Gharar

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Gharar is in language reduction هي النقصان كما في مقاييس اللغة . In Fiqh it is ambiguity that carries the risk of reduction. It is divided into minor and major Gharar. Major Gharar renders a contract invalid or impermissible (Haram).

Gharar is defined by the scholar Zuhayli (Financial Transactions in Islamic Jurisprudence, Vol. 1, p. 84) as a sale of

“(i) that which is not known to exist or not, (ii) whose measure ist not known to be large or small, or (iii) that is undeliverable.”

And he cites Professor Zarqa, who considers a sale “of probable items whose existence or characteristics are not certain, due to the risky nature that makes it similar to gambling.”

The prohibition of Gharar gets into stronger relevance in regard to derivatives, which are sometimes referred to belong to the categories of a Gharar sales and sometimes simply compared to straight gambling. Gharar, however, influences largely the way the insurance business needs to be done as it renders a conventional contract as not permissible for Muslims.

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