A Jurisprudential and Legal Analysis of the Conditions of Validity, Permissible Conditions, and Usurious Conditions in Loan Contracts under Imamī Jurisprudence and the Iranian Civil Code

Abstract

A loan contract (qarḍ), as one of the most fundamental legal institutions within the Islamic financial system, requires the fulfillment of certain conditions for its validity and legal effectiveness; the absence of any of these conditions may result in the invalidity of the contract. In addition, the conditions incorporated into a loan contract may generally be divided into two categories: permissible and lawful conditions, which contribute to the stability and security of financial relations, and prohibited and usurious conditions, which compromise the validity and integrity of the contract and fall within the scope of both religious and legal prohibitions. Employing a descriptive-analytical method and drawing upon authoritative jurisprudential and legal sources, this article examines the conditions governing the validity of a loan contract—including the requirement that the subject matter constitute tangible property, possess lawful economic value, be delivered to the borrower, and be binding—as well as contractual stipulations, distinguishing between permissible conditions, such as a term for repayment, collateral, a guarantor, place of performance, and a stipulation for a reduction in repayment, and prohibited conditions, such as a stipulation requiring an additional material or constructive benefit. The findings demonstrate that Imamī jurisprudence, by establishing a precise framework for the conditions of validity, not only safeguards the stability of financial relations but also prevents the transformation of the loan institution into an instrument of exploitation through the prohibition of usurious stipulations and the articulation of the relevant jurisprudential rule and its exceptions. Drawing upon these jurisprudential foundations, the Iranian legal system has likewise recognized such conditions in Articles 648, 650, and 232 of the Civil Code.