Gharar
Gharar is excessive uncertainty or ambiguity in the essential terms of a contract — the subject matter, the price, the delivery — of a kind that can make one party's gain depend on the other's ignorance.
Also called: excessive uncertainty · contractual uncertainty
The classical examples are selling a fish still in the sea, a bird in the air, or an unborn animal: the seller cannot deliver with confidence and neither party can know what is being traded. Gharar is about information and deliverability in the contract itself, which is why it is distinct from the ordinary commercial risk of whether a venture makes money.
Jurists distinguish excessive gharar, which invalidates a contract, from minor uncertainty that is unavoidable and tolerated. Much of the Islamic objection to conventional insurance and to many derivatives is framed as gharar, often together with maysir. Takaful and wa'd-based hedging are attempts to deliver similar economic protection without it.
In practice
Gharar does not mean all risk is prohibited. Islamic finance requires the financier to take risk; what it prohibits is contractual uncertainty serious enough to make the bargain itself unknowable.
Example
A buyer pays US$5,000 for "whatever the next voyage of this ship brings back", with no description of the cargo. The contract has excessive gharar. A buyer who pays US$5,000 for a specified 10 tonnes of a described grade, delivered on a set date, has ordinary commercial risk.
Commonly confused with
| Term | How it differs |
|---|---|
| Maysir | Maysir is gambling — gain dependent on chance at another's expense. Gharar is uncertainty in the contract's terms. Many speculative products raise both, but they are separate tests. |
See also
- MaysirMaysir is gambling or wagering — acquiring wealth by chance at someone else's expense rather than through trade, work or the productive use of capital. It is prohibited in the Qur'an and is a key test applied to speculative financial products.
- TakafulTakaful is a cooperative risk-sharing arrangement in which participants contribute to a common fund that pays claims among them, run by an operator under a Sharia-compliant contract rather than sold as conventional insurance.
- SalamSalam is a sale in which the buyer pays the full price at the time of contract for goods of a precisely specified type, quantity and quality, to be delivered on a fixed future date.
- Wa'dWa'd is a unilateral promise by one party to do something in the future, such as buy or sell an asset. Islamic finance uses binding promises in hedging and financing where a bilateral forward contract would not be permitted.