Professional Documents
Culture Documents
Contracts Business
Financial Contracts
Shariah rules achieve these objectives
by making the contracts
easy to enforce
removing ambiguities
reducing envy
promoting justice
With due cognisance of the fact that
parties in a contract may possess
asymmetric information
imperfect information
incomplete information
manipulated information
differential abilities of information processing
differential abilities of decision sound making
Principles are Easy: Logical
and Systematic
General Principles of Contracts.
Conditions for Existence
Conditions for Validity
Principles Specific to Finance.
Implications of these principles.
General Principles: Conditions
for Existence of Contract
on
Principles of Islamic Finance
Modes of Islamic Finance
Distance Learning Course
SHIRKAH
SHIRKAT-UL-MILK SHIRKAT-UL-AQD
Mr. A Mr. B
Object of sale
Rules for Bai Muajjal
Price is deferred.
Due date of payment has to be fixed with
certainty not with reference to some
probabilistic event.
Deferred price can be more than spot price
but should be fixed at the time of contract.
Once signed no adjustment in price is
possible relating to early or delayed
payments.
Bai Salam
Price
Mr. A Mr. B
Object of sale
Rules for Bai Salam
Spot payment of full price
Detailed specification of the subject
Time and place of delivery specified
Sold commodity must be found in the
markets throughout the period of salam
Resale without accepting delivery is
prohibited (*)
Bai Istisna
Applicable in manufactured items.
Price and the commodity both can be
deferred; it can be made in installments
Price known and the subject specified in
detail.
Sale is binding. Buyer can exit the
contract only if manufactured item is
not according to the specifications
Difference b/w Istisna and Salam
Istisna Salam
1 2
Promise I=Principal
not an actual sale Cli=Agent
3
4&5 I=Buyer
I=Seller/Creditor Sup=Seller
Cli=Buyer/Debtor
Ijarah based mode
Leasing
Hire-Purchase
Combination of Contracts
Islamic Financial Engineering
through combination of contracts
As a general rule all contracts are
permissible unless prohibited by Shariah
Separate contracts cannot be made
contingent on each other
Contracts can be combined as a bundle
However, some Sharia regulations must
be followed in combination of contracts
Bundled Contracts vs Contingent Contracts
Start Start
If contract 2 Dispute
No
End: Successful Conclusion Yes