The Doctrine of Hiyal (Legal Artifice) in Islamic Contract Law

Abstract

This paper examines the concept of hiyal (legal artifices or stratagems) in Islamic contract law through a comprehensive analysis of its theoretical foundations, historical development, and contemporary applications. The study investigates how the four major schools of Islamic jurisprudence (madhāhib) have approached the legitimacy of hiyal, revealing a spectrum from the formalistic acceptance of the Hanafi and Shafi'i schools to the substantive rejection by the Maliki school, with the Hanbali school occupying a middle ground. At the conceptual core of this debate lies the fundamental tension between form and substance in Islamic commercial transactions—whether adherence to the letter of the law suffices when the spirit may be compromised. The research distinguishes between permissible hiyal (makhārij) that provide legitimate solutions to hardship and prohibited ones that deliberately circumvent Sharī'ah prohibitions while maintaining technical compliance. This distinction assumes critical importance in contemporary Islamic finance, where practices like organized tawarruq, sale-and-leaseback sukuk, and Islamic derivatives frequently raise questions about their alignment with the objectives of Islamic law (maqāṣid al-Sharī'ah). The findings suggest that the excessive focus on formal compliance at the expense of substantive adherence risks reducing Islamic finance to a regulatory arbitrage exercise, undermining its ethical foundations. Moving forward requires a more holistic approach that integrates legal form with ethical substance, emphasizing genuine risk-sharing and socioeconomic justice as defining characteristics of an authentically Islamic financial system.