Posts tagged: Implied Terms

Introduction

Codified between 1868 and 1876 by a commission headed by Ahmet Cevdet Pasha, the Majalla (Mecelle-i Ahkâm-ı Adliye) remains one of the most concrete, dynamic, and systematic codifications of the Islamic law of obligations and commerce. Among the qawa’id al-fiqhiyya (general principles of jurisprudence) that constitute the first 100 articles of the Majalla, Articles 36 to 45 establish the “Theory of Custom, Usage, and Commercial Practice,” serving as the bridge between black-letter law and the realities of social and commercial life.

In modern global trade, drafting a flawless and perfectly exhaustive contract is virtually impossible. When it comes to filling contractual gaps, interpreting commercial terms, and integrating new needs arising from technological advancements into the legal framework, Articles 36–45 of the Majalla demonstrate a flawless alignment with modern international trade law (Lex Mercatoria) and the practices of international arbitration.

I. Majalla Articles 36–45: Texts, Commentaries, and International Arbitration Precedents

Article 36: Custom as an Arbitrator

Text: “Custom is recognized as a binding authority (arbitrator).”

(Âdet muhakkemdir.)

• Commentary and Analysis: The term “muhakkem” (recognized as an arbitrator/binding authority) indicates that in matters where no explicit statutory or religious textual injunction (nass) exists, custom and usage are accepted as binding legal evidence and the primary point of reference. In his commentary, Ali Haydar Efendi notes that this rule stems from the Hadith: “That which Muslims deem to be good is good in the eyes of God.” Custom emerges when an act ceases to be coincidental and takes root in the mind of the society or sector through repetition.
• Application in International Trade: In international arbitration or sales contracts, when an issue is not explicitly regulated by the parties, the established usages of the relevant sector are directly accepted as the “arbitrator” to resolve the dispute.
• Arbitral Precedent:
  • ICC Arbitral Award, No. 8817 (1997): In a dispute arising from an international sales contract, the Arbitral Tribunal ruled that even in the absence of an explicit contractual provision, pursuant to the principles of Lex Mercatoria and CISG Article 9(2), commercial usages widely known and regularly observed in international trade act directly as the “arbitrator” to supplement the contract.

Article 37: Custom as Conclusive Proof

Text: “The usage of people is a conclusive proof that must be acted upon.”

(Nâsın istimâli bir hüccettir ki onunla amel vâcip olur.)

• Commentary and Analysis: For an act to yield legal consequences, it must not be a mere personal habit but a widespread practice (istimâl) among people (nâs) or merchants. This practice serves as a binding and conclusive proof (hüccet) before the courts, establishing the intent of the parties and the scope of the obligation.
• Application in International Trade: In international freight or letter of credit (L/C) transactions where rigid written procedures might not always be followed, the generally accepted practices of the banking and logistics sectors serve as conclusive proof of whether an obligation was properly performed or breached.
• Arbitral Precedent:
  • ICC Arbitral Award, No. 3820 (1980): The Arbitral Tribunal ruled that the UCP (Uniform Customs and Practice for Documentary Credits) published by the ICC constitutes a binding proof (hüccet) and commercial usage in the execution of L/C transactions due to its widespread sectoral use (istimâl), even if the parties did not explicitly incorporate it into their text.

Article 38: The Limit of Custom – Widespread Application

Text: “A custom is only recognized if it is continuous or widespread.”

(Âdet ancak mütred yahud şâyi oldukta mu’teber olur.)

• Commentary and Analysis: Not every behavior qualifies as a custom. For a practice to be legally recognized, it must meet one of two conditions: It must be muttarıd (continuous, regular, and consistent) or şâyi (widespread and known by the majority of the society or merchants in that sector). Isolated, personal, or coincidental practices do not attain the force of custom.
• Application in International Trade: A party is precluded from imposing a narrow habit specific to its internal operations or local market onto its international partner as a “sectoral usage.” The usage must be demonstrably “widespread and continuous” on an international scale.
• Arbitral Precedent:
  • CIETAC (China International Economic and Trade Arbitration Commission) Award, 2006 (CISG/2006/16): The Arbitral Tribunal found that a commercial habit asserted by one party was confined to a local level and was not applied in a “regular and widespread” (muttarıd/şâyi) manner in the international market; therefore, it could not be recognized as a binding international trade usage.

Article 39: Adaptation of Rulings to Changing Times

Text: “It cannot be denied that with a change of times, the requirements of the law change.”

(Ezmanın tebeddülü ile ahkâmın tebeddülü inkâr olunamaz.)

• Commentary and Analysis: This principle demonstrates the dynamic, rather than static, nature of the law. While fundamental statutory/religious principles remain unchanged, rulings based on custom, changing circumstances, and public interest (maslahah) evolve as times change. Rooted in Imam Abu Yusuf’s jurisprudential methodology, this rule allows ancient precedents and practices to be adapted to meet new socio-economic needs.
• Application in International Trade: In the face of new instruments emerging from technological advancements or shifting financial balances due to economic crises, contracts are permitted to be stretched or adapted to changing circumstances (Hardship).
• Arbitral Precedent:
  • ICC Arbitral Award, No. 4761 (1987): The Arbitral Tribunal ruled that in the face of radical changes in international economic conditions and commercial customs over the years, the provisions of the contract could be adapted in accordance with the new realities of the time and the market (consistent with the UNIDROIT Principles of Hardship) if the contractual equilibrium is fundamentally altered.

Article 40: Superiority of Customary Meaning over Literal Meaning

Text: “The customary meaning of words is preferred over their literal meaning.”

(Hakîkatın terkine bedel olan ma’nâ-yı örfî mu’teberdir.)

