Aini Aryani, LLB (Hons)

I. INTRODUCTION

Ownership and right to property is the inherent right of a man to exercise his rights over property which he possesses and control with obligations connected therewith in the property acquired, such as to use for his own pleasure, to transfer and to extinguish his right by way of transfer if he chooses. (Note: the term inherent is use to denote that relationship).

Every human being has a right as inherent to his status to make such use of his physical and mental faculties as he chooses, provided he does not interfere with similar liberty of others. It is by the exercise of this inherent right that rights and obligations connected with property are mostly acquired, transferred or extinguished

Definitions of Ownership by western Jurists:
 Austin’s definition; “Ownership means a right which avails against everyone who is subject to the law conferring the right to put thing to user of indefinite nature.” Full ownership according to him is “a right indefinite in point of user, unrestricted in point of disposition and unlimited in point of duration.”
 According to Hibert, “Ownership involves four rights and those are the right of using the thing, excluding others from using it, the disposal of the thing and the destruction of the thing.”
 Salmond defines it as; “Relation between a person an right that is vested in him.”
 According to Buckland, “Ownership is ultimate right to the thing or what is left when all other rights vested in various people are taken out.”

The word used by Muslim jurists for ownership is milkiyah and that used for property is mal. The term al-milk, however, is sometimes used for ownership and at other times for the subject matter of ownership.

Ownership is defined by Muslim jurists as: “the relationship that exists between a person and a thing that gives absolute control and right of disposal over it to the exclusion of others.” Some of them also define it a “the relationship between man and property that has been established by the shari’ah through which he exercises exclusive control and right of disposal over it as long as there is no shar’i restriction.” This, however does not change the essential nature of the definition with respect to “control” and “exclusion of others”.

II. VARIOUS KINDS OF OWNERSHIP

Islamic concept of ownership has classified the ownership into many kinds and types. Here are I attempted some of its classifications;

A. Major Categories of Ownership

We can distinguish between three major categories of ownership: Private Ownership, Public Ownership, Waqf (voluntary sector).

1. Private Ownership

Islam recognizes the individual’s property and permits the ownership of all types of property acquired by lawful means. The authority of this sanction may be elucidated from the following verses:
“And for men is the benefit of what they earn. And for women is the benefit of what they earn.” (4:32)

“And give to orphans their property, and don’t substitute the worthless (things) for good ones.” (4:02)

Islam also recognizes the right of inheritance and obviously it can only be recognized by a system in which the people have the right of ownership. Islam considers the rich trustees and claims them to vindicate their trust-worthiness by so dealing with their wealth that it becomes wealth radiative and not wealth reflective. These trustees are answerable before Allah for the manner in which they discharge the trust reposed in this. The holy Quran says:

“And Allah has made some of you excel others in means of sustenance. So, those who are made to excel give not away their sustenance to those whom their right hands possess, so that they may be equal there in.” (16:71).

“And give them of wealth of Allah which He has given you.”

The Qur’anic verses quoted above thus make it clear that the wealth and all other instruments of wealth are mainly TRUST put in the hands of rich, with view to afford mutual benefits to all. No one is absolute master because real ownership and mastery over everything and every person vests only in Allah; others in these respective forms are no more than mere Trustees, answerable before Allah for the manner in which they discharge the trust reposed in them.

Islam gives guarantee for the safety of the property of the citizens and inflict heavy punishment on culprits. Thieves and robbers, who endanger the safety of property of the citizens and do not honour their rights are very severely punished by Islamic State. Islam condemns those who usurp the property of other people. It is explained in Qur’an:

“And (as far) the man and woman who committed theft, cut off their hands as punishment for what they have earned, an exemplary punishment form Allah.” (5:38)

“And swallow not up your property among your selves by false means.” (2:188)

Private ownership is essential prerequisite for a free society. Abolition of private property implies elimination of freedom. Freedom is most sacred in Islam. Life in Islam is worth living when it is a life of freedom. An individual is free to maximize his gains. But maximizing gains or at least getting some profits in the Islamic context is vastly different from capitalism. According to Islam, means of business should always be fair and legal. Wages should be fair and just. Production should be acceptable according to the Islamic norms i.e. it should be beneficial to the society. No “Haram” (prohibited) items should be produced. Similarly, spending of the fruits of ownership should also be within the limits set by Islam. The Qur’an tells us that we should always get our money in Halal (permissible) way.

Limits on Private Ownership

Islam recognizes the individual’s right of ownership but does not leave him entirely free to use this right in any way he likes. Islam has allowed private ownership in principle but has subjected it to such limitations as would render it absolutely harmless. It has authorized to community to enact necessary legislation to organize private ownership and to change it whenever the public interest demands it.

