Background
The Shariah Advisory Council of the Securities Commission Malaysia (the SAC) had, at its 183rd meeting held on 31 March 2016, deliberated on several issues in relation to wa`d (promise) and muwa`adah (bilateral promise).
Issue

The issues in deliberation were on the following:

(i) Definition of wa`d;
(ii) Binding effect of wa`d;
(iii) Permissibility of wa`d mulzim;
(iv) Implication of breach of wa`d;
(v) Definition of muwa`adah;
(vi) Binding effect of muwa`adah;
(vii) Permissibility of muwa`adah mulzimah; and
(viii) Implication of breach of muwa`adah.
Resolution
The SAC had resolved on wa`d and muwa`adah as follows:
1. Resolutions on Wa`d
Definition of Wa`d
Wa`d is a promise by a person or a party to perform certain task in the future.
Binding Effect of Wa`d
Wa`d is mulzim (unilaterally binding) on the promisor if the wa`d is attached to any of the following:

1. A particular action which is done by a party including the promisee in the future;
2. A particular time or date; or
3. A particular situation which will occur in the future.

The bindingness of wa`d shall take effect at the time when the wa`d is expressed.
Permissibility of Wa`d Mulzim
Wa`d mulzim is permissible based on the view of fuqaha’ that wa`d which is attached to conditions is binding. The types of conditions include a particular action, date/time and situation.

This ruling may clarify the types and categories of conditions attached to wa`d that lead to the binding effect of wa`d, especially in the financial instruments that involve promise to enter into contract that is attached to a particular date/time in the future.

Implication of breach of Wa`d
The promisor who breaches his wa`d is liable to pay ta`widh (compensation) based on actual loss suffered (if any) by the aggrieved promisee due to the breach of the wa`d.
2. Resolutions on Muwa`adah
Definition of Muwa`adah
Muwa`adah is a bilateral promise between two persons or two parties to enter into a contract in the future.
Binding Effect of Muwa`adah
Muwa`adah is mulzimah (bilaterally binding) on the promisors if the muwa`adah is attached to any of the following:

1. A particular action which is done by a party including the promisee in the future;
2. A particular time or date; or
3. A particular situation which will occur in the future.

The bindingness of muwa`adah shall take effect at the time when the muwa`adah is expressed.
Permissibility of Muwa`adah Mulzimah
Muwa`adah mulzimah is permissible because muwa`adah is merely a promise and does not tantamount to a contract. Since the contract is yet to be entered into, it does not have the effect of a contract. For example, when muwa`adah is expressed in relation to sale and purchase contract, there is no requirement of delivery of the counter values between the respective promisors because the contract will only be entered into at a time which have been agreed in the future in the muwa`adah arrangement.
Implication of breach of Muwa`adah
The promisor who breaches his promise in the muwa`adah is liable to pay ta`widh (compensation) based on actual loss suffered (if any) by the aggrieved promisee due to the breach of the promise.