Ruling 2170. A settlement is when a person compromises with someone to make the latter the owner of part of his property or the usufruct of his property or to relinquish a claim or right he has. In return, the other person gives him part of his property or the usufruct of his property or relinquishes a claim or right he has. In fact, even if a person compromises with someone to give him part of his property or the usufruct of his property or to relinquish a claim or a right of his without taking anything in return, the settlement is valid (ṣaḥīḥ).

Ruling 2171. A person who settles his property with someone must be of the age of legal responsibility (bāligh), sane (ʿāqil), and he must have an intention (qaṣd) to settle. Furthermore, no one must have compelled him [to settle], and he must not be foolish with finances (safīh)[1] nor be prohibited from having disposal over that property because of bankruptcy.

Ruling 2172. It is not necessary for a formula (ṣīghah) to be said [for a settlement to be valid, nor does it have to be] in Arabic; rather, it is valid by means of any words or actions that make it understood that the parties have concluded a settlement and have compromised with each other.

Ruling 2173. If a person gives his sheep to a shepherd so that, for example, he takes care of them for one year and uses their milk, and in return, he gives that person an amount of oil, then in the event that the person concludes a settlement for the sheep’s milk to be given in return for the shepherd’s labour and the oil, the settlement is valid. In fact, if he hires the sheep to the shepherd for one year for him to use their milk, and in return, the shepherd gives him an amount of oil, and it is not stipulated that the oil or milk must be from only those sheep, the hire (ijārah) contract is valid.

Ruling 2174. If a person wishes to settle a claim or right with someone, it will be valid only if the latter accepts. However, if he wishes to relinquish a claim or a right of his, the acceptance of the other party is not necessary.

Ruling 2175. If a person is aware of the amount he owes but his creditor is not aware of it, then in the event that the creditor settles the debt for an amount that is less than the actual amount – for example, he is owed £500 and settles the debt for £100 – the extra amount [i.e. £400 in this example] is not lawful (ḥalāl) for the debtor unless he informs the creditor of the actual amount he owes him and seeks his consent. Alternatively, the situation must be such that had the creditor known the actual amount of the debt, he would still have settled for the same [lesser] amount.

Ruling 2176. If two people have property that is in the hands of the other, or they owe each other some property and they know that one of the two properties is worth more than the other, in the event that selling the two properties to each other would amount to usury (ribā) and be unlawful (ḥarām), then concluding a settlement with respect to the properties would also be unlawful. In fact, if it is not known that one of the two properties is worth more than the other but there is a probability that it is, they cannot, based on obligatory precaution (al‑iḥtiyāṭ al‑wājib), conclude a settlement with each other with respect to the two properties.

Ruling 2177. If two people are owed by one person or by two persons and the creditors wish to arrive at a settlement between themselves with respect to the debts, in the event that it does not amount to usury as explained in the previous ruling, there is no problem. For example, if both are owed 10 kilograms of wheat, with one of them being owed high quality wheat and the other medium quality, and it is time for both debts to be paid, their settlement is valid.

Ruling 2178. If someone is owed something that he can claim after a certain period, in the event that he settles the debt for a lower amount with the intention of relinquishing his claim to part of the debt and getting the rest immediately, there is no problem. This rule applies when the claim is for gold or silver or for a commodity sold by weight or measure. As for other commodities, it is permitted (jāʾiz) for a creditor to settle his claim with a debtor or with someone else for less than the claim, or to sell the debt, as will be explained in Ruling 2307.

Ruling 2179. If two people conclude a settlement with each other with respect to something, they can annul the settlement with each other’s consent. Also, if in the transaction (muʿāmalah) they stipulate a right for both or one of them to annul the transaction, the person who has that right can annul the settlement.

Ruling 2180. Until the time a buyer and a seller do not depart from each other, they can annul the transaction. Also, if a buyer purchases an animal, he has the right to annul the transaction within three days. If for three days a buyer does not pay for a commodity he has bought and does not take possession of the commodity, then just as it was mentioned in Ruling 2134, the seller can annul the transaction. However, a person who concludes a settlement with respect to something does not have the right to annul the settlement in these three cases. But, in case the other party to the settlement delays paying for the property over which the settlement was reached for a period that exceeds conventional norms, or if a condition is stipulated that, for example, the item will be given immediately but the other party does not fulfil this condition, then one can annul the settlement. Similarly, in the other cases that were mentioned in the rulings (aḥkām) pertaining to buying and selling, one can also annul a settlement. Furthermore, in a case where one of the parties to a settlement has been cheated, if the settlement is concluded to resolve the dispute, he cannot annul the settlement. In fact, in settlements other than this, based on obligatory precaution, someone who has been cheated must not annul the transaction.

Ruling 2181. If the thing that one acquires from a settlement is defective, one can annul the settlement. However, if he wishes to take the difference between the price of a non-defective and defective item, it is problematic (maḥall al‑ishkāl) [i.e. based on obligatory precaution, he cannot do so].[2]

Ruling 2182. Whenever a person concludes a settlement with someone with respect to his own property and makes a condition saying, ‘After my death, the property that I settled with you must (for example) be given as a charitable endowment (waqf)’, and the other person accepts this condition, he must act according to the condition.