It is true that the government has an important role in checking the greed of the individuals. When we say that private property is essential in Islamic framework, it is not that shortcomings of private property are ignored. Private property can be misused. So, Islam tries to correct this imbalance from the very beginning in the following ways:
• Man is not considered to be the ultimate owner of property and wealth because he is not the creator. Allah is the creator of men as well as land and wealth. So that property could be used in the name of Allah.
• Morality, religion and ethics should determine human behavior. The government should intervene in order to ensure that performance of private property is not in contradiction with the interest of the society in general. The door is open for the Islamic government to play its constructive role in the economy, on the condition that there should be a real maslahah (public interest).


2. Public Ownership and Government Sector

We must distinguish between the public ownership and government ownership of the property. In past, fuqaha (jurists) have spoken about the streets and rivers, etc. and have maintained that these are owned by the community and not by the government. The prophet PBUH has stated that people are full partners in water, grazing and fire. These belong to community and the government should utilize them for the benefit of all. By the same token other jurists and scholars have added public utilities like transportation, etc. All other public utilities may be seen in the same way through Qiyas (deduction). The jurists have also spoken about al-ma’adan al-zahira (minerals on the face of earth) which are not supposed to be owned individually.

3. Waqf (Voluntary Sector)

Waqf is not mentioned in Qur’an explicitly, but it is implicit in the teachings of the Qur’an and sunnah and was done by the companions of the prophet PBUH during his life. Waqf is meant to take resources away from the private ownership and allocate them to the benefits of those who need the fruits or results of such projects.

The institution of al-waqf al-islami (Islamic trust) has played a great and important role in history of Muslims and gave the right answers to such question: why Islamic education of the past was independent of the government? Why our jurists were independent? Why our medical programs flourished to the extent that hospitals were built even for animals? Because of institution of Waqf. Thousands and thousands in Al-Azhar, in Al-Aqsa, in Egypt, in India and elsewhere got their education through the waqf.

The waqf is independent from the control of both the private sector and the government. It belongs directly to the society and is perpetual source of income to its beneficiaries. Unfortunately, most of these institutions have vanished for a number of reasons including the growing powers of our contemporary governments.

B. Types of Ownership

Ownership (al-milk) is classified in various ways. Some of these are given below:

1. Classification on the basis of participation. Ownership is classified on the basis of the person participating in the ownership into three types:

• Sole ownership. This is ownership by a single person of a particular property with all the attached rights and control.
• Co-ownership also called sharikat al-milk. When two or more persons jointly hold property it is called co-ownership. It is treated as a kind of partnership in Islamic law.
• Communal or public ownership. These are things that are jointly shared by the entire community including land, grass, fire. An individual does not have the right to exclude another person from such things, unless it has been converted to his personal ownership or possession through a legally valid mode of acquisition.

2. Classification on the basis of corpus (‘ayn) usurfruct (manfa’ah), and use (istimta’).

A person may own a thing as well as the benefits flowing from it, although he may temporarily alienate the benefits through contract, like an owner renting out this house to another person or mortgaging it as security for a debt. The Hanafis do not make a distinction between the ownership of the corpus and ownership of benefits or services for purposes of ownership. Both are attached to the same thing. The owner may contract out the use of the thing to another, but that does not make the other person the owner.

The benefit of this rule is that the other person not being the owner of the benefits does not have a right of further disposal in them. Thus, a tenant in a house cannot further sublet it. The majority of the jurists do make distinction, with some of them distinguishing between the right to manfa’ah and the right of intifa’. The word istimta’ pertains to conjugal rights. They arise from the marriage contract.

3. Classification on the basis of complete and incomplete ownership.

The word al-milk is also used to qualify other legal categories that are related to ownership, but are not ownership, but are not ownership proper. The word al-milk or ownership is employed in three senses. Milk ar-raqabah (proprietary right), milk al-yad (possession), milk at-tasarruf (right of disposal).

Thus, milk ar-raqabah is ownership proper that includes both exclusive control and the right of disposal. Possession or milk al-yad consists of exclusive control and the right the right to keep others out of such control, but it does not include the right of disposal. Milk at-tasarruf involves the right to dispose of property on behalf of the owner. This type of ownership belongs to the guardian, the executor and the agent and with some restrictions to the mortgagee and the bailee as well.

