Definition and Scope
The standard covers the mechanics of exercising cooling-off options established in the Cooling-Off Options standard. It addresses: • How revocation is communicated • What restitution is due • Liability for damage or loss while goods are held • Liability for increases or produce from the goods • How expenses are allocated • Post-revocation rights and disputes
Communication of Revocation
Method: Revocation may be communicated: • Explicitly (clear statement: "I revoke the contract") • Implicitly (through conduct: returning goods, refusing delivery, refusing to pay) The revocation must be CLEAR — ambiguous statements don't count.
Rights and Liabilities Upon Revocation
When option is held by BUYER only: • Buyer has already taken ownership of the goods • Upon revocation, buyer must return the goods in their original condition • If goods are destroyed or damaged in buyer's possession, buyer is liable for their value • Price is refunded to the buyer in full
When option is held by SELLER only: • Seller retains ownership throughout; goods never pass to buyer ownership-wise • If buyer took possession and damaged goods, buyer liable for damage • If goods destroyed without buyer's negligence, seller bears loss • Seller may revoke and keep the price already received, or return price and take goods
When option is held by BOTH: • Neither party owns the goods yet • Goods must be returned to original state • Increases and produce from goods belong to seller • Damages paid by the party responsible for loss
Liability for Increases and Produce
Critical rules (–5): Increases physically attached to the good (crops, offspring, improvements): • If buyer holds option: buyer gets the increase upon confirmation; seller gets it if buyer revokes • If seller holds option: seller gets the increase whether he confirms or revokes • If both hold option: seller gets the increase Increases physically separate but derivative (rental income, dividends): • If buyer holds option: buyer gets the income if he confirms; seller gets it if he revokes • If seller holds option: seller always gets the income • If both hold option: seller gets the income
Damage, Loss, and Expense Allocation
Liability for loss/damage: • Buyer responsible: if item destroyed due to buyer's negligence while buyer holds the option • Seller responsible: if item destroyed due to seller's negligence or while seller holds the option • Neither: if loss is due to force majeure (fire, theft, natural disaster not caused by either party)
Expenses for return: • Seller bears the cost of receiving returned goods back at the original place of sale • Buyer doesn't have to pay shipping to return • If the good is consumed/destroyed, return is impossible and buyer is liable for full value (unless seller caused it)
Applications in Practice
Bank as buyer with option: A bank buys goods for investment and stipulates a cooling-off option. If it revokes: • Goods return to seller • Bank pays nothing (or gets refund if already paid) • Seller bears the loss if goods damaged while in bank's hands
Bank as seller with option: A bank sells to a customer and retains a cooling-off option. If it revokes: • Customer must return goods • Bank keeps any payment received • Bank is liable only if damage is due to its negligence
Neither party holds option; third party does: A contract between bank and customer has a cooling-off option exercisable by a third party (e.g., Shari'ah board). Rules about ownership and damage follow the general principles.