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Abstract

There is widespread interest in the applications of Islamic law in construction contracts. This is due to the ongoing construction boom in many countries in the Middle East whose civil codes are based on Islamic law. This paper addresses the applications of an important theory in the Islamic law of transactions to construction contracts. This theory of gharar – normally translated as risk and uncertainty- has wide ranging applications in the field of construction law. The paper defines gharar and summarises its basic principles. It then goes on to introduce the essentials of a valid contract in Islamic law. These essentials are then related to the contract documents normally used in construction contracts. Based on this, five specific practical applications of the theory of gharar in construction contracts are elaborated, and illustrated with some case studies. The paper concludes that risks and uncertainties are inherent in construction contracts, due to the special nature and complexity of these contracts. These risks and uncertainties tend to lead to conflict and disputes. The theory of gharar places a limit on the level of risk and uncertainty that is acceptable in contracts of exchange. Exceeding this limit leads to invalidity of the contract. The theory of gharar, therefore, has a major role to play in the prevention and resolution of construction disputes. It is of vital importance that those involved in the drafting and execution of construction contracts- be they construction lawyers or engineers- understand this theory and its applications.

Keywords: Construction law, Islamic law, construction contracts, dispute prevention, dispute resolution, risk management.

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