4. Classification on the basis of primary and incidental rights.

Primary rights are associated with the property itself, while incidental rights are those that may be related to other property because of the primary rights. These incidental rights give rights to easement like the right of passage (haqq al-murur), the right to flow of the water (haqq al-majra), the right to water (haqq al-shurb), right to discharge rain water to another’s land (haqq al-masil). These rights correspond to easements in English law. An easement is to be enjoyed as in the past and cannot be enlarged or altered. It is loss by disuse.

Another right is known as rights of a neighbour (haqq al-jiwar). This right may also lead to the right of Pre-emption. The Punjab Pre-Emption Act 1991 defines right of pre-emption as a right to acquire by purchase an immovable property in preference to other persons by reason of such right.

The term pre-emption is usually used for the translation of haqq shuff’ah, it means the acquiring a vendor’s property for the price for which the vendor has sold it. The right of pre-emption comes into operation only when the vendor has actually sold the property for until the contract of sale has been entered into the matter resting solely upon his intention cannot be said to be free from uncertainty.

III. RIGHTS OF OWNERSHIP

One of the most pivotal and crucial issues is that of ownership of various elements of production. A hot debate is going on among scholars of the age and it is perplexing to pen down that no conclusive result has been achieved yet. There remains a gulf of difference on this theme.

a. True and Absolute Ownership

Some are of the view that actual ownership rests with Allah, being the Creator and the man holds property as a trust for that he is accountable. Acquisition and disposal of property are recognized on certain conditions laid down by Shariah. Absolute ownership of individuals is not according to tenets of Islam, because it belongs to God solely.

A few writers assert that Real Owner has given proprietary rights to the whole society and they are against individual’s rights of ownership, as has been depicted by Abdul Qadir Udah in this passage: “The society through its functionaries such as rules and councilors has authority to organize ways and means of utilizing wealth. All wealth belongs to Allah, but Allah has made it fr good society. The rule in Islam is that all rights belonging to Allah are for good of society which sits in authority over them and not individuals. The society can abrogate individual ownership of benefits of property subject to condition that suitable compensation is paid to owner of benefits involved. Though Islam allows ownership with limits, it authorizes society, as entity for enduring rights of God and for organizing utilization of wealth, to subject individual ownership of particular kinds of property to limits, when necessitated by public good. This may apply to ceilings on agricultural holdings or to urban property.

Sayyed Qutb and Maulana Maudoodi hold somewhat different opinions, however they declare that rights of ownership are allowed. But their emphasis is on ensuring of basic needs of every individual.

Abdul Hamid Abu Sulaiman describes in these words: “A strict equality in ownership of natural resources would require very frequent redistribution of those resources among members of society. This would be disruptive to economic activity and social relations. First alternative to avoid frequent redistribution and permit private ownership; second, to redistribute equally among members of society that part of income which is due to natural resources, thus achieving equality and justice.”

M.N Siddique remarks, “The individuals, state and society each have claim on property rights in view of the principle that Islamic state has jurisdiction over individual rights, being embodiment of God’s vicegerency on earth and representatives of people. This jurisdiction is however, functional, depending upon values and objectives cherished by Islam.”

b. Land Ownership

The claim for land nationalization is sought to be proved from these Qur’anic verses. Although there is no direct bearing to this matter, yet some writers put their contention on these passages.
“All that the heavens and earth contain belongs to Allah. Whether you reveal or conceal your thoughts, God will bring you to account of them. He has powers over all things. “ (2:284)

“Return to Our faith or We will banish you from Our land. We shall destroy wrongdoers and let you dwell in the land after them.” (14:13, 14)

“Unto Him belongs whatsoever is in the heavens and the earth and religion is His for ever. Will you then fear any other than Allah?” (16:52)

“For We shall inherit the earth and all who are thereon and they are returned unto Us.” (19:40).

“It is His, whatever the heavens and the earth comprise and all that lies between them and underneath the soil.” (20:6)

“He laid the earth for creatures, therein are fruits, blossom-bearing palm, husk covered grain and scented herbs.” (55:10-13)

The supporters of land nationalization argue on the basis of above mentioned verses and say that all land is owned by the ruler, being vicegerent of God and that individuals have no right of ownership. But they are not justified in it. According to God as He is the Creator of whole universe, even the very life of a Muslim is belonged by Allah. Hence, concept of land ownership is not refuted and moreover it is not confirmed that land is a national property.

The private ownership of land was a custom during and before the period of Prophet. The grants were made by the Prophet himself followed by four pious chalips. There are few reliable Traditions to this effect. Al-Quma bin Wail relates that his father said a piece of land was granted to him by the Prophet in Hadhramaut.

