What is the legal nature of a mutual rescission of sale (Iqalah)?
Chapter on Selling Assets and Fruits
Al-Mughni
Book of Sales
Primary text
There are differing narrations concerning Iqalah. The sound opinion, chosen by Abu Bakr and conforming to the Shafi'i madhhab, holds that it is a cancellation (Faskh) of the contract. The second narration, which is the Maliki madhhab, holds that it is a sale (Bay'). This is because the sold item returns to the seller in the same capacity it left, and since the first transaction was a sale, the second one is also a sale, as it involves the transfer of ownership for consideration by mutual consent.
Supporting text
It is narrated from Abu Hanifa that it is a cancellation regarding the contracting parties but a sale regarding third parties. Thus, the effects of a sale do not take effect between the contracting parties, but it takes effect concerning the right of pre-emption (Shuf'ah), allowing the pre-emptor to claim the share agreed upon in the Iqalah.