor has recourse against him only if his right perishes. According to Abu Hanifa, this perishing results from one of two things, with no third: the first, that the ceded debtor die insolvent, that is, leaving neither property, nor debt, nor guarantor in favor of the creditor against him; if he dies and the creditor affirms that he died insolvent while the transferor says otherwise, the creditor's word prevails, with his oath according to his knowledge, for he relies on the rule of hardship. The second, that he deny the hawala and swear, with no proof (bayyina) for the creditor against the ceded debtor of the acceptance of the hawala. Abu Yusuf and Muhammad retained these two cases, and a third: that the ceded debtor become insolvent during his lifetime and the judge rule his insolvency, for according to them the judge rules insolvency during his lifetime, whereas Abu Hanifa does not rule it. When one of these cases occurs, recourse against the transferor is established, for the debt was established in his liability before the hawala.

The principle is that a debt is extinguished only by payment, according to the saying of the Prophet (peace and blessings of Allah be upon him):

The debt must be paid.Narrated by Abu Dawud

Voluntary release was however annexed to payment in extinction, and hawala is neither payment nor release: the debt therefore remains in his liability as before the hawala; through it, only the claim has moved to the ceded debtor, but only up to perishing: for the life of the debt is the claim, and when it perishes, no means of reviving it remains; the right then returns to its place of origin (Bada'i' al-Sana'i', 6/18-19; Mukhtasar al-Wiqaya, 2/167; al-Jawhara al-Nayyira, 4/30-31; al-Ikhtiyar, 3/4; al-Lubab, 1/586; al-Hidaya, 3/99; Sharh Fath al-Qadir, 7/241-242; Tabyin al-Haqa'iq, 4/172; al-'Inaya, 10/183-184; al-Bahr al-Ra'iq, 6/271-274; Durrar al-Hukkam, 7/426; al-Durr al-Mukhtar, 5/346; al-Awsat, 5/729).

The Malikis said: the creditor's right moves onto the ceded debtor by the mere contract of hawala; if the ceded debtor becomes insolvent or denies the debt after the completion of the hawala, there is no recourse by the creditor against the transferor, and the affliction consists in the discharge obtained through the transfer into the ceded debtor's liability; whether the insolvency precedes the contract or arises after it. Based on the saying of the Prophet (peace be upon him): "if any of you is transferred to a solvent man, let him follow him" (Bukhari 2287, Muslim 1564), which he stated generally without restriction; and because hawala discharged the transferor's liability, no recourse is permitted; fundamentally, if the state of the ceded debtor does not change, no gharar is imposed upon the transferor, the liability not being discharged with it; and when the hawala contract becomes irrevocable, its persistence prevents the creditor's recourse against the transferor, gharar being what has not yet become irrevocable. Moreover, hawala is a cause of the extinction of the claim of the debt and of its transfer: the right of recourse is therefore extinguished by it, as by taking possession and release; no gharar is imposed upon him, the claim not being extinguished with it; and hawala takes the place of release and possession, as shown by the extinction of the claim through it and the permissibility of deferring in it. The insolvency of the ceded debtor is thus a defect arising after possession: no recourse follows from it.

The creditor has recourse against the transferor only if the latter knew of the ceded debtor's insolvency alone, and not of the creditor's: the creditor's right then does not move into the ceded debtor's liability, the transferor's liability is not discharged, and the creditor may have recourse against the transferor for his debt; for the transferor discharged the claim only on condition that a solvent liability be handed over to him: if he deceives him as to its absence, he has concealed its defect, and recourse becomes obligatory. Discharge was indeed conditioned upon the soundness of the ceded debtor's liability, and the creditor entered upon that basis: if soundness does not exist, the condition of discharge does not exist, and the debt remains in the liability. Likewise, the creditor entered a sound liability: if it emerges defective, recourse is permitted to him, like one who pays the price of merchandise against its soundness and sees it emerge defective. The debtor's insolvency is a defect in what attaches to his liability: if the transferor conceals it, recourse is permitted as for other defects; if he does not deceive the creditor, no recourse is permitted.

The transferor's knowledge of insolvency is established by proof or by his admission, and knowledge of denial counts as knowledge of insolvency. If the creditor knew of the insolvency before the hawala, the latter remains binding.

If the creditor claims against the transferor that he knew of the ceded debtor's insolvency, without proof or admission, the transferor swears to his ignorance if knowledge is suspected of him, that is, if a man of his kind would be suspected: if he swears, he is absolved and the hawala remains binding; if he shirks, the creditor swears and has recourse for his debt; if knowledge is not suspected of him, no oath is demanded of him.