It is related by Abu Bakr’s daughter, Asma, that Prophet gave her husband, Zubair bin Awwam, a land piece in Khybar that had date-palm and other trees.

Urwah Bin Zubair narrates that the Prophet granted him one piece of land from groves of Bani Nadheer which had been made state land.

Umar bin Dinar is said to have related, “When the Prophet came to Medina, he granted some land to Abu Bakr and Umar, the Great.”

It is related by Abu Rafia that Prophet had granted a tract of land to some of his relatives but could not develop or cultivate it and during Hadhrat Umar’s reign, they sold it for 8 thousands dinars. He grant of this form of lands was called Iqta, being inheritable and this was common practice in Arabia.

It is established fact that Islam is not against proprietary rights of land. However, it disfavours the bad form of feudalism and landlordism, because there arises exploitation and centralization of land in few hands and then unequal of wealth which is followed by oppression and corruption, ending with disruption and destruction of a nation.

IV. CONCLUSION

Numerous verses in the Qur’an give a clear indication that everything is owned by Allah (God) and that property in the absolute sense belongs to Him, and to Him alone. However, the right of ownership vests in God alone does not mean that we as human beings do not have the right to own property, it simply puts this individual right of ownership within a broader context. Ownership is basically our responsibility as trustees of God on earth. It is clear in the Quran that there is no objection on the individual right of property. For instance, God tells the Prophet:
“Take from their property charity”. (A-Tawbah 9:104).

In this verse, God uses the term ‘their property’, showing that there is no contradiction between God’s ultimate ownership to the universe and our right as humans to own within the restrictions that God has provided.

One of the restrictions on property in Islamic law is the legitimate acquisition of property, as the sanctity and right to defend property has to be recognized. Another restriction is not to allow your use of your property to cause harm or problem against other people.The Prophet PBUH once said;
“One should not harm himself or others” (Narrated by Muslim).

This requires considering other’s benefit while using your property. For example, monopolizing people’s basic necessities is restricted in Islamic law.[]

BIBLIOGRAPHY
1. Mehr Muhammad Nawaz Khan, Prof.; ISLAMIC AND OTHER ECONOMIC SYSTEMS, Islamic Book Service, Lahore, 1989.
2. LECTURES ON ISLAMIC ECONOMICS; Islamic Concept of Ownership and Its Economic Implications, by Mohammed Ahmed Sakr, Islamic Research and Training Institute Islamic Deveploment Bank Jeddah, Saudi Arabia.
3. Imran Ahsan Khan Nyazee, ISLAMIC JURISPRUDENCE; Property and Ownership, Center for Islamic Law & Legal Heritage
4. Dr. V.D. Mahajan, JURISPRUDENCE AND LEGAL THEORY, Mansoor Book House, Lahore.
5. Prof. Dr. Noor Mohammad Ghifari; SOCIAL SECURITY IN ISLAM, Atiq Publishing House, Lahore
6. Charles Hamilton; THE HIDAYAH; Mussulman Laws, vol. viii, Premier Book House, Lahore, 1982
7. M.A. Malik; THE PUNJAB PRE-EMPTION ACT 1991, PLD Publisher, Lahore, 1995
8. M.A, Abdul Rahim; THE PRINCIPLE OF MUHAMMADAN JURISPRUDENCE; Ownership.
9. http://uk.ask.com/web

I. INTRODUCTION

a) Bailment
Bailment is a legal relationship created when a person gives property to someone else for safekeeping. To create a bailment the other party must knowingly have exclusive control over the property. The receiver must use reasonable care to protect the property.

This word is derived from the French, bailler, to deliver. It is a compendious expression, to signify a contract resulting from delivery. It has been defined to be a delivery of goods on a condition, express or implied, that they shall be restored by the bailee to the bailor, or according to his directions, as soon as the purposes for which they are bailed shall be answered. Or it is a delivery of goods in trust, on a contract either expressed or implied, that the trust shall be duly executed, and the goods redelivered, as soon as the time or use for which they were bailed shall have elapsed or be performed.

Mr. Justice Blackstone has defined a bailment to be a delivery of goods in trust, upon contract, either expressed or implied, that the trust shall be faithfully executed on the part of the bailee. And in another place, as the delivery of goods to another person for a particular use.
Mr. Justice Story says that a bailment is a delivery of a thing in trust for some special object or purpose, and upon a contract, express or implied, to conform to the object or purpose of the trust.

Bailment is also defined as the temporary placement of control over, or possession of Personal Property by one person, the bailor, into the hands of another, the bailee, for a designated purpose upon which the parties have agreed. Or it can be said as the act of placing property in the custody and control of another, usually by agreement in which the holder (bailee) is responsible for their safe keeping and return of the property. It is also understood as the delivery of an asset by its owner to another person or persons for temporary care.

Sir William Jones has divided bailment into five sorts, namely:
-Depositum, or deposit.
-Mandatum, or commission without recompense.
-Commodatum, or loan for use, without pay.
-Pignori acceptum, or pawn.
-Locatum, or hiring, which is always with reward.

This last is subdivided into,
-Locatio rei, or biring, by which the hirer gains a temporary use of the thing.
-Locatio operis faciendi, when something is to be done to the thing delivered.
-Locatio operis mercium vehendarum, when the thing is merely to be carried from one place to another.

b) Wadee’ah

Literary, the word wadee’ah is derived from word al-wad’u or wada’ means ‘to leave’. It is because each mudee (proprietor) and muda’ (trustee) leaves one another. It can also mean al-hifz (to preserve, to keep, and to secure). It is kind of Amanah.

As-Sun’anee defines al-wadee’ah as the thing or good (corpus) entrusted by the owner or his agent to another to be kept in the custody. The contract of wadee’ah can be mandoob if the trustee has a character trust confidence in his self. Allah said in soorah al-Maidah verse 2:
وتعاونوا على البرّ والتّقوى

Means: “Do help one another in the courtesy and God-fearing”.

But wadee’ah can be wajib (compulsory) when nobody else other than himself (trustee) who is capable to keep the goods, and it is worried to be perish when nobody takes it into custody.

Ibn Balban defines wadee’ah as the wealth which is delivered or is handed over the person keeping it without reward.

In fact, wadee’ah contract is a kind of Bailment. It is sort of deposit in which the trust is for the benefit of the bailor as mandates. Generally, wadee’ah is done gratuitously.

II. COMPARISON

There are some comparisons between the contract of Bailment and Wadee’ah:

a. Definition
Bailment has a wider sense in definition, as it includes many kinds of trust contracts, e.g [1] Those contracts in which the trust is for the benefit of both parties, as pledges or pawns, and hiring and letting to hire, [2] Those in which the trust is for the benefit of the bailee, as gratuitous loans for use, and [3] those in which the trust is for the benefit of the bailor, as deposits and mandates. The result; wadee’ah is one of its kind, as it is sort of deposit and mandates.

b. Use of Term
The term of ‘Bailment’ is used for a kind of contract, while the term of ‘wadee’ah’ is used for two meanings: for the contract itself and for subject of the contract (the goods delivered to the muda’).

c. Elements of Contract
In Bailment three elements are generally necessary: delivery, acceptance, and consideration.
a.) Delivery
Actual possession of or control over property must be delivered to a bailee in order to create a bailment. Control over property is not necessarily the same as physical custody of it but, rather, is a type of constructive delivery. The delivery of the keys to a safe-deposit box is constructive delivery of its contents.
b.) Acceptance
A requisite to the creation of a bailment is the express or implied acceptance of possession of or control over the property by the bailee. A person cannot unwittingly become a bailee. Because a bailment is a contract, knowledge and acceptance of its terms are essential to its enforcement.
c.) Consideration
Consideration is the exchange of something of value, must be present for a bailment to exist. Unlike the consideration required for most contracts, as long as one party gives up something of value, such action is regarded as good consideration. It is sufficient that the bailor suffer loss of use of the property by relinquishing its control to the bailee; the bailor has given up something of value, the immediate right to control the property.
Whereas the Wadee’ah contract involved 3 elements as well, they are: Sighah, mudee, and muda’.

-Sighah (offer and acceptance),
-mudee’ (the party who deliver the goods, he can be the owner, the possessor or his agent), and
-muda’ (the trustee, or the party who is to take the goods into his custody).

But, Imam Shafe’i did not consider the sighah (offer and acceptance) as the element required in the wadee’ah contract. Merely silence of both mudee’ and muda’ in certain circumstances may be enough to create wadee’ah contract.

d. Parties involved
In Bailment the parties involved are known as bailor and bailee. Bailor is the party delivering the goods, and Bailee is the person to whom the goods are delivered. While in Wadee’ah they are known as mudee’ and muda’ (proprietor and trustee).

e. Source of Provision
The rights and duties of each bailor and bailee are provisioned in Contract Act 1872, while the rights and duties of each mudee and muda’ are regulated in the sources of Islamic Law (Qur’an, Sunnah, Ijma or consensus of jurists, and Qiyas).

