Home » Hanafi Fiqh » Qibla.com » Can we use non-compete clauses in our work contracts?  

Can we use non-compete clauses in our work contracts?  

Answered as per Hanafi Fiqh by Qibla.com

Answered by Shaykh Faraz Rabbani

I am a partner in a design company. We are hiring a highly talented designer from abroad whom others were seeking out, too. Is it permitted to make it a condition that upon termination of our contract, he cannot work for another design company in our country for one year?

Answer:
In the Name of Allah, Most Gracious, Most Merciful

Assalamu alaikum,

Sayyiduna Umar ibn al-Khattab (Allah be pleased with him) said, “No one may trade in our markets unless they have learned their fiqh, for otherwise they will eat unlawfully interest (riba) whether they like it or not.” [Zabidi, Sharh Ihya `Ulum al-Din, 1.130]

It has been said, “Learn your fiqh, and then engage in trade.” [ibid.]

This is a corrupt (fasid) condition that would corrupt the whole contract. As such, it should not be included in the contract itself, though it can be made a promise on the side. It would be sinful to make such a condition or to agree to it when one could avoid it.

In situation when it is not possible to avoid such a condition, such as when engaging in contracts with a large company that would not be expected to change its standard contracts, then such a condition would be considered corrupt, but would not invalidate the contract. It would be considered a non-binding promise. Shaykh Mahmoud Ashraf Usmani confirmed this.

This is because this condition is not entailed by the contract itself, nor does it reinforce the contract itself, and it is not something known and established customary practice, as explained below.

The customary practice that is considered is that which is the standard industry practice in the country of the contract, or right across the world.

It is explained in al-Majalla, the Ottoman Hanafi commercial law code:

SECTION IV. SALE SUBJECT TO A CONDITION.

186. If a contract of a sale is concluded with an essential condition attached, both sale and condition are valid.

* Example: A vendor sells subject to a right of retaining the thing sold until he has received payment of the price. This condition is no way prejudices the sale, but on the contrary is an essential condition of the contract.

187. In the case of a sale concluded subject to a condition of the object of which is to assure the due performance of the contract, both sale and condition are valid.

* Example: A certain thing is sold subject to the condition that some other thing shall be pledged or that a certain individual shall become a surety. Both sale and condition are valid. Moreover, should the purchaser fail to observe the condition, the vendor may cancel the sale. The reason for this is that these conditions assure the handing over of the price, which is an essential condition of the contract.

188. In the case of a sale concluded subject to a condition sanctioned by custom established and recognised in a particular locality, both sale and condition are valid.

* Example: The sale of a fur subject to a condition that it shall be nailed to its place; or of a suit of clothes subject to the condition that they shall be repaired. In these cases the condition must be observed in carrying out the sale.

189. In the case of sale subject to a condition which is not to the benefit of either party, the sale is valid, but the condition is voidable.

* Example:- The sale of an animal subject to a condition that it shall not be sold to a third party, or that it shall be put out to graze. In such a case the sale is valid, but the condition is of no effect.

Wassalam,

Faraz Rabbani,

Amman, Jordan.

This answer was indexed from Qibla.com, which used to have a repository of Islamic Q&A answered by various scholars. The website is no longer in existence. It has now been transformed into a learning portal with paid Islamic course offering under the brand of Kiflayn.

Read answers with similar topics: