Hawzah News Agency – In a security agreement, a person deposits some property with another person as collateral for a debt or for some property that he is responsible (ḍāmin) for so that in the event that he fails to pay off his debt or property, the other party can be compensated from the deposited property.
- In a security agreement, it is not necessary to say a particular formula (ṣīghah). In fact, if the depositor gives his property to the depositee with the intention (qaṣd) of a security deposit and the depositee accepts it with the same intention, it is valid (ṣaḥīḥ).
- The depositor and the depositee must be of the age of legal responsibility (bāligh), sane (ʿāqil), and no one must have compelled them [to enter into the security agreement]. Furthermore, the depositor must not have been proclaimed bankrupt (mufallas) nor must he be foolish with finances (safīh) (the meaning of these terms was explained in Ruling 2272). However, if a bankrupt person deposits as security property that is not his, or property over which he has not been prohibited to have disposal, there is no problem.
- A person can only deposit as security property over which he can legally (sharʿan) have disposal. And if he deposits as security another person’s property with his consent, it is valid.
- The property that is deposited as security must be something that is valid to buy and sell. Therefore, if wine or suchlike is deposited as security, it is not correct.
- The profits from the deposited item belong to its owner, whether that be the depositor or another person.
- A depositee cannot give or sell the deposited property without the owner’s consent, whether that be the depositor or another person. And if the owner consents afterwards, there is no problem.
Ruling 2326. If a depositee sells the deposited property with the owner’s consent, the proceeds of the sale will not be considered security as the property itself [was considered security]. The same applies if he sells it without the owner’s consent but the latter consents afterwards. However, if the depositor sells that property with the depositee’s consent so that the proceeds be deposited as security, then in case he violates this agreement, the transaction (muʿāmalah) is void (bāṭil) unless the depositee consents to it.
- If the time arrives for a debtor to pay his debt and the creditor demands it but the debtor does not pay him, in the event that the creditor has agency (wikālah) to sell the property that has been deposited as security and to take what he is owed from the proceeds, he can sell it and take what he is owed. And in case he does not have agency, it is necessary for him to obtain the owner’s consent. If he does not have access to him, then based on obligatory precaution (al-iḥtiyāṭ al-wājib), he must get authorisation from a fully qualified jurist (al-ḥākim al-sharʿī). In both cases, if he acquires an extra amount [from the sale], he must give that extra amount to the owner.
- If a debtor owns nothing besides the house in which he resides and some things such as household furniture which he needs, a creditor cannot claim what he is owed from him. However, if the property that has been deposited as security is something like a house and household furniture, then the creditor can sell it and take what he is owed in accordance with what was said in the previous ruling.