gharar

Gharar is an Islamic jurisprudence term describing excessive uncertainty, hazard, or risk in a contract that could lead to deception or unfair advantage. The word comes from the Arabic gharar, meaning deception or risk, and in fiqh it denotes conditions in which the subject matter, price, or outcome of a transaction is unclear or hidden. Classical jurists across the major Sunni and Shia schools generally regard gharar as forbidden in trades, loans, and other contracts, citing Qur’anic exhortations against deception and hadiths that condemn uncertain or exploitative arrangements.

Common examples of gharar include selling something you do not own, selling a commodity with unknown quantity or delivery, or contracts that hinge on future events with uncertain terms. Gharar is distinguished from permissible risk that is well-defined and fully disclosed; excessive or concealed uncertainty, misrepresentation, or speculation that harms others is normally prohibited. The aim is to achieve transparency, clarity, and fairness in exchange.

In contemporary Islamic finance, gharar is a central criterion for evaluating contracts and financial products. Institutions seek to minimize gharar by ensuring clear subject matter, price, and delivery terms, and by favouring risk-sharing structures such as partnerships over speculative arrangements. Some criticisms and debates remain, particularly around certain modern instruments and contingent contracts, but the general objective remains the reduction of uncertainty and deception in commercial dealings.