• Commentary and Analysis: When a term used in a contract has both a “literal/dictionary meaning” (hakikat) and a “customary/sectoral meaning” (mânâ-yı örfî), the customary meaning prevails. In Ali Haydar Efendi’s example, if a person swears, “I will not set foot in his house,” the customary intent is “not to enter the house,” and merely placing a bare foot inside the doorway does not break the oath.
• Application in International Trade: Terms used in commercial contracts are interpreted not according to their general English dictionary definitions, but according to the technical meaning understood by professionals in that specific industry or trade sector.
• Arbitral Precedent:
  • ICC Arbitral Award, No. 8385 (1995): When the general dictionary definition of a technical delivery term used in a contract conflicted with its specific commercial meaning in the relevant sector, the arbitrators rejected the literal dictionary meaning and based their decision on the technical/customary meaning (mânâ-yı örfî) attributed to the term by the merchants in that industry.

Articles 41 and 42: Boundaries and Impediments of Custom

Article 41 Text: “When an impediment and a requirement concur, the impediment is preferred.”

(Mânî’ müctemi’ oldukta muktezâya tercih olunur.)

Article 42 Text: “For a custom to be recognized, it must not contradict an explicit textual injunction (nass).”

(Âdetin mu’teber olması nass-ı şâri’e muhâlif olmamakla meşrûttur.)

• Commentary and Analysis: These two articles draw the boundaries of legitimacy for custom. No matter how widespread a custom or usage may be, it is invalid (void custom) if it contradicts public policy, morality, or an explicit, mandatory statutory/religious provision (nass).
• Application in International Trade: The fact that bribery or tax evasion has become a custom in a particular sector or region does not grant it legal validity. International public policy and mandatory rules (Jus Cogens) supersede any custom.
• Arbitral Precedent:
  • ICC Arbitral Award, No. 1110 (1963 – Judge Gunnar Lagergren): The assertion that paying bribes to intermediaries to influence public officials was a widespread custom/tradition in the commercial life of a specific country was categorically rejected. The arbitrator ruled that no custom or practice contrary to international public policy and mandatory moral rules could be legally protected, and that bribery contracts based on such illicit customs are void ab initio.

Article 43: Implied Terms – That Which is Recognized

Text: “That which is recognized by custom is regarded as a stipulated condition.”

(Maruf olan şey, şart kılınmış gibidir.)

• Commentary and Analysis: Rules of good faith and performance that are widely known (maruf) in the market are considered inherent parts of the contract (implied terms), even if the parties did not explicitly state them when forming the agreement. The defense of “it was not explicitly written” is rendered invalid.
• Application in International Trade: Even if not explicitly stated in the contract, a seller is obligated to provide standard packaging or prepare the goods suitably for transport, as dictated by international standards.
• Arbitral Precedent:
  • ICC Arbitral Award, No. 5713 (1989): The Arbitral Tribunal held that, despite the absence of an explicit contractual provision, packaging goods in a manner suitable for maritime transport in international sales is an implied condition widely known and accepted (maruf) in the trade, and the breach of this condition constitutes a breach of contract (paralleling CISG Art. 35(2)(d)).

Article 44: Usages Among Merchants as Implied Conditions

Text: “That which is recognized amongst merchants is regarded as a stipulated condition between them.”

(Tüccar beyninde maruf olan şey, aralarında meşrût gibidir.)

• Commentary and Analysis: This is the specific application of Article 43 to commercial life. Beyond general societal custom, the specific jargon, payment terms, and quality tolerance margins established by merchants within their specific commercial sectors are as binding as written contractual provisions.
• Application in International Trade: In the trade of grain, minerals, or commodities, margins of tolerance or quantity deviations during delivery, even if not specified in the contract, do not require compensation provided they fall within acceptable limits according to exchange and merchant usages.
• Arbitral Precedent:
  • ICC Arbitral Award, No. 8908 (1998): In a dispute concerning quantity tolerance margins among merchants engaged in pipeline and commodity trading, the Arbitral Tribunal ruled that the established rules and usages among the merchants (tüccar beyninde maruf olan) constitute binding contractual provisions that must be applied between the parties, even if not explicitly written in the text.

Article 45: Equivalence of Customary and Statutory Determination

Text: “A matter established by custom is like a matter established by law.”

(Örfî olan bir tâyin, nassî olan bir tayin gibidir.)

• Commentary and Analysis: This serves as the binding concluding article of the 36–45 sequence. A right or obligation defined by custom and usage yields legal consequences as if it were determined by the statute itself. It provides the judge or arbitrator with a complete legal basis in disputes between parties.
• Application in International Trade: If the “FOB” or “CIF” rule is selected in an international sale, even if the law does not dictate where obligations and risks transfer, it is determined pursuant to Incoterms custom, and this determination binds the tribunal exactly like a statutory provision.
• Arbitral Precedent:
  • ICC Arbitral Award, No. 8548 (1996): In a case where “FOB” was used as the delivery term in an international sales contract, it was ruled that the point at which risk and costs transfer between the buyer and seller would be determined by Incoterms rules; this determination made by commercial custom yields binding legal consequences identical to an explicit, mandatory statutory provision.

II. Comparison Table

The parallels between the Majalla’s theory of custom and usage and modern legal systems, as well as international arbitration mechanisms, can be summarized as follows:

III. Conclusion

The Theory of Custom, Usage, and Commercial Practice constructed between Articles 36 and 45 of the Majalla proves that the Islamic law of obligations is far from a rigid and dogmatic structure; conversely, it is a system that provides highly flexible and realistic responses to the needs of commercial life.

As evidenced by the precedents of the International Chamber of Commerce (ICC), the logical sequence (Lex Mercatoria) relied upon by arbitral tribunals resolving disputes in global trade aligns flawlessly with this 10-article regulatory set codified by the Majalla in the 19th century.