Definition and Scope
The standard covers immediate revocation rights that arise when:
- A buyer is deceived verbally (Taghrir) because the seller makes false claims about the goods or price.
- A buyer is deceived by conduct (Tadlis) because the seller physically misrepresents the goods.
- A buyer is price gouged (Ghabn) because the seller charges far above market price to a trusting buyer.
the Trust-Based Options standard does NOT cover options to revoke due to defect, cooling-off options, or incomplete performance. Those have separate standards.
Three Types of Trust-Breaching Options
1. Khiyar al-Taghrir (Option to Revoke on Grounds of Verbal Deception)
Definition: The right of a buyer to revoke a contract due to verbal deception by the seller or a colluding party, where the seller inaccurately describes the sale item so the buyer pays a higher price than justified.
Examples of verbal deception:
- Deliberate misinformation about cost and markup in a Murabahah, such as falsely claiming the cost was higher to justify a higher price.
- Phantom bidding (Najsh) in an auction, where colluders bid up the price artificially.
- False claims that the item is no longer available elsewhere when it is.
- Deceptive announcements about a company's financial performance to inflate share price.
Causes and consequences: The buyer may revoke and return the item within a customarily acceptable period. If the option lapses, the seller keeps the full price and the buyer gets nothing back.
2. Khiyar al-Tadlis (Option to Revoke on Grounds of Deceptive Conduct)
Definition: The right of a buyer to revoke a contract due to deceptive CONDUCT by the seller or a colluding party, where the seller portrays the sale item in a better condition than it actually is.
Prerequisites:
- The deception must result from the seller's conduct or instructions, not force majeure.
- The buyer must be unaware of the deception.
- The deception must be continuing. If the item improves to meet the original specification before revocation, the buyer has no right to revoke.
Examples of deceptive conduct:
- False branding using counterfeit labels.
- Painting an old car to hide its age.
- Adding lubricants to make a product appear in better condition.
- Covering defects with cosmetic touch-ups.
If the seller also verbally claimed the car was 2 years old, that overlaps with Khiyar al-Taghrir (verbal deception). The painting itself is conduct-based Tadlis.
Consequences: A buyer enticed by deceptive conduct may return the item OR keep it. If he keeps it, he gets no compensation. He must return within a customarily acceptable period.
3. Khiyar al-Ghabn (Option to Revoke on Grounds of Price Gouging)
Definition: The right of a buyer to revoke a contract if the price paid exceeds the highest market estimate given by certified valuators. The "gouging" must be deemed excessive under commercial custom.
Key requirement: The buyer must be unaware of the overcharging at the time of contract inception.
Examples of price gouging:
- Sale to a Mustarsil, a trusting buyer who does not negotiate.
- Collusion between brokers and sellers to spike prices.
- Exploiting an exporter's ignorance to buy far below fair price, then reselling at market.
- Acting as intermediary between buyer and seller to mark up far above market rate.
Consequences: The deceived party may revoke the contract OR accept it without recourse. If accepting, no compensation is due. But parties may mutually agree on an indemnification instead of full revocation.
When the option lapses:
- The sale item is destroyed or consumed.
- A third party attaches rights to the item, with the same effect as consumption.
- The buyer delays exercising the option after discovering price gouging.
- The buyer disposes of the item after discovering gouging.
Non-Transferability Rule
A critical rule: Khiyar al-Taghrir, Khiyar al-Tadlis, and Khiyar al-Ghabn do NOT transfer to heirs upon death. The option dies with the buyer. This reflects the personal nature of trust — the option is about the buyer's faith in the seller, not a transferable asset.