f. Voluntarily and Involuntarily
Bailment can be established voluntarily or involuntarily, e.g by operation of law, while wadee’ah contract is always created voluntarily.

g. Movable and Immovable
Bailment contract is created for movable property, while wadee’ah can be done for both movable and immovable property. For instance; Z (mudee’) entrusted his home to Y (muda’) during Z’s travel to other city, or during specific time period. That illustration is an example of wadee’ah contract for immovable property.

h. Transfer of Goods to 3rd Party
In Bailment when bailee, without the knowledge of or authority from bailor, transferred the goods bailed to other person to be kept in the custody of that other person, and that transfer caused the goods bailed to the damage or loss. In this case bailee will be held liable to compensate. In Wadee’ah, when C (owner of the goods) entrusted the goods to A to be kept in his home, but after few days the door of A’s home was broken, and it may cause to the loss of the goods. Knowing this condition, A transferred the goods to his friend (B/third party) by reason to believe that B has more capability to keep the goods in his save home. In this circumstance, A will not be held liable to compensate in case of damage or loss, because his act is done in his capacity as trustee who has right to do so in case of emergency or manifest urgency.

i. Legal & Possessory Right
Trust of wadee’ah may cover realty as well as personality; the beneficiary under a trust has an equitable interest only, whereas a bailee has a legal interest (viz. various possessory rights). A trustee has the legal title of ownership, and so has power to convey a good title to a bona fide purchaser for value, whereas the bailee has only possessory rights.

j. Several joint Owners
Bailment in accordance with section 165 of Contract Act states that if several joint owners of goods bail them, the bailee may deliver them back to, or according to the directions of one joint owner without the consent of all, in the absence of any agreement to the contrary. On the other hand, in case of deposit (wadee’ah) by two persons, the trustee cannot deliver to either his share, but in presence of the other. So, if two men deposit (entrusted) something jointly with another, and one of them afterward appears and demands his share of deposit, the trustee must not give it unless in the presence of the other depositor, according to Imam Abu Haneefah.

The argument of Abu Haneefah is that the person present, in claiming his on share, necessarily claim half of the absentee’s since he claim a separate and determinate portion, whereas his right is indefinite. Now, where a right is mixed indefinitely with another, it is to be rendered separate and determinate only by means of division, but the trustee has no power to make a division.

k. To Use the Goods
In bailment, the bailee may use the thing bailed, provided that his act is not out of authorized use. Bailee can be held liable in case of making unauthorized use of goods bailed. He can use the thing bailed as far as the permission given by the bailor is concerned. In Wadee’ah, the muda’ (trustee) is not allowed to use the thing deposited to him. When the mudee (depositor/proprietor) allowed him to use the goods, the wadee’ah contract turns into areeyah (loan).

l. Reward
Consideration is one of the elements of Bailment contract. That is why in many cases, the bailee will be given a reward after the accomplishment of the task. For instance; a tailor will have a right of money after finishing the task of sewing the ordered garment of customer. It is a kind of non-gratuitous bailment. In the other hand, Wadeeah is generally created gratuitously and without a reward. And the goods are to be returned when it is demanded or required.

m. Termination
The contract of Wadee’ah is terminated when the goods are returned to mudee (proprietor/depositor) on his demand. It can be also terminated by the agreement of both parties, e.g when the muda’ (trustee) feels of incapability to keep the goods, or when the time period was specified.

Bailment, according to section 148 of 1872 Contract Act, is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. Thus, a bailment is ended when its purpose has been achieved, when the parties agree that it is terminated, or when the bailed property is destroyed. A bailment created for an indefinite period is terminable at will by either party, as long as the other party receives due notice of the intended termination. Once a bailment ends, the bailee must return the property to the bailor or possibly be liable for conversion.[]

BIBLIOGRAPHY:

1. A Law Dictionary, Adapted to the Constitution and Laws of the United States, By John Bouvier. Published in 1856.
2. AL-IKHYAR LITA’LEEL AL-MUKHTAR, by Majdooddin Abdullah Ibn Mahmood Ibn
3. Maudood al-Mausly, vol. II, Darul Fikr, Amman, Jordan, 1999
4. MAWAHIBUL JALEEL; MIN ADILLAH KHOLEEL, by Sheikh Ahmad al-Mukhtar al-Jaknee as-Shanqeety, vol. IV, Publisher: Idaratu Ihya-e-Turats al-Islami, Qatar, 1987.
5. AKHSARUL MUKHTASARAT, by Ibn Balban, vol. I, publisher: Maktabah ar-Rushd
THE HIDAYAH; Mussulman Laws, by Charles Hamilton, vol. III, Premier Book House, Lahore, 1982
6. Contract Act 1872, Mansoor Book House, Lahore, 2007
7. http://legal-dictionary.thefreedictionary.com/bailment
8. http://www.fxwords.com/b/bailment.html
9. http://onlinedictionary.datasegment.com/word/deposit