If the transferor and the creditor dispute after the death of the ceded debtor, his insolvency or his prolonged absence, and the creditor says: "you transferred me onto a nonexistent debt, I have recourse against you", and the transferor replies: "rather, I transferred you onto a debt I hold against the ceded debtor, my liability is discharged toward you, no recourse is permitted": the transferor's word prevails, with an oath. And whoever claims, after accepting the hawala, that it bore upon a nonexistent debt is not believed, and the proof is upon him: for the creditor's acceptance of the hawala confirmed the existence of the debt, which is established by proof or by the creditor's admission, and here it is his admission (al-Ishraf, 3/55-56, numbers 914-915; al-Muntaqa, 2/600; Tahrir al-Mukhtasar, 4/206; Mawahib al-Jalil, 7/23; al-Taj wa-l-Iklil, 4/116; al-Sharh al-Kabir, 4/534; Sharh Mukhtasar Khalil, 6/19-21; al-Qawanin al-Fiqhiyya, 1/215).

The Shafi'is said: if collecting the debt from the ceded debtor becomes impossible, through an insolvency arising after the hawala, through his death, through his denial of the debt or of the hawala followed by an oath, or otherwise, the creditor has no recourse against the transferor, like one who takes a compensation for the debt and sees it perish in his hand. Based on the saying of the Prophet (peace be upon him): "if any of you is transferred to a solvent man, let him follow him": its generality indicates that the creditor follows always, even if he dies insolvent or denies. And because, when He recommended the creditor to follow the ceded debtor on condition that the latter be solvent, it is known that the right moves from the transferor to the ceded debtor's liability by a transfer that prevents the creditor from having recourse to the transferor: if recourse existed, the disappearance of this condition would not harm him. Likewise, the creditor has no recourse if the ceded debtor was insolvent at the time of the hawala and the creditor did not know it: he is at fault for not having investigated, like one who buys something while being cheated in it.

It is also said: he has recourse if he stipulated solvency, which is not contrary to the condition, like the case of one who stipulates a slave as scribe and is cheated. The first view is the more correct, for had he stipulated recourse for any of these cases, the hawala would be invalid (Rawdat al-Talibin, 3/434; al-Awsat, 5/729; al-Bayan, 6/288-289; Mughni al-Muhtaj, 3/157; Nihayat al-Muhtaj, 4/490; al-Najm al-Wahhaj, 4/457; Kanz al-Raghibin, 2/804-805; al-Dibaj, 2/274-275).

The Hanbalis said: when the hawala is completed, the transferor's liability is discharged by its mere conclusion, whether collection of the right is possible or impossible, through delay, insolvency, death or otherwise. Proof of this is the account of Sa'id ibn al-Musayyib: he had a claim against 'Ali (may Allah be pleased with him) and transferred it; the ceded debtor died; he informed him of it, and 'Ali said: "you have chosen the farthest from us for us, may Allah distance you", blaming him for the mere transfer, without telling him that he had a recourse. Hawala is indeed a release of a debt without possession being taken, neither from the debtor nor by one who would pay in his place: no recourse is therefore established in it, as in voluntary release.

But if the creditor believed the debt established upon the ceded debtor and the latter denies the debt without it being possible to prove it, the creditor has recourse against the transferor, for the principle is the persistence of the debt upon him and his discharge is not accomplished. And it is reported from Imam Ahmad what indicates that, if the ceded debtor was insolvent and the creditor did not know it, he has recourse, unless he consents after knowing: insolvency is a defect in the ceded debtor, so recourse is permitted, like one who buys merchandise and finds a defect in it; the transferor having deceived him, recourse is permitted, as in concealing the defect of the sold item.

If the creditor stipulates the solvency of the ceded debtor and the latter turns out insolvent, he has recourse against the transferor, based on the saying of the Prophet (peace and blessings of Allah be upon him):

Muslims are bound by their conditions.Narrated by Abu Dawud and al-Tirmidhi

For he stipulated what contains the interest of the contract in a contract of exchange: rescission is therefore established by its absence, like the stipulation of a description in the sale (see Rawdat al-Talibin, 3/434; al-Awsat, 5/729; al-Bayan, 6/288-289; Mughni al-Muhtaj, 3/157; Nihayat al-Muhtaj, 4/490; al-Najm al-Wahhaj, 4/457; Kanz al-Raghibin, 2/804-805; al-Dibaj, 2/274-275).