Kuwait Court of Cassation principle number 334

Summary: - A tawarruq contract. The legislature has not addressed it in legislative provisions. Recourse must be had to the rules of Islamic Sharia. Its effect: it is permissible under Sharia. The challenged judgment's conclusion that it was an absolute sham, relying on the provisions of the contract itself and several presumptions from which it concluded that it was impermissible under Sharia because the type of metal forming the subject of the contract was unspecified, Islamic Sharia prohibiting it from relating to gold and silver. This presumption is unsound because the court did not provide evidence that the contracting parties intended to conclude the contract in respect of those two metals. Inability to determine its effect on its ruling after excluding it vitiates the judgment and requires its cassation. Rule: The papers establish that, under the contract dated 7/10/2007, the parties agreed that the appellant company in the second appeal would purchase metals for the respondent in that same appeal and sell them to another party in its capacity as the respondent's agent, delivering the price to the latter; the purchase value was KD 94000 and the sale value KD 108141, which the latter undertook to pay to the appellant company in one payment on 7/10/2008. Consequently, the contract in this form—and without dispute between the parties—is a tawarruq contract, which the positive-law legislature has not addressed in its legislative provisions, necessitating application of the rules of Islamic Sharia. A tawarruq contract is permissible under Sharia, as the judgment under appeal concluded, subject to the conditions it specified. The challenged judgment declared that contract void on its finding that it was an absolute sham. In forming its conviction that the contract was a sham, it relied on the provisions of the contract itself without identifying a source from which its existence could be inferred apart from it. It also set out several presumptions in its ruling, from which it inferred collectively that the contract was one of the organized tawarruq contracts impermissible under Sharia that are concluded by Islamic banking institutions, and that the intention was not to conclude a tawarruq contract permissible under Sharia, but rather for the respondent to obtain cash, and considered that this contract merely rendered that objective lawful. Among the presumptions relied upon by the judgment was the presumption derived from the parties to the dispute not specifying the type of metal forming the subject of the contract, and that it was necessary to specify the type of metal on which the tawarruq contract was concluded because Islamic Sharia does not permit it to relate to the metals gold and silver, notwithstanding that the presumption is permissibility, as previously explained and as established in this Court's jurisprudence. The respondent did not provide evidence that their intention was to conclude the contract in respect of gold and silver, nor was it established that the contract was actually performed in respect of either of them, although he bears the burden of proof. Consequently, by treating the failure to specify the agreed metal in the contract as a presumption that the contract was one of the organized tawarruq contracts impermissible under Sharia, the judgment relied on an unsound presumption. Since the effect of this presumption on the formation of the court's conviction, and what its ruling would have been after exclusion of that presumption, is unknown, the judgment is defective and must be quashed on these grounds, without need to address the remaining grounds of appeal.