I. Introduction

Limited Liability Partnerships are distinct from limited partnerships, in that limited liability is granted to all partners, not to a subset of non-managing “limited partner”. As a result the LLP is more suited for business where the investors to take an active role in management. Whereas Limited Partnership is kind of partnership in which one or more partners have limited liability and at least one of the partners has unlimited liability. The liability of the limited partner is limited to the extent of his investment in the business. In Pakistan there is no Limited Partnership type of business.

A Limited Liability Partnership ("LLP") is essentially the same thing as a Limited Liability Company ("LLC"), except that an LLP is specifically designed for use by certain professions (for example, accountants, lawyers or architects). Generally the partners in limited liability partnerships aren't responsible for the debts, obligations, or liabilities of the partnership resulting from negligence, malpractice or wrongful acts, or misconduct by another partner, employee or agent of the partnership.

Professional organizations (such as accounting and law firms) generally prefer limited liability partnerships because they are specifically designed to limit malpractice claims against partners not involved in the malpractice. But a partner of a limited liability partnership is liable for other partnership debts and obligations as well as for their own negligence, malpractice or wrongful acts, or misconduct, and that of any person under their direct supervision and control.

There are more administrative duties involved compared to the Partnership business structure. In terms of liability, the Limited Liability Partnership is itself liable for debts run up in running the business, rather that the individual members of the LLP. As a result, LLP's are only recommended for profit running businesses.

Individuals or existing businesses can be members of a Limited Liability Partnership, and the LLP must have at least 2 members. The rights and responsibilities of all members would usually be laid out in a "Deed of Partnership". The LLP would typically select a "Designated Member" (or members) who would be responsible for maintaining communications with Companies House, preparing accounts and acting for the LLP if for some reason it is dissolved further down the line.

II. Forming a Limited Liability Partnership

Limited liability partnerships are formed by either:
filing a certificate with the Secretary of State, or
filing a certificate to convert an existing general partnership to a limited liability partnership.
At least two people “carrying on a lawful business with a view to profit” must subscribe their names to a document called an "incorporation document". The incorporation document must be delivered to the Registrar of Companies at Companies House. A statement must also be delivered to the Registrar that there has been compliance with the requirement that at least two persons, associated for the purpose of carrying on a lawful business with a view to profit, have subscribed their names to the incorporation document. The statement must be made by a subscriber to the incorporation document or a solicitor engaged in the formation of the limited liability partnership.

The incorporation document must include this information: the name of the limited liability partnership, the name and address of the persons who are to be members on incorporation; whether some or all of the members are to be designated members. There is no restriction on the number of members, but at least two must be designated members. A designated member is responsible for certain administrative and filing duties and for the filing of accounts as well as other duties in particular circumstances. Specifically, it is the designated partners who are held liable for the correct filing and recording of the limited liability partnership affairs. It is they too, who will be subject to the criminal penalties of failure to comply. If the LLP reduces in number and there are fewer than two designated members then every member is deemed to be a designated member.

An LLP should draw up a "Deed of Partnership" at the time of formation, a legally binding agreement between members which lays out the rights and responsibilities of each party to the agreement. Alongside administrative details such as the names and addresses of members, the deed will also include details on the amount of capital each partner will inject into the business, what their individual roles and responsibilities will be in running the business and what would happen if a partner leaves the business.

There are precise provisions for registration of a limited liability partnership, which are not dissimilar for those for creating a new limited company. However, a person cannot buy an "off the shelf" limited liability partnership as he can a limited company. The original documents have to be prepared with the names of the first set of "real" partners.

The law of “ostensible authority” applies to partner transactions. Every partner is an agent of the limited liability partnership. The limited liability partnership is bound by every contract made by any partner, unless first, the partner had no authority to make the contract and second, the third party was aware of that fact. The limited liability partnership is bound even by contracts by former partners, unless the other party has been told that the former partner is no longer a member, or the registrar has received a notice to that effect.

III. Tax and National Insurance

Limited liability partnerships are run like general partnerships and have a similar degree of management flexibility. Income, losses and gains are passed through to the general partners according to the partnership agreement. If there is no partnership agreement, income, losses and gains will be allocated in proportion to the partnership interests of each partner. Partners can agree among themselves as to how income, losses, and gains are divided among the partners. The partners then report the amount allocated on their own income tax returns and pay tax accordingly.

