Ethica Institute of Islamic Finance™

Under what circumstances does it become impermissible to cancel a contract?

The possibility of cancellation expires under three circumstances:

1) A buyer is no longer entitled to return an item of low or defective quality if, upon discovery of the fault, he delays the item’s return without a valid excuse, unless the seller agrees to accept the item back;

2) Once a buyer’s ownership in an item ends, whether by sale, transfer or disposition, the buyer may not demand compensation for a defect; though if the original buyer sells the item and after a time is returned the item due to a defect from the original sale, he may demand compensation;

3) If the buying and selling parties agree a period of time during which the buyer is entitled to cancel a contract for reasons agreed upon explicitly (e.g. the buyer agrees to sample a magazine subscription for 3 months) or understood implicitly (e.g. the item is of low or defective quality), the buyer is no longer entitled to cancel a contract if the period expires, unless the seller agrees to accept the item back.

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