The Legal Nature of the Hawala (Debt-Transfer) Contract: A Comparative Study of Iraqi Law, Iranian Law, and Islamic Jurisprudence

Abstract

The legal nature of the hawala contract remains a significant issue in the law of obligations because its effects overlap with several distinct legal institutions, including novation, delegation of performance, transfer of debt, assumption of liability, and guarantee. This study examines the legal characterization of hawala through a comparative analysis of Islamic jurisprudence, Iraqi civil law, and Iranian civil law. It focuses on whether hawala should be understood as a complete substitution of debtor resulting in the extinction of the original obligation, as a delegation of performance in which the original obligation survives, or as an independent debt-transfer contract with a distinct legal structure. The study adopts a doctrinal and comparative method and concentrates on those rules that reveal the nature of the contract, particularly the transfer of liability, discharge of the original debtor, consent of the parties, existence and certainty of the debt, the role of prior indebtedness, and the legal treatment of a transferee who owes no pre-existing debt to the transferor. The analysis shows that the jurisprudential foundation of hawala is better explained through the concept of transfer than through strict novation. Although the contract may produce a substitutive effect by releasing the original debtor and directing the creditor toward another person, the transferred obligation retains a sufficient connection with its original source to distinguish hawala from complete extinguishment and recreation of the debt. Iraqi law adopts a comparatively flexible and hybrid model, combining transfer with protective exceptions, whereas Iranian law remains more closely connected to the traditional jurisprudential conception of hawala as the transfer of an existing obligation. The study concludes that hawala is most accurately characterized as an independent debt-transfer contract with composite features rather than as a simple form of novation, delegation, or guarantee.