All profits in a Limited Liability Partnership (LLP) are split between the members. The tax liability falls on the individual members, not the LLP itself. Most members are likely to be self-employed, so all income should be declared via self-assessment. If an LLP member is another business, they will be liable to pay corporation tax on any income they receive from the LLP.
The profits of the business of a limited liability partnership are taxed as if the business were carried on by partners in partnership, rather than by a body corporate. This ensures that the commercial choice between using a limited liability partnership or a partnership is a tax neutral one. There are fair and foreseeable provisions to restrict set off of losses elsewhere against partnership profits of a partner and other anti-avoidance measures.

The transfer of an existing business to a limited liability partnership will not be treated for tax purposes as a cessation of the business of the partnership which is making the transfer unless in identical circumstances a transfer between one partnership and another would do so.

IV. When to use a limited liability partnership

Of all the legislation of the last few years, the “creation” of limited liability partnership is one of the most interesting.

a. Limited liability generally
The essence of a limited liability partnership for practical purposes is as a vehicle to contain a partnership of any size where partners may be at risk from the careless or accidental negligence of a colleague. For example, partners in International accountancy firms would be protected from personal liability if a claim was successfully pursued by a major client. Partners in a construction business would be protected if a new building collapsed, causing high level claims against them.

b. Protection for a non-active lender
A limited liability partnership may also be appropriate for a partnership where some partners are not actively involved. They might have once been called “sleeping” partners. This will suit both a company and an individual lender.

c. Easy in, easy out
The LLP structure is more suitable for a group of people engaging together in a property or finance venture where it may be necessary to account for partners coming and going more frequently than we would expect in a normal partnership business.
V. Direct Partner Liability in LLP

All limited liability partnership ("LLP") statutes provide that LLP partners will be personally liable for their own negligence or malfeasance. In addition, most LLP statutes provide that LLP partners are liable for the negligence, wrongful acts and misconduct of any person under the LLP partner's "direct supervision and control, "although the statutory terminology differs in this regard. The various state LLP statutes do not define what is meant by "direct supervision and control," and this question is left to judicial interpretation. For supervisory liability to be imposed upon a LLP partner, both "supervision and control" must exist, and the mandated supervision and control must be "direct."

It is probable that the LLP statutes contemplate immediate, close supervision and control by a LLP partner, rather than a casual level of supervision or control is contemplated. The direct supervision and control standard should require an intimate involvement in supervision and control in connection with actual work with respect to a matter, rather than mere responsibility for a matter or client. Thus, for example, a LLP partner in an accounting firm who is working on a day-to-day basis in supervising and directing the activities of an employee would appear to have liability exposure. On the other hand, the chair of a department in a law firm, the members of the governing body of law firm or the managing partner of a law firm, who have established general policy for their firms but who are not personally involved in a client representation would appear not to have liability exposure. Similarly, two LLP partners working on a matter independently of each other, neither of whom is viewed as supervising and controlling the other, should be able to argue that since they acted independently of each other, they should not be exposed to liability for the other's conduct. However, the lack of authority on this issue creates risk, which likely will affect the actions of LLP partners.

VI. The Benefits And The Disadvantages of LLP

A limited liability partnership is unlikely to be useful for a small trading company of any sort because a conventional limited company is likely to perform an appropriate role at less cost.
The benefits of a limited liability partnership against a limited company may be:
less public scrutiny because the partnership agreement remains confidential, easier manipulation of shares between partners, easier changes of membership, no administration relating to the issue and allotment of shares, easier expression of administration, roles and management in a partnership agreement.

The disadvantages may be:
lack of certainty as to how the Registrar and the courts will treat limited liability partnerships, lack of a body of law to protect minorities, possibly more “fuss” to administer until staff and advisers are fully conversant with new procedures, If the limited company is insolvent all the loss is the value of its assets.
It may be found a limited liability partnership insolvency more expensive since the amount which might lose is likely to be more. However, this cannot be a hard and fast rule. Each case will depend on its facts. []


References:
1. Qureshi, Fayyaz Hameed and Khurram Abbas Sheikh. LAW OF CONTRACT. Doggar Publisher: Lahore, 2006.
2. http://en.wikipedia.org/wiki/Limited_liability_partnership
3. http://www.bytestart.co.uk/content/19/19_1/set-up-a-limited-liability-partnership.shtml
4. http://www.netlawman.co.uk/info/limited-liability-partnership.php
5. http://www.lectlaw.com/files/buo04.htm