The Emergence of the Islamic Legal System and its Impacts on the Contracting Costs in the Arabian Peninsula (An Introduction to Economic Analysis of the History of Islamic Jurisprudence)

The existence of a specific legal system, which precisely defines property rights and contract rights, can play an important role in reducing the Contracting Costs. Before the advent of Islam, Northern Arabian Peninsula lacked the Property and Contract Laws and, consequently, a specific legal system. Thus, the contracting costs in that era were high. The migration of the Prophet Mohammad (PBUH) to the Medina created a suitable environment for the introduction of the Islamic legal doctrine. However, the question is: whether the Islamic legal teachings could play the role of a specific legal system in reducing contracting costs despite the prohibition of writing hadith and consequently the verbal status of the Islamic legal teachings in the first century AH. However, we should not forget that in this century the legal verses of the Holy Quran were written and many of the senior and junior Companions (Sahabah) were alive and have determining role in managing Islamic courts, the facts that prevented a legal gap in the first century AH. Islamic legal teachings contain a wide range of legal issues, especially issues related to property rights and Contract rights. So by relying on the vast historical and jurisprudential evidence we can reject the hypothesis that “Islam did not design and introduce a specific legal system”.