Answered by Shaykh Faraz Rabbani
Is it permitted to set pay-by (repayment) dates in a loan contract? Someone was saying that this is not permitted in the Hanafi school, and also according to the majority of the schools?
It is [1] permitted to set a repayment date in a loan contract, and [2] such a stipulation would be binding. This is the position of the leading Muslim jurists (fuqaha’) of our time, as affirmed in the AAOIFI Shariah Standard on Loans. (al-Ma`ayir al-Shar`iyya, 350)
This is the relied upon position within the Maliki school. [Sawi/Dardir, Hashiyat al-Sawi `ala al-Sharh al-Saghir] In the Hanafi school, the basis is that such a stipulation cannot be contractually made. [Ibn Abidin, Radd al-Muhtar; Ibn al-Humam/Marghinani, Fath al-Qadir `ala al-Hidaya] However, leading contemporary Hanafi jurists give fatwa in accordance with Maliki position because of market practice, and the general lack of trustworthiness when repayment isn’t contractually stipulated.
How Can One Avoid the Difference of Opinion?
If someone wants to avoid the difference of opinion on this issue, they can break the contract into two separate parts:
[1] The loan agreement
[2] The repayment agreement.
Each part should be signed separately. The loan agreement would be the contract itself; the repayment agreement would be a morally-binding promise to repay on time.
As in other agreements of material value, it is highly recommended that such a contract be [a] written, [b] signed, and [c] witnessed by two individuals who aren’t directly related (through family or business relation) to either party.
This is a simple way of avoiding the difference of opinion in one’s personal lending arrangements—such as when borrowing or lending with friends or family—that avoids the mentioned difference of opinion (whose legal reasoning may be found in the works of fiqh) and maintains accountability and responsibility for repayment.
And Allah alone gives success.
Wassalam,
Faraz Rabbani