Case Studies: Revival of Frustrated Sale Contract in Housing Project
1. Customers entered a contract with the bank to purchase a housing property from developer. The sale and purchase were based on al-'Inah, BBA and Murabahah principles and the property after the completion of the sale and purchase was duly charged to the bank. Nonetheless the developer was unable to complete the housing project for certain reasons. The sale was therefore frustrated because of this. After lapse of several years, the housing project was revived by a new developer. Customers were offered whether to continue the original contract with several choices: (1) to retain the original specification of the house, (2) the same with the first but with different location, (3) to upgrade a better specification and (4) to cancel the contract.
2. The fact of the contract is that no payment was made by the bank to the developer. Although the customer might have paid 10% deposit for the purpose of entering S&P agreement with the developer. The issue here is whether upon the revival of the housing project by a new developer the previous agreement entered by the customers with the bank can still be considered valid and therefore can be used in this new arrangement with the understanding some of the specifications of the house in respect of type and location have now changed. The price still remains as it was.
3. The ideal solution to the above issue is for both customer and bank to enter a new agreement and consider the previous contract as void and null for the reason of frustration and non delivery of the property. Nonetheless this solution theoretically may give rights to the aggrieved parties which are the customer to claim compensation for failure of non-delivery. This new contract may also involve additional cost mostly to the customer in respect of document preparation. Thus to consider the pervious contract as valid and still enforced is perhaps the most practical choice to both customers and bank.
4. As for the first and last choice as at para 1, the matter is straight forward. For the second and third choice additional agreement or perhaps schedule to the original contract can be inserted to specify the changes. The legal justification for this continuation is that as long as there is no demand or application from either parties to repudiate the contract, the original sale and purchase stands on the basis of the Islamic legal principle of istishab (continuation of the previous rule). In addition to this is the legal maxim of baqa' al-asl 'ala ma kana which rules that the previous law continues until there is a proof of its cancellation or revocation.
