Hawalah — practice questions

Correct answer: C. Clause 2: Hawalah of debt is the transfer of debt from the transferor (Muheel) to the payer (Muhal Alaihi). A transfer of right is a replacement of a creditor with another creditor. The two differ in that in a transfer of debt a debtor is replaced by another debtor, whereas in a transfer of right a creditor is replaced by another creditor. Clause 3/1 confirms that Hawalah is not a contract of sale.

Correct answer: A. Clauses 3/1 and 3/2: Hawalah is a legitimate and independent contract made out of courtesy and is not a contract of sale; it is permitted to facilitate payments and recovery. Acceptance by the transferee is recommended if the potential payer is known to be solvent and honours payments, because Hawalah benefits the creditor and relieves the debtor. If the payer’s financial status and creditworthiness are unknown, Hawalah becomes Mubah (permissible), not prohibited.

Correct answer: D. Clause 4/3: It is a requirement that a transfer of debt take effect immediately, not be suspended for a period of time, and not be concluded on a temporary basis or contingent on future events. However, it is permissible to defer payment of the transferred debt until a future specified date. Clause 4/2 adds that Hawalah is a binding contract and is not subject to unilateral termination.